EXHIBIT 99.1
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT is effective as of this 30th day of June, 2003 and is
entered into by and among NSD Bancorp, Inc. ("Corporation"), a Pennsylvania
business corporation having a place of business at 000 Xxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000, NorthSide Bank ("Bank"), a bank chartered under
the laws of the Commonwealth of Pennsylvania, having a place of business at 000
Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000, and Xxxxxx X. Xxxxxx
("Executive"), an adult individual residing at 000 Xxxxxxx Xxxxx, Xxxxxxxxxx, XX
00000, (collectively the "Parties" and, individually, sometimes a "Party").
WITNESSETH:
WHEREAS, the Executive is employed by the Corporation and Bank to serve in
the capacity of President and Chief Operating Officer; and
WHEREAS, this Agreement is intended to provide Executive with certain
benefits upon a Change of Control (as defined in Section 2(a)); and
WHEREAS, the purpose of this Agreement is to specify certain severance
benefits that the Corporation and/or Bank will pay to the Executive in the event
of a Change of Control (as defined in Section 2(a)), but is not intended to
affect, nor does it affect, the terms of employment of the Executive absent a
Change of Control (as defined in Section 2(a)) of the Corporation or Bank.
NOW THEREFORE, in consideration of the Executive's service to the
Corporation and Bank as well as of the mutual covenants, undertakings and
agreements set forth herein and intending to be legally bound hereby, the
Parties agree as follows:
1. TERM OF AGREEMENT.
(a) The term of this Agreement shall be effective as of the day and
year written above, and shall continue until either Executive, or
the Corporation, and Bank gives the other written notice of
termination of employment, with or without cause; provided,
however, that during the period of time between the execution of
an agreement to effect a Change of Control (as defined in Section
2(a)) and the actual Date of Change of Control (as defined in
Section 2(b)), termination of the Executive's employment,
demotion of the Executive, the removal of the Executive from
membership on the Corporation's and Bank's Boards of Directors
and/or reduction of the Executive's salary or benefits shall only
be for Cause (as defined in Section 1(b)).
(b) As used in this Agreement, "Cause" shall mean any of the
following:
(i) Executive's conviction of or plea of guilty or nolo
contendere to a felony, a crime of falsehood or a crime
involving moral turpitude, or the actual incarceration of
Executive for a period of time in excess of 30 days;
(ii) Executive's intentional failure to follow the good faith
lawful instructions of the Boards of Directors of the
Corporation or Bank with respect to their operations;
(iii) Executive's failure to perform Executive's duties to the
Corporation or Bank (other than a failure resulting from
Executive's incapacity because of physical or mental
illness), which failure results in monetary or other injury
to the Corporation or Bank and Executive fails to cure such
failure within fifteen (15) days following written notice
thereof by the Board of Directors;
(iv) gross negligence of the Executive in the performance of his
duties;
(v) Executive's breach of fiduciary duty involving personal
profit;
(vi) Executive's violation of any law, rule or regulation
governing banks or bank officers which is not insignificant
or any final cease and desist order issued by a bank
regulatory authority;
(vii) Executive's unlawful discrimination, including harassment,
against the Corporation's or Bank's employees, customers,
business associates, contractors, or visitors;
(viii) Executive's theft of the Corporation's or Bank's property
or the property of the Corporation's or Bank's customers,
employees, contractors, vendors, or business associates;
(ix) any final removal or prohibition order to which the
Executive is subject, by a federal banking agency pursuant
to Section 8(e) or 8(g) of the Federal Deposit Insurance Act
or by the Pennsylvania Department of Banking; or
(x) any act of fraud by Executive.
The Executive shall not be deemed to have been terminated, demoted, removed or
had his salary or benefits reduced for Cause unless and until he shall have
received a written notice of such from the Board, accompanied by a resolution
duly adopted by the affirmative vote of a majority of the entire Board at a
meeting called and held for such purpose (after reasonable notice to the
Executive and a reasonable opportunity for the Executive to make oral and
written presentations to the members of the Board, on his own behalf or through
a representative, who may be his legal counsel, to refute the grounds for the
proposed determination) finding that in the good faith opinion of the Board
grounds exist for such action. Provided however, that (i) at the discretion of
the Board, the effective date of termination, demotion, removal or reduction of
salary or benefits may relate back to the date of the written notice; and (ii)
the Board may during the period of time beginning with the written notice
contemplated in this section, until affirmative vote of a majority or the entire
Board, place the Executive on suspension with pay without such action being
deemed to be a termination, demotion, removal or reduction of salary or
benefits.
