EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT ("Agreement") dated as of December 17, 2003, among
NATIONAL PENN BANCSHARES, INC., a Pennsylvania business corporation and
registered bank holding company ("NPB"); NATIONAL PENN BANK, a national banking
association ("Bank"); and XXXX X. XXXXXXXXXX ("Executive") (NPB and Bank are
sometimes referred to herein collectively as "Employer").
BACKGROUND
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1. Executive is presently employed by The Peoples Bank of Oxford
("Peoples Bank") as its President and Chief Executive Officer, pursuant to an
Employment Agreement dated as of January 1, 2002 (the "Peoples Employment
Agreement").
2. Peoples Bank is a wholly-owned subsidiary of Peoples First, Inc., a
Pennsylvania business corporation and registered bank holding company
("Peoples").
3. On December 17, 0000, XXX and Peoples entered into an Agreement (the
"Merger Agreement") providing, among other things, for the merger of Peoples
with and into NPB (the "Merger"), followed immediately by the merger of Peoples
Bank with and into Bank (the "Bank Merger"). The Agreement also provides for
Bank to establish, immediately after the Bank Merger, a new banking division to
be called "The Peoples Bank of Oxford, a division of National Penn Bank" (the
"Peoples Bank Division").
4. It is the desire of the Boards of Directors of NPB and Bank that
Executive continue his employment from and after the effective date of the
Merger, on the terms and conditions set forth herein, in order that the
experience he has gained throughout his career and the management ability he has
demonstrated will continue to be available to NPB and Bank, including its
Peoples Bank Division. Executive is willing to continue such employment, on the
terms and conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual promises contained
herein, and each intending to be legally bound, NPB, Bank and Executive agree as
follows:
1. Background. The matters set forth in the "Background" section of
this Agreement are incorporated by reference herein.
2. Term. This Agreement shall be for a term of three years (the
"Term"), beginning on the date of closing of the Merger (the "Effective Date"),
subject to termination at any time as provided in Sections 9 through 13.
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3. Position, Duties.
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(a) During the Term, Bank will employ Executive as an executive vice
president of Bank and as President of the Peoples Bank Division. Executive
acknowledges that his employment as President of the Peoples Bank Division does
not give rise to an obligation to maintain the Peoples Bank Division beyond that
provided in the Merger Agreement. Employee accepts such employment, with such
powers and duties as may from time to time be determined by the Board of
Directors of Bank or by Bank's Chairman or President.
(b) Executive will devote substantially all his time and attention to,
and will use his best energies and abilities in the performance of, his duties
and responsibilities as prescribed in this Section 3, and will not engage in
consulting work or any trade or business for his own account or for or on behalf
of any other person, firm or corporation which competes, conflicts, or
interferes with the performance of his duties hereunder in any way.
Notwithstanding the foregoing, Executive may perform community service
consistent with NPB and Bank policy and engage in activities on behalf of NPB or
Bank or for his own account, including personal investment activities (excluding
any personal investments in publicly-traded companies (other than NPB) with
voting power equal to five percent or more); provided, however, that all such
service or activities do not interfere with Executive's performance of his
responsibilities under this Agreement.
4. Base Compensation. Except as provided in Section 17, for all
services to be performed by Executive pursuant to Section 3, Employer will pay
Executive a base salary of One Hundred Sixty Three Thousand Dollars ($163,000)
per year. Employer shall pay such salary to Executive in approximately equal
installments during each year on the customary salary payment dates of Employer,
and such salary shall be subject to applicable income tax withholding,
deductions required by law, and other deductions authorized by Executive.
Executive shall not be entitled to any additional compensation for service as a
director or committee member of NPB, Bank, the Peoples Bank Division or any
other affiliated company. Employer will evaluate Executive's performance
annually, and Executive shall be eligible for annual merit increases in base
salary in the discretion of the respective Boards of Directors of NPB and Bank.
Except as provided in Section 23, a base salary increase shall, when it takes
effect, become the new minimum base salary required thereafter by this Section
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5. Health Insurance, Benefit Plans, Stock Compensation Plans, etc.
