CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS CHANGE OF CONTROL SEVERANCE AGREEMENT is entered into this 22nd day of May, 2008,
between JUNIATA VALLEY FINANCIAL CORP., a Pennsylvania business corporation having its principal
place of business in Mifflintown, Pennsylvania, and THE JUNIATA VALLEY BANK, a state-chartered bank
located in Juniata, Pennsylvania (collectively, the “Bank”), and XXXXXX X. XXXXXX, an individual
residing at, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxx 00000 (the “Employee”).
WHEREAS, the Employee has substantial knowledge, ability and experience which are beneficial
to the successful operation of the Bank; and
WHEREAS, the Employee has recently accepted the position of Senior Vice President and Chief
Operating Officer at the Bank (“COO”); and
WHEREAS, the Bank desires to secure for itself the benefit of the Employee’s knowledge,
ability and experience and be assured of the Employee’s active participation in the business
operations of the Bank; and
WHEREAS, Employee will acquire and use extensive knowledge and information about the Bank’s
operations, much of which is confidential and proprietary in nature; and
WHEREAS, the Bank wishes to protect its confidential and proprietary information as well as
its general business interests; and
WHEREAS, the Employee and the Bank wish to enter into this Agreement in order to protect the
confidential and proprietary interests of the Bank and to induce the Employee to become actively
involved in the business operations of the Bank by providing the Employee with the opportunity to
receive benefits under this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be
legally bound, the parties agree as follows:
1. SEVERANCE BENEFIT. In consideration for agreeing to be bound hereunder, the Employee will
become eligible to receive the benefit provided in this Agreement. The benefit payable under this
Agreement is triggered upon termination of Employee’s employment upon the occurrence of any of the
events set forth in Section 2 hereof following a Change of Control as defined in Section 6(b) of
this Agreement. The severance benefit will be equal to that amount which, when reduced to its
present value (determined by using a discount rate equal to one hundred twenty(120%) percent of the
applicable federal rate, as determined under Section 1274(d) of the Internal Revenue Code of 1986,
as amended, compounded semiannually), equals 2.95 times Employee’s Average Annual Compensation.
For purposes of this Section, Employee’s Average Annual Compensation shall be the average of
Employee’s annual compensation payable by the Bank and includible in Employee’s gross income for
the five (5) most recent taxable years (or such shorter period as Employee has been employed by
Bank, if less than five years) ending before the date on which Employee’s employment with the Bank
was terminated.
The benefit shall be in the form of a lump sum payment and shall be made no later than thirty
(30) days following the effective date of the termination.
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In the event Employee should breach Employee’s obligations under this Agreement at any time,
the Bank’s obligation under this Section shall terminate immediately.
2. TERMINATION OF EMPLOYMENT. If a Change of Control shall occur and if thereafter, at any
time, there shall be:
(a) Any involuntary termination of Employee’s employment (other than for Cause);
(b) Any termination of Employee’s employment by the Employee for “Good Reason.” For purposes
of this Agreement, Employee shall have Good Reason to resign if:
(i) (A) there is a material diminution in Employee’s base compensation as in effect
immediately prior to the Change of Control; (B) there is a material increase in the
Employee’s commute by automobile from Mifflintown, Pennsylvania to where she must
perform her services; (C) there is a material diminution in the Employee’s
authority, duties or responsibilities (or those of the Employee’s supervisor) or the
Employee’s budget authority, (D) there is a material breach of any applicable
employment agreement; or (E) there is a material increase in the Employee’s travel
time away from home in performance of her required duties on behalf of the Bank than
was required of Employee during the year preceding the year in which the Change of
Control occurred;
(ii) the separation occurs no later than two years after the Good Reason condition
occurs; and
(iii) the Employee gives notice of the Good Reason condition to the Bank or its
successor within 90 days of when it comes into existence and the Bank or its
successor fails to remedy or cure the Good Reason condition within thirty (30) days.
If the Bank fails to cure the Good Reason condition, then, at the option of Employee, exercisable
by Employee within the time period in (ii) above, the Employee may resign from employment (or, if
involuntarily terminated, give notice of intention to collect the benefit hereunder) by delivering
a notice in writing (the “Notice of Termination”) to the Bank. .
3. DURATION OF AGREEMENT. Prior to the occurrence of a Change of Control, this Agreement
shall remain in effect only while the Employee is the COO or in a higher ranking position (as
determined by the Board of Directors) of the Bank.
