AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT
10.2
AMENDED
AND RESTATED
This
Amended and Restated EMPLOYMENT AGREEMENT (this “Agreement") is made and entered
into as of November 15, 2007 by and among Keystone Nazareth Bank &
Trust Company (the “Bank”), KNBT Bancorp, Inc. (the “Company”) (the Bank and the
Company are collectively referred to as the “Employer”), and Xxxxxx X. Xxxxx
(the "Executive").
W
I T N E
S S E T H :
WHEREAS,
the Executive is currently employed as the Senior Executive Vice President,
Chief Financial Officer and Treasurer of the Company and the Bank pursuant
to an
amended and restated employment agreement between the Company, the Bank and
the
Executive effective December 28, 2006 (the “Prior
Agreement”);
WHEREAS,
the Company and the Bank desire to amend and restate the Prior Agreement in
order to make changes to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”);
WHEREAS,
the Employer desires to ensure that the Company and the Bank are assured of
the
continued availability of the Executive's services as provided in this
Agreement; and
WHEREAS,
the Executive is willing to serve the Company and the Bank on the terms and
conditions hereinafter set forth.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
conditions hereinafter set forth, the Employer and the Executive hereby agree
as
follows:
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SECTION
1.
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EFFECTIVE
DATE; EMPLOYMENT.
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For
purposes of this Agreement, “Effective Date” shall mean December 31, 2004,
provided that this amendment and restatement shall be effective as of
the date first written above. The Employer agrees to employ the
Executive, and the Executive hereby agrees to such employment, during the period
and upon the terms and conditions set forth in this Agreement.
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SECTION
2.
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EMPLOYMENT
PERIOD.
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(a)
The terms and conditions of this Agreement shall be and remain in effect through
December 31, 2009 (the "Employment Period").
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(b)
Nothing in this Agreement shall be deemed to prohibit the Employer at any time
from terminating the Executive's employment during the Employment Period for
any
reason upon at least 30 days written notice to the Executive, other than
termination for Cause which shall be governed by Section 10 hereof, provided
that the relative rights and obligations of the Employer and the Executive
in the event of any such termination shall be determined under this
Agreement.
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SECTION
3.
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DUTIES.
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Throughout
the Employment Period, the Executive shall serve as the Senior Executive Vice
President, Chief Financial Officer and Treasurer of each Employer, having such
power, authority and responsibility and performing such duties as are prescribed
by or under the Bylaws of each of the Company and the Bank and as are
customarily associated with such positions. The Executive shall
devote his full business time, attention, skills and efforts (other than during
weekends, holidays, vacation periods, and periods of illness or leaves of
absence and other than as permitted or contemplated by Section 7 hereof) to
the
business and affairs of the Employer and shall use his best efforts to advance
the interests of the Employer.
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SECTION
4.
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CASH
AND OTHER COMPENSATION.
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(a)
In consideration for the services to be rendered by the Executive hereunder,
the
Employer shall pay to him a salary of two hundred sixty-two thousand and six
hundred fifty dollars ($262,650) annually (“Base Salary”). The
Executive's Base Salary shall be payable in approximately equal installments
in
accordance with the Company’s and the Bank’s customary payroll practices for
senior officers. Base Salary shall include any amounts of
compensation deferred by the Executive under any tax-qualified retirement or
welfare benefit plan or any other deferred compensation
arrangement. The Board of Directors of the Company (the “Company
Board”) and the Board of Directors of the Bank (the “Bank Board”) shall review
the Executive's annual rate of salary at such times during the Employment Period
as they deem appropriate, but not less frequently than once every twelve months,
and may, in their respective discretion, approve an increase
therein. In addition to salary, the Executive may receive other cash
compensation from the Employer for services hereunder at such times, in such
amounts and on such terms and conditions as the Company Board or the Bank Board
may determine from time to time. Any increase in the Executive’s
annual salary shall become the Base Salary of the Executive for purposes
hereof. The Executive’s Base Salary as in effect from time to time
cannot be decreased by the Employer without the Executive’s express prior
written consent.
(b)
The Executive shall be entitled to participate in an equitable manner with
all
other executive officers of the Employer in discretionary bonuses as authorized
by the Company Board and/or the Bank Board to executive officers. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive’s right to participate in such bonuses when and as declared by
the Company Board and/or the Bank Board.
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SECTION
5.
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EMPLOYEE
BENEFIT PLANS AND PROGRAMS.
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(a)
During the Employment Period, the Executive shall be treated as an employee
of
the Company and the Bank and shall be entitled to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings or profit-sharing plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans, and any other employee benefit and compensation
plans (including, but not limited to, any incentive compensation plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover employees of, the Company
and the Bank, in accordance with the terms and conditions of such employee
benefit plans and programs and compensation plans and programs and consistent
with the Company's and the Bank’s customary practices. The level of
participation in any restricted stock plan shall be at a level which is deemed
appropriate by the Company Board or the committee that administers such
plan. Nothing paid to the Executive under any such plan or program
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(b)
During the Employment Period, the Employer shall provide the Executive with
an
automobile allowance equal to $900 per month, payable monthly.
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SECTION
6.
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INDEMNIFICATION
AND INSURANCE.
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(a)
During the Employment Period and for a period of six years thereafter, the
Employer shall cause the Executive to be covered by and named as an insured
under any policy or contract of insurance obtained by them to insure their
directors and officers against personal liability for acts or omissions in
connection with service as an officer or director of the Employer or service
in
other capacities at the request of the Employer. The coverage
provided to the Executive pursuant to this Section 6 shall be of the same scope
and on the same terms and conditions as the coverage (if any) provided to other
officers or directors of the Employer or any successors.
