CHANGE OF CONTROL AGREEMENT
Exhibit
10.5
THIS
AGREEMENT is made as of the 18th
day of
July, 2000, among QNB CORP. (“Corporation”), a Pennsylvania business corporation
having a place of business at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx
00000, THE QUAKERTOWN NATIONAL BANK (“Bank”) a national banking association
having a place of business at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx
00000, and XXXXXX X. XXXXXX (“Executive”), an individual residing at 000
Xxxxxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
WITNESSETH:
WHEREAS,
the Corporation is a registered bank holding company;
WHEREAS,
the Bank is a subsidiary of the Corporation;
WHEREAS,
Corporation and Bank desire to continue to retain Executive to serve in the
capacity of Executive Vice President and Chief Operating Officer of Bank under
the terms and conditions set forth herein;
WHEREAS,
Executive desires to continue to serve the Corporation and Bank in an executive
capacity under the terms and conditions set forth herein.
AGREEMENT:
NOW,
THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1.
EMPLOYMENT. Executive is employed by Corporation and Bank on an “at will” basis
and there is no employment agreement between them. This Agreement is granted
by
Corporation and Bank in order to set forth terms and conditions between
Corporation, Bank and Executive in the event of a Change in Control as defined
herein.
2.
RIGHTS
IN EVENT OF TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. If
Executive’s employment is terminated by Corporation or Bank other than for Cause
(as defined below) on or before the three (3) year anniversary of the date
of a
Change in Control (as defined below), then Corporation or Bank shall pay to
Executive, in lieu of any other severance benefits to which Executive may be
entitled, an amount equal to the product of (a) the average annual aggregate
compensation paid by Corporation and Bank to Executive and includible in the
Executive’s gross income for federal income tax purposes during the five (5)
calendar years preceding the taxable year in which the date of the termination
occurs, multiplied by (b) 2, such payment to be made in a lump sum on or before
the fifth day following the date of termination and shall be subject to
applicable taxes and withholdings. However, if the lump sum payment under this
paragraph 2, when added to all other amounts or benefits provided to or on
behalf of the Executive in connection with his termination of employment, would
result in the imposition of an excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), such payment shall be reduced to
the extent necessary to avoid such excise tax imposition. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, if any
portion of the amount herein payable to the Executive is determined to be
non-deductible pursuant to the regulations promulgated under Section 280G of
the
Code, the Corporation shall be required only to pay to Executive the amount
determined to be deductible under Section 280G. The determination of any
reduction in the lump sum payment under this paragraph 2 pursuant to the
foregoing provisions shall be made by Corporation’s independent
auditors.
3.
TERMINATION OF EMPLOYMENT FOR CAUSE. For purposes of this Agreement, termination
for “Cause” shall mean any of the following:
(a)
Executive’s conviction of or plea of guilty or nolo contendere to a felony, a
crime of falsehood or a crime involving moral turpitude, or the actual
incarceration of Executive for a period of twenty (20) consecutive days or
more;
(b)
Executive’s willful or intentional failure to follow the good faith lawful
instructions of the Board of Directors of Corporation or Bank with respect
to
its operations, after written notice from Corporation or Bank and a failure
to
cure such violation within twenty (20) days of said written notice;
(c)
Executive’s willful or intentional failure to substantially perform Executive’s
duties to Corporation or Bank, other than a failure resulting from Executive’s
incapacity because of physical or mental illness, after written notice from
Corporation or Bank and a failure to cure such violation within twenty (20)
days
of said written notice;
(d)
dishonesty or negligence by the Executive in the performance of his
duties;
(e)
Executive’s violation of any law, rule or regulation governing banks or bank
officers or any final cease and desist order issued by a bank regulatory
authority;
(f)
conduct on the part of the Executive as determined by an affirmative vote of
seventy percent (70%) of the disinterested members of the Board of Directors
of
Corporation and Bank which brings public discredit to Corporation or Bank;
or
(g)
Executive’s breach of fiduciary duty involving personal profit.
4.
CHANGE
IN CONTROL DEFINED. As used in this Agreement, “Change in Control” shall mean
the occurrence of any of the following:
(a)(i)
a
merger, consolidation or division involving Corporation or Bank, (ii) a sale,
exchange, transfer or other disposition of substantially all of the assets
of
Corporation or Bank, or (iii) a purchase by Corporation or Bank of substantially
all of the assets of another entity, unless (y) such merger, consolidation,
division, sale, exchange, transfer, purchase or disposition is approved in
advance by seventy percent (70%) or more of the members of the Board of
Directors of Corporation or Bank who are not interested in the transaction
and
(z) a majority of the members of the Board of Directors of the legal entity
resulting from or existing after any such transaction and of the Board of
Directors of such entity’s parent corporation, if any, are former members of the
Board of Directors of Corporation or Bank; or
(b)
any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)), other than Corporation or Bank or
any “person” who on the date hereof is a director or officer of Corporation or
Bank is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Corporation or Bank
representing twenty-five (25%) percent or more of the combined voting power
of
Corporation or Bank’s then outstanding securities, or
(c)
during any period of two (2) consecutive years during the term of Executive’s
employment under this Agreement, individuals who at the beginning of such period
constitute the Board of Directors of Corporation 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; or
(d)
any
other change in control of Corporation and Bank similar in effect to any of
the
foregoing.