4. UNAUTHORIZED DISCLOSURE. During the term of this Agreement or at any later time, the
Employee shall not, without the written consent of the Bank, disclose to any person (including an
employee of the Bank or a Subsidiary), other than a person to whom disclosure is reasonably
necessary or appropriate or required in connection with the performance by the Employee of her
duties as an employee of the Bank, any material confidential information obtained by her while in
the employ of the Bank or any Subsidiary with respect to any of the services, products,
improvements, formulas, designs or styles, processes, customers, methods of distribution or
business practices, the disclosure of which reasonably would be expected to materially damage the
Bank; provided, however, that for purposes of this Agreement, confidential information shall not
include any information known generally to the public (other than as a result of unauthorized
disclosure by the Employee) or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that conducted by the Bank.
5. RESTRICTIVE COVENANTS. Except as otherwise provided below, upon termination of her
employment with the Bank (or a Subsidiary), regardless of the circumstances or reasons for such
termination, the Employee covenants and agrees as follows:
(a) NONCOMPETITION. Upon any termination of employment of Employee which results in the
payment of the Severance Compensation referred to in Paragraph 1, Employee shall not directly or
indirectly enter into or engage in the banking business, either as an individual, or as a partner
or joint venturer, or as an employee, agent, officer, or director of another banking institution,
for a period of two (2) years after such termination, which would involve the performance by
Employee of active duties in the geographical area within a forty (40) mile radius of Mifflintown,
Pennsylvania. The existence of any material claim or cause of action of the Employee against the
Bank, whether predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Bank of this covenant. The Employee acknowledges and agrees that enforcement of
this covenant not to compete will not prevent her from earning a livelihood and that any breach of
the restrictions set forth in this paragraph will result in irreparable injury to the Bank for
which it shall have no adequate remedy at law, and that, therefore, the Bank shall be entitled to
injunctive relief in order to enforce the provisions hereof. In the event that this paragraph
shaft be determined by any court of competent jurisdiction to be unenforceable in part by reason of
it being too great a period of time or covering too great a geographical area, it shall be in full
force and effect as to that period of time or geographical area determined to be reasonable by the
court.
(b) RETURN OF MATERIALS. Upon termination of employment with the Bank for any reason,
including a termination of employment in conjunction with a Change of Control, the Employee shall
immediately deliver to the Bank all correspondence, manuals, letters, notes, notebooks, reports and
any other documents and tangible items containing or constituting confidential information about
the Bank maintained at her office and shall promptly deliver all said materials held by her at
other locations.
(c) NONSOLICITATION OF EMPLOYEES. The Employee shall not entice or solicit, directly or
indirectly, any other Employees or key management personnel of the Bank to leave the employ of the
Bank or its Subsidiaries to work with the Employee or any entity with which the Employee has
affiliated for a period of one year following the Employee’s termination of employment with the
Bank for any reason, including a termination of employment in conjunction with a Change of Control.
(d) NONSOLICITATION OF CUSTOMERS. The Employee shall not entice or solicit, directly or
indirectly, any client or customer of the Bank or any Subsidiary for a period of one year following
the Employee’s termination of employment with the Bank for any reason, including a termination of
employment in conjunction with a Change of Control.
(e) REMEDY. The Employee acknowledges and agrees that any breach of the restrictions set
forth in Sections 4 and 5 shall be deemed a material breach of this Agreement and will result in
irreparable injury to the Bank for which it shall have no meaningful remedy in law and the Bank
shall be entitled to injunctive relief in order to enforce provisions hereof. Upon obtaining such
injunction, the Bank shall be entitled to pursue reimbursement from the Employee and/or the
Employee’s employer of costs incurred in securing a qualified replacement for any employee enticed
away from the Bank by the Employee. Further, the Bank shall be entitled to set off against or
obtain reimbursement from the Employee of any payments owed or made to the Employee by the Bank
hereunder.
6.
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DEFINITIONS.
(a) SUBSIDIARY. For purposes of this Agreement, the term “Subsidiary” shall mean any bank,
Bank or other entity of which the Bank owns, directly or indirectly through one or more
Subsidiaries, a majority of each class of equity security having ordinary voting power in an
election of directors.