(b)
To the maximum extent permitted under applicable law, the Employer shall
indemnify the Executive against and hold him harmless from any costs,
liabilities, losses and exposures that may be incurred by the Executive in
his
capacity as a director or officer of the Employer or any subsidiary or
affiliate.
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SECTION
7.
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OUTSIDE
ACTIVITIES.
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The
Executive may (a) serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by the Employer (which approval shall not be unreasonably withheld),
and (b) perform duties as a trustee or personal representative or in any other
fiduciary capacity, provided that in each case such service shall not
materially interfere with the performance of his duties under this Agreement
or
present any conflict of interest. The Executive may also engage in
personal business and investment activities which do not materially interfere
with the performance of his duties hereunder, provided that such
activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Employer and generally applicable
to all similarly situated executives. If the Executive is discharged or
suspended, or is subject to any regulatory prohibition or restriction with
respect to participation in the affairs of the Bank, he shall continue to
perform services for the Company in accordance with this Agreement but shall
not
directly or indirectly provide services to or participate in the affairs of
the
Bank in a manner inconsistent with the terms of such discharge or suspension
or
any applicable regulatory order.
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SECTION
8.
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WORKING
FACILITIES AND EXPENSES.
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It
is understood by the parties that the Executive's principal place of employment
shall be at the Employer's principal executive office located in Bethlehem,
Pennsylvania, or at such other location within 25 miles of
the address of such principal executive office, or at such other location as
the
Employer and the Executive may mutually agree upon. The Employer
shall provide the Executive at his principal place of employment with a private
office, secretarial services and other support services and facilities suitable
to his position with the Employer and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement. The
Employer shall reimburse the Executive for his ordinary and necessary business
expenses attributable to the Employer’s business, including, without limitation,
the Executive's travel and entertainment expenses incurred in connection with
the performance of his duties for the Employer under this Agreement, in each
case upon presentation to the Employer of an itemized account of such expenses
in such form as the Employer may reasonably require. Such reimbursement shall
be
paid promptly by the Employer and in any event no later than March 15 of the
year immediately following the year in which such expenses were
incurred.
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SECTION
9.
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TERMINATION
OF EMPLOYMENT WITH BENEFITS.
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(a)
The Executive shall be entitled to the benefits described in Section 9(b) in
the
event that either prior to a Change in Control or more than two years after
a
Change in Control as defined in Section 11(a):
(i)
his employment with the Employer
terminates during the Employment Period as a result of the Executive's
termination for Good Reason (as defined in Section 9(a)(i)(A) and (B) of this
Agreement), which shall mean a termination based on the following:
(A)
any material breach of this Agreement by either Employer,
including, without limitation any of the following: (1) a
material diminution in the Executive’s base compensation, (2) a material
diminution in the Executive’s authority, duties or responsibilities as
prescribed in Section 3, or (3) a material diminution in the authority, duties
or responsibilities of the officer to whom the Executive is required to report,
or
(B)
any material change in the geographic location at which the Executive must
perform his services under this Agreement;
provided,
however, that prior to any termination of employment for Good Reason, the
Executive must first provide written notice to each Employer within ninety
(90)
days of the initial existence of the condition, describing the existence of
such
condition, and the Employer shall thereafter have the right to remedy the
condition within thirty (30) days of the date the Employer received the written
notice from the Executive. If the Employer remedies the condition
within such thirty (30) day cure period, then no Good Reason shall be deemed
to
exist with respect to such condition. If the Employer does not remedy
the condition within such thirty (30) day cure period, then the Executive may
deliver a notice of termination for Good Reason at any time within sixty (60)
days following the expiration of such cure period; or
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(ii)
the
Executive's employment with the Employer is terminated by the Employer during
the Employment Period for any reason other than for "cause," death or
“Disability,” as provided in Section 10(a).
(b)
Upon the termination of the Executive’s employment pursuant to Section 9(a) of
this Agreement either prior to a Change in Control as defined in Section 11(a)
or more than two years after a Change in Control, the Employer shall pay and
provide to the Executive (or, in the event of his subsequent death, to his
estate):
(i)
his
earned but unpaid Base Salary (including, without limitation, all items which
constitute wages under applicable law and the payment of which is not otherwise
provided for in this Section 9(b)) as of the date of the termination of his
employment, with such payment to be made at the time and in the manner
prescribed by law applicable to the payment of wages but in no event later
than
30 days after termination of employment;
(ii)
the
benefits, if any, to which he is entitled under the employee benefit plans
and
programs and compensation plans and programs maintained for the benefit of
the
Company's and the Bank’s officers and employees through the date of the
termination of his employment;
(iii)
continued group life, health, dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to Section 9(b)(ii),
and after taking into account the coverage provided by any subsequent employer,
if and to the extent necessary to provide for the Executive, for
the period beginning on the date on which his employment terminates
and ending on the earlier of (A) the last day of the Employment Period (the
“Remaining Employment Period”) or (B) 24 months from the date of termination
(with such lesser period being the “Coverage Period”), coverage equivalent to
the coverage to which he would have been entitled under such plans if he had
continued to be employed during such period; provided that any insurance
premiums payable by the Employer or any successors pursuant to this Section
9(b)(iii) shall be payable at such times and in such amounts as if the Executive
was still an employee of the Employer, subject to any increases in such amounts
imposed by the insurance company or COBRA, and the amount of insurance premiums
required to be paid by the Employer in any taxable year shall not affect the
amount of insurance premiums required to be paid by the Employer in any other
taxable year; and
provided further that if the participation of the Executive or other covered
dependents in any group insurance plan is barred, the Employer shall either
arrange to provide such persons with insurance benefits substantially similar
to
those which the Executive was entitled to receive under such group insurance
plan or, if such coverage cannot be obtained, pay a lump sum cash equivalency
amount within thirty (30) days following the Date of Termination based on the
annualized rate of premiums being paid by the Employer as of the date of
termination of employment.