2
2. CHANGE OF CONTROL.
(a) As used in this Agreement, "Change of Control" shall mean the
occurrence of any of the following:
(i) (A) a merger, consolidation or division involving
Corporation or Bank, (B) a sale, exchange, transfer or other
disposition of substantially all of the assets of
Corporation or Bank, or (C) a purchase by Corporation or
Bank of substantially all of the assets of another entity,
unless (y) such merger, consolidation, division, sale,
exchange, transfer, purchase or disposition is approved in
advance by seventy percent (70%) or more of the members of
the Boards of Directors of the Corporation and Bank who are
not interested in the transaction and (z) a majority of the
members of the Board of Directors of the legal entity
resulting from or existing after any such transaction and of
the Board of Directors of such entity's parent corporation,
if any, are former members of the Board of Directors of
Corporation or the Bank, as the case may be; or
(ii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), other than Corporation or Bank or any "person" who on
the date hereof is a director or officer of Corporation or
Bank is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of Corporation or Bank representing
twenty-five percent (25%) or more of the combined voting
power of Corporation's or Bank's then outstanding
securities, or
(iii) during any period of two (2) consecutive years during the
term of this Agreement, individuals who at the beginning of
such period constitute the Board of Directors of Corporation
or Bank cease for any reason to constitute at least a
majority thereof, unless the election of each director who
was not a director at the beginning of such period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were
directors at the beginning of the period; or
(iv) any other change in control of Corporation or Bank similar
in effect to any of the foregoing.
3
(b) For purposes of this Agreement, the "Date of Change of Control"
shall mean:
(i) the first date on which a "person" or group of "persons" (as
such term is used in Sections 13(d), and 14(d) of the
Exchange Act,) acquire the beneficial ownership of
twenty-five (25%) percent or more of the Corporation's or
Bank's voting securities;
(ii) the date of the closing of a transaction transferring all or
substantially all of the Corporation's or Bank's assets or
by which the Corporation or Bank acquires substantially all
of the assets of another entity;
(iii) the date on which a merger, consolidation or business
combination becomes effective; or
(iv) the date on which individuals that formerly constituted a
majority of the Board of Directors of the Corporation or
Bank as contemplated by Section 2(a)(iii) above, cease to be
a majority.
3. RIGHTS IN THE EVENT OF A CHANGE OF CONTROL.
(a) If during the period of time between the execution of an
agreement to effect a Change of Control and the actual Date of
the Change of Control Executive's employment is terminated for
Cause, then all rights of the Executive under this Agreement
shall cease as of the effective date of such termination, except
that Executive (i) shall be entitled to receive accrued salary
through the date of such termination and (ii) shall be entitled
to receive the payments and benefits to which he is then entitled
under the employee benefit plans of the Corporation or Bank as of
the date of such termination.
(b) If a Change of Control occurs and the Executive was not
terminated for Cause prior to the Date of the Change of Control
or if during the period of time between the execution of an
agreement to effect a Change of Control and the actual Date of
Change of Control Executive's employment was terminated, he was
demoted, he was removed from membership on the Corporation's or
Bank's Board of Directors, or his salary or benefits were
reduced, other than for Cause, then the Executive shall be paid a
lump sum cash payment as of the Date of Change of Control equal
to two (2) times the Executive's then current Annual Direct
Salary (as defined herein) plus two (2) times either (w) if the
Date of Change of Control occurs on or prior to September 30th,
100% of the bonus and incentive compensation paid to the
Executive for the prior calendar year or (x) if the Date of
Change of Control occurs subsequent to September 30th, the
projected annualized bonus and incentive compensation to be paid
to the Executive for the current calendar year, provided that the
Date of Change of Control occurs within the first three (3) years
following the date of this Agreement. If the Date of Change of
Control occurs after the first three (3) years following the date
of this Agreement, then the Executive shall be paid a lump sum
cash payment as of the Date of Change of Control equal to two and
one-half (2.5) times the Executive's then current Annual Direct
Salary plus two and one-half (2.5) times either (y) if the Date
of Change of Control occurs on or prior to September 30th, 100%
of the bonus and incentive compensation paid to the Executive for
the prior calendar year or (z) if the Date of Change of Control
occurs subsequent to September 30th, the projected annualized
bonus and incentive compensation to be paid to the Executive for
the current calendar year.