(b) CHANGE OF CONTROL. For purposes of this Agreement, the term “Change of Control” shall
mean:
i) An acquisition by any “person” or “group” (as those terms are defined or used in Section
13(d) of the Exchange Act) of “beneficial ownership” (within the meaning of Rule 13d-3 under the
Exchange Act, specifically, including the signing of a definitive agreement to acquire securities
of JUVF) of securities of Juniata Valley Financial Corp. (“JUVF”) representing 24.99% or more of
the voting power of JUVF’s securities then outstanding;
ii) A merger, consolidation or other reorganization of Bank, except where the resulting entity
is controlled, directly or indirectly, by JUVF;
iii) A merger, consolidation or other reorganization of JUVF, except where shareholders of
JUVF 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 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 JUVF’s Board of
Directors;
iv) A sale, exchange, transfer or other disposition of substantially all of the assets of JUVF
to another entity, or a corporate division involving JUVF; or
v) A contested proxy solicitation of the shareholders of JUVF that 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 JUVF.
(c) TERMINATION FOR CAUSE. For purposes of this Agreement, Employee’s “Termination for Cause”
shall mean that Employee is terminated for any of the following reasons:
i) Negligent or willful failure or the continuing inability to perform duties and functions
reasonably assigned to Employee by the Board of Directors, which neglect or failure is not
corrected within thirty (30) days following receipt of written notice of default;
ii) The commission or a criminal act against the Bank by Employee;
iii) Default by the Employee in the performance of her obligations under this Agreement, which
default is not corrected within thirty (30) days following receipt of written notice of default.
7. NOTICE. For the purposes of this Agreement, notices and all other communications shall be
in writing and shall be deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to the Employee:
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Xxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000 |
If to the Bank:
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Juniata Valley Financial Corp.
and The Juniata Valley Bank
X.X. Xxx 00
Xxxxxxxxxxx, XX 00000 |
or to such other address as either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon actual receipt.
8. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the
Employee and her heirs and personal representatives, and the Bank and any successor to the Bank.
9. ENFORCEMENT OF SEPARATE PROVISIONS. Should any provision of this Agreement be ruled
unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
10. AMENDMENT. Except as otherwise provided herein, this Agreement may be amended or canceled
only by mutual agreement of the parties in writing without the consent of any other person. This
Agreement may be amended to enhance the benefits available to the Employee hereunder at any time,
provided the Employee consents in writing to any such amendment.
11. ARBITRATION. In the event that any disagreement or dispute shall arise between the
parties concerning this Agreement, the issue(s) will be submitted to binding arbitration in the
City of Harrisburg, PA pursuant to the rules of the American Arbitration Association. Any award
entered shall be final and binding upon the parties hereto and judgment upon the award may be
entered in any court having jurisdiction thereof. Attorneys’ fees and administrative court costs
incurred in connection with such actions shall be paid by the Bank.
12. EMPLOYMENT. Nothing contained herein shall be construed as conferring upon the Employee
the right to continue in the employ of the Bank.
13. 409A SAFE HARBOR. Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be obligated to commence payment or distribution to the Employee of any amount that
constitutes nonqualified deferred compensation within the meaning of Internal Revenue Code Section
409A (“Code Section 409A”) earlier than the earliest permissible date under Code Section 409A that
such amount could be paid without additional taxes or interest being imposed under Code Section
409A. The Bank and the Employee agree that they will execute any and all amendments to this
Agreement as they mutually agree in good faith may be necessary to ensure compliance with the
distribution provisions of Code Section 409A and to cause any and all amounts due under this
Agreement, the payment or distribution of which is delayed pursuant to Code Section 409A, to be
paid or distributed in a single sum payment at the earliest permissible date under Code Section
409A.
14. PAYMENT OF MONEY DUE DECEASED EMPLOYEE. If the Employee dies prior the payment of any
moneys that may be due her from the Bank under this Agreement as of the date of death, such moneys
shall be paid to the executor, administrator, or other personal representative of the Employee’s
estate.
15. LAW GOVERNING. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
16. CAPTIONS; PRONOUNS. All captions are for convenience only and do not form a substantive
part of this Agreement. All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the person or persons may
require.
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Attest:
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JUNIATA VALLEY FINANCIAL CORP. |
/s/ Xxxxxx X. Xxxxxxx
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By: /s/ Xxxxxxx X. Xxxxxxxxx |
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Xxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxxxx |
Attest:
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THE JUNIATA VALLEY BANK |
/s/ Xxxxxx X. Xxxxxxx
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By: /s/ Xxxxxxx X. Xxxxxxxxx |
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Xxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxxxx |
Witness:
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EMPLOYEE: |
/s/ Xxxx Xxxxxxxx
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By: /s/ Xxxxxx X. Xxxxxx |
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Xxxx Xxxxxxxx
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Xxxxxx X. Xxxxxx |
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