Document:

Unassociated Document

    
      

      DATED 9 January 1
2001

      

      

      
        
          	 
      	
                  (1)  
      

                	
                  IMAGE METRICS
      PLC

                	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  (2)

                	
                  KEVIN
      WALKER

                	 
      

        

      

       

      

      __________________________

      

      SERVICE
AGREEMENT

      relating
to

      Image
Metrics plc

      __________________________

      

      

      

      halliwell
landau

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      DATED 9 January
2001

      

      BETWEEN:

      

      
        	
                (1)

              	
                IMAGE
      METRICS PLC (registered in England and Wales under number 4098216)
      having its registered office at St James’s Court, Brown Street,
      Manchester, M2 2JF (“the
      Company”); and

              

      

      

      
        	
                (2)

              	
                KEVIN
      WALKER of Flat 5, 21 Old Lansdowne Road, West Didsbury, Manchester
      M20 2PB (“the
      Director”).

              

      

      

      OPERATIVE
PROVISIONS:

      

      
        	
                1

              	
                Definitions
      and Interpretation

              

      

      

      In this
agreement unless the context otherwise requires:

      

      
        	
                1.1 

              	
                the
      following words and expressions shall have the following
      meanings:

              

      

      

      “Associated
Company”

      a body
corporate which for the time being:

      

      
        	
                 
      

              	
                (a)

              	
                is
      a
      holding company of the Company or a subsidiary (other than the
      Company) of such a holding company;
or

              

      

      

      
        	
                 
      

              	
                (b)

              	
                has
      not less than twenty per cent of its equity share capital beneficially
      owned by such a holding company or the
Company;

              

      

      

      “Board”

      the board
of directors of the Company from time to time;

      

      “Business Day”

      a day on
which clearing banks in London are open for a full range of banking
transactions;

      

      “Commencement
Date”

      the date
of this agreement;

      

      “Group”

      the
Company and any Associated Company from time to time;

      

      “London Stock
Exchange”

      London
Stock Exchange plc;

      

      “Prohibited
Business”

      any
business or activity carried on by the Company at the Termination Date or at any
time in the Relevant Period in which the Director shall have been directly
concerned to a material extent in the course of his employment at any time in
the Relevant Period;

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Prospective
Customer”

      any
person, firm, company or other entity who was at the Termination Date or during
the Relevant Period negotiating with the Company with a view to dealing with the
Company as a customer;

      

      “Protected
Supplier”

      any
supplier to the Company with whom the Director shall have had material dealings
in the course of his employment during the Relevant Period;

      

      “Relevant Period”

      the 12
month period ending with the Termination Date;

      

      “Remuneration
Committee”

      the
remuneration committee of the Board from time to time;

      

      “Restricted
Customer”

      any
person, firm, company or other entity who was at any time in the Relevant Period
a customer of the Company;

      

      “Review Date”

      each
anniversary of the Commencement Date;

      

      “Termination Date”

      the date
of termination of the Director’s employment with the Company;

      

      “Territory”

      the
United Kingdom;

      

      “WTR”

      Working
Time Regulations 1998;

      

      
        	
                1.2

              	
                words
      and phrases the definition of which is contained or referred to in the
      Companies Act 1985 shall be construed as having the meanings thereby
      attributed to them;

              

      

      

      
        	
                1.3

              	
                references
      to statutory provisions shall be construed as references to those
      provisions as respectively amended or re-enacted or as their application
      is modified by other provisions (whether before or after the date hereof)
      from time to time and shall include references to any provisions of which
      they are re-enactments (whether with or without
    modification);

              

      

      

      
        	
                1.4

              	
                headings
      are for ease of reference only and shall not affect
      construction;

              

      

      

      
        	
                1.5

              	
                words
      denoting the singular include the plural and vice
  versa;

              

      

      

      
        	
                1.6

              	
                words
      denoting one gender include all
genders;

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                1.7

              	
                words
      denoting persons include firms and corporations;
  and

              

      

      

      
        	
                1.8

              	
                references
      to the Director’s employment are to his employment by the Company under
      and pursuant to this agreement.

              

      

      

      
        	
                2

              	
                Position

              

      

      

      
        	
                2.1

              	
                The
      Company shall employ the Director and the Director shall serve the Company
      as Engineering Director or in such other capacity as the Board may from
      time to time determine provided that such other capacity is commensurate
      with the Director’s status as a Director of the
  Company.

              

      

      

      
        	
                2.2

              	
                The
      Company is entitled from time to time to appoint any other person or
      persons to act jointly with the Director in the performance of his
      duties.

              

      

      

      
        	
                2.3

              	
                If
      the Director is at any time unable through sickness, injury or otherwise
      to carry out his duties hereunder the Company may temporarily employ any
      person or persons to perform those duties in his place until such time as
      he is able to resume his duties
hereunder.

              

      

      

      
        	
                3

              	
                Duties

              

      

      

      During
the continuance of this agreement the Director shall devote the whole of his
time, attention and abilities to the business of the Group and, so far as
consistent with the nature of his office hereunder, shall:

      

      
        	
                 
      

              	
                3.1.1

              	
                undertake
      such duties and exercise such powers in relation to the Group as the Board
      shall from time to time assign to or vest in
  him;

              

      

      

      
        	
                 
      

              	
                3.1.2

              	
                in
      the discharge of such duties and in the exercise of such powers, observe
      and comply with all lawful resolutions and directions from time to time
      given by the Board;

              

      

      

      
        	
                 
      

              	
                3.1.3

              	
                keep
      the Board promptly and duly informed (in writing if so requested) of the
      business and affairs of the Company and such other companies in the Group
      as the Director may be involved with, whether in accordance with clause
      3.1.4 or otherwise, and of his conduct and provide such explanation as the
      Board may require in connection
therewith;

              

      

      

      
        	
                 
      

              	
                3.1.4

              	
                in
      pursuance of his duties hereunder accept such offices in any other
      companies in the Group (without further remuneration unless otherwise
      agreed) as the Board; and

              

      

      

      
        	
                 
      

              	
                3.1.5

              	
                well
      and faithfully serve the Group and use his reasonable endeavours to
      promote and develop the business and interests of the
    Group.

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                3.2

              	
                The
      Director acknowledges that, for the purposes of the Working Time
      Regulations 1998, his working time is unmeasured and that he falls within
      regulation 20 of the WTR and that therefore the provisions in those
      Regulations regarding maximum hours of working time, daily rest, weekly
      rest or rest breaks do not apply to the
  Director.

