CHANGE-IN-CONTROL SEVERANCE AGREEMENT
THIS
AGREEMENT entered into this 2nd day of March, 2010 (the “Effective Date”), by
and between Xxxxxxx X. Xxxxx, (the “Employee”), Xxxxx Bank (the “Bank”), and
Xxxxxxx Financial Corp. (the “Company”).
WHEREAS,
the Employee has heretofore been employed by the Bank and the Company as Chief
Financial Officer, and the Bank and the Company deem it to be in their best
interest to enter into this Agreement as additional incentive to the Employee to
continue as an executive employee of the Bank and the Company; and
WHEREAS,
the parties desire by this writing to set forth their understanding as to their
respective rights and obligations in the event a change of control occurs with
respect to the Bank or the Company.
NOW,
THEREFORE, the undersigned parties AGREE as follows:
1. Defined
Terms
When used
anywhere in this Agreement, the following terms shall have the meaning set forth
herein.
(a) “Change in Control” shall
mean any one of the following events: (I) the acquisition of
ownership, holding or power to vote more than 25% of the Bank's or the Company's
voting stock, (ii) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (iii) the acquisition of a
controlling influence over the management or policies of the Bank or the Company
by any person or by persons acting as a “group” (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), or (iv) during any period of two
consecutive years, individuals (the “Continuing Directors”) who at the beginning
of such period constitute the Board of Directors of the Bank or the Company (the
“Existing Board”) cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, in the case of (I), (ii) and
(iii) hereof, ownership or control of the Bank by the Company itself shall not
constitute a Change in Control. For purposes of this paragraph only,
the term “person” refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed
herein. The decision of the Bank's non-employee directors as to
whether or not a Change in Control has occurred shall be conclusive and
binding.
(b) “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time, and as interpreted
through applicable rulings and regulations in effect from time to
time.
(c) “Code §280G Maximum” shall
mean product of 2.99 and his “base amount” as defined in Code
§280G(b)(3).
(d) “Good Reason” shall mean any
of the following events, which has not been consented to in advance by the
Employee in writing: (I) the requirement that the Employee move his personal
residence, or perform his principal executive functions, more than thirty (30)
miles from his primary office as of the date of the Change in Control; (ii) a
material reduction in the Employee's base compensation as in effect on the date
of the Change in Control or as the same may be increased from time to time;
(iii) the failure by the Bank or the Company to continue to provide the Employee
with compensation and benefits provided for on the date of the Change in
Control, as the same may be increased from time to time, or with benefits
substantially similar to those provided to him under any of the employee benefit
plans in which the Employee now or hereafter becomes a participant, or the
taking of any action by the Bank or the Company which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by him at the time of the Change in Control; (iv) the
assignment to the Employee of duties and responsibilities materially different
from those normally associated with his position; (v) a failure to elect or
reelect the Employee to the Board of Directors of the Bank or the Company, if
the Employee is serving on such Board on the date of the Change in Control; (vi)
a material diminution or reduction in the Employee's responsibilities or
authority (including reporting responsibilities) in connection with his
employment with the Bank or the Company; or (vii) a material reduction in the
secretarial or other administrative support of the Employee.
(e) “Just Cause” shall mean, in
the good faith determination of the Bank's Board of Directors, the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. The Employee shall have no right to
receive compensation or other benefits for any period after termination for Just
Cause. No act, or failure to act, on the Employee's part shall be
considered “willful” unless he has acted, or failed to act, with an absence of
good faith and without a reasonable belief that his action or failure to act was
in the best interest of the Bank and the Company.
(f) “Protected Period” shall mean
the period that begins on the date six months before a Change in Control and
ends on the later of the first annual anniversary of the Change in Control or
the expiration date of this Agreement.
2. Trigger
Events
The
Employee shall be entitled to collect the severance benefits set forth in
Section 3 of this Agreement in the event that (I) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
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the
Protected Period and constitutes Good Reason, or (iii) the Bank or the Company
or their successor(s) in interest terminate the Employee's employment for any
reason other than Just Cause during the Protected Period.
3. Amount of Severance
Benefit
If the
Employee becomes entitled to collect severance benefits pursuant to Section 2
hereof, the Employee shall receive from the Bank an amount equal to two times
the base salary as of the employee’s date of hire and subsequently as of the
last date of the prior calendar year preceding the Change in Control, but in no
event more than Code §280G Maximum. Said sum shall be paid in one
lump sum within ten (10) days of the later of the date of the Change in Control
and the Employee's last day of employment with the Bank or the
Company.
