TERMINATION AGREEMENT
Exhibit 10.11
THIS
AGREEMENT
("Agreement") made as of this 1st day of January 2007, by and between
PEOPLES
FINANCIAL SERVICES CORP.,
a
Pennsylvania corporation ("Peoples") and XXXXXXX
X. XXXXXXXXX
(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 (the "Bank");
and
WHEREAS,
the
Executive is presently serving as Vice President 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 the Bank on an impartial and objective basis in the event of
a
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, 2007, and ending on December 31, 2008;
and
(ii) be
automatically extended to provide for a two (2) year term, annually, on January
1, 2008, 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 or the Bank, 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 a Vice President of the Bank;
(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)(1).
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 Scranton, 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.
16. 409A
Safe Harbor.
Notwithstanding anything in this Agreement to the contrary, in no event shall
Peoples be obligated to commence payment or distribution to the Executive of
any
amount that constitutes nonqualified deferred compensation within the meaning
of
Internal Revenue Code Section 409A (“CODE SECTION 409A”) earlier that 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.
Peoples and the Executive 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.
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
Witness: EXECUTIVE
Xxxxxxx
X. Xxxxxxxxx