(iv)
(A)
if his termination occurs prior to June 1, 2009, within 30 days following the
date on which his employment terminates, a lump sum payment equal to two times
the Executive’s aggregate taxable income from the Employer reported on the Form
W-2 (excluding any income related to stock options) for the calendar year
preceding the year in which the date of termination occurs, with such lump
sum
to be paid in lieu of all other payments of Base Salary or bonuses provided
for
under this Agreement in respect of the Coverage Period; or
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(B)
if his termination occurs after May
31, 2009, within 30 days following the date on which his employment terminates,
a lump sum payment, in an amount equal to the sum of the present value of
the:
(i) Base
Salary that the Executive would have earned if he had continued to be employed
during the Coverage Period at the highest annual rate of Base Salary achieved
during the Employment Period, with such present value to be determined using
a
discount rate equal to the applicable short-term federal rate prescribed under
Section 1274(d) of the Code, compounded using the compounding periods
corresponding to the Company's and the Bank’s regular payroll periods for their
officers, and with such lump sum to be paid in lieu of all other payments of
Base Salary provided for under this Agreement in respect of the Coverage Period;
and
(ii) payments
that would have been made to the Executive under any cash bonus or long-term
or
short-term cash incentive compensation plan maintained by, or covering employees
of, the Company and the Bank if he had continued to be employed during the
Coverage Period and had earned in each calendar year that ends during the
Coverage Period a bonus or incentive award that equals the highest annual bonus
or incentive award paid to the Executive during the preceding 36 calendar
months, with the present value of such payments to be determined using a
discount rate equal to the applicable short-term federal rate prescribed under
Section 1274(d) of the Code, compounded using the compounding periods
corresponding to the Company’s and the Bank’s schedule of paying
bonuses;
(v)
within 30 days following the date on which his employment terminates, a lump
sum
payment in an amount equal to the excess, if any, of:
(A)
the present value of the aggregate
benefits to which he would be entitled under any and all qualified defined
benefit pension plans and non-qualified plans related thereto maintained by,
or
covering employees of, the Company and the Bank if he were 100% vested
thereunder and had continued to be employed during the Coverage Period at the
highest annual rate of Base Salary achieved during the Employment Period;
over
(B)
the present value of the benefits
to which he is actually entitled under such defined benefit pension plans as
of
the date on which his employment terminates;, with such present
values to be determined using the mortality tables prescribed under Section
415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly, equal
to
the annualized rate of interest prescribed by the Pension Benefit Guaranty
Corporation for the valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which the Executive's
employment terminates ("Applicable PBGC Rate");
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(vi)
within 30 days following the date on which his employment terminates, a lump
sum
payment in an amount equal to the present value of the additional employer
contributions to which he would have been entitled under any and all qualified
defined contribution plans and non-qualified plans related thereto maintained
by, or covering employees of, the Company and the Bank as if he were 100% vested
thereunder and had continued to be employed during the Coverage Period at the
highest annual rate of Base Salary achieved during the Employment Period and
making the maximum amount of employee contributions, if any, required or
permitted under such plan or plans, with such present value to be determined
on
the basis of a discount rate, compounded using the compounding period that
corresponds to the frequency with which employer contributions are made to
the
relevant plan, equal to the applicable short-term federal rate prescribed under
Section 1274(d) of the Code, provided that no payments shall be made pursuant
to
this subsection (vi) with respect to the Company’s Employee Stock Ownership Plan
(“ESOP”) if the ESOP is terminated effective as of a date within one
year of the date of the termination of the Executive’s employment, with the
Executive to reimburse the Employer for any such payments previously made within
30 days of the Executive’s receipt of a request for reimbursement from the
Employer;
(vii)
for
the first year following the date on which his employment terminates,
reimbursement for all reasonable expenses incurred by the Executive in
connection with the search for new employment, including without limitation
those of a placement agency or service, and reimbursement for all reasonable
relocation expenses incurred by the Executive in connection with securing new
employment, with such expenses to be reimbursed promptly by the Employer and
in
any event no later than March 15 of the year immediately following the year
in
which such expenses were incurred; provided, however, that the amounts payable
by the Employer pursuant to this subsection (viii) shall not exceed $25,000;
and
(viii)
within 30 days following the date on which his employment terminates, upon
the
surrender of then outstanding options or appreciation rights (other than options
or appreciation rights which do not, by their terms, vest in the event of a
Change in Control as defined in Section 11(a) hereof) previously issued to
the
Executive under any stock option and appreciation rights plan or program
maintained by, or covering employees of, the Employer, a lump sum payment in
an
amount equal to the product of:
(A)
the excess of (I) the fair market
value of a share of stock of the same class as the stock subject to the option
or appreciation right, determined as of the date on which his employment
terminates, over (II) the exercise price per share for such option or
appreciation right, as specified in or under the relevant plan or program;
multiplied by
(B)
the number of shares with respect
to which options or appreciation rights are being surrendered.