4
In addition, notwithstanding the payments to the Executive
contemplated by this Section 3(b) and possibly Section 5 hereof,
if the Executive is requested by the Corporation, Bank or a
successor thereto to remain in the employ of the Corporation,
Bank or a successor thereto following the Date of Change of
Control, the Executive expressly agrees, subject to the condition
set forth below, to remain in the employ of the Corporation,
Bank, or successor for not less than six months following the
Date of Change of Control. The Corporation, Bank or successor
thereto shall have the right to request the Executive remain in
the employ of the Corporation, Bank, or successor for a period of
less than six months following the Date of Change of Control. The
Executive agrees to remain an employee of the Corporation, Bank,
or successor pursuant to their request conditioned upon the
Executive being compensated in the same amount and on the same
terms as he was compensated immediately prior to the Date of
Change of Control, including participation in all employee
benefit plans to which he would otherwise be entitled.
The Corporation, Bank or successor thereto shall maintain and
provide for a period of twenty four (24) months following the
later of (i) the Date of Change of Control or (ii) the
termination of any continued employment by the Executive
following the Date of Change of Control as contemplated by the
preceding paragraph, in any event not to exceed thirty (30)
months, at no cost to the Executive, the Executive's continued
participation in all group insurance, life insurance, health and
accident, disability and other employee benefit plans, programs
and arrangements in which the Executive was entitled to
participate immediately prior to the Date of Change of Control.
However, in the event the Executive's participation in any plan,
program or arrangement is barred or discontinued or the benefits
thereunder are materially reduced, the Corporation and Bank shall
arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive
under such plans, programs and arrangements immediately prior to
the Date of Change of Control at the Corporation's and Bank's
sole expense, provided, however, that the Corporation's and
Bank's obligation to provide the Executive with substantially
similar benefits in such events shall not be interpreted as
requiring the Corporation or Bank to pay a premium or otherwise
expend funds to secure such benefit which would exceed 120% of
the premium or other expenditure which the Corporation or Bank
was paying or expending immediately prior to the Date of Change
of Control for such plan, program or arrangement.
5
In the event a payment is due pursuant to this Agreement and the
Bank is subject to 12 C.F.R. Part 359, the Bank shall receive the
prior written consent of the Federal Deposit Insurance
Corporation prior to being obligated to make any payments. In
such event, the Bank shall, in good faith, request the prior
written consent of the Federal Deposit Insurance Corporation.
Executive shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment
or otherwise. Unless otherwise agreed to in writing, the amount
of payment provided for in this Section shall not be reduced by
any compensation earned by Executive as the result of employment
by another employer or by reason of Executive's receipt of or
right to receive any retirement or other benefits after the date
of termination of employment or otherwise.
4. DEFINITION OF "ANNUAL DIRECT SALARY". For purposes of this Agreement,
"Annual Direct Salary" shall be defined as the Executive's fixed,
gross, base annual salary then in effect as determined by the Board
from time to time and shall not include any benefits, bonuses,
incentives or other compensation.
