EXHIBIT 10.4
EMPLOYMENT AGREEMENT BETWEEN FIRST COMMONWEALTH
AND XXXXX X. XXXXXXXX
[DRAFT]
EMPLOYMENT AGREEMENT
This Agreement, made this _____ day of _________, 1998, by and between
First Commonwealth Financial Corporation, a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania and whose principal place of
business is in Indiana, Pennsylvania (the "Employer"), and Xxxxx X. Xxxxxxxx, an
individual residing in __________, Pennsylvania (the "Executive").
WITNESSETH
WHEREAS, the Employer has entered into an Agreement and Plan of Merger with
Southwest National Corporation, a Pennsylvania bank holding company whose
principal place of business is in Greensburg, Pennsylvania ("Southwest
Corporation") to effect a tax-free merger (as described in Section 368 of the
Internal Revenue code of 1986, as amended) of Southwest Corporation into the
Employer (the "Merger"), and is presently in the process of seeking regulatory
approval in connection with such Merger.
WHEREAS, the Executive is presently employed by Southwest Corporation and
by Southwest National Bank of Pennsylvania, its wholly owned subsidiary
("Southwest Bank") as president and chief executive officer;
WHEREAS, the Employer regards the services of the Executive as key to the
success of the business of Southwest Bank after the Merger and accordingly
wishes to employ the Executive after the date of acquisition in accordance with
the terms and conditions hereinafter set forth.
WHEREAS, the Executive is willing to be employed by the Employer after the
Merger in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Conditional Agreement. This Agreement, and all of its covenants, are
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conditional upon the completion of the Merger and shall be absolutely void ab
initio upon the failure of the Merger to occur.
2. Employment, Duties and Responsibilities. The Employer hereby employs the
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Executive as Vice-Chairman of the Employer, with the present additional role of
President and Chief Executive Officer of Southwest Bank, and the Executive
hereby accepts employment by the Employer, in accordance with the terms and
conditions herein provided. The Executive shall have such duties as may be
assigned to him from time to time by the President of the Employer, or such
person or persons as he may designate and authorize for this purpose. The
Executive is hereby employed as a full-time employee and he shall accordingly
devote his entire working time, ability and attention to the business of the
Employer during the term of this Agreement. Accordingly, the Executive shall not
directly or indirectly engage in, or render, any
services of a business, commercial or professional nature to any other person or
organization, or engage in any self-employment, during the term of this
Agreement.
3. Compensation and Benefits.
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(a) For his services, the Executive shall be paid cash compensation by the
Employer in an amount equal to Three Hundred Thousand Dollars ($300,000)
annually, subject to such increases as the Employer may deem appropriate.
However, it is recognized that the Employer may pay cash compensation over a
different payroll frequency, and, in that event, each paycheck that the Employer
pays to the Executive may be adjusted proportionately so that it is equivalent
to the amount provided by the previous sentence when computed on an annual
basis. In addition the Executive shall be entitled to all of the same employee
benefits as the other employees of the Employer at a similar level and
classification and shall be included in, and have the same benefits under, the
Employer's health insurance, life insurance and other welfare plans and pension,
retirement, stock option and other retirement and benefit plans as the other
employees of the Employer at a similar level and classification. The Executive
shall also be entitled to such other perquisites and remuneration as may be
provided by the Employer from time to time pursuant to its policies and
procedures as applicable from time to time. The Executive's years of service
with Southwest Bank and Southwest Corporation shall be taken into account in
determining eligibility, vesting and benefit levels as if such years of service
had accrued as an employee of the Employer.
(b) The Employer has established the following compensation plans and, as
additional compensation, executive shall participate in these plans so long as
they are offered to any other executives of the Employer:
(1) An incentive bonus plan whereby the Executive shall receive a cash
bonus payment equal to a percentage of his base compensation if the earnings per
share of the Employer increase by at least 10% over the prior year. The exact
percentage of compensation shall be reasonably determined by the Employer.
(2) A supplemental executive retirement plan whereby the Executive may
contribute up to five percent (5%) of the portion of his annual compensation
which is in excess of the eligible compensation limits imposed on highly
compensated employees by the Federal Qualified Benefit Plan requirements. The
Employer shall contribute twelve dollars to such plan for every five dollars
contributed to the plan by the Executive. Future benefits shall be calculated
based on a tax free return on the contributions. Such amounts shall be deposited
in a rabbi trust established for the benefit of the Executive. The detailed
terms of such plan shall be set forth in a plan document prepared by the
Employer.