              

      

      

      
        	
                 
      

              	
                3.3

              	
                The
      Director shall promptly disclose to the Board any information which comes
      into his possession which affects adversely or may affect adversely the
      Company or any Associated Company or any of their respective businesses.
      Such information shall include but shall not be limited
  to:

              

      

      

      
        	
                 
      

              	
                3.3.1

              	
                the
      plans of any employee to leave the Company (whether alone or in concert
      with other employees);

              

      

      

      
        	
                 
      

              	
                3.3.2

              	
                the
      plans of any employee (whether alone or in concert with other employees)
      to join a competitor or establish a business in competition with the
      Company or any Associated Company;

              

      

      

      
        	
                 
      

              	
                3.3.3

              	
                any
      steps taken by any employee to implement any plans mentioned in clauses
      3.3.1 or 3.3.2;

              

      

      

      
        	
                 
      

              	
                3.3.4

              	
                the
      misuse by any employee of any confidential information belonging to the
      Company or any Associated Company.

              

      

      

      
        	
                4

              	
                Period

              

      

      

      
        	
                4.1

              	
                The
      Director’s employment under this agreement shall commence on the
      Commencement Date and shall continue for an initial period of 12 months
      and thereafter until determined by at least 3 months’ written notice given
      by either party to the other, such notice period to commence only after
      the expiry of that initial period of 12
months.

              

      

      

      
        	
                4.2

              	
                Notwithstanding
      clause 4.1, this agreement shall automatically terminate when the Director
      reaches age 65.

              

      

      

      
        	
                4.3

              	
                The
      Director’s employment with Digitech Projects Limited from  to  shall count
      towards the Director’s continuous period of employment with the
      Company.

              

      

      

      
        	
                4.4

              	
                The
      Company may, at its entire discretion, lawfully terminate this agreement
      with immediate effect by giving notice of such termination and by paying
      to the Director, in lieu of salary and other benefits pursuant to this
      agreement, an amount equal to the salary which the Director would have
      earned from the Termination Date until the first date upon which his
      employment could, apart from this clause 4.4 have been lawfully terminated
      in accordance with clause 4. 1 above together with a further sum
      equivalent to the cost to the Company of the provision value of the
      benefits to which the Director would have been entitled during such
      period, to the extent only that the Director does not in fact receive
      those benefits for the whole or part of such period. Any such payment to
      the Director will be subject to tax and other statutory deductions
      required from time to time.

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                4.5

              	
                If
      this agreement is terminated by notice given by either party to the other,
      whether pursuant to clause 4.1 or otherwise, or if the Director wishes to
      resign with immediate effect but the Company refuses to accept such
      resignation and requires the due period of notice to be given by the
      Director, then:

              

      

      

      
        	
                 
      

              	
                4.5.1

              	
                the
      Company shall be under no obligation to vest in or assign to the Director
      any powers or duties or to provide work for the Director but the Company
      may at its discretion provide suitable work for the Director to be
      undertaken at the Director’s home and the Company may require the Director
      to carry out special duties or
projects;

              

      

      

      
        	
                 
      

              	
                4.5.2

              	
                the
      Company may at any time or from time to time during such notice
      period deny
      the Director access to any premises of any company in the Group or require
      the Director not to have any business contact or dealings with any
      customer, client, supplier or employee of the Group;
  and

              

      

      

      
        	
                 
      

              	
                4.5.3

              	
                salary
      and all benefits will not cease to be payable or available to the Director
      by reason only of that exclusion of the Director from any premises of any
      company in the Group until the expiration of such notice
      period.

              

      

      

      
        	
                5

              	
                Directorship

              

      

      

      
        	
                5.1

              	
                The
      Director shall not be entitled to any director’s fees from any company in
      the Group in addition to his remuneration under clause
  7.

              

      

      

      
        	
                5.2

              	
                If
      the Director ceases to be a director of the Company his employment on the
      terms of this agreement (save as to job title which shall upon such
      cessation be deemed to have become Director of Engineering) shall continue
      unless the Company exercises its right under clause
  19.1.9.

              

      

      

      
        	
                6

              	
                Place
      of Work

              

      

      

      
        	
                6.1

              	
                The
      Company shall provide a suitable office for the use of the Director at the
      Company’s premises at Regent House, Heaton Lane, Stockport, Cheshire and
      the Director shall carry out his duties there and in such other places as
      the Board considers
      reasonably appropriate from time to time. The Director may be required to
      travel on the business of the
Company.

              

      

      

      
        	
                7

              	
                Remuneration

              

      

      

      
        	
                7.1

              	
                The
      Director shall be entitled to remuneration for his services hereunder at
      the rate of £35,000 per annum as from the Commencement Date which shall
      accrue from day to day payable monthly in
  arrears.

              

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                7.2

              	
                On
      every Review Date during the continuance of this agreement the
      remuneration of the Director payable under this clause 7 shall be reviewed
      by the Board but there shall be no obligation on the Board to effect any
      increase.

              

      

      

      
        	
                7.3

              	
                For
      the purpose of the Employment Rights Act 1996 and otherwise the Director
      hereby consents to the deduction of any sums owing by the Director to the
      Company at any time from his salary or any other payment or payments due
      from the Company to the Director hereunder or otherwise and the Director
      hereby also agrees to make any payment to the Company of any sums owed by
      the Director to the Company upon demand by the Company at any
      time.

              

      

      

      
        	
                7.4

              	
                Payment
      of salary to the Director shall be made either by the Company or by any
      other member of the Group and, if by more than one company, in such
      proportions as the Board may from time to time think
  fit.

              

      

      

      
        	
                7.5

              	
                Any
      other benefit provided by or paid for by the Company to or for the
      Director and not referred specifically to in this agreement is wholly
      discretionary and at any time and from time to time without any
      requirement for prior consultation and without any obligation to provide
      any alternative or pay any compensation the Company may withdraw or
      suspend any such benefit or the terms on which it is made
      available.

              

      

      

      
        	
                8

              	
                Expenses

              

      

      

      In
addition to his remuneration hereunder the Director shall be reimbursed all
reasonable expenses properly incurred by him in the discharge of his duties
hereunder upon production of appropriate written evidence thereof if reasonably
practicable.

      

      
        	
                9

              	
                Motor
      Vehicle

              

      

      

      The
Director shall be entitled to receive an allowance of £350 per calendar month in
respect of a motor vehicle.

      

      
        	
                10

              	
                Pension

              

      

      

      There is
no contracting out certificate in force in respect of the Director’s employment
under this agreement.