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(a) In addition to the compensation payable to Executive pursuant to
Section 4 hereof, Executive shall be entitled during the time this Agreement is
in effect to participate in all health insurance and benefit plans, group
insurance, pension or profit-sharing plans, or other plan or plans providing
benefits applicable generally to executive employees of
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NPB or Bank which are presently in force or which may hereafter be adopted by
NPB or Bank.
(b) Executive shall also be eligible during the time this Agreement is
in effect for receipt of stock options or restricted stock commensurate with his
positions with NPB and Bank, pursuant to NPB's Officers' and Key Employees'
Stock Compensation Plan or any successor or additional stock option plan or
stock compensation plan which may hereafter be adopted by NPB for officers and
other key employees of NPB and its subsidiaries. Any discretionary terms of
grants or awards to Executive (other than with respect to amount) shall be
consistent with grants or awards to other senior officers generally.
6. Bonuses. As additional compensation for services rendered hereunder,
Executive shall be entitled:
(a) for the two year period beginning on the first day of the first
month following the Effective Date, to the receipt of a special cash bonus in
the amount of ______________________ ($_________) per month; and
(b) during the time this Agreement is in effect, to participate as a
"Category C Participant" in NPB's Executive Incentive Plan, assuming such plan
remains in effect, or at an equivalent level in any successor executive bonus
plan covering the officers of NPB or Bank which may be adopted by NPB or Bank.
Executive acknowledges that this Section 6 does not preclude NPB's or Bank's
Board of Directors, as the case may be, from amending or terminating the
Executive Incentive Plan or any other executive bonus plan in accordance with
its terms.
7. Other Benefits. Except as provided in Sections 14 and 23, as
additional compensation for services rendered hereunder, Executive shall be
entitled during the time this Agreement is in effect:
(a) To payment by NPB or Bank of, or reimbursement by NPB or Bank for,
100% of Executive's regular membership dues and assessments at Derfield County
Club, or similar quality replacement club, and all eligible business expenses
related thereto;
(b) To (i) life insurance coverage in an amount equal to two times
Executive's base salary (determined pursuant to Section 4), and (ii) long-term
disability insurance coverage in such amount and on such terms and conditions as
is such disability insurance coverage for Executive in effect on the date of
this Agreement, each at no expense to Executive;
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(c) To the use of an automobile (make and model to be mutually
agreeable to Executive and Employer), or to the receipt of an automobile
allowance (for an automobile of make and model mutually agreeable to Executive
and Employer), in such amount as shall be determined by Employer from time to
time, in Employer's sole discretion, but in no event less than $600 per month;
and
(d) To reasonable vacation and sick leave in accordance with Employer
policy, as the same may be revised from time to time.
8. Change in Control.
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(a) If a Change in Control (as defined in Section 8(b)) shall occur,
and if thereafter, there shall be:
(1) At any time, any involuntary termination of Employee's
employment (other than for Cause);
(2) At any time, any reduction in Employee's title,
responsibilities or authority, including such title, responsibilities or
authority as such may be increased from time to time;
(3) At any time, any reduction in Employee's Salary in effect
immediately prior to a Change in Control, or any failure to provide Employee
with benefits at least as favorable as those enjoyed by Employee under any of
the pension, life insurance, medical, health and accident, disability or other
employee plans of Employer in which Employee participated immediately prior to a
Change in Control, or the taking of any action that would materially reduce any
of such compensation or benefits in effect at the time of the Change in Control,
unless such reduction relates to a reduction applicable to all employees
generally;
(4) At any time, any reassignment of Employee beyond a thirty
(30) mile commute by automobile from Employee's home at 000 Xxxxxx Xxx Xxxx,
Xxxxxxx University, Pennsylvania; or
(5) At any time, any requirement that Employee travel in
performance of his duties on behalf of NPB or an Affiliate for a greater period
of time during any year than was required of Employee during the year preceding
the year in which the Change in Control occurred;
then, at the option of Employee, exercisable by Employee within one hundred
eighty (180) days of the occurrence of any of the foregoing events, Employee may
resign from employment (or, if involuntarily terminated, give notice of
intention to collect benefits hereunder) by delivering a notice in writing to
Employer, in which case Employee shall be
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entitled to a lump sum cash severance payment equal to 150% of Employee's
average Salary for the five years prior to the year in which a Change in Control
occurs (including the time of Executive's employment with Peoples Bank prior to
the Effective Date), which Employer shall pay to Employee within fifteen (15)
days of Employee's termination of employment.