The
Employer and the Executive agree that the Employer may condition the payments
and benefits (if any) due under Sections 9(b)(iii), (iv), (v), (vi) and (vii)
on
the receipt of the Executive's resignation from any and all positions which
he
holds as an officer, director or committee member with respect to the Employer
or any of its subsidiaries or affiliates.
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(c) In
the event the Executive’s employment is terminated by voluntary resignation
(including voluntary retirement) subsequent to January 1, 2009 but before the
end of the Employment Period other than pursuant to Section 9(a) and such
termination occurs either before a Change in Control as defined in Section
11(a)
or more than two years after a Change in Control, the Employer shall pay and
provide to the Executive (or, in the event of his subsequent death, to his
estate):
(i) his
earned but unpaid Base Salary as of the date of the termination of
his employment, with such payment to be made at the time and in the manner
prescribed by law applicable to the payment of wages but in no event later
than
30 days after termination of employment;
(ii) the
benefits, if any, to which he is entitled under the employee benefit plans
and
programs and compensation plans and programs maintained for the benefit of
the
Company's and the Bank’s officers and employees through the date of the
termination of his employment;
(iii) in
eighteen (18) equal monthly installments beginning with the first business
day
of the month following the Executive’s termination of employment an aggregate
amount equal to 1.125 times his Base Salary as in effect immediately prior
to
his termination; provided that if the Executive is a “Specified Employee” (as
defined in Section 409A of the Code and the regulations thereunder) as of the
date of termination of his employment, then the monthly installments shall
not
commence until the first business day of the month following the lapse of six
months from the date of termination of employment (the “Delayed Payment Date”),
with the monthly installments that would have been paid prior to the Delayed
Payment Date absent the six-month delay required by Section 409A of the Code
to
be aggregated and included in the payment made on the Delayed Payment Date
and
to be counted toward the total of eighteen (18) monthly installments;
and
(iv) continued
group health and dental insurance benefits at the same level as in effect as
of
the date of termination of employment for a period of eighteen (18) months
beginning on the date his employment terminates; provided that any insurance
premiums payable by the Employer or any successors pursuant to this Section
9(c)(iv) shall be payable at such times and in such amounts as if the Executive
was still an employee of the Employer, subject to any increases in such amounts
imposed by the insurance company or COBRA, and the amount of insurance premiums
required to be paid by the Employer in any taxable year shall not affect the
amount of insurance premiums required to be paid by the Employer in any other
taxable year; and
provided further that if the participation of the Executive or other covered
dependents in any group insurance plan is barred, the Employer shall either
arrange to provide such persons with insurance benefits substantially similar
to
those which the Executive was entitled to receive under such group insurance
plan or, if such coverage cannot be obtained, pay a lump sum cash equivalency
amount within thirty (30) days following the Date of Termination based on the
annualized rate of premiums being paid by the Employer as of the date of
termination of employment.
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SECTION
10.
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TERMINATION
WITHOUT ADDITIONAL EMPLOYER
LIABILITY.
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(a) In
the event that the Executive's employment with the Employer shall terminate
during the Employment Period on account of:
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(i)
the discharge of the Executive for "cause," which, for purposes of this
Agreement, shall mean a discharge because either the Company Board or the Bank
Board determines that the Executive has: (A) willfully failed to perform his
assigned duties under this Agreement, other than any failure resulting from
the
Executive’s incapacity due to physical or mental impairment; (B) committed an
act involving moral turpitude in the course of his employment with the Employer
and its subsidiaries; (C) engaged in willful misconduct; (D) breached his
fiduciary duties for personal profit; (E) willfully violated, in any material
respect, any law, rule or regulation (other than traffic violations or similar
offenses), written agreement or final cease-and-desist order with respect to
his
performance of services for the Company or the Bank, as determined by the
Company Board or the Bank Board; or (F) materially breached the terms of this
Agreement and failed to cure such material breach during a 15-day period
following the date on which the Company Board or the Bank Board gives written
notice to the Executive of the material breach;
(ii) the
Executive's voluntary resignation from employment (including voluntary
retirement) with the Company and the Bank for reasons other than Good Reason
as
specified in Section 9(a)(i) and other than pursuant to the provisions of
Section 9(c); or
(iii)
the death of the Executive while employed by the Employer, or the termination
of
the Executive's employment because of "Disability" as defined in Section 10(c)
below;
then
in
any of the foregoing events, the Employer shall have no further obligations
under this Agreement, other than (A) the payment to the Executive of his earned
but unpaid Base Salary as of the date of the termination of his employment,
(B)
the payment to the Executive of the benefits to which he is entitled under
all
applicable employee benefit plans and programs and compensation plans and
programs, and (C) the provision of such other benefits, if any, to which he
is
entitled as a former employee under the Company's or the Bank’s employee benefit
plans and programs and compensation plans and programs.
(b) For
purposes of this Section 10, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Employer. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Company Board, the Bank Board
or
based upon the written advice of counsel for the Employer shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith
and
in the best interests of the Employer. The cessation of employment of
the Executive shall not be deemed to be for "cause" within the meaning of
Section 10(a)(i) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of
three-fourths of the members of the Company Board or the Bank Board at a meeting
of such Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before such Board), finding that, in the good faith
opinion of such Board, the Executive is guilty of the conduct described in
Section 10(a)(i) above, and specifying the particulars thereof in
detail.
