CHANGE OF CONTROL AGREEMENT
FOR
XXXXXXX X. XXXXXX
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement"), made as of December
17, 2004, is by and among DNB FINANCIAL CORPORATION ("Holding Company"), DNB
FIRST, NATIONAL ASSOCIATION, a national banking association with principal
offices at 0 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000 ("Bank") (Holding Company
and Bank are sometimes referred to individually and collectively herein as the
"Company") and XXXXXXX X. XXXXXX, an individual residing in Xxxxxxx County,
Pennsylvania ("Executive").
Background
A. Company and Executive wish to enter into an agreement pursuant to
which Company wishes to secure the future services of Executive by providing
Executive the severance payments provided in this Agreement as additional
incentive to induce Executive to devote Executive's time and attention to the
interests and affairs of the Company.
B. Executive is willing to enter into this Agreement upon the terms and
conditions herein set forth.
C. The Boards of Directors of the Holding Company and the Bank have
each approved this Agreement and it is intended to be maintained as part of the
official records of the Holding Company and the Bank.
NOW THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties agree as follows:
1. Employment. Except strictly to such extent (if any) as may be provided
in another agreement between Holding Company or Bank and Executive, Executive
shall remain an employee at will of the Company hereafter. This Agreement is not
an employment agreement, but shall only be interpreted as governing the payment
of severance, which may be due to Executive upon termination of Executive's
employment with Company under the specific circumstances described in this
Agreement. No provision of this Agreement shall be interpreted to derogate from
the power of the Company or its Board of Directors to terminate the employment
of the Executive, subject nevertheless to the terms of this Agreement.
2. Compensation. The compensation to be paid by Company to Executive from
time to time, including any fringe benefits or other employee benefits, shall
not be governed by this Agreement. This Agreement shall not be deemed to affect
the terms of any stock options, employee benefits or other agreements between
the Company and Executive.
3. Severance Payments upon Termination of Employment After a "Change in
Control". This Agreement does not govern any termination of Executive's
employment with Company which occurs prior to a "change in control" as defined
in subsection (e) of this Section. No inference shall be drawn from any
provision of this Section 3 concerning the rights and
obligations of the parties in connection with a termination of Executive's
employment prior to such a "change in control".
(a) Termination by Company for Cause or Not for Cause. If Executive's
employment is terminated by Company for "cause" (as defined in subsection (c) of
this Section) at any time, or with or without "cause" prior to a "change in
control", Executive shall have no right to any severance or other payments under
this Agreement due to such termination. If Executive is terminated by Company or
Holding Company after a "change in control" (as defined in subsection (e) of
this Section) other than for "cause", Executive's right to severance payments
under this Agreement shall be as set forth in subsection (f) of this Section. A
termination by Company of Executive's employment with Bank only or Holding
Company only shall be deemed a termination for purposes of this Agreement, and
Executive's right to severance payments (if any) hereunder, shall be determined
as if such termination were a termination from employment with Company entirely.
(b) Termination by Executive for Good Reason or Not for Good Reason.
If Executive terminates Executive's employment with Holding Company and Bank
prior to a change in control, or without "good reason" (as defined in subsection
(d) of this Section) at any time, Executive shall have no right to any severance
or other payments under this Agreement due to such termination. If Executive
terminates Executive's employment with Holding Company and Bank for "good
reason" after a "change in control" (as defined in subsection (e) of this
Section), Executive's right to severance payments under this Agreement shall be
as set forth in subsection (f) of this Section.
(c) Definition of "Cause". For the purpose of this Agreement,
termination for "cause" shall mean termination for personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, conviction of a felony, suspension or removal from office or prohibition
from participation in the conduct of Holding Company's or Bank's affairs
pursuant to a notice or other action by any Regulatory Agency, or willful
violation of any law, rule or regulation or final cease-and-desist order which
in the reasonable judgment of the Board of Directors of the Company will
probably cause substantial economic damages to the Company, willful or
intentional breach or neglect by Executive of his duties, or material breach of
any material provision of this Agreement. For purposes of this paragraph, no
act, or failure to act on Executive's part shall be considered "willful" unless
done, or omitted to be done, by him without good faith and without reasonable
belief that this action or omission was in the best interest of Company;
provided that any act or omission to act by Executive in reliance upon an
approving opinion of counsel to the Company or counsel to the Executive shall
not be deemed to be willful. The terms "incompetence" and "misconduct" shall be
defined with reference to standards generally prevailing in the banking
industry. In determining incompetence and misconduct, Company shall have the
burden of proof with regard to the acts or omission of Executive and the
standards prevailing in the banking industry.