(3) $600,000 of whole life split dollar insurance coverage on his life.
(4) Options for the purchase of the Employer's common stock, which stock
shall have an aggregate market value, as of the date of th e
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grant of the options, equal to 110% of the Executive's base compensation.
Options for an aggregate market price of $100,000 of the Executive's common
stock shall be in the form of Qualified Incentive Stock Options (as defined by
the Internal Revenue Code of 1986) with the remainder being in the form of non-
qualified stock options. Such options shall be issued in accordance with the
terms of the Employer's qualified and non-qualified stock option plans.
4. Books, Records and Files. It is understood and agreed that any and all
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books, records, files, diaries, schedules, client lists and so on maintained by
the Executive in connection with his employment by the Employer is the property
of the Employer and not the Executive and shall be made available to authorized
officers of the Employer upon request from time to time and shall be returned to
the Employer upon the termination of the Executive's employment with the
Employer. The books, records and other material referred to in this paragraph
shall include, but not be limited to, data maintained in any medium whatsoever,
whether paper or electronic and shall include all digitally maintained files. In
connection therewith, the Executive shall provide the Employer with all
passwords, encryption codes, encryption software and so on, to permit the
Employer to access the data maintained digitally on any electronic medium.
5. Inventions, Ideas and Discoveries. Any and all inventions, ideas and
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discoveries made by the Executive while employed by the Employer and in
connection with such employment shall be the sole property of the Employer and
not the Executive, whether such inventions, ideas and discoveries are patentable
or subject to copyright or not, and whether or not such inventions, ideas or
discoveries were developed by the Executive during his normal working hours or
not.
6. Confidentiality and Non-Disclosure. The Executive recognizes that any and
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all information acquired during the course of his employment by the Employer is
confidential and proprietary and will not be disclosed to any third party
whatsoever (whether during the period of this Agreement or thereafter) except in
the ordinary course of the Executive's employment as required by his duties and
responsibilities and in accordance with the understanding and directions of the
President of the Employer. Such information shall include, but not be limited
to, information acquired from, or about, third parties such as the Employer's
customers, including, but not limited to, account, general banking and financial
information relating thereto, trade secrets such as business plans, practices,
marketing plans, compilations of information, customer lists and all other
information, records, files and data bases owned by the Employer or to which the
Employer has access. It is further recognized that banking and account
information acquired by the Executive in the course of his employment with
respect to customers of the Employer are confidential pursuant to the laws of
the Commonwealth of Pennsylvania and the United States of America, and that the
Executive will strictly conform to all such laws and administrative regulations
and will take all action necessary or appropriate to cause all persons under the
Executive's supervisory responsibility to conform to all such laws and
regulations.
7. Removal of Bank Property or Data from Premises. Executive shall not, without
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the direction or consent of the President of the Employer, or a person who he
delegates
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to act on his behalf for this purpose, remove from the Employer's premises any
files, documents, electronic storage media or other material owned by, or in the
possession of, the Employer to which the Executive has been provided access by
virtue of his employment with the Employer. In any event, all such material
shall be returned to the Employer upon the Executive ceasing to be employed by
the Employer and the Executive shall in no event retain copies or duplicates
(stored in any manner or medium whatsoever) of any such material.
8. Legal Requirements. The Executive shall exercise his duties of employment in
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a manner consistent with the requirements of all applicable statutes of the
United States of America and the Commonwealth of Pennsylvania and of the
administrative rules and regulations issued thereunder and of the procedures,
rules and regulations of the applicable regulatory agencies of the United States
of America and the Commonwealth of Pennsylvania. Similarly, the Executive shall
exercise his supervision and control over the Executives that report to him in
such a manner as to cause them to exercise their duties of employment so as to
meet the standards provided by the previous sentence of this paragraph.
9 Expenses. Employer shall reimburse Executive or otherwise provide for or pay
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for all reasonable expenses incurred by Executive in connection with the
business of Employer, subject to such reasonable limitations as may be
established by Employer. If such expenses are paid in the first instance by
Executive, Employer will reimburse Executive in accordance with the expense
reimbursement policy in effect at that time.
10. Term of Agreement. The initial term of employment under this Agreement
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shall commence on the effective date of the Merger and shall terminate on the
fifth anniversary date of the effective date of the Merger, unless further
extended or sooner terminated in accordance with the terms of this Agreement.