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(c) “Disability”
shall be deemed to have occurred if the Executive: (i) is unable to engage
in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be
expected to last for a continuous period of not less than 12 months, or (ii)
is,
by reason of any medically determinable physical or mental impairment which
can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for
a
period of not less than three months under an accident and health plan covering
employees of the Employer.
(d) During
any period in which the Executive is absent due to physical or mental
impairment, the Employer may, without breaching this Agreement, appoint another
person or persons to act as interim Senior Executive Vice President and interim
Chief Financial Officer pending the Executive’s return to his duties on a
full-time basis hereunder or his termination as a result of such
Disability. Prior to the Executive’s employment being terminated due
to Disability under Section 10(e) hereof, the Executive shall continue to
receive his full Base Salary, bonuses and other benefits to which he is entitled
under this Agreement, including continued participation in all employee benefit
plans and programs.
(e) The
Employer may provide notice to the Executive in writing that it intends to
terminate the Executive’s employment under this Agreement, with the termination
date to be on or after the date that the Executive is deemed to have a
Disability. At the time his employment hereunder is terminated due to
Disability, (i) the Executive shall not be entitled to any payments or benefits
pursuant to Sections 4 and 5 hereof for periods subsequent to such date of
termination, and (ii) the Executive shall become entitled to receive the
Disability payments that may be available under any applicable long-term
disability plan or other benefit plan.
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SECTION
11.
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PAYMENTS
UPON A CHANGE IN CONTROL.
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The
term
“Change in Control” means the occurrence of any of the following:
(1) any
person or “group” of persons (as provided under Section 409A of the Code, and
any Internal Revenue Service (the “IRS”) guidance and regulations issued under
Section 409A of the Code) acquires ownership of stock of the Company or the
Bank
that, together with stock held by such person or group, constitutes more than
50% of the total fair market value or total voting power of the outstanding
stock of the Company or the Bank, provided that the stock of the Company or
the
Bank remains outstanding after such acquisition and provided further that if
the
person or group of persons is already deemed to own more than 50% of the total
fair market value or total voting power, then the acquisition of additional
stock by such person or group of persons shall not constitute an additional
Change in Control;
(2) any
person or “group” of persons (as provided under Section 409A of the Code and any
IRS guidance and regulations issued under Section 409A of the
Code) acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such person or group of persons)
ownership of stock of the Company or the Bank possessing 30% or more of the
total voting power of the stock of the Company or the Bank, provided that if
a
person or group of persons that is deemed to have effective control of the
Company or the Bank pursuant to this clause acquires additional stock of the
Company or the Bank, such additional acquisition shall not constitute an
additional Change in Control;
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(3) a
majority of the members of the Board of Directors of the Company is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the Board of Directors of the Company prior to the
date of the appointment or election, provided that if a person or group of
persons that is deemed to have effective control of the Company or the Bank
pursuant to this clause acquires stock of the Company or the Bank that would
trigger either clauses (1) or (2) above, such acquisition of stock shall not
constitute an additional Change in Control; and
(4) any
person or “group” of persons (as provided under Section 409A of the Code and any
IRS guidance and regulations issued under Section 409A of the Code) acquires
(or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or group of persons) assets from the Company or
the
Bank that have a total gross fair market value equal to 40% or more of the
total
gross fair market value of all of the assets of the Company or the Bank, as
the
case may be, immediately prior to such acquisition or
acquisitions. For purposes of this provision, “gross fair market
value” means the value of the assets of the Company or the Bank, as the case may
be, or the value of the assets being disposed of, determined without regard
to
any liabilities associated with such assets. A transfer of assets by
the Company or the Bank to related persons, shareholders or entities shall
not
be treated as a Change in Control to the extent that such transfers are excluded
from the definition of a change in control under Section 409A of the Code and
the regulations issued thereunder.
(b) For
purposes of determining whether a Change in Control has occurred, persons will
not be considered to be acting as a group solely because they purchase or own
stock of the Company at the same time.
(c) Upon
the occurrence of a Change in Control prior to the expiration of the Employment
Period, the Executive shall be entitled to receive a severance benefit in an
amount as calculated hereunder. If the Executive is not terminated as
of the Change in Control, he shall receive a lump sum payment within 25 days
after the effective time of such Change in Control in an amount equal to 1.5
times the Executive’s Base Amount, as hereinafter defined, from the
Employer. If the Executive’s employment is terminated as of the
Change of Control, he shall receive a lump sum payment within 25 days after
the
effective time of such Change in Control in an amount equal to 3.0 times the
Executive’s Base Amount from the Employer, minus $1.00. If the Executive’s
employment is not terminated as of the Change in Control but is terminated
within one year thereafter by either the Employer for other than cause or by
the
Executive upon the occurrence of any of the events set forth in Section 9(a)(i),
then in addition to the payment made at or within 25 days of the Change in
Control, the Executive shall receive a lump sum payment upon termination of
employment from the Employer or its predecessor in an amount equal to 1.5 times
the Executive’s Base Amount as calculated in connection with the Change in
Control. If the Executive’s employment is terminated more than one year but less
than two years after the Change in Control by either Employer other than for
cause or by the Executive upon the occurrence of any of the events set forth
in
Section 9(a)(i), then in addition to the payment made at or within 25 days
of
the Change in Control, he shall receive a lump sum payment upon termination
from
the Employer or its predecessor in an amount equal to 1.5 times the Executive’s
Base Amount as if the Change in Control had occurred as of the date of
termination; provided however, that for purposes of calculating the
Executive’s Base Amount for purposes of this sentence, any income related to the
initial severance payment paid to the Executive at or within 25 days of the
Change in Control pursuant to this Section 11(c) shall be
excluded. For purposes hereof, “Base Amount” shall be equal to the
Executive’s “base amount” (excluding any income resulting from the vesting of
restricted stock or the exercise of non-qualified options on or prior to the
Effective Date) as defined under Section 280G of the Code. The
Executive shall not be entitled to receive any payments or benefits under
Section 9 of this Agreement if he receives payments pursuant to this Section
11(c) unless his employment is terminated more than two years after a Change
in
Control.
