EMPLOYMENT AGREEMENT
Exhibit
99.1
THIS
AGREEMENT
(“Agreement”) is made this July 23, 2007, between HARLEYSVILLE
MANAGEMENT SERVICES, LLC
(“HMS”),
a corporation having a place of business at 000 Xxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000; and Xxxx X. Xxxxxxxx ("Executive"), an individual residing
at 000 Xxxxxx Xxxx, Xxxxxxxxx, XX 00000.
WITNESSETH:
WHEREAS,
HMS is
a subsidiary of HARLEYSVILLE
NATIONAL BANK AND TRUST COMPANY
(the
"Bank"), a national bank having a place of business at 000 Xxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000;
WHEREAS,
Bank is
a subsidiary of HARLEYSVILLE
NATIONAL CORPORATION
("HNC"),
a Pennsylvania business corporation having a place of business at 000 Xxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000;
WHEREAS,
HMS
desires to employ Executive as President and Chief Executive Officer of HNC,
effective the date of this Agreement, under the terms and conditions set forth
herein;
WHEREAS,
Executive desires to accept that assignment under the terms and conditions
set
forth herein.
AGREEMENT:
NOW,
THEREFORE,
the
parties hereto intending to be legally bound hereby agree as follows:
1.
Employment.
(a)
HMS
hereby employs Executive and Executive hereby accepts employment with HMS on
the
terms and conditions set forth in this Agreement.
(b)
Executive hereby represents to HMS and HNC that (i) the execution and delivery
of this Agreement by the Executive and the performance by the Executive of
the
Executive’s duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any other agreement or policy to which the Executive
is
a party or by which he is otherwise bound; (ii) the agreements disclosed on
Schedule A to this Agreement are the only agreements to which Executive is
a
party which contain nonsolitication or noncompetition provisions; and (iii)
Executive agrees to comply fully with the nonsolitication and noncompetition
provisions of the agreements disclosed on Schedule A.
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2.
Duties
and Positions of Employee.
(a)
Executive shall perform and discharge well and faithfully such duties as
President and Chief Executive Officer of HNC as may be assigned to Executive
from time to time by the Board of Directors of HNC and the Bank. Executive
shall
be President and Chief Executive Officer of HNC and a member of the Board of
Directors of HNC and the Bank, and shall hold such other titles as may be given
to him from time to time by the Board of Directors of HNC. Executive shall
devote his full time, attention and energies to the business of HNC during
the
Employment Period (as defined in Section 3 of this Agreement);
(b)
Provided however, that this Section 2 shall not be construed as preventing
Executive from (a) engaging in activities incident or necessary to personal
investments so long as such investment does not exceed 5% of the outstanding
shares of any publicly held company, (b) devoting a reasonable amount of time
to
civic, charitable, trade association, political and similar activities with
the
prior approval of the Board of Directors of HNC, which approval will not be
unreasonably withheld; or (c) acting as a member of the Board of Directors
of
any other corporation or as a member of the Board of Trustees of any other
organization, with the prior approval of the Board of Directors of HNC, which
approval will not be unreasonably withheld. The Executive shall not engage
in
any business or commercial activities, duties or pursuits that compete with
the
business or commercial activities of HNC, or any of its subsidiaries or
affiliates, nor may the Executive serve as a director or officer or in any
other
capacity in a company that competes with HNC or any of its subsidiaries or
affiliates.
3.
Term
of Agreement.
(a)
This
Agreement shall be for a two (2) year period (the “Employment Period”) beginning
on July 23, 2007, (“the date of this Agreement”) and ending two (2) years from
the date of this Agreement. On the first anniversary of the date of this
Agreement, and on the same date of each subsequent year (each, a “Renewal Date”)
the Employment Period shall be automatically extended for an additional year
such that the Employment Period shall end two (2) years from the current Renewal
Date, unless either party shall give written notice of non-renewal to the other
party at least ninety (90) days prior to that Renewal Date, in which event
this
Agreement shall terminate at the end of the then existing Employment Period.
