Exhibit 10.3
February 11, 2005
Xxxxxxx X. Xxxxxx, Esquire
0000 Xxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000
RE: CHANGE OF CONTROL AGREEMENT
Dear Xxxxxxx:
The Board of Directors of First National Bank of Xxxxxxx County (the
"Company") believes that it is in the best interests of the Company and its
shareholders to make the commitments set forth in this letter to you regarding
your future employment with the Company. As a result, the Board hereby offers to
you the additional benefits described below. If you desire to accept the
benefits described below, you must sign the extra copy of this Change of Control
Agreement (the "Agreement") which is enclosed and return it to me on or before
March 7, 2005.
1) TERM OF AGREEMENT.
This Agreement is effective immediately upon your acceptance as described
above and will continue in effect as long as you are actively employed by the
Company, unless you and the Company agree in writing to its termination.
2) TERMINATION COMPENSATION.
If your employment with the Company is terminated without "Cause" (as
defined in Section 6) at any time within two years following a "Change of
Control" (as defined in Section 4), you will receive the "Termination Benefits"
(as defined in Section 3). You will also receive the Termination Benefits if you
terminate your employment for "Good Reason" (as defined in Section 5) at any
time within two years following a Change of Control.
You are not entitled to receive the Termination Benefits if your employment
is terminated by you or the Company for any or no reason before a Change of
Control occurs or more than two years after a Change of Control has occurred.
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In order to receive the Termination Benefits, you must execute any release
of claims that you may have pursuant to this Agreement (but not any other
claims) that may be requested by the Company.
The Termination Benefits will be paid to you under the terms and conditions
hereof, without regard to whether you look for or obtain alternative employment
following your termination of employment with the Company.
3) TERMINATION BENEFITS DEFINED.
For purposes of this Agreement, the term "Termination Benefits" will mean
and include the following:
a) For a period of one year from your termination (the "Benefit Period"),
payment of your base salary on the same basis that you were paid
immediately prior to your termination; Payment of any bonus you would
otherwise be eligible to receive for the year in which your termination
occurs and for that portion of the following year which is included in
the Benefit Period, such bonus to be calculated and paid as provided
below; and
b) Continuation during the Benefit Period of all fringe benefits that you
were receiving immediately prior to your termination, including,
without limitation, life, disability, accident and group health
insurance benefits coverage for you and your immediate family ("Fringe
Benefits"), such Fringe Benefits to be provided on substantially the
same terms and conditions as they were provided immediately prior to
your termination.
c) The bonus component of your Termination Benefits will equal the sum of
(i) the bonus to which you would have been entitled for the year during
which your termination occurs (calculated after annualizing the
Company's consolidated financial results through the date of
termination if such bonus is based upon a percentage of profits) (the
"Annual Amount"), and (ii) an amount equal to the product of (x) the
Annual Amount times (y) a fraction the numerator of which is the number
of days in the year following termination which is included in the
Benefit Period and the denominator of which is 365 (the "Prorated
Amount"). Both the Annual Amount and the Prorated Amount will be paid
to you not later than March 31st of the year following your
termination.
Notwithstanding the foregoing, if you terminate your employment for Good
Reason, your Termination Benefits will be based upon the greater of (i) your
salary, bonus and benefits immediately prior to your termination or (ii) your
salary, bonus and benefits immediately prior to the Change of Control which
gives rise to your right to receive Termination Benefits under this Agreement.
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The Company does not intend to provide duplicative Fringe Benefits.
Consequently, Fringe Benefits otherwise receivable pursuant to this Section will
be reduced or eliminated if and to the extent that you receive comparable Fringe
Benefits from any other source (for example, another employer); provided,
however, that you will have no obligation to seek, solicit or accept employment
from another employer in order to receive such benefits.
4) CHANGE OF CONTROL DEFINED.