11
|
SECTION
12.
|
TAX
INDEMNIFICATION.
|
(a) If
the payments and benefits pursuant to this Agreement, either alone or together
with other payments and benefits which the Executive has the right to receive
from the Employer and its subsidiaries, would constitute a “parachute payment”
as defined in Section 280G(b)(2) of the Code (the “Initial Parachute Payment”),
then the Company shall pay to the Executive, at the time such payments or
benefits are paid and subject to applicable withholding requirements, a lump
sum
cash amount equal to the sum of the following:
(i) twenty
(20) percent (or such other percentage equal to 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 Employer and its subsidiaries (including
their predecessors), 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
(ii) such
additional amount (tax allowance) as may be necessary to compensate the
Executive for the payment by the Executive of state and federal 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
and state income and employment-related tax rate (including Social Security
and
Medicare taxes), including any applicable excise tax rate, applicable to the
Executive in the year in which the payment under clause (i) above is made,
and
shall also reflect the phase-out of deductions and the ability to deduct certain
of such taxes.
(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 (before giving effect to the payments under Sections 12(a)(i) and
(ii) above) is different from the Initial Excess Parachute Payment (such
different amount being hereafter referred to as the “Determinative Excess
Parachute Payment”), then the Company’s independent tax counsel or accountants
shall determine the amount (the “Adjustment Amount”) which either the Executive
must pay to the Company or the Company must pay to the Executive in order to
put
the Executive (or the Company, as the case may be) in the same position the
Executive (or the Company, 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, and in no event more than thirty (30) days after
the Adjustment Amount has been so determined, the Company shall pay the
Adjustment Amount to the Executive or the Executive shall repay the Adjustment
Amount to the Company, as the case may be.
12
(c) In
each calendar year that the Executive receives payments of benefits that
constitute a parachute payment, the Executive shall report on his state and
federal income tax returns such information as is consistent with the
determination made by the independent tax counsel or accountants of the Company
as described above. The Company shall indemnify and hold the
Executive harmless from any and all losses, costs and expenses (including
without limitation, reasonable attorneys’ fees, interest, fines and penalties)
which the Executive incurs as a result of so reporting such information, with
such indemnification to be paid by the Company to the Executive as soon as
practicable and in any event no later than March 15 of the year immediately
following the year in which the amount subject to indemnification was
determined. The Executive shall promptly notify the Company in
writing whenever the Executive receives notice of the institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Section 12 is being reviewed or is in dispute. The Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate
for
the Executive to resolve any such proceeding with respect to any matter
unrelated to amounts paid or payable pursuant to this Section 12) and the
Executive shall cooperate fully with the Company in any such
proceeding. The Executive shall not enter into any compromise or
settlement or otherwise prejudice any rights the Company may have in connection
therewith without the prior consent of the Company.
(d) The
Executive hereby agrees with the Employer and any successor thereto to in good
faith consider and take steps commonly used to minimize or eliminate any tax
liability or costs that would otherwise be created by the tax indemnification
provisions set forth in Section 12 of this Agreement if requested to do so
by
the Employer or any successor thereto; provided, however, that the
foregoing language shall neither require the Executive to take or not take
any
specific action in furtherance thereof nor contravene, limit or remove any
right
or privilege provided to the Executive under this Agreement.
|
SECTION
13.
|
SOURCE
OF PAYMENTS; NO DUPLICATION OF
PAYMENTS.
|
All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Company or the Bank. Payments pursuant to
this Agreement shall be allocated between the Company and the Bank in proportion
to the level of activity and the time expended on such activities by the
Executive as determined by the Company and the Bank on a quarterly basis, unless
the applicable provision of this Agreement specifies that the payment shall
be
made by either the Company or the Bank. In no event shall the
Executive receive duplicate payments or benefits from the Company and the
Bank.
13
|
SECTION
14.
|
COVENANT
NOT TO COMPETE.
|
In
the event the Executive’s employment
with the Employer is terminated for any reason prior to the expiration of the
Employment Period other than a termination of employment occurring within 30
days of a Change in Control, the Executive hereby covenants and agrees that
for
a period of two years following the date of his termination of employment with
the Employer (or, if less, for the Remaining Employment Period), he shall not,
without the written consent of the Employer, become an officer, employee,
consultant, director or trustee of any savings bank, savings and loan
association, savings and loan holding company, bank or bank holding company,
or
any direct or indirect subsidiary or affiliate of any such entity, that entails
working within any county in which the Company or the Bank maintains an office
as of the date of termination of the Executive’s employment.
|
SECTION
15.
|
CONFIDENTIALITY.