(b)
Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement
shall terminate automatically for Cause (as defined herein) upon written notice
from the Board of Directors of HNC to Executive. 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 thirty (30) consecutive days or
more;
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(ii)
Executive’s willful failure to follow the good faith lawful instructions of the
Board of Directors of HNC with respect to the operations of HNC;
(iii)
Executive’s willful failure to perform Executive’s duties to HNC (other than a
failure resulting from Executive’s incapacity because of physical or mental
illness, as provided in subsection (d) of this Section 3), which failure results
in injury to HNC, monetarily or otherwise;
(iv)
Executive’s intentional violation of the provisions of this
Agreement;
(v)
dishonesty or gross negligence of the Executive in the performance of his
duties;
(vi)
conduct on the part of the Executive that brings public discredit to HNC or
the
Bank;
(vii)
Executive’s breach of fiduciary duty involving personal gain;
(viii)
Executive’s willful violation of any law, rule or regulation governing banks or
bank officers or any final cease and desist order issued by a bank regulatory
authority;
(ix)
Executive’s unlawful discrimination, including harassment, against employees,
customers, business associates, contractors or visitors of HNC or the Bank;
(x)
Executive's theft or abuse of HNC's or the Bank’s property or the property of
customers, employees, contractors, vendors or business associates of HNC or
the
Bank;
(xi)
any
final removal or prohibition order to which the Executive is subject, by a
federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance
Act;
(xii)
any
act of fraud or misappropriation by Executive;
(xiii)
intentional misrepresentation of a material fact, or intentional omission of
information necessary to make the information supplied not materially
misleading, in any application or other information provided by the Executive
to
HNC or the Bank or any representative of HNC or the Bank in connection with
the
Executive's employment with HMS and HNC;
(xiv)
judgment of a court that he has violated any noncompetition or nonsolicitation
agreement with any other entity, provided such violation shall not be a result
of the Board instructing him to do so; or
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(xv)
failure of Executive to meet performance standards established by the Board
of
Directors which performance standards shall be based on HNC exceeding the median
performance of the HNC peer group of banks and bank holding companies with
assets between one (1) billion and six (6) billion dollars and shall include,
but not be limited to, median stock price appreciation, median return on equity,
median return on assets, median interest income, and median noninterest income
excluding extraordinary nonrecurring items or transactions provided however,
this provision shall not apply during the first nine (9) months of the
Employment Period. In the event a Change of Control as defined in Section 5(b)
occurs, this Section 3(b)(xv) shall cease to apply and shall be considered
null
and void.
If
this
Agreement is terminated for Cause, Executive's rights under this Agreement
shall
cease as of the effective date of such termination and HMS shall have no further
obligation under this Agreement.
(c)
Notwithstanding the provisions of Section 3(a) of this Agreement, this
Agreement
shall terminate automatically upon Executive’s voluntary termination of
employment (other than in accordance with Section 5 of this Agreement) for
Good
Reason. The term “Good
Reason”
shall
mean (i) the assignment of duties and responsibilities inconsistent with
Executive’s status as President and Chief Executive Officer of HNC, (ii) a
reduction in salary or benefits, except such reductions that are the result
of a
national financial depression or national or bank emergency when such reduction
has been implemented by the Board of Directors for HNC or Bank’s senior
management, or (iii) a reassignment which requires Executive to move his
principal office more than seventy-five (75) miles from Executive’s office on
the date of this Agreement.
If
such
termination occurs for Good Reason prior to the first anniversary date of this
agreement and upon execution of a reasonable release satisfactory to HMS, then
HMS will provide Executive with the following pay and benefits: (i) a payment
in
an amount equal to 1.0 times the Executive’s then Annual Base Salary payable in
twelve (12) equal monthly installments; and (ii) HMS
shall
reimburse Executive in an amount equal to the monthly premium paid by him to
obtain substantially similar employee benefits which he enjoyed prior to
termination, which reimbursement shall continue until the expiration of 12
months following the date of termination of employment or until Executive
secures substantially similar benefits through other employment, whichever
shall
first occur, subject to Code Section 409A if applicable.
If
such
termination occurs for Good Reason after the first anniversary date of the
Agreement and upon execution of a reasonable release satisfactory to HMS, then
HMS will provide Executive with the following pay and benefits: (i) an amount
equal to Executive’s then Annual Base Salary for the remainder of the then
existing Employment Period that has not been paid to Executive as of the date
his employment terminates pro-rated into monthly payments over the remaining
Employment Period; and (ii) HMS shall reimburse Executive in an amount equal
to
the monthly premium paid by him to obtain
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substantially
similar employee benefits which he enjoyed prior to termination, which
reimbursement shall continue until the expiration of the then existing
Employment Period or until Executive secures substantially similar benefits
through other employment, whichever shall first occur, subject to Code Section
409A if applicable.