For purposes of this Agreement, a "Change of Control" will be deemed to
have occurred upon the earliest to occur of the following events:
a) the date the shareholders of the Company (or the Board of Directors, if
shareholder action is not required) approve a plan or other arrangement
pursuant to which the Company will be dissolved or liquidated;
b) the date the shareholders of the Company (or the Board of Directors, if
shareholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets of
the Company;
c) the date the shareholders of the Company (or the Board of Directors, if
shareholder action is not required) and the shareholders of the other
constituent corporation (or its board of directors if shareholder
action is not required) have approved a definitive agreement to merge
or consolidate the Company with or into such other corporation, other
than, in either case, a merger or consolidation of the Company in which
holders of shares of the Common Stock immediately prior to the merger
or consolidation will hold at least a majority of the ownership of
common stock of the surviving corporation (and, if one class of common
stock is not the only class of voting securities entitled to vote on
the election of directors of the surviving corporation, a majority of
the voting power of the surviving corporation's voting securities)
immediately after the merger or consolidation, which common stock (and,
if applicable, voting securities) is to be held in the same proportion
as such holders' ownership of Common Stock immediately before the
merger or consolidation;
d) the date any entity, person or group, (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act")), other than the Company or any
of its subsidiaries or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries,
shall have become the beneficial owner of, or shall have obtained
voting control over, more than fifty percent (50%) of the outstanding
shares of the Common Stock; or
e) the first day after the date this Plan is adopted when directors are
elected so that a majority of the Board of Directors shall have been
members of the Board of Directors for less than twenty-four (24)
months, unless the nomination for election of each new director who was
not a director at the beginning of such twenty-four (24) month period
was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period.
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Notwithstanding any provision herein to the contrary, the filing of a
proceeding for the reorganization of the Company under Chapter 11 of the Federal
Bankruptcy Code or any successor or other statute of similar import will not be
deemed to be a Change of Control for purpose of this Agreement.
5) GOOD REASON DEFINED.
For purposes of this Agreement, the term "Good Reason" will mean and
include the following situations:
a) any material adverse change in your status, responsibilities or Fringe
Benefits;
b) any failure to nominate or elect you as Executive Vice President of
Human Resources;
c) causing or requiring you to report to anyone other than the President;
d) assignment to you of duties materially inconsistent with your position
as Executive Vice President of Human Resources;
e) any reduction of your annual base salary by more than 15% or other
material reduction in compensation or benefits, or
f) requiring you to be principally based at any office or location more
than 25 miles from the current offices of the Company in West Chester,
Pennsylvania.
6) CAUSE DEFINED.
For purposes of this Agreement, the term "Cause" will mean and include the
following situations:
(a) Your conviction by a court of competent jurisdiction of any criminal
offense involving dishonesty or breach of trust or any felony or crime
involving moral turpitude;
(b) Your failure to perform the duties reasonably assigned to you by the
Board of Directors of the Company without reasonable cause or excuse,
which failure or breach continues for more than ten days after written
notice thereof is given to you.
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7) CEILING ON BENEFITS.
Under the "golden parachute" rules in the Internal Revenue Code (the
"Code") you will be subject to a 20% excise tax (over and above regular income
tax) on any "excess parachute payment" that you receive following a Change in
Control, and the Company will not be permitted to deduct any such excess
parachute payment. Very generally, compensation paid to you that is contingent
upon a Change in Control will be considered a "parachute payment" if the present
value of such consideration equals or exceeds three times your average annual
compensation from the Company for the five years prior to the Change in Control.
If payments are considered "parachute payments," then all such payments to you
in excess of your base annual compensation will be considered "excess parachute
payments" and will be subject to the 20% excise tax imposed under Section 4999
of the Code.
For example, if your base annual compensation was $100,000, you could
receive $299,000 following a Change in Control without payment of any excise
tax. If you received $301,000 in connection with a Change in Control, however,
the entire $301,000 would be considered a parachute payment and $201,000 of this
amount would be considered an excess parachute payment subject to excise tax.
In order to avoid this excise tax and the related adverse tax consequences
for the Company, by signing this Agreement, you agree that the Termination
Benefits payable to you under this Agreement will in no event exceed the maximum
amount that can be paid to you without causing any portion of the amounts paid
or payable to you by the Company following a Change in Control, whether under
this Agreement or otherwise, to be considered an "excess parachute payment"
within the meaning of Section 280G(b) of the Code.