(d) Definition of "Good Reason". For purposes of this Agreement,
Executive shall have "good reason" for terminating his employment with Holding
Company and Bank if Executive terminates such employment within two (2) years
after the occurrence of any one or more of the following events (a "Triggering
Event") without Executive's express written consent, but only if the Triggering
Event occurs within two (2) years after a "change in control" (as defined in
subsection (e) of this Section) of Bank or Holding Company: (i) the assignment
to Executive of any duties inconsistent with Executive's positions, duties,
responsibilities, titles or offices with Bank or Holding Company as in effect
immediately prior to a change in control of Bank or
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Holding Company, (ii) any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with a termination or
suspension of employment for cause, disability, death or retirement, (iii) a
reduction by Holding Company or Bank in Executive's base annual salary as in
effect immediately prior to a change in control or as the same may be increased
from time to time thereafter, or the failure to grant increases in the
Executive's base annual salary on a basis at least substantially comparable to
the lowest increase granted to other officers of the Company having the title of
senior vice president or above, or (iv) any purported termination of Executive's
employment with Bank or Holding Company when "cause" (as defined in this
Agreement) for such termination does not exist.
(e) Definition of "Change in Control". For purposes of this
Agreement, a "change in control" of Company or Bank shall mean any one or more
of the following:
(1) a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act")(or
any successor provision) as it may be amended from time to time;
(2) any "persons" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act in effect on the date first written above), other than
Company or Bank or any "person" who on the date hereof is a director of officer
of Company or Bank, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of Company
or Bank representing 25% or more of the combined voting power of Company's or
Bank's then outstanding securities; or
(3) during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of Company
or Bank cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
(4) the signing of a letter of intent or a formal acquisition
or merger agreement between the Holding Company or Bank, of the one part, and a
third party which contemplates a transaction which would result in a "change of
control" under paragraphs (1), (2) or (3) of this subsection (f), but, as to any
Triggering Event, only if such letter of intent or agreement, or the transaction
contemplated thereby, has not been canceled or terminated at the time the
occurrence of the Triggering Event in question.
(f) Severance. If Executive is entitled to severance payments under
subsection (a) or (b) of this Section, and if Executive shall have signed a
release or releases as more fully described in Section 4 of this Agreement,
Company shall pay as severance to Executive the following:
(I) Base Severance. An amount equal to: (A) the annual base
salary paid to the Executive and includible in the Executive's gross income for
federal income tax purposes during the year in which the date of termination
occurs by Company and any of its subsidiaries subject to United States income
tax; multiplied by (B) 2.99. Such payment shall be made in a lump sum within one
(1) calendar week following the date of termination, subject to withholding by
the Company as required by applicable law and regulations. Notwithstanding any
provision of this Agreement or any other agreement of the parties, if the
severance payment or payments under this Agreement, either along or together
with other payments which the Executive has the right
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receive from the Company, would constitute a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or
any successor provision, such lump sum severance payment shall be reduced to the
largest amount as will result in no portion of the lump sum severance payment
under this Agreement being subject to the excise tax imposed by Section 4999 of
the Code.
(II) Medical/Health Benefits. For a period of eighteen (18)
months from the date of termination of the Executive's employment with the
Company, the Company shall continue to pay for Executive's health insurance, HMO
or other similar medical provider benefits (excluding any disability plans or
benefits) on the same terms and conditions available to other employees from
time to time. Thereafter, if the Executive chooses to continue such
medical/health benefits as provided under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA"), Executive must do so at Executive's own expense.
If, at any time after the termination of Executive's employment with the
Company, Executive becomes covered for medical/health benefits on any terms with
a new employer, the Company shall thereafter have no obligation to pay for any
benefits or coverage and the Company's COBRA obligations shall terminate to the
extent permitted by COBRA. Executive agrees to immediately notify Company, in
writing, upon Executive's acceptance of new employment which provides
medical/health benefits for which Executive is eligible.