Notwithstanding the foregoing or any other provision of this Agreement
to the contrary, in no event shall the lump sum payment to Employee pursuant to
this Section 6(a) be greater than an amount equal to an amount ("X") determined
pursuant to the following formula:
X = (2.99A - B) x (1 + C)D.
For purposes of the foregoing formula:
A = Employee's Base Amount on the date of the Change in
Control;
B = The present value of all other amounts which
qualify as parachute payments under Code Section
280G(b)(2)(A) or (B) (without regard to the
provisions of Code Section 280G(b)(2)(A)(ii)), such
present value to be determined pursuant to the
provisions of Code Section 280G;
C = 120% times 0.5 times the lowest of the semiannual
applicable federal rates (determined pursuant to Code
Section 1274(d)) in effect on the date of the Change
in Control; and
D = The number of whole semiannual periods plus any
fraction of a semiannual period from the date of the
Change in Control to the date of termination of the
Employee's employment.
(b) "Change in Control" means:
(1) An acquisition by any "person" or "group" (as those terms
are defined or used in Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) of "beneficial ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of securities of NPB representing 24.99% or more of the
combined voting power of NPB's securities then outstanding;
(2) A merger, consolidation or other reorganization of Bank,
except where the resulting entity is controlled, directly or indirectly, by NPB;
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(3) A merger, consolidation or other reorganization of NPB,
except where shareholders of NPB, immediately prior to consummation of any such
transaction, continue to hold at least a majority of the voting power of the
outstanding voting securities of the legal entity resulting from or existing
after any such transaction and a majority of the members of the Board of
Directors of the legal entity resulting from or existing after any such
transaction are former members of NPB's Board of Directors;
(4) A sale, exchange, transfer or other disposition of
substantially all of the assets of Bank to another entity, except to an entity
controlled, directly or indirectly, by NPB;
(5) A sale, exchange, transfer or other disposition of
substantially all of the assets of NPB to another entity, or a corporate
division involving NPB; or
(6) A contested proxy solicitation of the shareholders of NPB
which results in the contesting party obtaining the ability to cast 25% or more
of the votes entitled to be cast in an election of directors of NPB.
(c) "Affiliate" means any corporation which is included within a
"controlled group of corporations" including NPB, as determined under Code
Section 1563.
(d) "Base Amount" means Employee's average annualized taxable
compensation from Employer for the five years prior to the year in which a
Change in Control occurs, determined in accordance with the provisions of Code
Section 280G.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and as
the same may be amended from time to time.
(f) "Employer" includes, for purposes of Section 6 only, NPB or any
Affiliate which employs Employee at any particular time.
(g) "Salary" means Employee's annual base salary, established either by
contract or by the Board of Directors of Employer, prior to any reduction of
such salary pursuant to any contribution to a tax-qualified plan under Section
401(k) of the Code.
(h) Employee shall not be required to mitigate the amount of any
payment provided for in Section 8(a) by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in Section 8(a) be
reduced by any compensation earned by Employee as the result of employment by
another employer or by reason of Employee's receipt of or right to receive any
retirement or other benefits after the date of termination of employment or
otherwise.
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9. Termination--Disability. Employer may terminate Executive's
employment at any time if Executive shall be "disabled" for a period of 180
consecutive days. "Disability" means that, because of Executive's injury or
sickness, Executive cannot perform each of the material duties of his regular
occupation, as determined by Employer in good faith. In such event:
(a) This Agreement shall remain in effect for the remainder of the Term
and terminate at the end of such Term;
(b) Employer shall continue to pay Executive the compensation set forth
in Section 4 for the remainder of the Term of this Agreement, at the times set
forth in Section 4; and
(c) Employer shall continue to pay Executive the compensation set forth
in Section 6(a), if any, at the times and for the duration set forth in Section
6(a).