      

      
        	
                11

              	
                Holidays

              

      

      

      
        	
                11.1

              	
                The
      Director shall be entitled during every calendar year (which is his leave
      year for the purposes of the WTR) of his employment (and pro rata for part
      of such year) to:

              

      

      

      
        	
              	
                11.1.1

              	
                all
      generally observed UK public holidays;
and

              

      

      

      
        	
              	
                11.1.2

              	
                25
      days each year at such time as shall reasonably be agreed by the Board.
      The Director acknowledges Regulation 15(1) of the WTR is
      excluded.

              

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        	
                11.2

              	
                The
      Director shall be entitled to carry forward from one year to the next a
      maximum of five days’ unused holiday entitlement but no payment will be
      made by the Company in lieu of accrued but unused holiday entitlement at
      the end of the holiday year.

              

      

      

      
        	
                11.3

              	
                For
      the calendar year in which the Director’s employment commences or
      terminates the Director is entitled to holidays during that year assessed
      on a pro-rata basis. On the termination of the Director’s employment the
      Director shall either be entitled to pay in lieu of outstanding holiday
      entitlement or be required to repay to the Company any salary received for
      holiday taken in excess of his actual entitlement (as the case may be).
      The basis for payment shall be 1/261 salary for each day. The sum (if any)
      the Director is entitled to receive under this clause satisfies his
      entitlement to compensation under Regulation 14 of the
  WTR.

              

      

      

      
        	
                12

              	
                Incapacity

              

      

      

      
        	
                12.1

              	
                Subject
      as hereinafter provided, during any period of absence from work due to
      illness or disability the Director shall continue to be entitled to his
      full remuneration for a period of 26 weeks in each calendar year subject
      to deduction Of statutory sick pay.

              

      

      

      
        	
                12.2

              	
                If
      the Director is absent from work as a result of illness or disability, he
      will:

              

      

      

      
        	
              	
                12.2.1

              	
                notify
      the Company as soon as practicable on the first day of his
      absence;

              

      

      

      
        	
              	
                12.2.2

              	
                if
      the period of absence is less than eight consecutive days, submit to the
      Company on his return a certificate of sickness completed by himself;
      and

              

      

      

      
        	
              	
                12.2.3

              	
                if
      the period of absence is eight consecutive days or more, submit to the
      Company without delay a medical certificate signed by a practising medical
      practitioner in respect of each week of absence after the
      first.

              

      

      

      
        	
                12.3

              	
                If
      the Director shall at any time be incapacitated or prevented by mental or
      physical illness, injury, accident or any other circumstances beyond his
      control from performing his duties hereunder for a period of 6 consecutive
      months or if he shall be so incapacitated at different times for more than
      6 months in any one period of 52 consecutive weeks then in either of such
      cases the Company shall be at liberty
  thereafter:

              

      

      

      
        	
              	
                12.3.1

              	
                to
      terminate his employment by 6 months’ notice in writing and the Director
      shall not be entitled to claim any compensation from the Company or any
      other company in the Group or otherwise in respect of such termination and
      provided further that if at any time during the currency of such a notice
      the Director shall provide a medical certificate satisfactory to the Board
      to the effect that he has fully recovered his physical and/or mental
      health and that no recurrence of the illness or incapacity can reasonably
      be anticipated, the Company shall withdraw the notice;
    and/or

              

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        	
              	
                12.3.2

              	
                to
      discontinue payment in whole or part of his remuneration on and from such
      date as it specifies in the notice until such time as he shall be capable
      of performing and shall have resumed his full duties
      hereunder.

              

      

      

      
        	
                12.4

              	
                If
      the Director’s absence from work as a result of illness or disability
      shall be or appear to be occasioned by the actionable negligence of a
      third party in respect of which damages are or may be recoverable, then
      all sums paid by the Company in accordance with this clause 12 shall
      constitute loans to the Director, who
shall:

              

      

      

      
        	
              	
                12.4.1

              	
                forthwith
      notify the Company of the relevant circumstances and of any claim,
      compromise, settlement or judgment made or awarded in connection
      therewith;

              

      

      

      
        	
              	
                12.4.2

              	
                give
      to the Company all such particulars of such matters as the Company may
      reasonably require; and

              

      

      

      
        	
              	
                12.4.3

              	
                if
      any damages are recovered from the third party refund to the Company such
      sum as the Company may determine, not exceeding the lesser
    of:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                the
      amount of damages recovered by the Director under such compromise,
      settlement or judgment; and

              

      

      

      
        	
                 
      

              	
                (b)

              	
                the
      sums advanced to the Director in respect of the period of the incapacity,
      provided that, in the event that the Director shall be a director of the
      Company or the Company’s holding company, the Director shall not be
      entitled to receive any payments in excess of the maximum aggregate sum
      permitted to be loaned by the Company
      to a director under the provisions of Companies Act
  1985.

              

      

      

      
        	
                12.5

              	
                The
      Director shall at the expense of the Company submit as and when required
      and from time to time to medical examination by a registered medical
      practitioner nominated by the Company and shall authorise such medical
      practitioner to disclose to and discuss with the Company’s medical adviser
      the results of the examination and the matters which arise from it so that
      the Company’s medical adviser can notify the Company of any matters he
      considers might impair the Director from properly discharging his duties.
      The Director shall consent to and authorise the release of all his medical
      records for the purpose.

              

      

      

      
        	
                13

              	
                Other
      Interests

              

      

      

      
        	
                13.1

              	
                The
      Director shall not without the prior written consent of the Board during
      the continuance of this agreement be concerned, engaged or interested
      either directly or indirectly in any capacity in any other trade, business
      or employment or engaged in any occupation (including membership of
      parliament or of any local government authority or public body or any
      other public or private work) provided that, other than any shares held in
      the Company, the Director shall be permitted to hold not more than 3% of
      any class of shares or debentures or other securities (other than shares,
      debentures or other securities of the Company) which are quoted or dealt
      on the Official List or the Alternative Investment Market of the London
      Stock Exchange or any other recognised investment exchange (as defined in
      section 207 of the Financial Services Act 1986) whether in the United
      Kingdom or otherwise and shall be permitted to invest in the units of any
      collective investment scheme (as defined in section 75 of the Financial
      Services Act 1986) or Business Expansion Scheme or similar
      fund.

              

      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      
        	
                13.2

              	
                Subject
      to any regulations issued by the Company which may be applicable to him,
      the Director shall not be entitled to receive or obtain directly or
      indirectly any discount, rebate or commission in respect of any sale,
      purchase or provision of goods or services effected or other business
      transacted (whether or not by him) by or on behalf of any company in the
      Group and if he (or any firm or company in which he is interested) shall
      obtain any such discount, rebate or commission, he shall account to the
      Company (for itself or on behalf of the relevant company in the Group, as
      appropriate) for the amount received by him (or a due proportion of the
      amount received by such company or firm having regard to the extent of his
      interest therein).

