FIRST KEYSTONE BANK AMENDED AND RESTATED AGREEMENT
EXHIBIT
10.5
AMENDED
AND RESTATED AGREEMENT
THIS AMENDED AND RESTATED
AGREEMENT (the
“Agreement”), between First Keystone Bank (the “Savings Bank”), a federally
chartered savings bank, and Xxxxx Xxxxx (the “Executive”), is hereby amended and
restated effective as of March 24, 2010, provided that the effectiveness of this
Agreement is subject to and conditioned upon the non-objection of the Office of
Thrift Supervision (the “OTS”) as set forth below.
WHEREAS, the Executive is
presently an officer and Corporate Secretary of First Keystone Financial, Inc.
(the “Corporation”) and the Savings Bank (together, the “Employers”), pursuant
to an employment agreement between the Savings Bank and the Executive originally
dated as of December 1, 2004 (the “Prior Agreement”);
WHEREAS, the Savings Bank
entered into a Supervisory Agreement with the OTS dated as of February 13, 2006
(the “Supervisory Agreement”), which generally precludes the Savings Bank from
(i) entering into, renewing, extending or revising any arrangement related to
compensation or benefits of any director or senior executive officer of the
Savings Bank unless the Savings Bank first: (A) provides a minimum of 30 days’
advance written notice of the proposed transaction to the OTS, and (B) receives
a written notice of non-objection from the OTS; and (ii) making or agreeing to
make any “golden parachute payments” as defined in 12 U.S.C. Section 1828(k) and
12 C.F.R. Part 359, except as may be permitted by the OTS and the preceding
statutory authority;
WHEREAS, the Savings Bank
previously authorized a renewal of the Prior Agreement subject to and
conditioned upon the receipt of non-objection from the OTS, which non-objection
has been requested and was received by letter dated March 4, 2010;
WHEREAS, the Savings Bank
previously amended and restated the Prior Agreement in order to comply with
Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”);
WHEREAS, the Employers desire
to assure themselves of the continued availability of the Executive’s services
as provided in this Agreement; and
WHEREAS, the Executive is
willing to serve the Employers on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in
consideration of the premises and the mutual agreements herein contained, the
parties hereby agree as follows:
1. Definitions. The
following words and terms shall have the meanings set forth below for the
purposes of this Agreement:
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(a) Annual Compensation. The
Executive’s “Annual Compensation” for purposes of this Agreement shall be deemed
to mean the Executive’s annual base salary in effect immediately prior to the
Date of Termination.
(b) Cause. Termination of the
Executive’s employment for “Cause” shall mean termination because of 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.
(c) Change in
Control. “Change in Control” shall mean a change in the
ownership of the Corporation or the Savings Bank or a change in the effective
control of the Corporation or the Savings Bank, in each case as provided under
Section 409A of the Code and the regulations thereunder.
(d) Code. Code shall
mean the Internal Revenue Code of 1986, as amended.
(e) Date of Termination. “Date of
Termination” shall mean (i) if the Executive’s employment is terminated for
Cause, the date on which the Notice of Termination is given, and (ii) if the
Executive’s employment is terminated for any other reason, the date specified in
such Notice of Termination.
(f) Disability. “Disability” shall
mean the Executive (i) is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, receiving income replacement benefits for a period of
not less than three (3) months under an accident and health plan covering
employees of the Savings Bank.
(g) Good Reason. “Good
Reason” means the occurrence of any of the following events:
(i) any
material breach of this Agreement by the Savings Bank, including without
limitation any of the following: (A) a material diminution in the Executive’s
base compensation, (B) a material diminution in the Executive’s authority,
duties or responsibilities, or (C) a material diminution in the authority,
duties or responsibilities of the supervisor to whom the Executive is required
to report, or
(ii) any
material change in the geographic location at which the Executive must perform
her services under this Agreement;
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provided,
however, that prior to any termination of employment for Good Reason, the
Executive must first provide written notice to the Savings Bank within ninety
(90) days of the initial existence of the condition, describing the existence of
such condition, and the Savings Bank shall thereafter have the right to remedy
the condition within thirty (30) days of the date the Savings Bank received the
written notice from the Executive. If the Savings Bank remedies the
condition within such thirty (30) day cure period, then no Good Reason shall be
deemed to exist with respect to such condition. If the Savings Bank
does not remedy the condition within such thirty (30) day cure period, then the
Executive may deliver a Notice of Termination for Good Reason at any time within
sixty (60) days following the expiration of such cure period.