5. ADDITIONAL BENEFITS UNDER CERTAIN CIRCUMSTANCES
(a) If the payments and benefits pursuant to Section 3 hereof, either
alone or together with other payments and benefits which the
Executive has the right to receive from the Corporation and Bank
would constitute a "parachute payment" as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") (the "Initial Parachute Payment"), then the Corporation
and Bank shall pay to the Executive in a lump sum on the Date of
Change of Control, a cash amount equal to the sum of the
following:
(i) ten (10) percent (or such other percentage equal to one-half
of the tax rate imposed by Section 4999 of the Code) of the
amount by which the Initial Parachute Payment exceeds the
Executive's "base amount" from the Corporation and Bank, as
defined in Section 280G(b)(3) of the Code, with the
difference between the Initial Parachute Payment and the
Executive's base amount being hereinafter referred to as the
"Initial Excess Parachute Payment"; and
6
(ii) such additional amount (tax allowance) as may be necessary
to compensate the Executive for the payment by the Executive
of all applicable federal, state and local income and excise
taxes on the payment provided under clause (i) above and on
any payments under this clause (ii). In computing such tax
allowance, the payment to be made under clause (i) above
shall be multiplied by the "gross up percentage" ("GUP").
The GUP shall be determined as follows:
-------- ---------------
Tax Rate
GUP = ---------------
1- Tax Rate
-------- ---------------
The Tax Rate for purposes of computing the GUP shall be the
highest marginal federal, state and local income and
employment-related tax rate, including any applicable excise
tax rate, applicable to the Executive in the year in which
the payment under clause (i) above is made.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final
administrative settlement to which the Executive is a party that
the actual excess parachute payment as defined in Section
280G(b)(1) of the Code is different from the Initial Excess
Parachute Payment (such different amount being hereafter referred
to as the "Determinative Excess Parachute Payment"), then the
Corporation's and Bank's independent tax counsel or accountants
shall determine the amount (the" Adjustment Amount") which either
the Executive must pay to the Corporation and Bank or the
Corporation and Bank must pay to the Executive in order to put
the Executive (or the Corporation and Bank, as the case may be)
in the same position the Executive (or the Corporation and Bank,
as the case may be) would have been if the Initial Excess
Parachute Payment had been equal to the Determinative Excess
Parachute Payment. In determining the Adjustment Amount, the
independent tax counsel or accountants shall take into account
any and all taxes (including any penalties and interest) paid by
or for the Executive or refunded to the Executive or for the
Executive's benefit. As soon as practicable after the Adjustment
Amount has been so determined, the Corporation and Bank shall pay
the Adjustment Amount to the Executive or the Executive shall
repay the Adjustment Amount to the Corporation and Bank, as the
case may be.
7
(c) Notwithstanding anything in this Section 5 to the contrary, the
payment contemplated by this Section 5 shall be made provided the
amount of the Initial Parachute Payment equals or exceeds 3.1
times the Executive's "base amount" from the Corporation and
Bank, as defined in Section 280G(b)(3) of the Code. If the
Initial Parachute Payment does not equal or exceed 3.1 times the
Executive's base amount, as defined, such payment shall be
reduced, as determined by the Executive, to the extent necessary
to avoid the imposition of an excise tax pursuant to Section 4999
of the Code.
6. UNAUTHORIZED DISCLOSURE. During the term of his employment, or at any
later time, the Executive shall not, without the written consent of
the Boards of Directors of Corporation and Bank or a person authorized
thereby, knowingly use or disclose to any person, other than an
employee of the Corporation and Bank or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance
by the Executive of his duties as an executive of Corporation and
Bank, any material confidential information obtained by him while in
the employ of Corporation or Bank with respect to any of the services,
products, improvements, formulas, designs or styles, processes,
customers, customer lists, methods of business or any business
practices of Corporation, Bank, or their subsidiaries or affiliates,
the disclosure of which could be or will be damaging to Corporation,
Bank, or its subsidiaries and affiliates; provided, however, that
confidential information shall not include any information known
generally to the public (other than as a result of unauthorized
disclosure by the Executive or any person with the assistance, consent
or direction of the Executive) or any information of a type not
otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by Bank or its
subsidiaries or affiliates or any information that must be disclosed
as required by law.
7. NO EMPLOYMENT CONTRACT. This Agreement is not an employment contract.
Nothing contained herein shall guarantee or assure Executive of
continued employment by Corporation or Bank.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
8
If to the Corporation: Xx. Xxxxxxxx X. Xxxx
Chairman of the Board of Directors
NorthSide Bank
0000 XxXxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
or to such other address as Executive, Corporation or Bank may have
furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon the Corporation, Bank and Executive,
their respective personal representatives, heirs or successors,
provided, however, that the Executive may not commute, anticipate,
encumber, dispose or assign any payment herein except as specifically
set forth in Section 12 of this Agreement.