In the
event that the Employee, the Bank, and the Company jointly agree that the
Employee has collected an amount exceeding the Code §280G Maximum, the parties
may jointly agree in writing that such excess shall be treated as a loan ab initio which the
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust
upon Change in Control
Not later
than ten business days after a Change in Control, the Bank shall (I) establish a
grantor trust (the “Trust”) designed in accordance with Revenue Procedure 92-64
and having a trustee independent of the Bank and the Company, (ii) deposit in
said Trust an amount equal to the Code §280G Maximum, unless the Employee has
previously provided a written release of any claims under this Agreement, and
(I) provide the trustee of the Trust with a written direction to hold said
amount and any investment return thereon in a segregated account for the benefit
of the Employee, and to follow the procedures set forth in the next paragraph as
to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 15 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall
thereafter have no further interest in the Trust.
During
the 12-consecutive month period after a Change in Control, the Employee may
provide the trustee of the Trust with a written notice requesting that the
trustee pay to the Employee an amount designated in the notice as being payable
pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Bank via overnight and registered mail return receipt
requested. On the tenth (10th) business day after mailing said notice
to the Bank, the trustee of the Trust shall pay the Employee the amount
designated therein in immediately available funds, unless prior thereto the Bank
provides the trustee with a written notice directing the trustee to withhold
such payment. In the latter event, the trustee shall submit the
dispute to non-appealable binding arbitration for a determination of the amount
payable to the Employee pursuant to this Agreement, and the costs of such
arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the
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dispute,
and such arbitrator shall be bound by the rules of the American Arbitration
Association in making his determination. The parties and the trustee
shall be bound by the results of the arbitration and, within 3 days of the
determination by the arbitrator, the trustee shall pay from the Trust the
amounts required to be paid to the Employee and/or the Bank, and in no event
shall the trustee be liable to either party for making the payments as
determined by the arbitrator.
5. Term of the
Agreement. This Agreement shall remain in effect for the
period commencing on the Effective Date and ending on the earlier of (I) the
date sixty months after the Effective Date, and (ii) the date on which the
Employee terminates employment with the Bank; provided that the Employee's
rights hereunder shall continue following the termination of this employment
with the Bank under any of the circumstances described in Section 2
hereof.
6. Termination or Suspension
Under Federal Law.
(a) Any
payments made to the Employee pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k)
and any regulations promulgated thereunder.
(b) If
the Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) or
(g)(1)), all obligations of the Bank under this Agreement shall terminate,
as of the effective date of the order, but the vested rights of the parties
shall not be affected.
(c) If
the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations
of the Bank under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the
parties.
(d) If
a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee from
participating in the conduct of the Bank's affairs, the Bank's obligations under
this Agreement shall be suspended as of the date of such service, unless stayed
by appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall (I) pay the Employee all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were
suspended.
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7. Expense
Reimbursement.
In the
event that any dispute arises between the Employee and the Bank or the Company
as to the terms or interpretation of this Agreement, whether instituted by
formal legal proceedings or otherwise, including any action that the
Employee takes to enforce the terms of this Agreement or to defend against any
action taken by the Bank or the Company, the Employee shall be reimbursed for
all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Employee shall obtain a
final judgment in favor of the Employee in a court of competent jurisdiction or
in binding arbitration under the rules of the American Arbitration
Association. Such reimbursement shall be paid within ten (10)
days of Employee's furnishing to the Bank and the Company written evidence,
which may be in the form, among other things, of a cancelled check or receipt,
of any costs or expenses incurred by the Employee.
8. Successors and
Assigns.
(a) This
Agreement shall inure to the benefit of and be binding upon any corporate or
other successor of the Bank or the Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Company.
(b) Since
the Bank and the Company are contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank and the Company.
9. Joint and Several
Liability
The
Company hereby agrees that to the extent permitted by law, it shall be jointly
and severally liable for both the payment of all amounts due under this
Agreement, and the taking of any actions required under this
Agreement.
10. Amendments
No
amendments or additions to this Agreement shall be binding unless made in
writing and signed by all of the parties, except as herein otherwise
specifically provided.
11. Applicable
Law
Except to
the extent preempted by Federal law, the laws of the State of Pennsylvania shall
govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
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12. Severability
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
13. Entire
Agreement
This
Agreement, together with any understanding or modifications thereof as
agreed to in writing by the parties, shall constitute the entire agreement
between the parties hereto.
IN
WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
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ATTEST:
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XXXXX
BANK
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| /s/ Xxxxxxx X. Xxxx |
By
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/s/ Xxxxx X. Xxxxxxxx | |
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Assistant
Secretary
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Its:
President and Chief Executive Officer
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ATTEST:
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XXXXXXX
FINANCIAL CORP.
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| /s/ Xxxxxxx X. Xxxx |
By
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/s/ Xxxxx X. Xxxxxxxx | |
|
Assistant
Secretary
|
Its:
President and Chief Executive Officer
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||
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WITNESS:
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EMPLOYEE
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| /s/ Xxxxx X. Xxxxxx | /s/ Xxxxxxx X. Xxxxx | ||
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