10. Termination--Death. If Executive's employment is terminated because
of Executive's death:
(a) This Agreement shall terminate at that time; and
(b) Within 30 days of the date of death, Employer shall pay to
Executive's designated beneficiary, in one lump sum, an amount equal to the
total amount of compensation remaining to be paid to Executive pursuant to
Section 4 through the remaining Term of the Agreement and Section 6(a) for the
remaining period set forth in Section 6(a).
11. Voluntary Termination. Executive may terminate his employment with
Employer at any time. In such event:
(a) This Agreement shall terminate at that time; and
(b) Employer shall not be obligated to pay Executive any further
compensation pursuant to Section 4 or otherwise, except that the following shall
remain due and payable by Employer to Executive notwithstanding termination of
this Agreement:
(1) Section 4 compensation, if any, accrued and unpaid
through the date of voluntary termination;
(2) The remaining amount payable to Executive pursuant to
Section 6(a), if any; and
(3) The amount payable to Executive pursuant to Section 8, if
any.
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12. Termination--Cause. Nothing contained in this Agreement shall be
construed to prevent Employer from terminating the employment of Executive
hereunder at any time for "cause".
(a) "Cause" means the Employer's good faith reasonable belief that the
Executive committed (1) fraud, theft or embezzlement, (2) falsified corporate
records, (3) disseminated confidential information concerning customers, NPB,
Bank, any NPB or Bank subsidiary or any of its or their employees, (4) had
documented unsatisfactory job performance under NPB's dismissal policy, or (5)
violated NPB's Code of Conduct. The foregoing definition of "cause" is the
definition of "cause" used by NPB, Bank and their subsidiaries in the ordinary
course of business.
(b) If Employer terminates Executive's employment for cause:
(1) Employer shall give Executive a written notice of
termination effective on the date specified by Employer in said notice, which
notice shall contain a full statement of the facts and reasons for such
termination;
(2) This Agreement shall terminate at such time; and
(3) Employer shall not be obligated to pay Executive any
further compensation pursuant to Section 4 or otherwise, except for (A) Section
4 compensation, if any, accrued and unpaid through the date of termination and
(B) the remaining amount payable to Executive pursuant to Section 6(a), if any.
13. Termination--Without Cause. Employer may terminate Executive's
employment at any time without cause (defined in Section 12(a)). In such event:
(a) This Agreement shall remain in effect for the remainder of its Term
and terminate at the end of the Term;
(b) Employer shall continue to pay Executive the compensation set forth
in Section 4 for the remainder of the Term of this Agreement, at the times set
forth in Section 4;
(c) Employer shall continue to pay Executive the compensation set forth
in Section 6(a), if any, at the times and for the duration set forth in Section
6(a);
(d) Employer shall reimburse Executive for the cost of "COBRA" health
care continuation coverage for the remainder of the Term of this Agreement, but
not to exceed 18 months;
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(e) If a Change in Control (defined in Section 8(b)) shall occur prior
to the end of the Term of this Agreement, Employer shall pay to Executive the
payment to which Executive is entitled pursuant to Section 8; and
(f) Executive shall not receive any other employee benefits, including
the benefits described in Section 7 of this Agreement, or be entitled to
participate in any other plan or plans providing benefits generally to employees
of Employer which are presently in effect or which may hereafter be adopted by
Employer, for the remainder of the Term of this Agreement.