After the initial term, this Agreement shall be renewed automatically for
successive one year terms, unless either party gives contrary written notice at
least thirty days in advance of the automatic renewal date. The provisions of
Sections 4, 5, and 6 hereof, and all provisions specifically requiring duties to
be performed, and describing benefits to be received, after the termination of
the Executive's employment shall survive the termination of Executive's
employment hereunder.
11. Termination.
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(a) Employer shall have the right at any time to terminate Executive's
employment for just cause. For the purpose of this Agreement, "termination for
just cause" shall mean termination for personal dishonesty, willful misconduct,
breach of fiduciary duty involving personal profit, conviction of a felony,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses), willful violation of a final cease and desist order,
willful or intentional breach or neglect by Executive of his duties, negligence,
incompetence or misconduct in the performance of such duties and/or material
breach of any provision of this Agreement as determined by the Employer.
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(b) In the event employment is terminated for just cause pursuant to
subparagraph (a), above, Executive shall have no right to compensation or other
benefits for any period after the date of termination.
(c) Executive shall have the right to terminate his employment at any time.
In such event, Executive shall have no right after the date of termination to
compensation or other benefits as provided in this Agreement, unless such
termination is for "good reason" which is defined as a failure by Employer to
comply with any material provision of this Agreement, which failure has not been
cured within thirty days after a notice of noncompliance has been given by
Executive to Employer's Board of Directors.
(d) Any termination of Executive's employment by Employer or by Executive
shall be communicated by written notice of termination to the other party. For
purposes of this Agreement, a "notice of termination" shall mean a dated notice
which shall (i) indicate the specific termination provisions in this Agreement
relied upon; (ii) 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; (iii) specify a date of termination, which shall be not
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less than thirty nor more than ninety days after such notice of termination. In
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the case of termination by Employer of Executive's employment for just cause
pursuant to subparagraph 11 (a), the notice of termination may specify a date of
termination as of the date such notice of termination is given.
(e) If Executive provides a Notice of termination for good reason, the date
of termination shall be the date on which a notice of termination is given.
(f) Employer shall have the right to terminate Executive's employment at
any time for any reason. However, if Executive terminates his employment for
good reason as defined in subparagraph 11(c), or if Executive is terminated by
Employer for reasons other than just cause as defined in subparagraph 11(a),
then in lieu of any further salary payments to Executive for periods subsequent
to the date of termination, Employer shall pay as severance to Executive an
amount equal to 12 month's base salary, based on Executive's then current annual
base salary and payable in accordance with Employer's customary payroll
practices beginning on the first payroll payment date following the date of
termination and continuing throughout the remaining twelve months.
(1) Executive shall not be required to mitigate the amount of any
payment period provided for in this section if he obtains other employment.
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(2) Additionally, Employer will continue to pay Employer's share of the
health insurance premiums for Executive under the group plan in effect at the
time for a period not to exceed 18 months. Executive will be responsible to pay
any employee contributory share and COBRA administration fee.
(g) If Executive retires prior to the expiration of this Agreement, he will
be deemed to have voluntarily quit his employment and shall only be entitled to
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compensation and/or benefits in accordance with Employer's retirement policy and
plan documents.
11. Change in Control of Employer.
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(a) For purposes of this Agreement, a "change in control of Employer" shall
mean the acquisition of sufficient shares of the employer's stock by any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
other than Employer, so as to become a "beneficial owner" as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of securities of Employer
representing 25% or more of the combined voting power of Employer's then
outstanding securities.
(b) Subsequent to a change in control of Employer, Executive has the option
to terminate his employment with Employer and any successor immediately.
Executive may also terminate his employment immediately subsequent to the change
in control of Employer if there is, within one year of the change in control:
(1) without Executive's express written consent, the assignment to
Executive of any duties inconsistent with Executive's position, duties,
responsibility, and status with Employer immediately prior to change in
control of Employer, or
(2) an adverse change in Executive's reporting responsibilities,
titles or officers in effect immediately prior to a change in control of
Employer; any removal of Executive from, or any failure to reelect
Executive to, any such positions, except in connection with a termination
of employment for just cause (as defined in subparagraph 11(a)),
disability, death and/or retirement;
(3) a reduction by Employer, in Executive's annual salary in effect
immediately prior to a change in control or as the same may be increased
from time to time;
(4) a failure to continue in effect any bonus, benefit, compensation,
life insurance, health and accident and/or disability plans in which
Executive is participating at the time of a change in control of Employer,
or the taking of any action by Employer, which would adversely affect
Executive's participation in or materially reduce Executive's benefits
under any of such plans; or
(5) a failure by Employer to obtain the assumption of and agreement to
perform this Agreement by any successor as contemplated in Section 15.