However,
in the event the payments described herein, when added to all other amounts
or
benefits provided to or on behalf of the Executive in connection with his
termination of employment, would result in the imposition of an excise tax
under
Internal Revenue Code
of
1986, as amended (“Code”) Section
4999, the severance payments shall be retroactively (if necessary) reduced
to
the extent necessary to avoid such excise tax imposition. Upon written notice
to
Executive, together with calculations of HMS’s independent auditors, Executive
shall remit to HMS the amount of the reduction plus such interest as may be
necessary to avoid the imposition of such excise tax. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, if any
portion of the amount herein payable to the Executive is determined to be
non-deductible pursuant to the regulations promulgated under Code Section 280G,
then HMS shall be required only to pay to Executive the amount determined to
be
deductible under Section 280G.
If
when
the Executive’s employment terminates, the Executive is a “specified employee,”
as defined in Code Section 409A(a)(2)(B)(i), then despite any provision of
this
Employment Agreement or other plan or agreement to the contrary, the Executive
will not be entitled to the payments until the earliest of: (a) the date that
is
at least six months after the Executive’s separation from service (within the
meaning of Code Section 409A) for reasons other than the Executive’s death, (b)
the date of the Executive’s death, or (c) any earlier date that does not result
in additional tax or interest to the Executive under Code Section 409A. As
promptly as possible after the end of the period during which payments are
delayed under this provision, the entire amount of the delayed payments shall
be
paid to the Executive in a single lump sum with any remaining payments to
commence in accordance with the terms of this Agreement or other applicable
plan
or agreement.
(d)
Notwithstanding the provisions of Section 3(a) of this Agreement, this
Agreement
shall terminate automatically upon Executive’s Disability and Executive’s rights
under this Agreement shall cease as of the date of such termination; provided,
however, that Executive shall nevertheless be entitled to receive an amount
equal to and no greater than seventy (70%) of the Executive’s then Annual Base
Salary as defined in subsection (a) of this Section 4, less amounts payable
under any disability plan of HMS, until the earliest of (i) his return to
employment, (ii) his attainment of age 65, (iii) his death, or (iv) the date
this Agreement would have expired. In addition, Executive shall be entitled
to a
continuation of HMS’s employee benefits for such period. In the event Executive
is no longer eligible to participate in any employee benefit plan because he
is
no longer an employee, HMS shall reimburse Executive in an amount equal to
the
monthly premium paid by him to obtain substantially similar employee benefits
which he enjoyed prior to termination, which reimbursement shall continue until
the earliest of (i) his return to employment, (ii) his attainment of age 65,
(iii) his death, (iv) the date this
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Agreement
would have expired, or (v) until Executive secures substantially similar
benefits through other employment, whichever shall first occur. For purposes
of
this Agreement, Disability shall mean Executive’s incapacitation by accident,
sickness or otherwise which renders Executive mentally or physically incapable
of performing all of the essential functions of his job, taking into account
any
reasonable accommodation required by law, without posing a direct threat to
himself or others, for a period of twelve (12) months.
(e)
Notwithstanding the provisions of Section 3(a) of this Agreement, this Agreement
shall terminate automatically upon Executive’s death, and Executive’s rights
under this Agreement (other than vested plan benefits) shall cease as of the
date of such termination.
(f)
Executive agrees that in the event his employment under this Agreement is
terminated, Executive shall resign, and upon such event does hereby resign,
as a
director of HNC, the Bank and any affiliate or subsidiary thereof, if he is
then
serving as a director of any such entities.
(g)
Executive agrees that in the event that HMS provides notice of nonrenewal of
this Agreement under Section 3(a), HMS shall have no further obligation under
this Agreement, other than payment to Executive of his earned but unpaid Annual
Base Salary under Section 4(a) and any employee benefits under Section 4(d),(e),
or (f), as of the date of the expiration of this Agreement or until Executive
voluntarily terminates his employment, whichever occurs earlier.
4.
Employment
Period Compensation.
(a)
Annual
Base Salary.