              

      

      

      
        	
                13.3

              	
                The
      Director shall comply with all codes of conduct from time to time adopted
      by the Board and with all applicable rules and regulations of the London
      Stock Exchange including the AIM Model Code for Securities Transactions by
      Directors of Listed Companies.

              

      

      

      
        	
                14

              	
                Secrecy

              

      

      

      The
Director shall not, except as authorised or required by his duties or as obliged
by law, reveal to any person or use for his own purposes or for any purposes
other than those of the Group any of the trade secrets, secret or confidential
operations, processes or dealings or any information concerning the
organisation, prospective business, business methods, systems or affairs,
finances, transactions or affairs of any company in the Group, or any similar
information in relation to any customer or supplier of the Group, which may come
to his knowledge during and as a result of his employment and shall keep with
complete secrecy all confidential information entrusted to him and shall not use
or attempt to use any such information in any manner which may injure or cause
loss either directly or indirectly to any company in the Group or their
respective businesses or which may be likely so to do. This restriction shall
continue to apply after the termination of this agreement without limit in point
of time but shall cease to apply to information or knowledge which is ordered to
be disclosed by a Court of competent jurisdiction or otherwise required to be
disclosed by law or which comes into the public domain other than as a result of
a breach by the Director of his obligations to the Company or any other company
in the Group or where disclosure is permitted in accordance with the Public
Incorrect Disclosure Act 1998.

      

      
        	
                15

              	
                Notes
      or Memoranda

              

      

      

      The
Director shall not during the continuance of this agreement make, otherwise than
for the benefit of the Group, any notes or memoranda relating to any matter
within the scope of the business of the Group or concerning any of its dealings
or affairs, nor shall the Director either during the continuance of this
agreement or afterwards use or permit to be used any such notes or memoranda
otherwise than for the benefit of the Group. All such notes and memoranda made
by the Director shall be the property of the Group and shall be left at the
registered office of the Company upon the termination of the Director’s
employment.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      
        	
                16

              	
                Inventions

              

      

      

      
        	
                16.1

              	
                Any
      discovery, development, invention, process, design, improvement in
      procedure, computer program, copyright works, trade name or trade mark
      made, discovered or created by the Director during the period of this
      agreement either alone or with any other person in connection with or in
      any way affecting or relating to the business of the Group or capable of
      being used or adapted for use therein or in connection therewith
      (“Inventions”) shall forthwith be disclosed by the Director to the Company
      and shall belong to and be the absolute property of the Company or such
      Associated Company as the Company may nominate for that purpose provided
      that this clause 18.1 shall not apply to those rights of the Director in
      Inventions which cannot under applicable law be vested in the Company as
      his employer (“Employee Rights”).

              

      

      

      
        	
                16.2

              	
                The
      Director, if and whenever required to do so (whether during or after the
      termination of his appointment), shall at the expense of the Company
      forthwith assign to the Company or an Associated Company nominated by the
      Company (or, if assignment is not permitted under applicable law, shall
      grant an exclusive licence to the Company or such Associated Company) all
      Employee Rights and upon such assignment or licensing shall deliver to the
      Company or such Associated Company all documents and other materials
      relating to the Inventions and the Company will itself or will procure
      that such Associated Company will thereupon pay to the Director such
      remuneration for the assignment or licence and the delivery of the said
      documents and materials as may be agreed or in default of agreement such
      remuneration as may be determined pursuant to an application by the
      Director under section 40 of the Patents Act
  1977.

              

      

      

      
        	
                16.3

              	
                The
      Director if and whenever required to do so (whether during or after the
      termination of his appointment) shall at the expense of the Company or its
      nominee:

              

      

      

      
        	
              	
                16.3.1

              	
                apply
      or join in applying for patents, registered designs, trade marks or other
      similar protection in the United Kingdom or any other part of the world
      for any Inventions and execute all instruments and do all things necessary
      for vesting the said patents, registered designs, trade marks or other
      similar protection when obtained and all right and title to and interest
      in the same in the Company or such other third party as the Company may
      require absolutely and as the sole beneficial owner;
  and

              

      

      

      
        	
              	
                16.3.2

              	
                sign
      and execute all such documents and do all such acts as the Company may
      reasonably require in connection with any proceedings in respect of such
      applications and any petitions or applications for revocation of such
      patents, registered designs, trade marks or other
    protection.

              

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	
                16.4

              	
                The
      Director hereby irrevocably appoints the Company to be his attorney to act
      in his name and on his behalf to execute and do any such instrument or
      thing and generally to use his name for the purpose of giving to the
      Company the full benefit of this clause and a certificate in writing
      signed by any director or by the secretary of the Company that any
      instrument or act falls within the authority hereby conferred shall be
      conclusive evidence that such is the case as against the Director in
      favour of the Company and any third
party.

              

      

      

      
        	
                16.5

              	
                Should
      the Company, in its sole discretion, so require, the Inventions shall not
      be made the subject of patents or similar protections, but shall be worked
      by the Company and/or the Associated Companies as secret
      processes.

              

      

      

      
        	
                17

              	
                Termination

              

      

      

      
        	
                17.1

              	
                The
      Company may (without prejudice to any other rights or remedies in respect
      thereof) forthwith determine the employment of the Director without
      compensation by notice in writing to him in any of the following
      circumstances:

              

      

      

      
        	
              	
                17.1.1

              	
                the
      Director breaches any material term of this agreement and which, in the
      case of a breach capable of remedy, is not so remedied within 30 days of a
      written notice from the Board so to
remedy;

              

      

      

      
        	
              	
                17.1.2

              	
                the
      Director neglects, omits or refuses to discharge his duties hereunder or
      to comply with any proper and reasonable instruction given to him by the
      Board;

              

      

      

      
        	
              	
                17.1.3

              	
                the
      Director is guilty of gross or persistent misconduct or shall be guilty of
      conduct likely to bring himself or any member of the Group into
      disrepute;

              

      

      

      
        	
              	
                17.1.4

              	
                the
      Director is convicted of a criminal offence other than an offence which,
      in the opinion of the Board, does not affect his position as a director of
      the Company nor destroy the Company’s trust and confidence in
      him;

              

      

      

      
        	
              	
                17.1.5

              	
                the
      Director is declared bankrupt or an interim order is made against him or
      he makes or attempts to make any voluntary arrangement with his
      creditors;

              

      

      

      
        	
              	
                17.1.6

              	
                it
      is determined that any of the representations and warranties set forth in
      clause 26 hereof shall have been untrue when
  made;

              

      

      

      
        	
              	
                17.1.7

              	
                a
      disqualification order is made or is in force against the Director under
      the Company Directors’ Disqualification Act
  1986;

              

      

      

      
        	
              	
                17.1.8

              	
                the
      Director becomes of unsound mind or becomes a patient as defined in the
      Mental Health Act 1983;

              

      

      

      
        	
              	
                17.1.9

              	
                the
      Director ceases to be a director of the Company for any
      reason.