(c) If Executive terminates his Employment due to a change in control of
Employer then, in lieu of any further salary payments to Executive for periods
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subsequent to the date of termination, Employer shall pay as severance to
Executive an amount equal to (a) the average aggregate annual compensation paid
to the Executive and included in the Executive's gross income for federal income
tax purposes during the five calendar years preceding the taxable year in which
the date of termination occurs (or such lesser amount of time if the Executive
has not been employed by Employer for five years at the time of termination) by
Employer and any of its subsidiaries subject to United States income tax,
multiplied by ____. Such payment shall be made in a lump sum on or before the
fifth day following the date of termination; provided, however, that the lump
sum severance payment under this section shall be subject to the excise tax
imposed by Section 4999 of the Code. The determination of any reduction in the
lump sum severance payment under this section pursuant to the foregoing
provision shall be made by independent counsel to Employer in consultation with
the independent certified public accountants of Employer Bank, subject to review
by Executive or his designated representative. Following termination pursuant
to this paragraph, Employer shall:
(1) pay 100% of the health insurance premium for Executive under the
group plan in effect at that time, for a period of 18 months; and,
(2) make available to Executive a maximum of 6 months outplacement
assistance with a provider selected by Employer and at Employer's expense.
(d) Executive shall not be required to mitigate the amount of any payment
period provided for in this section if he obtains other employment.
13. Potential tax liability. It is the intention of Employer and Executive
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that any and all severance benefits Executive receives pursuant to this
Agreement, together with any other payments due to Executive from Employer or
its successor ("other payments"), shall not constitute "excess parachute
payments" within the meaning of Sections 280G and 4999 of the Internal Revenue
Code of 1986, as amended. If the Internal Revenue Service or the independent
accountants acting as auditors for Employer or its successor determine that the
severance benefits would either by themselves or together with other payments
constitute "excess parachute payments," the severance benefits shall be reduced
to the maximum amount which may be paid without constituting the severance
benefits and other payments as "excess parachute payments." If, regardless of
the aforesaid adjustment, the Internal Revenue Service determines that the
severance benefits, constitute "excess parachute payments" under Sections 280G
and 4999 of the Code, Employer shall assume responsibility for the loss of any
tax deductions, and Executive shall assume responsibility for payment of any
income and excise taxes attributable to the excess parachute payment.
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14. Miscellaneous.
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(a) This Agreement may not be amended except in writing signed by the
Executive or by his duly authorized representative, and by a duly authorized
officer of Employer.
(b) All notices given or required to be given shall be in writing, sent by
United States first-class certified or registered mail, postage prepaid, to
Executive (or to Executive's spouse or estate upon Executive's death) at
Executive's last known address and to Employer at its principal offices. All
such notices shall be effective when deposited in the mail. Either party by a
notice in writing may change or designate the place for receipt of all such
notices.
(c) Employer or Executive to exercise any right or power given under this
Agreement shall: (i) impair the subsequent exercise of any right or power, or,
(ii) be construed to be a waiver of any default or any right or power that shall
have arisen.
(d) All payments required to be made by Employer hereunder to the Executive
shall be subject to the withholding of such amounts, if any, relating to tax and
other payroll deductions as Employer may reasonably determine should be withheld
pursuant to any applicable law or regulation.
(e) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be determined to be an original but all of which together will
constitute one and the same instrument.
15. Future Rights and Obligations under the Agreement.
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(a) Employer will attempt to obtain an express written agreement from its
successors, and assigns, including, without limitation, any person, partnership,
or corporation which may acquire all or substantially all of the Employer's
assets and business, or with or into which Employer may be consolidated or
merged, to assume the obligations set forth in this Agreement. However,
Executive understands and agrees that such an assumption and agreement to
perform the terms and conditions set forth in this Agreement may not occur.
(b) This Agreement is personal to each of the parties and neither party may
assign or delegate any of its rights or obligations under this Agreement without
the prior written consent of the other party.
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(c) If Executive should die during the term of this Agreement, the
Agreement shall immediately terminate on the day of his death as if such day
were the day fixed for termination.
16. Applicable law. This Agreement shall be governed in all respects and be
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interpreted by and under the laws of the Commonwealth of Pennsylvania, except to
the extent that such law may be preempted by applicable federal law.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.
ATTEST: EMPLOYER:
First Commonwealth Financial Corporation
----------------------------- BY:
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WITNESS: EXECUTIVE:
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Xxxxx X. Xxxxxxxx
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