|
Unless
he obtains the prior written consent of the Employer, the Executive shall at
all
times keep confidential and shall refrain from using for the benefit of himself,
or any person or entity other than the Employer or its subsidiaries, any
material document or information obtained from the Employer or its subsidiaries,
in the course of his employment with any of them concerning their properties,
operations or business (unless such document or information is readily
ascertainable from public or published information or trade sources or has
otherwise been made available to the public through no fault of his own) until
the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this Section 15 shall prevent the
Executive, with or without the Employer's consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding or the Company’s public
reporting requirements to the extent that such participation or disclosure
is
required under applicable law.
|
SECTION
16.
|
SOLICITATION.
|
The
Executive hereby covenants and agrees that, for a period of two years following
his termination of employment with the Employer for any reason, he shall not,
without the written consent of the Employer, either directly or
indirectly:
(a)
solicit, offer employment to, or take any other action intended, or that a
reasonable person acting in like circumstances would expect, to have the effect
of causing any officer or employee of the Employer or any of its subsidiaries
or
affiliates to terminate his employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the business
of accepting deposits, making loans or doing business within the counties
specified in Section 14;
14
(b)
provide any information, advice or recommendation with respect to any such
officer or employee to any savings bank, savings and loan association, bank,
bank holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits, making loans or doing business
within the counties specified in Section 14, that is intended, or that a
reasonable person acting in like circumstances would expect, to have the effect
of causing any officer or employee of the Employer or any of its subsidiaries
or
affiliates to terminate his employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the business
of accepting deposits, making loans or doing business within the counties
specified in Section 14; or
(c)
solicit, provide any information, advice or recommendation or take any other
action intended, or that a reasonable person acting in like circumstances would
expect, to have the effect of causing any customer of the Company or the Bank
to
terminate an existing business or commercial relationship with the Company
or
the Bank.
|
SECTION
17.
|
NO
EFFECT ON EMPLOYEE BENEFIT PLANS OR
PROGRAMS.
|
The
termination of the Executive's employment during the Employment Period or
thereafter, whether by the Employer or by the Executive, shall have no effect
on
the vested rights of the Executive under the Company's or the Bank’s qualified
or non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans, or other
employee benefit plans or programs, or compensation plans or programs in which
the Executive was a participant.
|
SECTION
18.
|
SUCCESSORS
AND ASSIGNS.
|
(a)
This Agreement is personal to each of the parties hereto, and no party may
assign or delegate any of its rights or obligations hereunder without first
obtaining the written consent of the other parties; provided, however, that
the
Employer will require any successor or assign (whether direct or indirect,
by
purchase, merger, consolidation or otherwise) to all or substantially all of
the
business and/or assets of the Employer, by an assumption agreement in form
and
substance satisfactory to the Executive, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Employer would be required to perform it if no such succession or assignment
had taken place. Failure of the Employer to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Employer in the same amount and on the same terms as the compensation
pursuant to Sections 9 and 11 hereof. For purposes of implementing
the provisions of this Section 18(a), the date which any such succession without
an assumption agreement becomes effective shall be deemed the date of
termination of the Executive’s employment.
(b)
This Agreement and all rights of the Executive hereunder shall inure to the
benefit of and be enforceable by the Executive’s personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees.
15
|
SECTION
19.
|
NOTICES.
|
Any
communication required or permitted to be given under this Agreement, including
any notice, direction, designation, consent, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as
it is
delivered personally, or five days after mailing if mailed, postage prepaid,
by
registered or certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such party may
by
written notice specify to the other party:
If
to the Executive:
Xxxxxx
X. Xxxxx
At
the address last appearing
on
the personnel records of
the
Executive
If
to the Employer:
KNBT
Bancorp, Inc.
Keystone
Nazareth Bank & Trust Company
Xxxxx
000 xxx Xxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxxx 00000
|
(or
the address of the Company’s or the Bank’s principal executive office, if
different)
|
Attention:
Chairman of the Board
with
a copy, in the case of a notice to the Employer, to:
Elias,
Matz, Xxxxxxx & Xxxxxxx L.L.P.
000
00xx Xxxxxx,
X.X.
Xxxxxxxxxx,
X.X. 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx
Xxxx Xxxxx, Esq.
|
SECTION
20.
|
INDEMNIFICATION
FOR ATTORNEYS' FEES.
|
(a)
The Employer shall indemnify, hold harmless and defend the Executive against
reasonable costs, including legal fees and expenses, incurred by him in
connection with or arising out of any action, suit or proceeding in which he
may
be involved, as a result of his efforts, in good faith, to defend or enforce
the
terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement
of
the Employer's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.
16
(b)
The Employer's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected by
any
set-off, counterclaim, recoupment, defense or other claim, right or action
which
the Employer may have against the Executive or others. Unless it is
determined that a claim made by the Executive was either frivolous or made
in
bad faith, the Employer agrees to pay as incurred (and in any event no later
than March 15 of the year immediately following the year in which incurred),
to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of or in connection with his
consultation with legal counsel or arising out of any action, suit, proceeding
or contest (regardless of the outcome thereof) by the Employer, the Executive
or
others regarding the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Code. This Section 20(b) shall apply whether such consultation,
action, suit, proceeding or contest arises before, on, after or as a result
of a
Change in Control.
|
SECTION
21.
|
PROVISIONS
APPLICABLE FOLLOWING THE ACQUISITION BY NATIONAL
PENN.
|
The
Company, the Bank, the Executive, National Penn Bancshares, Inc. (“National
Penn”) and National Penn Bank (“NPBank”) previously entered into a Release,
Consulting and Noncompetition Agreement dated September 6, 2007 (the “Consulting
Agreement”). This amendment and restatement of the Prior Agreement
does not alter or modify the Consulting Agreement in any manner, except that
the
definition of “Employment Agreement” in the third Whereas clause in the
Consulting Agreement shall refer to this Amended and Restated Employment
Agreement dated November 15, 2007. All other provisions of the
Consulting Agreement shall continue in full force and effect.
|
SECTION
22.
|
SEVERABILITY.
|
A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision
hereof.
|
SECTION
23.
|
WAIVER.
|
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant or
condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or
power hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
|
SECTION
24.
|
COUNTERPARTS.
|
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
Agreement.