(i) Notice of Termination. Any
purported termination of the Executive’s employment by the Savings Bank for any
reason, including without limitation for Cause, Disability or Retirement, or by
the Executive for any reason, including without limitation for Good Reason,
shall be communicated by a written “Notice of Termination” to the other party
hereto. For purposes of this Agreement, a “Notice of Termination”
shall mean a notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated, (iii) specifies a Date of
Termination, which shall be not less than thirty (30) days nor more than ninety
(90) days after such Notice of Termination is given, except any termination of
the Executive’s employment for Cause shall be effective immediately, and (iv) is
given in the manner specified in Section 7 hereof.
(j) Retirement. “Retirement”
shall mean voluntary termination by the Executive in accordance with the
Employers’ retirement policies, including early retirement, generally applicable
to their salaried employees.
2. Benefits Upon Termination. If
the Executive’s employment by the Savings Bank shall be terminated subsequent to
a Change in Control by (i) the Savings Bank other than for Cause, Retirement or
as a result of the Executive’s death or Disability, or (ii) the Executive for
Good Reason, then the Corporation or the Savings Bank shall, subject to the
provisions of Section 3 hereof:
(a) pay
to the Executive, in a lump sum within five (5) business days following the Date
of Termination, a cash severance amount equal to one (1) times the Executive’s
Annual Compensation less the value of the benefits to be provided to Executive
pursuant to the terms of subsection (b) hereof; and
(b) maintain
and provide for a period ending at the earlier of (i) one (1) year after the
Date of Termination or (ii) the date of the Executive’s full-time employment by
another employer (provided that the Executive is entitled under the terms of
such employment to benefits substantially similar to those described in this
subparagraph (b)), at no cost to the Executive, the Executive’s continued
participation in all group insurance, life insurance, health and accident
insurance, and disability insurance in which the Executive was participating
immediately prior to the Date of Termination; provided that any insurance
premiums payable by the Savings Bank or any successors pursuant to this Section
2(b) shall be payable at such times and in such amounts (except that the Savings
Bank shall also pay any employee portion of the premiums) as if the Executive
was still an employee of the Savings Bank, subject to any increases in such
amounts imposed by the insurance company or COBRA, and the amount of insurance
premiums required to be paid by the Savings Bank in any taxable year shall not
affect the amount of insurance premiums required to be paid by the Savings Bank
in any other taxable year; and provided further that if the Executive’s
participation in any group insurance plan is barred, the Savings Bank shall
either arrange to provide the Executive with insurance benefits substantially
similar to those which the Executive was entitled to receive under such group
insurance plan or, if such coverage cannot be obtained, pay a lump sum cash
equivalency amount within thirty (30) days following the Date of Termination
based on the annualized rate of premiums being paid by the Savings Bank as of
the Date of Termination.
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(c) Notwithstanding
anything to the contrary herein, the total amount of severance benefits that the
Executive receives under this Agreement and/or the Amended and Restated
Agreement between the Corporation and the Savings Bank entered into concurrently
with this Agreement shall not in the aggregate exceed the amount of the benefits
provided by subsections (a) and (b) of this Section 2.
(d) In
the event that the Executive’s employment is terminated by the Savings Bank for
Cause, the Executive shall have no right pursuant to this Agreement to
compensation or other benefits for any period after the applicable Date of
Termination.
3. Limitation
of Benefits under Certain Circumstances.
(a) If
the payments and benefits pursuant to Section 2 hereof, either alone or together
with other payments and benefits which the Executive has the right to receive
from the Savings Bank and the Corporation, would constitute a “parachute
payment” under Section 280G of the Code, then the payments and benefits payable
by the Savings Bank pursuant to Section 2 hereof shall be reduced by the minimum
amount necessary to result in no portion of the payments and benefits under
Section 2 being non-deductible to the Savings Bank pursuant to Section 280G of
the Code and subject to the excise tax imposed under Section 4999 of the
Code. If the payments and benefits under Section 2 are required to be
reduced, the cash severance shall be reduced first, followed by a reduction in
the fringe benefits. The determination of any reduction in the
payments and benefits to be made pursuant to Section 2 shall be based upon the
opinion of independent tax counsel selected by the Savings Bank and paid for by
the Savings Bank. Such counsel shall promptly prepare the foregoing
opinion, but in no event later than thirty (30) days from the Date of
Termination, and may use such actuaries as such counsel deems necessary or
advisable for the purpose. Nothing contained in this Section 3 shall
result in a reduction of any payments or benefits to which the Executive may be
entitled upon termination of employment other than pursuant to Section 2 hereof,
or a reduction in the payments and benefits specified in Section 2 below
zero.