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	
              	
                17.2

              	
                On
      the termination of this agreement or on either the Company or the Director
      having served notice of such termination the Director shall upon the
      request of the Company:

              

      

      

      
        	
              	
                17.2.1

              	
                resign
      without compensation from all directorships and other offices held by him
      in the Group;

              

      

      

      
        	
              	
                17.2.2

              	
                sign
      or execute such transfers or other deeds or documents as may be required
      to transfer to the Company or as it may direct any shares or other
      securities held by the Director as nominee or trustee for the Company (or
      any other company in the Group);

              

      

      

      
        	
              	
                17.2.3

              	
                deliver
      to the Company forthwith all credit cards, motor car, car keys and other
      property of or relating to the business of the Company or the Group
      (including any notes or memoranda referred to in clause 15) which may be
      in his possession or under his control;
and

              

      

      

      
        	
              	
                17.2.4

              	
                for
      the purposes of clauses 17.2.1, 17.2.2 and 17.2.3 the Director hereby
      irrevocably appoints the Company to be his attorney to act in his name and
      on his behalf to execute and do any such instrument or thing and generally
      to use his name for the purpose of giving to the Company the full benefit
      of this clause and a certificate in writing signed by any director or by
      the secretary of the Company that any instrument or act falls within the
      authority hereby conferred shall be conclusive evidence that such is the
      case as against the Director in favour of the Company and any third
      party.

              

      

      

      
        	
                17.3

              	
                The
      Director shall not at any time after the termination of his employment
      falsely represent himself as being in any way connected with the business
      of the Company or any other company in the
  Group.

              

      

      

      
        	
                18

              	
                Suspension

              

      

      

      If the
Board have reason to suspect that any one or more of the events set out in
clauses 17.1.1 to 17.1.9 (inclusive) of this agreement has or have occurred the
Board may suspend the Director on such terms as to payment of salary or
otherwise as the Board may think fit pending further investigations for so long
as may be necessary to carry out such investigation.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      

      
        	
                19

              	
                Non-Competition

              

      

      

      
        	
                19.1

              	
                The
      Director shall not so as to compete with the Company during the period of
      12 months after the Termination Date directly or indirectly on his own
      account or on behalf of or in conjunction with any person, firm or company
      or other organization canvass or solicit or by any other means seek to
      conduct Prohibited Business with or conduct Prohibited Business with any
      Restricted Customer with whom the Director shall have had material
      dealings in the course of his duties hereunder at any time in the Relevant
      Period or with whom and to the knowledge of the Director any employee of
      the Company under the Director’s control shall have had material dealings
      in the course of their duties to the Company in the Relevant
      Period.

              

      

      

      
        	
                19.2

              	
                The
      Director shall not so as to compete with the Company during the period of
      12 months after the Termination Date directly or indirectly on his own
      account or on behalf of or in conjunction with any person, firm or company
      or other organisation canvass or solicit or by any other means seek to
      conduct Prohibited Business with or conduct Prohibited Business with any
      Prospective Customer with whom the Director shall have had material
      dealings in the course of his duties hereunder at any time in the Relevant
      Period or with whom and to the knowledge of the Director any employee of
      the Company under the Director’s control shall have had material dealings
      in the course of their duties to the Company in the Relevant
      Period

              

      

      

      
        	
                19.3

              	
                The
      Director shall not so as to compete with the Company during the period of
      12 months after the Termination Date directly or indirectly induce or seek
      to induce any senior employee of the Company engaged in the Prohibited
      Business who was such an employee at the Termination Date and with whom
      the Director shall during the Relevant Period have had material dealings
      in the course of his duties hereunder to leave the employment of the
      Company whether or not this would be a breach of contract on the part of
      the employee.

              

      

      

      
        	
                19.4

              	
                The
      Director shall not so as to compete with the Company during the period of
      12 months after the Termination Date directly or indirectly seek to entice
      away from the Company or otherwise solicit or interfere with the
      relationship between the Company and any Protected
    Supplier.

              

      

      

      
        	
                19.5

              	
                The
      Director shall not so as to compete with the Company during the period of
      12 months after the Termination Date within the Territory carry on or be
      directly or indirectly engaged, concerned or interested whether as
      principal, agent, substantial shareholder, substantial investor, director,
      employee, consultant or otherwise howsoever in any business or the setting
      up of any business engaged in or which it is intended to be engaged in any
      Prohibited Business. For the purpose of this clause 19.5 acts done by the
      Director outside the Territory shall nonetheless be deemed to be done
      within the Territory where their primary purpose is the obtaining of any
      Prohibited Business from any person, firm, company or other entity with
      business premises within the
Territory.

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      
        	
                19.6

              	
                The
      Director covenants that in respect of any other company in the Group in
      the business or affairs of which the Director shall at any time during the
      Relevant Period have been materially concerned or interested he will
      perform and observe in relation to each such Associated Company the
      covenants set out in this clause 19 and that each covenant shall be
      construed and enforceable as a separate covenant in relation to each such
      Associated Company. For the purposes of giving effect to the provisions of
      this clause 19.6 only, references to the Company in clauses 19.1 to 19.5
      inclusive and in the definitions of Prohibited Business, Prospective
      Customer, Protected Supplier and Restricted Customer shall be deemed to be
      references to each such company.

              

      

      

      
        	
                19.7

              	
                The
      Director shall not, either during the continuance of this agreement or at
      any time after the Termination Date engage in any trade or business or be
      associated with any person, firm or Company engaged in any trade or
      business using the names “Malin”, “Digitech” or “Image Metrics” or
      incorporating any such words.

              

      

      

      
        	
                19.8

              	
                These
      restrictions are entered into by the Company and the Director after having
      been separately legally advised.

              

      

      

      
        	
                19.9

              	
                Each
      of these restrictions contained in this clause 19 is intended to be
      separate and severable. In the event that any of the restrictions shall be
      held void but would be valid if part of the wording thereof were deleted
      such restriction shall apply with such deletion as may be necessary to
      make it valid and effective.