If the Company believes that these rules will result in a reduction of the
payments to which you are entitled under this Agreement, it will so notify you
within 60 days following delivery of the "Notice of Termination" described in
Section 8. If you wish to have such determination reviewed, you may, within 30
days of the date you are notified of a reduction of payments, ask that the
Company retain, at its expense, legal counsel, certified public accountants,
and/or a firm of recognized executive compensation consultants (an "Outside
Expert") to provide an opinion concerning whether, and to what extent, your
Termination Benefits must be reduced so that no amount payable to you by the
Company (whether under this Agreement or otherwise) will be considered an excess
parachute payment.
The Outside Expert will be as mutually agreed by you and the Company,
provided that if we are not able to reach a mutual agreement, the Company will
select an Outside Expert, you will select an Outside Expert, and the two Outside
Experts will select a third Outside Expert to provide the opinion required under
this Section. The determination of the Outside Expert will be final and binding,
subject to any contrary determination made by the Internal Revenue Service.
If the Company believes that your Termination Benefits will exceed the
limitation contained in this Section, it will nonetheless make payments to you,
at the times stated above, in the maximum amount that it believes may be paid
without exceeding such limitation. The balance, if any, will then be paid after
the opinion of the Outside Expert has been received.
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If the amount paid to you by the Company following a Change in Control is
ultimately determined, pursuant to the opinion of the Outside Expert or by the
Internal Revenue Service, to have exceeded the limitation contained in this
Section, the excess will be treated as a loan to you by the Company and will be
repayable on the 90th day following demand by the Company, together with
interest at the "applicable federal rate" provided in Section 1274(d) of the
Code.
In the event that the provisions of Sections 280G and 4999 of the Code are
repealed without successor provisions, this Section will be of no further force
or effect.
8) TERMINATION NOTICE AND PROCEDURE.
Any termination by the Company or you of your employment during the two
years immediately following a Change of Control will be communicated by written
Notice of Termination to you if such Notice of Termination is delivered by the
Company and to the Company if such Notice of Termination is delivered by you,
all in accordance with the following procedures:
The Notice of Termination will indicate the specific termination provision
in this Agreement relied upon, if applicable, and will set forth in reasonable
detail the facts and circumstances alleged to provide a basis for such
termination.
Any Notice of Termination by the Company will be in writing signed by the
Chairman of the Board of the Company.
If the Company furnishes you with a Notice of Termination or if you furnish
the Company with a Notice of Termination, and no good faith dispute exists
regarding such termination, then the date of your termination will be the date
such Notice of Termination is deemed given pursuant to Section 11 of this
Agreement.
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If the Company in good faith furnishes you with a Notice of Termination for
Cause and you in good faith notify the Company that a dispute exists concerning
such termination within the 15-day period following your receipt of such notice,
you may elect to continue your employment during such dispute. If it is
thereafter determined that (i) Cause did exist, the date of your termination
will be the earlier of (A) the date on which the dispute is finally determined
or (B) the date of your death or permanent disability; or (ii) Cause did not
exist, your employment will continue as if the Company had not delivered its
Notice of Termination and there will be no termination arising out of such
notice.
If you in good faith furnish a Notice of Termination for Good Reason and
the Company notifies you that a dispute exists concerning the termination within
the 15-day period following the Company's receipt of such notice, you may elect
to continue your employment during such dispute. If it is thereafter determined
that (i) Good Reason did exist, your date of termination will be the earlier of
(A) the date on which the dispute is finally determined or (B) the date of your
death or permanent disability; or (ii) Good Reason did not exist, your
employment will continue after such determination as if you had not delivered
the Notice of Termination asserting Good Reason. If Good Reason is determined to
exist, your salary, bonus and Fringe Benefits prior to such determination will
be no less than your salary, bonus and benefits immediately prior to the Change
of Control which gives rise to your right to receive Termination Benefits as
provided in this Agreement.
If you do not elect to continue employment pending resolution of a dispute
regarding a Notice of Termination, and it is finally determined that the reason
for termination set forth in such Notice of Termination did not exist, if such
notice was delivered by you, you will be deemed to have voluntarily terminated
your employment other than for Good Reason and if delivered by the Company, the
Company will be deemed to have terminated you without Cause.
9) SUCCESSORS.
The Company will 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 the Company or any of its subsidiaries to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession will be a breach of this
Agreement and will entitle you to compensation in the same amount and on the
same terms to which you would be entitled hereunder if you terminate your
employment for Good Reason following a Change of Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective will be deemed the date of your termination. As used in this
agreement "the Company" will mean "the Company" as hereinbefore defined and any
successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
10) BINDING AGREEMENT.