(b) Notwithstanding
any other provision herein to the contrary, for as long as required by the
Supervisory Agreement, if the Supervisory Agreement is still in effect as of the
date of such termination, or if the Savings Bank is deemed “troubled” as such
term is defined in 12 C.F.R. §563.555, the Savings Bank shall not make or agree
to make any “golden parachute payments” (as such term is defined in 12 U.S.C.
Section 1828(k) and 12 C.F.R. Part 359) prior to such time as the Savings Bank
has complied in all respects with the restrictions concerning the making of such
payments that apply to the Savings Bank as set forth in 12 C.F.R. Part 359, and
has received all required regulatory approvals or non-objections to make such
payments.
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4.
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Mitigation;
Exclusivity of Benefits.
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(a) The
Executive shall not be required to mitigate the amount of any benefits hereunder
by seeking other employment or otherwise, nor shall the amount of any such
benefits be reduced by any compensation earned by the Executive as a result of
employment by another employer after the Date of Termination or otherwise,
except as set forth in Section 2(b) above.
(b) The
specific arrangements referred to herein are not intended to exclude any other
benefits which may be available to the Executive upon a termination of
employment with the Employers pursuant to employee benefit plans of the
Employers or otherwise.
5. Withholding. All
payments required to be made by the Savings Bank hereunder to the Executive
shall be subject to the withholding of such amounts, if any, relating to tax and
other payroll deductions as the Savings Bank may reasonably determine should be
withheld pursuant to any applicable law or regulation.
6. Assignability. The Savings
Bank may assign this Agreement and its rights and obligations hereunder in
whole, but not in part, to any corporation, bank or other entity with or into
which the Savings Bank may hereafter merge or consolidate or to which the
Savings Bank may transfer all or substantially all of its assets, if in any such
case said corporation, bank or other entity shall by operation of law or
expressly in writing assume all obligations of the Savings Bank hereunder as
fully as if it had been originally made a party hereto, but may not otherwise
assign this Agreement or its rights hereunder. The Executive may not
assign or transfer this Agreement or any rights or obligations
hereunder.
7. Notice. For the purposes of
this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth
below:
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To
the Savings Bank:
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President
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00
Xxxx Xxxxx Xxxxxx
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Xxxxx,
Xxxxxxxxxxxx 00000
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To
the Executive:
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Xxxxx
Xxxxx
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At
the address last appearing on the personnel
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records
of the Savings Bank
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8. Amendment; Waiver. No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer or officers as may be specifically designated by the
Board of Directors of the Savings Bank to sign on its behalf. No
waiver by any party hereto at any time of any breach by any other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time. In addition, notwithstanding anything in this Agreement to the
contrary, the Savings Bank may amend in good faith any terms of this Agreement,
including retroactively, in order to comply with Section 409A of the
Code.
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9. Governing Law. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the United States where applicable and otherwise by the
substantive laws of the Commonwealth of Pennsylvania.
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10.
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Nature
of Employment and Obligations.
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(a) Nothing
contained herein shall be deemed to create other than a terminable at will
employment relationship between the Savings Bank and the Executive, and the
Savings Bank may terminate the Executive’s employment at any time, subject to
providing any payments specified herein in accordance with the terms
hereof.
(b) Nothing
contained herein shall create or require the Savings Bank to create a trust of
any kind to fund any benefits which may be payable hereunder, and to the extent
that the Executive acquires a right to receive benefits from the Savings Bank
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Savings Bank.
11. Term of Agreement. This
Agreement shall terminate two (2) years after the date first written
above. Subject to the last sentence of this Section 11, at least
thirty (30) days prior to the first annual anniversary of the date first written
above and each annual anniversary thereafter, the Board of Directors of the
Savings Bank shall consider and review (with appropriate corporate documentation
thereof, and after taking into account all relevant factors, including the
Executive’s performance as an employee) the extension of the term of this
Agreement for an additional one (1) year. The term of this Agreement shall not
be extended unless the Board of Directors of the Savings Bank approves such
extension and provides written notice to the Executive, at least thirty (30)
days prior to the date of any such anniversary, of the Savings Bank’s election
to extend the term beyond its then scheduled expiration date; provided that,
notwithstanding the foregoing to the contrary, this Agreement shall be
automatically extended for an additional one (1) year upon a Change in Control.