              

      

      

      
        	
                20

              	
                Amalgamation
      or Reconstruction

              

      

      

      If before
the termination of this agreement the employment of the Director shall be
determined by reason of the winding up of the Company for the purposes of
reconstruction or amalgamation and the Company shall procure that any concern or
undertaking resulting from such solvent reconstruction or amalgamation shall
offer to the Director employment on no less favorable terms than contained in
this agreement, the Director shall have no claim against the Company for damages
or otherwise in connection with such determination provided that, in the event
of the Director being made such an offer, it shall be conditional upon his
employment with the Company counting as continuous employment within the meaning
of the Employment Rights Act 1996.

      

      
        	
                21

              	
                Grievance
      and Discipline

              

      

      

      
        	
                21.1

              	
                The
      Director should refer any grievances about his employment or about any
      decision relating to him to the Board by giving written notice. The
      reference will be dealt with by a majority present at the relevant Board
      meeting and whose decision shall be
final.

              

      

      

      
        	
                21.2 

              	
                There
      are no disciplinary rules relating to the Director’s
      employment.

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      
        	
                22

              	
                Collective
      Agreements

              

      

      

      No
collective agreements affect the Director’s terms and conditions of employment
with the Company.

      

      
        	
                23

              	
                Notices

              

      

      

      
        	
                23.1

              	
                Any
      demand, notice or communication shall be deemed to have been duly
      served:

              

      

      

      
        	
              	
                23.1.1

              	
                if
      delivered by hand, when left at the proper address for
      service;

              

      

      

      
        	
              	
                23.1.2

              	
                if
      given or made by prepaid first class post, 48 hours after being posted
      (excluding Saturdays, Sundays, and public
  holidays),

              

      

      

      provided
that where in the case of delivery by hand such delivery occurs either after
4.00pm on a Business Day or on a day other than a Business Day service shall be
deemed to occur at 10.00am on the next following Business Day (such times being
local times at the address of the recipient).

      

      
        	
                23.2

              	
                Any
      demand, notice or communication shall be made in writing addressed to the
      recipient at its registered office or its address stated in this agreement
      (or such other address as may be notified in writing from time to
      time).

              

      

      

      
        	
                24

              	
                Breach
      Prior to Termination

              

      

      

      The
expiration of or the lawful termination of this agreement shall not affect such
other provisions hereof as are expressed to operate or have effect thereafter
and shall be without prejudice to any right or action already accrued to either
party in respect of any breach of this agreement by the other
party.

      

      
        	
                25

              	
                Prior
      Agreements

              

      

      

      As from
the Commencement Date, this agreement will govern the employment relations
between the Company and the Director and any former agreements subsisting
between the Director and the Company or any other company in the Group in
respect of such employment relationship will thereafter cease to be of
effect.

      

      
        	
                26

              	
                Representation

              

      

      

      
        	
                26.1

              	
                The
      Director represents and warrants to the Company that he is free to enter
      into this agreement and that he is not bound by any court order, agreement
      or arrangement which would prevent him from entering into this agreement
      or which would restrict the availability of his services to the
      Group.

              

      

      

      
        	
                26.2

              	
                The
      Director hereby agrees to indemnify the Company fully against any and all
      liabilities, damages, costs and expenses, including without limitation,
      legal fees and disbursements incurred by the Company in connection with
      any action, suit or proceedings brought against the Company concerning the
      subject matter of clause 26.1.

              

      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
        	
                27

              	
                Proper
      Law and Jurisdiction

              

      

      

      This
agreement shall be governed by and construed in accordance with English law and
each of the parties hereto submits to the non-exclusive jurisdiction of the
English Courts.

      

      This
agreement has been executed as a deed and is delivered on the date stated at the
beginning of this agreement.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      
        

        
          	
                  EXECUTED AS A
      DEED

                	
                  )

                	 
      
	
                  By
      IMAGE
      METRICS PLC

                	
                  )

                	 
      
	
                  acting
      by:

                	
                  )

                	 
      

        

        
          	
                  Director:

                	
                  

                
	
                   

                  Director/Secretary:

                	
                  

                

        

        

        
          	
                   

                  EXECUTED
      AS A DEED

                  by
      KEVIN
      WALKER

                  in
      the presence of:

                   

                	
                   

                  )

                  )

                  )

                   

                	
                  

                

        

        

        Signature:

        

        Name:     
STEVEN DURNING

        

        Address:
FLAT 215, THE GRAND APTS, 1 AYTOUN ST

         MANCHESTER, MI 30A

        

        Occupation:
PROJECT MANAGER

         

        
          
            
            

          

          
            17a6621352ex10_12.htm

Exhibit 10.12

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

STATE CORPORATION COMMISSION

BUREAU OF FINANCIAL INSTITUTIONS

RICHMOND, VIRGINIA

 

	
Written Agreement by and among

 

EASTERN VIRGINIA BANKSHARES,

INC.

Tappahannock, Virginia

 

EVB

Tappahannock, Virginia

 

FEDERAL RESERVE BANK OF

RICHMOND

 

Richmond, Virginia

 

And

 

	
Docket Nos. 10-244-WA/RB-HC

10-244-WA/RB-SM

	
STATE CORPORATION COMMISSION

BUREAU OF FINANCIAL

INSTITUTIONS

Richmond, Virginia

	  

 

WHEREAS, in recognition of their common goal to maintain the financial soundness of Eastern Virginia Bankshares, Inc., Tappahannock, Virginia (“Bankshares”), a registered bank holding company, and its subsidiary bank, EVB, Tappahannock, Virginia (the “Bank”), a state- chartered bank that is a member of the Federal Reserve System, Bankshares, the Bank, the Federal Reserve Bank of Richmond (the “Reserve Bank”), and the State Corporation Commission Bureau of Financial Institutions (the “Bureau”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on February 17, 2011, the boards of directors of Bankshares and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing William Rand Cook to enter into this Agreement on behalf of Bankshares and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by Bankshares and the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

 

  

  

  

 

NOW, THEREFORE, Bankshares, the Bank, the Reserve Bank, and the Bureau agree as follows:

 

Source of Strength

 

1.           The board of directors of Bankshares shall take appropriate steps to fully utilize Bankshares’ financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure the Bank complies with this Agreement, and any other supervisory action taken by the Bank’s federal or state regulators.