For
services performed by Executive under this Agreement,
HMS shall pay Executive an Annual Base Salary in the aggregate during the
Employment Period at the rate of $375,000.00 per year, payable at the same
times
as salaries are payable to other executives of the Bank and HNC. HNC shall
review Executive’s performance and salary at least on an annual basis. HMS may,
from time to time, in its sole discretion, increase Executive’s Annual Base
Salary, and any and all such increases shall be deemed to constitute amendments
to this Section 4(a) to reflect the increased amounts, effective as of the
date
established for such increases by the Board of Directors of HNC or any committee
of such Board in the resolutions authorizing such increases.
(b)
Incentive
Plans.
Executive shall be entitled to participate in HMS’ Annual and Long Term
Incentive Plans which provide incentives based on goals and objectives as
specified by the Compensation Committee of the Board of Directors of HNC.
(c)
Vacations.
During
the term of this Agreement, Executive shall be entitled to a paid annual
vacation in accordance with the policies as established from time to time by
the
Board of Directors of HNC. However, Executive shall not be entitled
to
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(d)
Employee
Benefit Plans.
During
the term of this Agreement, Executive shall be entitled to participate in and
receive the benefits of any employee benefit plan currently in effect at HMS,
until such time that the Board of Directors of the Bank and HNC authorizes
a
change in such benefits. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to Executive pursuant to Section 4(a) hereof.
(e)
Automobile.
During
the term of this Agreement, HMS shall provide Executive
with exclusive use of a luxury automobile mutually agreed upon by HMS and
Executive. HMS shall be responsible and shall pay for all costs of insurance
coverage, repairs, maintenance and other operating and incidental expenses,
including license, fuel and oil to the extent permitted by Treasury Regulations.
The automobile shall at all times remain the property of HMS.
(f)
Business
Expenses.
During
the term of this Agreement, Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him, to the extent
properly accounted for, in accordance with the policies and procedures
established by the Board of Directors of HMS for its executive officers. HMS
shall reimburse Executive for any and all dues and reasonable HMS related
business expenses associated with the Executive’s membership in a country club,
golf or tennis club, social club, or service organization subject to approval
by
the Compensation Committee of HNC.
(g)
Stock
Options.
Executive shall be entitled to 25,000 stock options pursuant to the terms of
2004 Omnibus Stock Incentive Plan, as amended (the “2004 Plan”). The exercise
price will be the Fair Market Value for HNC’s common stock on the date of the
grant as defined in the 2004 Plan. Fifty percent (50%) of the options granted
pursuant to this subparagraph shall vest and
be
exercisable when
the
price of HNC’s common stock rises to an average of $20.00 per share over a
period of thirty (30) consecutive trading days within five years of the date
of
this Agreement. The remaining fifty percent (50%) of the options granted
pursuant to this subparagraph shall vest and be exercisable when the price
of
HNC’s common stock rises to an average of $22.50 per share over thirty (30)
consecutive trading days within five years of the date of this Agreement. All
such options shall be subject to the terms and conditions of the 2004 Plan
and
shall be conditioned upon the Executive’s execution of an option agreement in a
form specified by the Compensation Committee of HNC.
(h)
Supplemental
Executive Retirement Plan.
Subject
to the terms of the plan, which shall be compliant with Code Section 409A,
HMS
shall enter into an supplemental executive retirement plan with Executive to
provide for a retirement benefit equal to sixty percent (60%) of the sum of
(i)
his previous year’s Annual Base Salary and (ii) an average of the last three (3)
years’ bonuses reduced by any qualified retirement or
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(i)
Country
Club.
During
the term of this Agreement, Executive shall be entitled to receive prompt
reimbursement for his business expenses incurred at and monthly membership
dues
to a country club of the Executive’s choosing subject to approval by the
Compensation Committee.
5.
Termination
of Employment Following Change in Control.