(g) Any termination of Executive's employment by Company or by
Executive shall be communicated by a dated, written notice, signed by the party
giving the notice, which shall (A) indicate the specific termination provision
in this Agreement relied upon; (B) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated; (C) specify the effective date of
termination.
(h) All obligations under this Agreement are subject to termination
by any bank regulatory agency having jurisdiction over Holding Company or Bank
("Regulatory Agency") in accordance with any applicable provisions of law or
regulations granting such authority, but rights of the Executive to compensation
earned as of the date of termination shall not be affected.
(i) Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
The severance payments provided for in this Agreement shall not be reduced by
any compensation or other payments received by Executive after the date of
termination of Executive's employment from any source.
4. Execution of Release Required. Executive agrees that, as a precondition
to receiving the payments provided for in this Agreement, Executive shall have
executed and delivered to Holding Company and Bank a release or releases, in
form satisfactory to Holding Company and Bank, releasing all claims which
Executive may then have against Holding Company or Bank, including without
limitation any claims related to employment, termination of employment,
discrimination, harassment, compensation or benefits, but excluding any claims
for payments due or to become due under this Agreement.
5. Payment Obligations Absolute. Provided that the preconditions for
payment set forth in this Agreement are fully satisfied, Company's obligation to
pay Executive the severance payments provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off counter claim, recoupment, defense or
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other right which Company may have against Executive. All amounts payable by
Company hereunder shall be paid without notice or demand.
6. Continuing Obligations. Executive shall retain in confidence any
confidential information known to him concerning Company and its business so
long as such information is not publicly disclosed.
7. Amendments. No amendments to this Agreement shall be binding unless in
a writing, signed by both parties, which states expressly that it amends this
Agreement.
8. Notices. Notices under this Agreement shall be deemed sufficient and
effective if (i) in writing and (ii) either (A) when delivered in person or by
facsimile, telecopier, telegraph or other electronic means capable of being
embodied in written form or (B) forty-eight (48) hours after deposit thereof in
the U.S. mails by certified or registered mail, return receipt requested,
postage prepaid, addressed to each party at such party's address first set forth
above and, in the case of Company, to the attention of the Chairman of the
Board, or to such other notice address as the party to be notified may have
designated by written notice to the sending party.
9. Prior Agreements. There are no other agreements between Company and
Executive regarding Executive's employment. This Agreement is the entire
agreement of the parties with respect to its subject matter and supersedes any
and all prior or contemporaneous discussions, representations, understandings or
agreements regarding its subject matter.
10. Assigns and Successors. The rights and obligations of Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company and Executive, provided, however, that
Executive shall not assign or anticipate any of his rights hereunder, whether by
operation of law or otherwise. For purposes of this Agreement, "Company" shall
also refer to any successor to Holding Company or Bank, whether such succession
occurs by merger, consolidation, purchase and assumption, sale of assets or
otherwise.
11. Executive's Acknowledgment of Terms. Executive acknowledges that he
has read this Agreement fully and carefully, understands its terms and that it
has been entered into by Executive voluntarily. Executive acknowledges that any
payments to be made hereunder will constitute additional compensation to
Executive. Executive further acknowledges that Executive has had sufficient
opportunity to consider this Agreement and discuss it with Executive's own
advisors, including Executive's attorney and accountants. Executive has been
informed that Executive has the right to consider this Agreement for a period of
at least twenty one (21) days prior to entering into it. Executive acknowledges
that Executive has taken sufficient time to consider this Agreement before
signing it. Executive also acknowledges that Executive has the right to revoke
this Agreement for a period of seven (7) days following this Agreement's
execution by giving written notice of revocation to Company.
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IN WITNESS WHEREOF, the parties hereto have caused the due execution of
this Agreement as of the date first set forth above.
Attest: Holding Company:
DNB FINANCIAL CORPORATION
/s/ Xxxxxx X. Xxxxxxxxx By: /s/_William X. Xxxx
----------------------- -------------------
Secretary President
Attest: Bank:
DNB FIRST, NATIONAL ASSOCIATION
/s/ Xxxxxx X. Xxxxxxxxx By: /s/_William X. Xxxx
----------------------- -------------------
Secretary President
Executive:
/s/ Xxxxxxx X. Xxxxxx
---------------------
Xxxxxxx X. Xxxxxx
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