5.
DATE
OF CHANGE IN CONTROL DEFINED. For purposes of this Agreement, the date of Change
in Control shall mean:
(a)
the
first date on which a single person and/or entity, or group of affiliated
persons and/or entities, acquire the beneficial ownership of twenty-five (25%)
or more of the Bank or Corporation’s voting securities, or
(b)
the
date of the closing of an Agreement, transferring all or substantially all
of
the Bank or Corporation’s assets, or
(c)
the
date on which a merger, consolidation or business combination is consummated,
as
applicable, or
(d)
the
date on which individuals who formerly constituted a majority of the Board
of
Directors of the Bank or the Corporation under paragraph 4(b) above, cease
to be
a majority.
6.
NO
EMPLOYMENT CONTRACT. This Agreement is not an employment contract. Nothing
contained herein shall guarantee or assure Executive of continued employment
by
Corporation or Bank. Rather, Corporation’s and Bank’s obligations to Executive
hereunder shall arise only if Executive continues to be employed by Corporation
and Bank in his present or in a higher capacity and then only in the event
the
conditions described herein for payment to Executive have been met.
7.
WAIVER. 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 Executive and an executive officer specifically designated by the Boards
of
Directors of Corporation and Bank. 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 shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any
prior or subsequent time.
8.
ATTORNEY’S FEES AND COSTS. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, each party shall bear their
own attorney’s fees, costs, and necessary disbursements.
9.
ENTIRE
AGREEMENT. This Agreement supersedes any and all understandings and agreements,
either oral or in writing, between the parties with respect to any severance
that may become due as a result of or in connection with a Change in Control.
This Agreement contains all the covenants and agreements between the parties
with respect to any severance that may become due as a result of or in
connection with a Change in Control.
10.
SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure
to
the benefit of Corporation, Bank and Executive, and their respective successors,
assigns, heirs and personal representatives.
11.
ARBITRATION. Corporation, Bank and Executive recognize that in the event a
dispute should arise between them concerning the interpretation or
implementation of this Agreement, lengthy and expensive litigation will not
afford a practical resolution of the issues within a reasonable period of time.
Consequently, each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted for resolution,
in Philadelphia, Pennsylvania, to the American Arbitration Association (the
“Association”) in accordance with the Association’s National Rules for the
Resolution of Employment Disputes or other applicable rules then in effect
(“Rules”). Corporation, Bank or Executive may initiate an arbitration proceeding
at any time by giving notice to the other in accordance with the Rules.
Corporation and Bank and Executive may, as a matter of right, mutually agree
on
the appointment of a particular arbitrator from the Association’s pool. The
arbitrator shall not be bound by the rules of evidence and procedure of the
courts of the Commonwealth of Pennsylvania but shall be bound by the substantive
law applicable to this Agreement. The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of fact, shall be final and
binding upon the parties and shall be enforceable in courts of proper
jurisdiction. Following written notice of a request for arbitration,
Corporation, Bank and Executive shall be entitled to an injunction restraining
all further proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein.
12.
VALIDITY. 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.
13.
APPLICABLE LAW. This Agreement shall be governed by and construed in accordance
with the domestic, internal laws of the Commonwealth of Pennsylvania, without
regard to its conflicts of laws principles.
14.
HEADINGS.
The section headings of this Agreement are for convenience only and shall
not
control or affect the meaning or construction or limit the scope or intent
of
any of the provisions of this Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
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ATTEST:
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/s/
Xxxxxxx X. Xxxxxxxx, III
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/s/
Xxxxxx X. Xxxxx
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Xxxxxxx
X. Xxxxxxxx, III, Secretary
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Xxxxxx
X. Xxxxx, President
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ATTEST:
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THE
QUAKERTOWN NATIONAL BANK
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/s/
Xxxxxxx X. Xxxxxxxx, III
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/s/
Xxxxxx X. Xxxxx
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Xxxxxxx
X. Xxxxxxxx, III, Secretary
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Xxxxxx
X. Xxxxx, President
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WITNESS:
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EXECUTIVE:
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/s/
Xxx X. Xxxxxx
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/s/
Xxxxxx X. Xxxxxx
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Xxx
X. Xxxxxx
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Xxxxxx
X. Xxxxxx, Executive
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