14. Non-Competition. Executive acknowledges that NPB is a registered
bank holding company engaged principally in the commercial and retail banking
business through its ownership, support, operation and management of its
subsidiaries, including Bank. During the Term of this Agreement and for a period
of one year thereafter, or if Executive shall voluntarily terminate his
employment pursuant to Section 11 hereof, for a period of one year after the
termination of Executive's employment, Executive shall not, directly or
indirectly, acting alone or in conjunction with others:
(a) Engage as a director, officer, employee, partner, shareholder,
consultant, agent or in any other capacity, in the commercial or retail banking
business in competition with NPB, Bank or any other future NPB banking
subsidiary, in any location whether or not within the Commonwealth of
Pennsylvania that is within either fifty (50) miles of Boyertown, Berks County,
Pennsylvania, or within fifty (50) miles of Oxford, Xxxxxxx County,
Pennsylvania;
(b) Request any customers of NPB, Bank or any other future NPB banking
subsidiary, to curtail or cancel their business with NPB, Bank, or any other
future NPB banking subsidiary, excluding himself and any customer who is a
relative of Executive; or
(c) Induce, or attempt to influence, any employee of NPB, Bank, or any
other future NPB banking subsidiary to terminate employment with NPB, Bank, or
any other future NPB banking subsidiary, or to enter into any employment or
other business relationship with any other person (including Executive), firm or
corporation.
Executive recognizes that immediate and irreparable damage will result
to Employer if Executive breaches any of the terms and conditions of this
Section 14 and, accordingly, Executive hereby consents to the entry by any court
of competent jurisdiction of an injunction against him to restrain any such
breach, in addition to any other remedies or claims for money damages which
Employer may seek. Executive represents and warrants to Employer that his
experience and capabilities are such that he can obtain employment in business
without breaching the terms and conditions of this Section 14, and the
enforcement hereof by injunction or otherwise will not prevent him from earning
a livelihood.
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15. Non-Disclosure. During the Term of this Agreement and for an
indefinite period thereafter, Executive shall not, directly or indirectly,
acting alone or in conjunction with others, disclose to any person, firm or
corporation any of the following information: any trade secret, any details of
organization or business affairs, any names of past or present customers,
consumers or employees, or any other proprietary data or confidential
information, of NPB, Bank, or of any of NPB's other direct or indirect, present
or future, subsidiaries or affiliates; provided, however, that disclosure of
such information within the scope of Executive's employment, disclosure of such
information as is required by law, and disclosure of such information already in
the public domain through no fault of Executive, shall not be prohibited by this
Section 15.
Employer may enforce the provisions of this Section 15 by suit for
damages, injunction, or both. Executive agrees that Employer would be
irreparably injured by the breach of any provision of this Section 15, and money
damages alone would not be an appropriate measure of the harm to Employer from
such continuing breach. Therefore, equitable relief, including specific
performance of the provisions of this Section 15 by injunction, would be an
appropriate remedy for the breach of these provisions.
16. Binding Effect, Assignment.
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(a) This Agreement shall be binding upon and inure to the benefit of
NPB and Bank, and it shall be assignable to any corporation, limited liability
company or other entity which may become the legal employer of all of NPB's and
Bank's current employees (as is contemplated by NPB as of December 31, 2003), in
which case both NPB and Bank shall be guarantors of the due performance of all
obligations set forth herein and the term "Employer" used herein shall include
such assignee. This Agreement shall also be assignable to any corporation, bank
or other entity which may acquire NPB's or Bank's business or all or
substantially all of the assets of NPB or Bank, or with or into which NPB or
Bank may be merged or consolidated, as provided in Section 16(b).
(b) Each of NPB and Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of NPB or Bank to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that NPB or Bank would be required to perform it if no such succession
had taken place. Failure to obtain such assumption and agreement prior to the
effectiveness of any such succession shall constitute a breach of this
Agreement, in which case a "Change in Control" (as defined in Section 8(b))
shall be deemed to have occurred and Executive shall have the immediate right to
take the actions and receive the payments provided in Section 8. As used in this
Agreement, "NPB" and "Bank" shall mean NPB and Bank as previously defined and
any successor to the business and/or assets of NPB or Bank as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.
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(c) This Agreement shall be binding upon and inure to the benefit of
Executive, his personal and legal representatives, heirs, distributees, devisees
and assigns. Notwithstanding the foregoing, the obligations and duties of
Executive hereunder shall be personal and not assignable or delegable by him in
any manner whatsoever.
