EXHIBIT 10.3
TERMINATION AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 1st day of
January 1997, by and between PEOPLES FINANCIAL SERVICES CORP., a
Pennsylvania corporation ("Peoples") and XXXXXXX X. XXXXXXX (the
"Executive").
WITNESSETH:
WHEREAS, Peoples is engaged in the business of a bank
holding company and is the owner of all the issued and
outstanding capital stock of Peoples National Bank of Susquehanna
County (the "Bank"); and
WHEREAS, the Executive is presently serving as
Executive Vice President and Secretary of Peoples and of the
Bank; and
WHEREAS, Peoples considers the continued services of
the Executive to be in the best interests of Peoples and its
shareholders and desires to induce the Executive to remain in the
employ of Peoples on an impartial and objective basis in the
event of change in control of Peoples.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Term of Agreement.
(a) The term of this Agreement shall:
(i) initially be a term commencing as of
January 1, 1997, and ending on December 31, 1998; and
(ii) be automatically extended to provide
for a two (2) year term, annually, on January 1, 1998, and
again on January 1 of each year thereafter, effective as of
such respective dates, unless either Peoples or the
Executive shall have given written notice of nonextension of
the term of this Agreement to the other at least ninety (90)
days before the date of any such extension.
(b) Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination by Peoples of the Executive's
employment for Cause. As used in this Agreement, "Cause" shall
mean the following:
(i) the Executive is convicted of or enters
a plea of guilty or nolo contendere to a felony, a crime of
falsehood, or a crime involving fraud or moral turpitude, or
the actual incarceration of the Executive for a period of
forty-five (45) consecutive days;
(ii) the Executive willfully fails to follow
the lawful, good faith instructions of the Board of
Directors of Peoples after the Executive's receipt of
written notice of such instructions, other than a failure
resulting from the Executive's incapacity because of
physical or mental illness; or
(iii) any government regulatory agency
orders that Peoples terminate the employment of the
Executive or relieve him of his duties.
Notwithstanding the foregoing, the Executive's employment under
this Agreement shall not be deemed to have been terminated for
"Cause" under Clause (i) or (ii) above if such termination took
place solely as a result of:
(i) questionable judgment on the part of the
Executive;
(ii) any act or omission believed by the
Executive, in good faith, to have been in, or not opposed
to, the best interests of Peoples or its affiliated
companies; or
(iii) any act or omission in respect of
which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed
for indemnification or reimbursement or payment of expenses
under the Charter or Bylaws of Peoples (or its affiliates)
or the directors' and officers' liability insurance of
Peoples (or its affiliates), in each case as in effect at
the time of such act or omission.
If the Executive's employment is terminated for Cause, the
Executive's rights under this Agreement shall cease as of the
effective date of such termination.
(c) Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's voluntary termination (other than in
accordance with Section 2 of this Agreement), retirement at the
Executive's election, or death, and the Executive's rights under
this Agreement shall cease as of the date of such voluntary
termination, retirement at the Executive's election, or death;
provided, however, that if the Executive dies after a Notice of
Termination (as defined in Section 2(a) of this Agreement) is
delivered by the Executive, the provisions of Section 11(b) of
this Agreement shall apply.
(d) Notwithstanding the provisions of
Section 1(a) of this Agreement, this Agreement shall terminate
automatically upon termination of the Executive's employment as a
result of the Executive's disability and the Executive's rights
under this Agreement shall cease as of the date of such
termination. For purposes of this Agreement, "disability" shall
mean the Executive's incapacitation by accident, sickness, or
otherwise that renders the Executive mentally or physically
incapable of performing the services therefore required of the
Executive for a continuous period of six (6) months.
2. Termination Following Change in Control.
(a) If a Change in Control (as defined in
Section 2(b) of this Agreement) shall occur and if thereafter, at
any time during the term of this Agreement, the Executive shall
be involuntarily terminated or there shall be:
(i) any reduction in title or a reduction in
the Executive's responsibilities or authority with respect
to Peoples, including such responsibilities and authority as
the same may be increased at any time during the term of
this Agreement, or the assignment to the Executive of duties
inconsistent with the Executive's prior status as an officer
of Peoples;
(ii) any reassignment of the Executive which
requires the Executive to move his principal residence;
(iii) any removal of the Executive from
office or any adverse change in the terms and conditions of
the Executive's employment, except for any termination of
the Executive's employment under the provisions of
Section 1(b) hereof;
(iv) any reduction in the Executive's annual
base salary as in effect on the date hereof or as the same
may be increased from time to time;
(v) any failure of Peoples to provide the
Executive with benefits at least as favorable as those
enjoyed by the Executive under any of the pension, life
insurance, medical, health, accident, disability or other
employee benefit plans of Peoples (or any affiliated
company) in which the Executive participated at the time of
the Change in Control, or the taking of any action that
would materially reduce any of such benefits in effect at
the time of the Change in Control, unless such reduction is
part of a reduction applicable to all employees;
(vi) any failure to obtain a satisfactory
agreement from any successor to assume and agree to perform
under this Agreement, as contemplated in Section 11(a)
hereof;
(vii) any material change in the legal
relationship between Peoples and the Bank; or
(viii) any material breach of this Agreement
on the part of Peoples;
then, at the option of the Executive, exercisable by the
Executive within one hundred twenty (120) days of the occurrence
of each and every of the foregoing enumerated events, the
Executive may resign from employment with Peoples (or, if
involuntarily terminated, give notice of intention to collect
benefits under this Agreement) by delivering a notice in writing
(the "Notice of Termination") to Peoples, and the provisions of
Section 3 of this Agreement shall apply.