(a)
If a
Change in Control (as defined in Section 5(b) of this Agreement) shall occur,
and if thereafter at any time during the term of this Agreement there shall
be:
(i)
any
involuntary termination of Executive’s employment (other than
for
the reasons set forth in Section 3(b) or 3(d) of this Agreement);
(ii)
any
reduction in Executive’s title, responsibilities, including reporting
responsibilities, or authority, including such title, responsibilities or
authority as such title, responsibilities or authority may be increased from
time to time during the term of this Agreement;
(iii)
the
assignment to Executive of duties inconsistent with Executive’s office on the
date of the Change in Control or as the same may be increased from time to
time
after the Change in Control;
(iv)
any
reassignment of Executive to a location greater than seventy-five (75) miles
from the location of Executive’s office on the date of the Change in Control;
(v)
any
reduction in Executive’s Annual Base Salary in effect on the date of the Change
in Control or as the same may be increased from time to time after the Change
in
Control; or
(vi)
any
failure to provide Executive with benefits at least as favorable as those
enjoyed by Executive under any of HMS’s retirement or pension, life insurance,
medical, health and accident, disability or other employee plans in which
Executive participated at the time of the Change in Control, or the taking
of
any action that would materially reduce any of such benefits in effect at the
time of the Change in Control; or any requirement that Executive travel in
performance of his duties on behalf of the Bank or any of its subsidiaries
or
affiliates for a significantly greater period of time during any year than
was
required of Executive during the year preceding the year in which the Change
in
Control occurred;
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then,
at
the option of Executive, Executive shall within ninety (90) days of the
occurrence of any of the foregoing events, provide notice to HMS of the
existence of the condition and provide HMS thirty (30) days in which to cure
such condition. In the event that HMS does not cure the condition within thirty
(30) days of such notice, Executive may resign from employment with HMS (or,
if
involuntarily terminated, give notice of intention to collect benefits under
this Agreement) by delivering such notice in writing (the “Notice of
Termination”) to HMS and the provisions of Section 6 of this Agreement shall
apply.
(b)
As
used in this Agreement, “Change in Control” shall mean the occurrence of any of
the following, provided the event constitutes a change in control within the
meaning of Code Section 409A and the rules, regulations, and guidance
promulgated thereunder:
(i)
(A) a
merger, consolidation or division involving HNC only (not the Bank), (B) a
sale,
exchange, transfer or other disposition of substantially all of the assets
of
HNC only (not the Bank), (C) a purchase by HNC only (not the Bank) of
substantially all of the assets of another entity, or (D) an acquisition of
common stock of HNC by a third party not HNC or an affiliate of HNC of more
than
thirty-five percent (35%) of the total voting power of HNC, unless (x) such
merger, consolidation, division, sale, exchange, transfer, purchase,
disposition, or acquisition of common stock, is approved in advance by seventy
percent (70%) or more of the members of the Board of Directors of HNC only
(not
the Bank) who are not interested in the transaction and (y) 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 HNC only
(not the Bank); or
(ii)
any
other change in control of HNC only (not the Bank) similar in effect to any
of
the foregoing.
(c)
A
consolidation of the Bank’s subsidiary charters shall not constitute a Change in
Control under this Agreement.
6.
Rights
in Event of Termination of Employment Following Change in
Control.
(a) In
the
event that Executive delivers a Notice of Termination (as defined in Section
5(a) of this Agreement) to HMS, Executive shall be absolutely entitled to
receive the compensation and benefits set forth below:
If,
at
the time of termination of Executive’s employment, a “Change in Control” (as
defined in Section 5(b) of this Agreement) has also occurred prior to the second
anniversary date of this Agreement, upon execution of a reasonable release
satisfactory to HMS, HMS will provide Executive with the following pay and
benefits: (i) a payment in an amount equal to and no greater than 2.0 times
the
Executive’s then
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Annual
Base Salary, which amount shall be payable in twenty-four (24) equal monthly
installments commencing within thirty (30) days of receiving an executed release
subject to the requirements of Code Section 409A; and (ii) HMS shall reimburse
Executive in an amount equal to the monthly premium paid by him to obtain
substantially similar employee benefits which he enjoyed prior to termination,
which reimbursement shall continue until the expiration of 24 months following
the date of termination of employment or
until
Executive secures substantially similar benefits through other employment,
whichever shall first occur,
subject
to Code Section 409A if applicable.
If,
at
the time of termination of Executive’s employment, a “Change in Control” (as
defined in Section 5(b) of this Agreement) has also occurred after the second
anniversary date of this Agreement, upon execution of a reasonable release
satisfactory to HMS, HMS will provide Executive with the following pay and
benefits: (i) a payment in an amount equal to and no greater than 2.0 times
the
sum of (a) Executive’s then Annual Base Salary and (b) the highest annual
incentive bonus paid to the Executive during the previous two years, which
amount shall be payable in twenty-four (24) equal monthly installments
commencing within thirty (30) days of receiving an executed release subject
to
the requirements of Code Section 409A; and (ii) HMS shall reimburse Executive
in
an amount equal to the monthly premium paid by him to obtain substantially
similar employee benefits which he enjoyed prior to termination, which
reimbursement shall continue until the expiration of 24 months following the
date of termination of employment or until Executive secures substantially
similar benefits through other employment, whichever shall first occur, subject
to Code Section 409A if applicable.