Furthermore, notwithstanding the Savings Bank’s action to extend the term, such
term shall not extend if the Executive gives notice thirty (30) days prior to
the scheduled expiration date of her election to not allow the term of the
Agreement to extend. Notwithstanding anything in this Agreement to the contrary,
as long as the Savings Bank remains subject to the Supervisory Agreement or is
deemed “troubled” as such term is defined in 12 C.F.R. §563.555 and for as long
as required by the Supervisory Agreement, any renewal of this Agreement shall be
subject to and conditioned upon the written approval or non-objection of the OTS
and, if applicable, the Federal Deposit Insurance Corporation (the
“FDIC”).
12. Headings. The
section headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
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13. Validity. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
14. Changes in Statutes or
Regulations. If any statutory or regulatory provision
referenced herein is subsequently changed or re-numbered, or is replaced by a
separate provision, then the references in this Agreement to such statutory or
regulatory provision shall be deemed to be a reference to such section as
amended, re-numbered or replaced.
15. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and the same
instrument.
16. Regulatory Prohibition.
Notwithstanding any other provision of this Agreement to the contrary,
any payments made to the Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the
Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. §1828(k)) and 12 C.F.R. Part
359.
17. Regulatory
Actions. The following provisions shall be applicable to the
parties to the extent that they are required to be included in agreements
between a savings association and its employees pursuant to Section 563.39(b) of
the Regulations Applicable to all Savings Associations, 12 C.F.R. §563.39(b), or
any successor thereto, and shall be controlling in the event of a conflict with
any other provision of this Agreement.
(a) If
the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Savings Bank’s affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the FDIA (12 U.S.C.
§§1818(e)(3) and 1818(g)(1)), the Savings Bank’s obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed,
the Savings Bank may, in its discretion: (i) pay the Executive all or part of
the compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(b) If
the Executive is removed from office and/or permanently prohibited from
participating in the conduct of the Savings Bank’s affairs by an order issued
under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and
(g)(1)), all obligations of the Savings Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Executive and the Savings Bank as of the date of termination shall not be
affected.
(c) If
the Savings Bank is in default, as defined in Section 3(x)(1) of the FDIA (12
U.S.C. §1813(x)(1)), all obligations under this Agreement shall terminate as of
the date of default, but vested rights of the Executive and the Savings Bank as
of the date of termination shall not be affected.
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(d) All
obligations under this Agreement shall be terminated pursuant to 12 C.F.R.
§563.39(b)(5), except to the extent that it is determined that continuation of
the Agreement for the continued operation of the Savings Bank is necessary: (i)
by the Director of the OTS, or his/her designee, at the time the FDIC enters
into an agreement to provide assistance to or on behalf of the Savings Bank
under the authority contained in Section 13(c) of the FDIA (12 U.S.C. §1823(c));
or (ii) by the Director of the OTS, or his/her designee, at the time the
Director or his/her designee approves a supervisory merger to resolve problems
related to operation of the Savings Bank or when the Savings Bank is determined
by the Director of the OTS to be in an unsafe or unsound condition, but vested
rights of the Executive and the Savings Bank as of the date of termination shall
not be affected.
18. Entire
Agreement. This Agreement embodies the entire agreement
between the Savings Bank and the Executive with respect to the matters agreed to
herein. All prior agreements between the Savings Bank and the
Executive with respect to the matters agreed to herein, including the Prior
Agreement, are hereby superseded and shall have no force or
effect. Notwithstanding the foregoing, nothing contained in this
Agreement shall affect the agreement of even date being entered into between the
Corporation and the Executive.
[signature
page follows]
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IN WITNESS WHEREOF, this
Agreement has been executed effective as of the date first written
above.
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ATTEST:
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By:
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/s/ Xxxx X. Xxxxxxxxxx
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By:
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/s/ Xxxxxx X.
Xxxxxxx
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Name:
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Xxxx X. Xxxxxxxxxx
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Xxxxxx
X. Xxxxxxx
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Title:
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President/CEO
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Chairman
of the Board of Directors
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EXECUTIVE
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By:
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/s/ Xxxxx
Xxxxx
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Xxxxx
Xxxxx, Individually
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