17
|
SECTION
25.
|
GOVERNING
LAW.
|
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the Commonwealth of Pennsylvania applicable to contracts
entered into and to be performed entirely within the Commonwealth of
Pennsylvania, except to the extent that federal law controls.
|
SECTION
26.
|
HEADINGS
AND CONSTRUCTION.
|
The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any section. Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.
|
SECTION
27.
|
ENTIRE
AGREEMENT; MODIFICATIONS.
|
This
instrument and the Consulting Agreement contain the entire agreement of the
parties relating to the subject matter hereof, and supersede in their entirety
any and all prior agreements, understandings or representations relating to
the
subject matter hereof, including but not limited to the Prior
Agreement. No modifications of this Agreement shall be valid unless
made in writing and signed by the parties hereto. provided, however,
that if the Employer determines, after a review of the final regulations issued
under Section 409A of the Code and all applicable IRS guidance, that this
Agreement should be further amended to avoid triggering the tax and interest
penalties imposed by Section 409A of the Code, the Employer may amend this
Agreement to the extent necessary to avoid triggering the tax and interest
penalties imposed by Section 409A of the Code.
|
SECTION
28.
|
REQUIRED
REGULATORY PROVISIONS.
|
Notwithstanding
anything herein contained to the contrary, any payments to the Executive by
the
Employer, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated
thereunder in 12 C.F.R. Part 359.
|
|
SECTION
29. DISPUTE RESOLUTION.
|
(a) In
the event of any dispute, claim, question or disagreement arising out of or
relating to this Agreement or the breach hereof, the parties hereto shall use
their best efforts to settle such dispute, claim, question or
disagreement. To this effect, they shall consult and negotiate with
each other, in good faith, and, recognizing their mutual interests, attempt
to
reach a just and equitable solution satisfactory to both parties.
(b) If
they do not reach such a solution within a period of thirty (30) days, then
the
parties agree first to endeavor in good faith to amicably settle their dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association (the “AAA”), before resorting to arbitration.
18
(c) Thereafter,
any unresolved controversy or claim arising out of or relating to this Agreement
or the breach thereof, upon notice by any party to the other, shall be submitted
to and finally settled by arbitration in accordance with the Commercial
Arbitration Rules (the “Rules”) of the AAA in effect at the time demand for
arbitration is made by any such party. The parties shall mutually
agree upon a single arbitrator within thirty (30) days of such
demand. In the event that the parties are unable to so agree within
such thirty (30) day period, then within the following thirty (30) day period,
one arbitrator shall be named by each party. A third arbitrator shall
be named by the two arbitrators so chosen within ten (10) days after the
appointment of the first two arbitrators. In the event that the third
arbitrator is not agreed upon, he or she shall be named by the
AAA. Arbitration shall occur in Bethlehem, Pennsylvania or such other
location as may be mutually agreed to by the parties.
(d) The
award made by all or a majority of the panel of arbitrators shall be final
and
binding, and judgment may be entered based upon such award in any court of
law
having competent jurisdiction. The award is subject to confirmation,
modification, correction or vacation only as explicitly provided in Title 9
of
the United States Code. The prevailing party shall be entitled to
receive any award of pre- and post-award interest as well as attorney’s fees
incurred in connection with the arbitration and any judicial proceedings related
thereto. The parties acknowledge that this Agreement evidences a
transaction involving interstate commerce. The United States
Arbitration Act and the Rules shall govern the interpretation, enforcement,
and
proceedings pursuant to this Section. Any provisional remedy which
would be available from a court of law shall be available from the arbitrators
to the parties to this Agreement pending arbitration. Either party
may make an application to the arbitrators seeking injunctive relief to maintain
the status quo, or may seek from a court of competent jurisdiction any interim
or provisional relief that may be necessary to protect the rights and property
of that party, until such times as the arbitration award is rendered or the
controversy otherwise resolved.
19
IN
WITNESS WHEREOF, the Employer has caused this Agreement to be executed and
the
Executive has hereunto set his hand, all as of the day and year first above
written.
THIS
AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE
PARTIES.
|
Xxxxxx
X. Xxxxx, Executive
|
||||
|
ATTEST:
|
KEYSTONE
NAZARETH BANK
|
|||
|
&
TRUST COMPANY
|
||||
|
BY:
|
BY:
|
|||
|
Name:
|
Xxxxxxx
X. Xxxxxx
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Corporate
Secretary
|
Title:
|
Chairman
of the Board
|
|
|
[Seal]
|
||||
|
ATTEST:
|
KNBT
BANCORP, INC.
|
|||
|
BY:
|
BY:
|
|||
|
Name:
|
Xxxxxxx
X. Xxxxxx
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Corporate
Secretary
|
Title:
|
Chairman
of the Board
|
|
20