However,
in the event the payments described herein, when added to all other amounts
or
benefits provided to or on behalf of the Executive in connection with his
termination of employment, would result in the imposition of an excise tax
under
Code Section 4999, the severance payments shall be retroactively (if necessary)
reduced to the extent necessary to avoid such excise tax imposition. Upon
written notice to Executive, together with calculations of HMS's independent
auditors, Executive shall remit to HMS the amount of the reduction plus such
interest as maybe necessary to avoid the imposition of such excise tax.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, if any portion of the amount herein payable to the Executive is
determined to be non-deductible pursuant to the regulations promulgated under
Section 280G of the Code, then HMS shall be required only to pay to Executive
the amount determined to be deductible under Section 280G.
If
when
the Executive’s employment terminates, the Executive is a “specified employee,”
as defined in Code Section 409A(a)(2)(B)(i), then despite any provision of
this
Employment Agreement or other plan or agreement to the contrary, the Executive
will not be entitled to the payments until the earliest of: (a) the date that
is
at least six months after the Executive’s separation from service (within the
meaning of Code Section 409A) for reasons other than the Executive’s death, (b)
the date of the Executive’s death, or (c) any earlier date that does not result
in additional tax or interest to the Executive under Code Section 409A. As
promptly as possible after the end of the period during which payments are
delayed under this provision, the entire amount of the
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delayed
payments shall be paid to the Executive in a single lump sum with any remaining
payments to commence in accordance with the terms of this Agreement or other
applicable plan or agreement.
(b)
Executive shall not be required to mitigate the amount of any payment provided
for in this Section 6 by seeking other employment or otherwise. Unless otherwise
agreed to in writing, the amount of payment or the benefit provided for in
this
Section 6 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.
7.
Rights
in Event of Termination of Employment Absent Change in
Control.
(a)
In
the event that Executive’s employment is involuntarily terminated prior to the
first anniversary date of this Agreement, by HMS without Cause and no Change
in
Control shall have occurred as of the date of such termination, upon execution
of a reasonable release satisfactory to HMS, HMS will provide Executive with
the
following pay and benefits: (i) a payment in an amount equal to 1.0 times the
Executive’s then Annual Base Salary payable in twelve (12) equal monthly
installments; and (ii) HMS shall reimburse Executive in an amount equal to
the
monthly premium paid by him to obtain substantially similar employee benefits
which he enjoyed prior to termination, which reimbursement shall continue until
the expiration of 12 months following the date of termination of employment
or
until
Executive secures
substantially similar benefits through other employment, whichever shall first
occur, subject to Code Section 409A if applicable.
In
the
event that Executive’s employment is involuntarily terminated after the first
anniversary date of this Agreement, by HMS without Cause and no Change in
Control shall have occurred as of the date of such termination, upon execution
of a reasonable release satisfactory to HMS, HMS will provide Executive with
the
following pay and benefits: (i) an amount equal to Executive’s then Annual Base
Salary for the remainder of the then existing Employment Period that has not
been paid to Executive as of the date his employment terminates pro-rated into
monthly payments over the remaining Employment Period; and (ii) HMS shall
reimburse Executive in an amount equal to the monthly premium paid by him to
obtain substantially similar employee benefits which he enjoyed prior to
termination, which reimbursement shall continue until the expiration of the
existing Employment Period or
until
Executive secures substantially similar
benefits through other employment, whichever shall first occur, subject to
Code
Section 409A if applicable.
However,
in the event the payments described herein, when added to all other amounts
or
benefits provided to or on behalf of the Executive in connection with his
termination of employment, would result in the imposition of an excise tax
under
Code Section 4999, the severance payments shall be retroactively (if necessary)
reduced to the extent necessary to avoid such imposition. Upon written notice
to
Executive,
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(b)
Executive shall not be required to mitigate the amount of any payment provided
for in this Section 7 by seeking other employment or otherwise. The amount
of
payment or the benefit provided for in this Section 7 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.
(c)
The
amounts payable pursuant to this Section 7 shall constitute Executive's sole
and
exclusive remedy in the event of involuntary termination of Executive's
employment by HMS without cause in the absence of a Change in Control.
8.