 

Board Oversight

 

2.           Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank and the Bureau a written plan to strengthen board oversight of the management and operations of the Bank. The plan shall, at a minimum, address, consider, and include:

 

(a)           The actions the board of directors will take to improve the Bank’s condition and maintain effective control over, and supervision of, the Bank’s major operations and activities, including but not limited to, lending, credit administration, credit risk management, investment portfolio management, asset quality, capital, earnings, liquidity, and audit;

 

(b)           the responsibility of the board of directors to monitor and to develop measures to ensure management’s and staff’s adherence to the Bank’s approved policies and procedures, and applicable laws, rules and regulations;

 

(c)           distribution of monitoring reports to the full board of directors;

 

(d)           ensuring regulatory, external review, and internal audit findings are reported to the board of directors and corrected in a timely manner;

 

(e)           assessing the structure, qualifications and staffing of the Bank’s credit function;

 

(f)           enhancing the audit committee charter to include the responsibility of the audit committee for the engagement and approval of third party service providers; and

 

(g)           steps to improve the information and reports to be regularly reviewed by the board of directors in its oversight of the operations and management of the Bank, including information on the Bank’s adversely classified assets, credit analyses for loans subject to board approval, enhanced portfolio reports which include credit risk level and trend analysis, allowance for loan and lease losses (“ALLL”), investment portfolio, audit, capital, liquidity, and earnings.

 

  

  

  

 

Credit Risk Management

 

3.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to strengthen credit risk management practices. The plan shall, at a minimum, address, consider, and include:

 

(a)          The responsibility of the board of directors to establish appropriate risk tolerance guidelines and risk limits;

 

(b)          periodic review and revision of risk exposure limits to address changes in market conditions;

 

(c)          strategies to minimize credit losses and reduce the level of problem assets;

 

(d)          timely and accurate identification of problem loans; and

 

(e)          enhanced portfolio monitoring and problem loan watch list reports.

 

Lending and Credit Administration

 

4.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau acceptable revised written lending and credit administration policies and procedures that shall, at a minimum, address, consider, and include:

 

(a)           Procedures to ensure timely and consistent analyses of borrowers’ and guarantors’ current financial condition, global cash flow, repayment sources, contingent liabilities, commitment usage, and performance;

 

(b)           controls to ensure staff’s adherence to policies, procedures, rules, regulations, and laws;

 

(c)           guidelines to ensure standardized preparation of loan proposals;

 

(d)           steps to ensure compliance with loan documentation requirements and minimize technical exceptions;

 

(e)           procedures to ensure appraisals conform to accepted appraisal standards, as defined in the Uniform Standards of Professional Appraisal Practice, and comply with the requirements of Subpart G of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. Part 225, Subpart G) made applicable to state member banks by Section 208.50 of Regulation H of the Board of Governors (12 C.F.R. § 208.50), the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994 (SR 94-55), and related provisions of Virginia law; and

 

(f)           procedures to monitor and control overdrafts.

 

Loan Grading

 

5.           Within 30 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the effective grading of the Bank’s loan portfolio. The program shall provide for policies, procedures, and processes for the timely and ongoing grading of loans. The program shall, at a minimum, address, consider, and include:

 

  

  

  

 

(a)           Standards and criteria for assessing the credit quality of loans, including a discussion of the factors used to assign appropriate risk grades to loans;

 

(b)           procedures for the early identification of problem loans;

 

(c)           procedures to re-evaluate the grading of loans in the event of material changes in the borrower’s performance or the value of the collateral;

 

(d)           procedures to evaluate the grading of all loans assigned less than a pass grade at least quarterly;

 

(e)           designation of the person(s) responsible for the grading of loans;

 

(f)           controls to ensure staff’s consistent application and adherence to the loan grading system; and

 

(g)           a mechanism for reporting to senior management and the board of directors, at least monthly, that at a minimum: summarizes the Bank’s loan grades; describes trends in asset quality; identifies the loans that are nonperforming, adversely graded, or identified as needing special attention, describes the status of those loans, and describes the actions taken, or to be taken, by management for strengthening of the quality of any such loans.

 

Asset Improvement

 

6.           The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the combined report of inspection and examination conducted by the Reserve Bank that commenced on June 14, 2010 (the “Report of Examination”), or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof. The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying: (i) the Bank’s risk management policies and practices for loan workout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes the extension of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding credit and the extension of credit or renewal will be repaid according to its terms. The written certification shall be made a part of the minutes of the meetings of the board of directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information used in the determination, shall be retained by the Bank in the borrower’s credit file for subsequent supervisory review. For purposes of this Agreement, the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

 

  

  

  

 

7.           (a)         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan, relationship, or other asset in excess of $900,000, including other real estate owned (“OREO”), that are past due as to principal or interest more than 90 days as of the date of this Agreement, are on the Bank’s problem loan list, or were adversely classified in the Report of Examination.

 

(b)           Within 30 days of the date that any additional loan, relationship, or other asset in excess of $900,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank’s problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to improve the Bank’s position on such loan, relationship, or asset.

 

(c)           Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank and the Bureau to update each asset improvement plan, to include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank’s current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

 

Allowance for Loan and Lease Losses

 

8.           (a)         The Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank and the Bureau.

 

(b)           Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank and the Bureau. The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectability.

 

(c)           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the maintenance of an adequate ALLL. The program shall include policies and procedures to ensure adherence to the Bank’s revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate. The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions. The board of directors shall maintain written documentation of its review, including the factors considered and conclusions reached by the Bank in determining the adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau, within 30 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of the ALLL for that quarter.

 

  

  

  

 

Internal Audit

 

9.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable enhanced written internal audit program that shall, at a minimum, provide for:

 

(a)           Improved oversight of all aspects of the audit program by the board of directors’ audit committee;

 

(b)           completion, at least annually, of a written, board approved, risk-based audit plan that encompasses all appropriate areas of audit coverage;

 

(c)           controls to ensure audits are completed on a timely basis in accordance with the approved audit plan;

 

(d)           requirements for detailed, comprehensive audit reports and adequate work papers from the independent firm and/or staff;

 

(e)           timely distribution of audit reports to the audit committee;

 

(f)           timely resolution of audit findings and follow-up reviews to ensure completion of corrective measures; and

 

(g)           comprehensive tracking and reporting of the status and resolution of audit and examination findings to the audit committee.

Capital Plan

 

10.           Within 90 days of this Agreement, Bankshares shall submit to the Reserve Bank and the Bureau an acceptable written plan to maintain sufficient capital at Bankshares on a consolidated basis, and Bankshares and the Bank shall jointly submit to the Reserve Bank and the Bureau an acceptable written plan to maintain sufficient capital at the Bank, as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address, consider, and include:

 

(a)           Bankshares’ current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

 

(b)           the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

 

  

  

  

 

(c)           the adequacy of the Bank’s capital, taking into account the volume of classified assets, concentrations of credit, the adequacy of the ALLL, current and projected asset growth, projected earnings, and the results of the consolidated organization’s stress testing;

 

(d)           the source and timing of additional funds to fulfill Bankshares’ and the Bank’s future capital requirements; and

 

(e)           the requirements of section 225.4(a) of Regulation Y of the Board of Governors that Bankshares serve as a source of strength to the Bank.