This Agreement will inure to the benefit of and be enforceable by you and
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder had you continued to live, all such
amounts, unless otherwise provided herein, will be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
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11) NOTICES.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement will be in writing and will be deemed to have
been duly given when personally delivered or mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed to you
at the last address you have filed in writing with the Company or, in the case
of the Company, at its main office, attention of the Chairman of the Board of
Directors, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
will be effective only upon receipt.
12) MISCELLANEOUS.
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 you
and the Chairman of the Board of the Company. 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 be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreement or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
will be governed by the laws of the State of Delaware without regard to its
conflicts of law principles. All references to sections of the Exchange Act or
the Code will be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder will be paid net of any applicable
withholding required under federal, state or local law. The obligations of the
Company that arise prior to the expiration of this Agreement will survive the
expiration of the term of this Agreement.
13) VALIDITY.
The invalidity or unenforceability of any provision of this Agreement will
not affect the validity or enforceability of any other provision of this
Agreement, which will remain in full force and effect.
14) COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which will
be deemed to be an original but all of which together will constitute one and
the same instrument.
15) EXPENSES AND INTEREST.
If a good faith dispute arises with respect to the enforcement of your
rights under this Agreement or if any arbitration or legal proceeding will be
brought in good faith to enforce or interpret any provision contained herein, or
to recover damages for breach hereof, and you are the prevailing party, you will
recover from the Company any reasonable attorneys' fees and necessary costs and
disbursements incurred as a result of such dispute or legal proceeding, and
prejudgment interest on any money judgment obtained by you calculated at the
rate of interest announced by Chase Manhattan Bank, New York from time to time
as its prime rate from the date that payments to you should have been made under
this Agreement. It is expressly provided that the Company will in no event
recover from you any attorneys' fees, costs, disbursements or interest as a
result of any dispute or legal proceeding involving the Company and you.
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16) PAYMENT OBLIGATIONS ABSOLUTE.
The Company's obligation to pay you the Termination Benefits in accordance
with the provisions herein will be absolute and unconditional and will not be
affected by any circumstances; provided, however, that the Company may apply
amounts payable under this Agreement to any debts owed to the Company by you on
the date of your termination. All amounts payable by the Company in accordance
with this Agreement will be paid without notice or demand. If the Company has
paid you more than the amount to which you are entitled under this Agreement,
the Company will have the right to recover all or any part of such overpayment
from you or from whomsoever has received such amount.
17) ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between you and the Company
concerning the subject matter discussed in this Agreement and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations, or warranties, whether written or oral, by any officer,
employee or representative of the Company. Any prior agreements or
understandings with respect to the subject matter set forth in this Agreement
are hereby terminated and canceled.
18) LITIGATION.
Any action or claim at law or equity arising under or related to this
Agreement will be brought only in the Superior Court of Pennsylvania or in the
United States District Court for the District of Pennsylvania, and the parties
hereto hereby consent to personal jurisdiction and venue in said courts.
19) DEFERRAL OF PAYMENTS.
To the extent that any payment under this Agreement, when combined with all
other payments received during the year that are subject to the limitations on
deductibility under Section 162(m) of the Code, exceeds the limitations on
deductibility under Section 162(m) of the Code, such payment will, in the
discretion of the Company, be deferred to the next succeeding calendar year.
Such deferred amounts will be paid no later than the 60th day after the end of
such next succeeding calendar year, provided that such payment, when combined
with any other payments subject to the Section 162(m) limitations received
during the year, does not exceed the limitations on deductibility under Section
162(m) of the Code.
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If you would like to participate in this special benefits program, please
sign and return the extra copy of this letter which is enclosed.
Sincerely,
/s/ Xxxx X. Xxxxxxxxxx, III
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Xxxx X. Xxxxxxxxxx, III
Chairman of the Board
ACCEPTANCE
I hereby accept the offer to participate in this special benefits program
and I agree to be bound by all of the provisions noted above.
/s/ Xxxxxxx X. Xxxxxx Dated:
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Xxxxxxx X. Xxxxxx