Covenant
Not to Compete
(a)
Executive hereby acknowledges and recognizes the highly competitive nature
of
the business of HNC and the Bank and accordingly agrees that, during his
employment and for the applicable period set forth in Section 8(c) hereof.
Executive shall not:
(i)
in
any county in which, at any time during the Employment Period or as of the
date
of termination of the Executive's employment, a branch, office or other facility
of HNC or any of its subsidiaries is located, or in any county contiguous to
such a county, including contiguous counties located outside of the Commonwealth
of Pennsylvania (the "Non-Competition Area") be engaged, directly or indirectly,
either for his own account or as agent consultant, employee, partner, officer,
director, proprietor, investor (except as an investor owning less than 5% of
the
stock of a publicly owned company and not exercising management discretion)
or
otherwise of any person, firm, corporation or enterprise engaged in the banking
(including bank and financial holding company) or financial services industry,
or any other activity in which HNC or any of its subsidiaries are engaged during
the Employment Period; or
(ii)
in
the Non-Competition area provide financial or other assistance to any person,
firm, corporation, or enterprise engaged in the banking (including bank and
financial holding company) or financial services industry, or any other activity
in which HNC or any of its subsidiaries are engaged during the Employment
Period; or
(iii)
directly or indirectly contact, solicit or attempt to induce any person,
corporation or other entity who or which is a customer or referral source of
HNC,
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(iv)
directly or indirectly solicit, induce or encourage any employee of HNC or
any
of its subsidiaries or affiliates, who is employed during the term of
Executive's employment or on the date of termination of Executive’s employment,
to leave the employ of HNC or any of its subsidiaries or affiliates, or to
seek,
obtain or accept employment with any person or entity other than HNC or any
of
their subsidiaries or affiliates.
(b)
It is
expressly understood and agreed that, although Executive and HNC consider the
restrictions contained in Section 8(a) hereof reasonable for the purpose of
preserving for HNC and its subsidiaries their good will and other proprietary
rights, if a final judicial determination is made by a court having jurisdiction
that the time or territory or any other restriction contained in Section 8(a)
hereof is an unreasonable or otherwise unenforceable restriction against
Executive, the provisions of Section 8(a) hereof shall not be rendered void
but
shall be deemed amended to apply as to such maximum time and territory and
to
such other extent as such court may judicially determine or indicate to be
reasonable.
(c)
The
provisions of this Section 8 shall be applicable commencing on the date of
this
Agreement and ending on one of the following dates, as applicable:
(i)
if
Executive’s employment terminates as a result of Executive giving notice of
nonrenewal of this Agreement or if Executive voluntarily terminates his
employment without Good Reason, the first anniversary date of the effective
date
of termination of employment; or
(ii)
if
Executive’s employment terminates in accordance with the provisions of Section
3(b)(i) through 3(b)(xiv) of this Agreement (relating to termination for Cause),
the first anniversary date of the effective date of termination of employment;
or
(iii)
if
Executive’s employment terminates in accordance with the provisions of Section
3(b)(xv) of this Agreement (relating to termination for Cause), the provisions
of Section 8(a)(i) and 8(a)(ii) shall end six (6) months from the effective
date
of termination of employment and the provisions Sections 8(a)(iii) and 8(a)(iv)
shall end on the first anniversary date of the effective date of termination;
or
(iv)
prior to the first anniversary date of this Agreement, if the Executive
terminates his employment in accordance with Section 3(c) (relating to Good
Reason termination) or his employment is terminated in accordance with Section
7
(relating to termination without cause), the first anniversary date of the
effective date of termination of employment; or
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(v)
if
the Executive terminates his employment in accordance with Section 3(c)
(relating to Good Reason termination) or his employment is terminated in
accordance with Section 7 (relating to termination without cause) after the
first anniversary date of this Agreement, then the greater of (a) the first
anniversary date of the effective date of termination or (b) the then existing
Employment Period under the Agreement; or
(vi)
if
the Executive voluntarily terminates his employment in accordance with the
provisions of Section 5 (relating to Change in Control) hereof, the second
anniversary date of the effective date of termination of
employment.
9.
Unauthorized
Disclosure.