10. SEVERABILITY. If any provision of this Agreement is declared
unenforceable or invalid for any reason, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full
force and effect.
11. WAIVER; AMENDMENT. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge
is agreed to in writing and signed by Executive and an executive
officer specifically designated by the Boards of Directors of
Corporation and Bank. No waiver by either party, at any time, of any
breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. This Agreement may be
amended or canceled only by mutual agreement of the parties in
writing.
12. PAYMENT OF MONEY DUE DECEASED EXECUTIVE. In the event of Executive's
death, any monies that may be due him from the Corporation or Bank
under this Agreement as of the date of death or thereafter, shall be
paid to the person designated by him in writing for this purpose, or,
in the absence of any such designation, to his estate.
13. LIMITATION OF DAMAGES FOR BREACH OF THIS AGREEMENT. In the event of a
breach of this Agreement, by either the Corporation or Bank on the one
hand or Executive on the other hand, each hereby (i) waives to the
fullest extent permitted by law, the right to assert any claim against
the others for punitive or exemplary damages and (ii) agrees that the
non-breaching Party shall be entitled to the recovery of reasonable
attorney's fees and costs (not to exceed $20,000) incurred in
enforcing such Party's rights hereunder.
9
14. ARBITRATION. Corporation, Bank and Executive recognize that in the
event a dispute should arise between them concerning the
interpretation or implementation of this Agreement, lengthy and
expensive litigation will not afford a practical resolution of the
issues within a reasonable period of time. Consequently, each party
agrees that all disputes, disagreements and questions of
interpretation concerning this Agreement are to be submitted for
resolution, in Pittsburgh, Pennsylvania or as mutually agreed upon by
the parties, to the American Arbitration Association (the
"Association") in accordance with the Association's National Rules for
the Resolution of Employment Disputes or other applicable rules then
in effect ("Rules"). Corporation, Bank or Executive may initiate an
arbitration proceeding at any time by giving notice to the other in
accordance with the Rules. Corporation, Bank and Executive may, as a
matter of right, mutually agree on the appointment of a particular
arbitrator from the Association's pool. The arbitrator shall not be
bound by the rules of evidence and procedure of the courts of the
Commonwealth of Pennsylvania, but shall be bound by the substantive
law applicable to this Agreement. The decision of the arbitrator,
absent fraud, duress, incompetence or gross and obvious error of fact,
shall be final and binding upon the parties and shall be enforceable
in courts of proper jurisdiction. Following written notice of a
request for arbitration, Corporation, Bank and Executive shall be
entitled to an injunction restraining all further proceedings in any
pending or subsequently filed litigation concerning this Agreement,
except as otherwise provided herein.
15. LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without
regard to its conflicts of law principles.
16. HEADINGS. The section headings of this Agreement are for convenience
only and shall not control or affect the meaning or construction or
limit the scope or intent of any of the provisions of this Agreement.
17. ENTIRE AGREEMENT. This Agreement supersedes any and all prior
agreements, either oral or in writing, between the Parties with
respect to the subject matter hereof and this Agreement contains all
the covenants and agreements between the Parties with respect to same.
IN WITNESS WHEREOF, the Parties, intending to be legally bound hereby, have
caused this Agreement to be duly executed in their respective names and, in the
case of the Corporation or Bank by its authorized representatives the day and
year above mentioned.
ATTEST: NSD, Bancorp, Inc.
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxxx X. Xxxx
-------------------------- By ----------------------------------------
Xxxxxxxx X. Xxxx, Chairman, Board of Directors
ATTEST: NorthSide Bank
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxxx X. Xxxx
-------------------------- By ---------------------------------------
Xxxxxxxx X. Xxxx, Chairman, Board of Directors
WITNESS: EXECUTIVE:
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxx
-------------------------- By ---------------------------------------
Xxxxxx X. Xxxxxx
10