17. Exception for Across-the-Board Actions. If, during the Term, the
Boards of Directors of NPB and Bank shall determine, acting in good faith and
with a reasonable basis, that it is in the best interests of NPB, Bank and NPB's
shareholders to implement one or more broad, across-the-board cost-cutting
measures for all members of senior management, then, notwithstanding Sections 4
and 7, Executive's base compensation and other benefits may be reduced in
accordance with such cost-cutting measures in a manner consistent with any such
reductions in base compensation and/or other benefits for other senior officers
generally.
18. Employment After Term; Survival of Provisions. Upon expiration of
the Term of this Agreement:
(a) Executive's employment status shall convert to "at will" employment
status;
(b) except as set forth in (c) below, this Agreement shall remain in
effect solely as a "change-in-control" agreement for so long as Executive shall
remained employed by Employer; and
(c) the provisions of Sections 14 and 15 relating to non-competition
and non-disclosure shall remain in full force and effect in accordance with
their respective provisions.
19. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given upon delivery if delivered personally or two
business days after mailing if mailed by prepaid, registered or certified mail,
return receipt requested, addressed as follows:
If to NPB, to:
Xxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
National Penn Bancshares, Inc.
Reading and Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
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If to Bank, to:
Xxxxx X. Xxxxxxx
Chairman
National Penn Bank
Reading and Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
If to Executive, to:
Xxxx X. Xxxxxxxxxx
000 Xxxxxx Xxx Xxxxx
Xxxxxxx Xxxxxxxxxx, XX 00000
or to such other address as may have been previously furnished by the party to
the other by notice given in the manner provided herein.
20. Entire Agreement. This Agreement is intended by the parties to
constitute and does constitute the entire agreement between NPB, Bank and
Executive with respect to the subject matter hereof. This Agreement supersedes
any and all prior agreements, understandings, negotiations and discussions of
the parties, whether oral or written.
21. Amendment. This Agreement may be amended, modified, waived,
discharged or terminated only by an instrument in writing signed by Executive,
an authorized officer of NPB or an authorized officer of Bank, as the case may
be, against whom or which enforcement of the amendment, modification, waiver,
discharge or termination is sought.
22. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic internal law of the Commonwealth of Pennsylvania.
23. Interpretation of Provisions. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement. Without limiting
the generality of the foregoing, if a court of competent jurisdiction shall
determine that the time or geography provisions of Section 14 are not
reasonable, then such provision(s) shall be reformed to reflect such period of
time or geographical areas as the court shall determine to be reasonable and
enforceable.
24. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
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25. Joint and Several Obligations. All obligations of NPB and Bank
herein shall be joint and several obligations.
26. Termination of Prior Agreement, Pay-Out of Change-in-Control
Benefit.
(a) Effective concurrently with the closing of the Merger, the Peoples
Employment Agreement is terminated and of no further force and effect, except
that Executive shall be paid the full amount calculated under Section 9(b)(1) of
the Peoples Employment Agreement, such amount to be paid to Executive on the
Effective Date to the extent, in the opinion of NPB's counsel, that such payment
will not trigger the excise tax provisions of Code Section 4999.
(b) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment by Employer to or for the benefit of
Executive, whether paid or payable pursuant to the terms of this Agreement or
otherwise (other than payments to be made pursuant to Section 8 hereof) (each
such other payment a "Parachute Payment"), would constitute an "excess parachute
payment" within the meaning of Code Section 280G (whether or not under an
existing plan, arrangement or other agreement) and would result in the
imposition on Executive of an excise tax under Code Section 4999, then, in
addition to any other amounts to which Executive is entitled under this
Agreement or otherwise (other than pursuant to Section 8), Executive shall be
paid an amount equal to the sum of the excise taxes payable by Executive by
reason of receiving Parachute Payments plus the amount necessary to place
Executive in the same after-tax position (taking into account any and all
applicable federal, state and local excise, income or other taxes at the highest
possible applicable rates on such Parachute Payments (including, without
limitation, any payments under this subparagraph (b)) as if no excise tax had
been imposed with respect to Parachute Payments (the "Parachute Gross-up"). Any
Parachute Gross-up otherwise required by this subparagraph (b) shall be made not
later than the time of the corresponding payment hereunder giving rise to the
underlying Section 4999 excise tax (to the extent such determination has been
made prior to such time), even if the payment of the excise tax is not required
under the Code until a later time. Any Parachute Gross-up otherwise required
under this subparagraph (b) shall be made whether or not payments are payable
under this Agreement and whether or not Executive's employment or engagement
(pursuant to Section 27) with Employer shall have been terminated.