During
the term of his employment hereunder, or at any later time, the Executive shall
not, without the written consent of the Board of Directors of HNC or a person
authorized thereby, knowingly disclose to any person, other than an employee
of
the Bank, HNC or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties
as
President and Chief Executive Officer of HNC, any material confidential
information obtained by him while in the employ of HMS with respect to any
of
HNC’s or the Bank’s services, products, improvements, formulas, designs or
styles, processes, customers, methods of business or any business practices
the
disclosure of which could be or will be damaging to HNC or the Bank; 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
HNC or the Bank or any information that must be disclosed as required by law.
10.
Work
Made for Hire.
Any
work performed by the Executive under this Agreement should be considered a
“Work Made for Hire” as that phrase is defined by the U.S. patent laws. In the
event it should be established that such work does not qualify as a Work Made
for Hire, the Executive agrees to and does hereby assign to HNC and its
affiliates and subsidiaries, all of his rights, title, and/or interest in such
work product, including, but not limited to, all copyrights, patents,
trademarks, and property rights.
11.
Return
of Company Property and Documents.
The
Executive agrees that, at the time of termination of his employment, regardless
of the reason for termination, he will deliver to HNC, any and all Bank, HNC
or
HMS property, including, but not limited to, automobiles, keys, security codes
or passes, mobile telephones, pagers, computers, devices, confidential
information, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, software programs, equipment,
other documents or property, or reproductions of any of the aforementioned
items
developed or obtained by the Executive during the course of his employment.
12.
Liability
Insurance.
HNC
shall use its best efforts to obtain insurance coverage for the Executive under
an insurance policy covering officers and directors of
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13.
Notices.
Except
as otherwise provided in this Agreement, any notice required or permitted to
be
given under this Agreement shall be deemed properly given if in writing and
if
mailed by registered or certified mail, postage prepaid with return receipt
requested, to Executive’s residence, in the case of notices to Executive; to the
principal executive offices of the Bank, in the case of notices to the Bank,
and
to the principal executive offices of HNC, in the case of notices to HNC.
14.
Waiver.
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 the Board of Directors’ designee. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with,
any
condition or provision of this Agreement to similar or dissimilar provisions
or
conditions at the same or at any prior or subsequent time.
15.
Assignment.
This
Agreement shall not be assignable by any party, except by HNC or HMS to any
successor in interest to its respective businesses.
16.
Entire
Agreement.
This
Agreement contains the entire agreement of the parties and supersedes all other
agreements, written or oral, between the parties relating to the subject matter
of this Agreement.
17.
Successors,
Binding Agreement.
(a)
HNC
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the businesses
and/or assets of HNC to expressly assume and agree to perform this Agreement
in
the same manner and to the same extent that HNC would be required to perform
it
if no such succession had taken place. Failure by HNC to obtain such assumption
and agreement prior to the effectiveness of any such succession shall constitute
a breach of this Agreement and the provisions of Section 3 of this Agreement
shall apply. As used in this Agreement “HNC” and “Bank” shall mean HNC and Bank,
as defined previously and any successor to its respective businesses and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(b) This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees. If Executive should die after he has
delivered a Notice of Termination to HMS pursuant to Section 5 above, or
following HMS’s termination of Executive’s employment without Cause, such
amounts that would have been payable to Executive under this Agreement if
Executive had continued to live, shall be paid in
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18.
Arbitration.
HNC,
HMS 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 (except for any enforcement sought with respect to Sections 8, 9,
10
or 11, which maybe litigated in court through an action for an injunction or
other relief) are to be submitted for resolution, in Xxxxxxxxxx County,
Pennsylvania, 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”). HNC, HMS
or Executive may initiate an arbitration proceeding at any time by giving notice
to the other in accordance with the Rules. HNC, HMS and Executive may, as a
matter or 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, HNC, HMS 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 or
any
enforcement sought with respect to Sections 8, 9, 10 or 11, which may be
litigated through an action for injunction or other relief.
19.
Validity.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
20.
Applicable
Law.
This
Agreement shall be governed by and construed in accordance with the domestic,
internal laws of the Commonwealth of Pennsylvania, without regard to its
conflicts of laws principles.
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21.
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.
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above written.
ATTEST: HARLEYSVILLE
MANAGEMENT
SERVICES,
LLC
By:
/s/ XxXxx
Xxxxx By:
/s/
Xxxxxx X. Xxxxxx, Xx.
Xxxxxx
X. Xxxxxx, Xx.
WITNESS: EXECUTIVE
By:
/s/ Xxxxxxx X. High /s/
Xxxx X. Xxxxxxxx
Xxxx
X. Xxxxxxxx
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