(b) As used in this Agreement, "Change in
Control" means a change of 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, as amended (the "Exchange Act"), as enacted and in force
on the date hereof, whether or not Peoples is then subject to
such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if:
(i) any "person" (including a group acting
in concert, as the term "person" is defined in Section 13(d)
of the Exchange Act, as enacted and in force on the date
hereof) becomes the "beneficial owner" (as that term is
defined in Rule 13d-3, as enacted and in force on the date
hereof, under the Exchange Act) of securities of Peoples
representing more than 19.9% of the combined voting power of
Peoples' securities then outstanding;
(ii) there occurs a merger, consolidation or
other business combination or reorganization to which
Peoples or the Bank is a party, whether or not approved in
advance by the Board of Directors of Peoples or the Bank (as
the case may be) in which the members of the Board of
Directors of Peoples or the Bank (as the case may be)
immediately preceding the consummation of such transaction
do not constitute a majority of the members of the Board of
Directors of the resulting corporation and of any parent
corporation thereof immediately after the consummation of
such transaction;
(iii) there occurs a sale, exchange,
transfer, or other disposition of substantially all of the
assets of Peoples or the Bank to another entity, which is
not approved in advance by the Board of Directors of
Peoples;
(iv) there occurs a contested proxy
solicitation of the stockholders of Peoples that results in
the contesting party obtaining the ability to elect
candidates to a majority of the positions on Peoples' Board
of Directors next up for election; or
(v) there occurs a tender offer for the
shares of voting securities of Peoples that results in the
tender offeror obtaining securities representing more than
19.9% of the combined voting power of Peoples' securities
then outstanding.
3. Rights in Event of Certain Termination of
Employment After Change in Control. In the event that Executive
resigns from employment in accordance with the provisions of
Section 2(a), or Executive's employment is terminated by Peoples
without Cause after a Change in Control, Peoples shall pay (or
cause to be paid) to the Executive in cash, within twenty (20)
days following termination, an amount equal to 2.00 times his
"base amount" (within the meaning of Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")),
calculated as though the occurrence of the Change in Control were
an event described in Code Section 280G(b)(2)(A)(i).
Notwithstanding the preceding sentence, in the event the lump sum
payment described in the preceding sentence, 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 Code Section
4999, such lump sum shall be reduced to the extent necessary to
avoid such imposition.
4. Legal Expenses. Peoples shall pay to the
Executive all legal fees and expenses incurred by the Executive
in seeking in good faith to obtain or enforce any right or
benefit provided by the Agreement, provided that any action or
proceeding is not summarily decided against the Executive.
5. Arbitration. Peoples and the 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 to the American Arbitration Association (the
"Association") in Philadelphia, Pennsylvania. Peoples, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the other in accordance with the rules of the
Association. The Association shall designate a single arbitrator
to conduct the proceeding, but Peoples, and the Executive, may,
as a matter of right, require the substitution of a different
arbitrator chosen by the Association. Each such right of
substitution may be exercised only once. 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, Peoples, and the Executive, shall be entitled to an
injunction restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement.
Notwithstanding the preceding provisions of this section, in the
event any such provision is in conflict with a rule or policy of
the Association, the arbitration proceeding shall be governed by
such rule or policy.
6. Mitigation of Damages. The Executive shall not be
required to mitigate the amount of any payment provided for in
Section 3 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in Section 3 be
reduced by any compensation earned by the Executive as the result
of employment by another employer or by reason of the Executive's
receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise;
provided, however, that the payments provided for in Section 3
shall be reduced by the amount actually received by the Executive
under any severance policy of Peoples then in effect.
7. Notices. Any notice required or permitted to be
given under this Agreement shall be deemed properly given if in
writing and if mailed by registered or certified mail, postage
prepaid with return receipt requested, to the residence of the
Executive, in the case of notices to the Executive, and to the
principal office of Peoples, in the case of notices to Peoples.
8. 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 the Executive
and an executive officer of Peoples specifically designated by
the Board of Directors of Peoples. 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.
9. Assignment. This Agreement shall not be
assignable by either party, except by Peoples to any successor in
interest to the business of Peoples.
10. Entire Agreement. This Agreement contains the
entire agreement of the parties relating to the subject matter of
this Agreement.
11. Successors; Binding Agreement.
(a) Peoples 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 Peoples to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Peoples
would be required to perform it if no such succession had taken
place. Failure by Peoples to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
constitute a breach of this Agreement and the provisions of
Section 3 of this Agreement shall apply. As used in this
Agreement, "Peoples" shall mean Peoples as hereinbefore defined
and any successor to the respective businesses and/or assets of
Peoples which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(b) This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees. If the Executive should die after a
Notice of Termination is delivered by the Executive and any
amounts would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts shall be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if there is
none, to the Executive's estate.
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 laws (but not
the law of conflict of laws) of the Commonwealth of Pennsylvania.
14. Headings. The headings of the sections 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.
15. Termination of Prior Agreements. Upon the
execution and delivery of this Agreement by the parties hereto,
any prior agreement relating to the subject matter hereof shall
be automatically terminated and be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
PEOPLES FINANCIAL SERVICES CORP.
By_________________________________
President
(SEAL)
Attest:____________________________
(Assistant) Secretary
("Peoples")
Witness:
__________________________ _____________________________(SEAL)
Xxxxxxx X. Xxxxxxx
("Executive")