(c) All determinations to be made under subparagraph (b) shall be made
by Employer's independent public accountant ("Accounting Firm"), which firm
shall provide its determination and any supporting calculations both to Employer
and Executive within ten (10) days of the calculation thereof.
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(d) If the Internal Revenue Service notifies Executive of an inquiry
with respect to the applicability of Code Sections 280G or 4999 to any payment
by Employer, or assessment of tax under Code Section 4999 with respect to any
payment by Employer, Executive shall provide notice thereof to Employer within
ten (10) days of receipt, and shall take no action with respect to such inquiry
or assessment until Employer has responded thereto (provided such response is
timely). Employer shall have the right to appoint an attorney or accountant to
represent Executive with respect to such inquiry or assessment, and Executive
shall fully cooperate with such representative with respect to such inquiry or
assessment as a condition of receiving a Parachute Gross-up.
(e) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subparagraph (b), or of the representative
appointed pursuant to subparagraph (d), shall be borne solely by Employer.
27. Consulting Arrangement. Notwithstanding anything to the contrary in
this Agreement, beginning on the second anniversary of the Effective Date,
Executive shall have the option, exercisable upon not less than sixty (60) days
prior written notice to Employer, to resign as an executive vice president of
Bank and as President of the Peoples Bank Division, and to become a consultant
to NPB and Bank. If Executive exercises the option set forth in this Section 27:
(a) Executive shall become an independent contractor of NPB and Bank;
(b) Executive's primary responsibilities shall be to actively
participate in a transition process and to work closely with his named
successor, and to actively participate with client and referral source
retention. Executive agrees to spend at least twenty four hours per week
performing these services for NPB and Bank, at such times and places as shall be
determined by Executive;
(c) As compensation for the services to be provided by Executive
pursuant to subsection 27(b), NPB or Bank shall pay Executive seventy percent
(70%) of Executive's base salary as then in effect pursuant to Section 4 of this
Agreement. Executive shall provide his own health and other insurances.
Executive shall not be entitled to participate, and shall not participate, in
any employee benefit or welfare plan providing benefits to NPB or Bank
employees, whether presently in force or hereafter adopted;
(d) The term of Executive's engagement as a consultant shall be for one
year from the date specified in the notice of exercise of the option as the
"effective date" of the consulting arrangement, which date shall not be earlier
than sixty days after the date of the notice;
(e) The provisions of Sections 2 through 13 of this Agreement shall
automatically terminate and be of no further force and effect;
14
(f) Executive shall resign as a director of Bank and as a member of the
Peoples Bank Board (as defined in the Merger Agreement), provided, however, that
Bank may request Executive to remain on the Peoples Bank Board as it then
presently exists as an advisory director; and
(g) At Executive's option, Executive may elect to extend the term of
this consulting arrangement for an additional twelve (12) months by providing
written notice to NPB and Bank not less than sixty (60) days prior to the
expiration of the consulting term specified in subsection 27(d). In such event,
Executive's consulting arrangement shall be on the same terms and conditions as
the first consulting year, except that:
(i) Executive shall perform such services as shall be
requested by Executive's named successor, at such times as shall be reasonably
requested by such named successor; and
(ii) As compensation for the services to be provided by
Executive pursuant to subsection 27(g)(i), NPB or Bank shall pay Executive
thirty five percent (35%) of Executive's base salary as was last in effect
pursuant to Section 4 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
NATIONAL PENN BANCSHARES, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and CEO
NATIONAL PENN BANK
By: /s/ Xxxxx X. Xxxxx
--------------------------
Name: Xxxxx X. Xxxxx
Title: President and CEO
Witness: /s/ Xxxxx X. Dougherty__ /s/ Xxxx X. Xxxxxxxxxx
--------------------------- --------------------------
Xxxx X. Xxxxxxxxxx
15