 

11.           Bankshares and the Bank shall notify the Reserve Bank and the Bureau, in writing, no more than 30 days after the end of any calendar quarter in which any of Bankshares’ consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios. Together with the notification, the Bankshares and the Bank shall submit an acceptable written plan that details the steps Bankshares or the Bank, as appropriate, will take to increase Bankshares’ or the Bank’s capital ratios to or above the approved capital plan’s minimums.

 

Liquidity and Funds Management

 

12.           Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan designed to improve management of the Bank’s liquidity position and funds management practices. The plan shall, at a minimum, address, consider, and include measures to enhance the monitoring, measurement, and reporting of the Bank’s liquidity to the board of directors.

 

13.           Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable revised written contingency funding plan that, at a minimum, identifies available sources of liquidity and includes adverse scenario planning.

 

Investment Portfolio Management

 

14.           Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable revised written investment policy that shall, at a minimum, address, consider, and include:

 

(a)           A description of acceptable and unacceptable types of investments within the categories of permissible investments;

 

(b)           periodic review of the credit quality of nonrated securities;

 

(c)           enhancements to the pricing, analysis, support, and ongoing monitoring of investments; and

 

(d)           procedures to ensure the timely and accurate analysis and reporting of the Other Than Temporary Impairment calculation (“OTTI”) of the investment portfolio.

 

  

  

  

 

Information Technology

 

15.           Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program to strengthen information technology (“IT”). The program shall, at a minimum, address, consider, and include:

 

(a)           An enterprise-wide information security risk assessment, as required by Appendix D-2 to Regulation H of the Board of Governors (12 C.F.R. Part 208, App. D-2) and Appendix F to Regulation Y of the Board of Governors (12 U.S.C. Part 225, App. F), to enable the Bank to meet all applicable requirements for protecting nonpublic customer information and to assist the Bank in making future appropriate adjustments to its information security safeguards;

 

(b)           revised policies, procedures, and controls to address logical information security;

 

(c)           procedures and controls to strengthen the effectiveness and integrity of the Bank’s information security program; and

 

(d)           development of an information technology audit program.

 

Dividends and Distributions

 

16.           (a)         Bankshares and the Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the “Director”), and the Bureau.

 

(b)         Bankshares shall not directly or indirectly take any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank and the Bureau.

 

(c)           Bankshares and its nonbank subsidiary shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank, the Director, and the Bureau.

 

(d)           All requests for prior written approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at minimum, current and projected information, as appropriate, on Bankshares’ capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and ALLL needs; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, Bankshares and the Bank, as appropriate, must also demonstrate the requested declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323), and the provisions of Section 6.2-869 of the Code of Virginia.

 

Debt and Stock Redemption

 

17.           (a)         Bankshares and its nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank and the Bureau. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

 

  

  

  

 

(b)         Bankshares shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Bureau.

 

 Compliance with Laws and Regulations

 

18.           (a)         In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so the officer would assume a different senior executive officer position, Bankshares and the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

 

(b)           Bankshares and the Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

 

Compliance with the Agreement

 

19.           Within 30 days after the end of each calendar quarter following the date of this Agreement, Bankshares and the Bank shall submit to the Reserve Bank and the Bureau joint written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

 

Approval and Implementation of Plans, Programs, Policies, and Procedures

 

20.           (a)         The Bank and, as applicable, Bankshares, shall submit written plans, programs, policies, and procedures that are acceptable to the Reserve Bank and the Bureau within the applicable time periods set forth in paragraphs 3, 4, 5, 7(a), 7(b), 8(c), 9, 10, 12, 13, 14, and 15 of this Agreement.

 

(b)         Within 10 days of approval by the Reserve Bank and the Bureau, the Bank and, as applicable, Bankshares, shall adopt the approved plans, programs, policies, and procedures. Upon adoption, the Bank and, as applicable, Bankshares, shall promptly implement the approved plans, programs, policies, and procedures, and thereafter fully comply with them.

 

(c)         During the term of this Agreement, the approved plans, programs, policies, and procedures shall not be amended or rescinded without the prior written approval of the Reserve Bank and the Bureau.

 

Communications

 

21.           All communications regarding this Agreement shall be sent to:

 

  

  

  

 

	  	
(a)

	
Eugene W. Johnson, Jr.

	  	  	
Vice President

	  	  	
Federal Reserve Bank of Richmond P. O. Box 27622

	  	  	
Richmond, Virginia 23261-7622

	 	 	 
	  	
(b)

	
Mr. John M. Crockett

	  	  	
Deputy Commissioner

	  	  	
State Corporation Commission Bureau of Financial Institutions P.O. Box 640

	  	  	
Richmond, Virginia 23218

	 	 	 
	  	
(c)

	
Mr. Joe A. Shearin

	  	  	
President and Chief Executive Officer Eastern Virginia Bankshares, Inc.

	  	  	
EVB

	  	  	
320 Hospital Road

	  	  	
Tappahannock, Virginia 22560

Miscellaneous

 

22.           Notwithstanding any provision of this Agreement, the Reserve Bank and the Bureau may, in their sole discretion, grant written extensions of time to Bankshares and the Bank to comply with any provision of this Agreement.

 

23.           The provisions of this Agreement shall be binding upon Bankshares and the Bank and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

 

24.           Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank and the Bureau.

 

25.           The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, the Bureau, or any other federal or state agency from taking any other action affecting Bankshares and the Bank or any of their current or former institution-affiliated parties and their successors and assigns.

 

  

  

  

 

26.          Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818). This Agreement is enforceable by the Bureau under Chapter 8 (§ 6.2-800 et. seq.) of the Code of Virginia.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 17 of February, 2011.

 

 

	
EASTERN VIRGINIA BANKSHARES, INC.

	 	
FEDERAL RESERVE BANK

	
EVB

	 	
OF RICHMOND

	 	 	 
	 	 	 
	  	 	  	  
	  	 	  	  
	
By:  /s/ William Rand Cook

	 	
By:

	
/s/ Eugene W. Johnson, Jr.

	
William Rand Cook

	 	  	
Eugene W.  Johnson, Jr.

	
Chairman

	 	  	
Vice President

	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	  	 	
STATE CORPORATION

COMMISSION BUREAU OF

FINANCIAL INSTITUTIONS

	 	 	 
	 	 	 
	 	 	 
	  	 	
By:

	
/s/ John M. Crockett

	  	 	  	
John M. Crockett

	  	 	  	
Deputy Commissioner

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