SEVERANCE COMPENSATION AGREEMENT
Dated as of January 1, 1998 between THE XXXXXX CORPORATION, a New York
corporation (the "Company"), and XXXXXX X. XXXXXXX (the "Executive").
The Company's Board of Directors has determined that it is appropriate to
reinforce and encourage the continued attention and dedication of the Executive
to his assigned duties as President and Chief Executive Officer of Xxxxxx
National Bank, a wholly owned subsidiary of Company (herein called "WNB")
without distraction in potentially disturbing circumstances arising from the
possibility of a change in control of the company or of WNB.
This Agreement sets forth the severance compensation which the company
agrees it will pay, or cause WNB to pay, to the Executive if the Executive's
employment with WNB terminates under one of the circumstances described herein
following a Change in Control (as defined herein) of the Company or of WNB.
1. Term. This Agreement shall terminate, except to the extent that any
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obligation of the company hereunder remains unpaid as of such time,
upon the earliest of (i) the sixty-second birth date of Executive if a
Change in Control of the Company or of WNB has not occurred prior to
such date; and (ii) the termination of the Executive's employment with
WNB is based on death, Disability (as defined in Section 3(d)
Retirement (as defined in Seciton 36)or cause (as defined in Section
3d)or by the Executive other than for Good Reason (as defined in
Section 3(e)).
2. Compensation in the Event of Change in Control. No compensation shall
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be payable under this Agreement unless and until (a) there shall have
been a Change in Control of the company or of WNB, while the Executive
is still an employee of WNB and (b) the Executive's employment by WNB
thereafter shall have been terminated in accordance with Section 3.
For purposes of this Agreement, a Change in Control shall deemed to
have occurred (unless Executive shall have agreed in writing to the
contrary) if (i) there shall be consummated (x) any consolidation or
merger of the Company or of WNB in which the Company or WNB is not the
continuing or surviving corperation or puruant to which shares of the
Company's or WNB's Common Stock would be converted in cash, securities
or other property, other than a merger of the Company or of WNB in
which the holders of the Company's or WNB's Common Stock immediately
prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the
assets of the company or of WNB, or (ii) the stockholders of the
company or of WNB approved any plan or proposal for the liquidation or
dissolution of the Company or of WNB, or (iii) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than Xxxxx X.
Xxxxxx, his spouse or his children, shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of 25% or
more of the company's outstanding common Stock, or (iv) any person (as
defined above), other than the Company, shall become the beneficial
owner (as defined above) of 50% or more of WNB's outstanding Common
Stock, or (v) during any period of two consecutive years, individuals
who at the beginning of such period constitute the entire Board of
Directors of Company shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election
by the Company's stockholders, of each new director was approved by a
vote of a least two-thirds of the directors then still in office who
were directors at the beginning of the period.
Notwithstanding that prior to any Change in Control, WNB may have
terminated Executive's employment pursuant to the Employment Agreement between
them, Executive shall be deemed to be still employed by WNB for the purposes of
this Severance Compensation Agreement if:
(a) within six (6) months prior to the effective date of termination
of Executive's employment with WNB, and prior to any initial
conduct by Executive described below as "cause", there shall have
commenced material discussions, by authorized representatives of
Company with particular persons or organizations, regarding a
potential Change in Control, and
(b) within twelve (12) months after the effective date of termination
of Executive's employment with WNB there occurs a Change in
Control involving said particular persons or organization as a
result of such discussions, and
(c) Executive's termination by WNB was not for "cause", defined for
the purposes of this paragraph as:
(i) the willful and continued failure of the Executive to
substantially perform the Executive's duties with WNB (other
than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the
Board of WNB which specifically identifies the manner in
which the Board believes that the Executive has not
substantially performed the Executives' duties;
(ii) the willful engaging by the Executive illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company;
(iii)personal dishonesty or breach of fiduciary duty to WNB that
in either case results or was intended to result in personal
profit to the Executive at the expense of WNB, or
(iv) willful violation of any law, rule or regulation (other than
traffic violations, misdemeanors or similar offenses) or
cease-and-desist order, court order, judgment or supervisory
agreement, which violation is materially and demonstrably
injurious to WNB or the Company.
For purposes of the preceding clauses, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith and without reasonable
belief that the Executive's action or omission was in the best interests of
the company or WNB. Any act, or failure to act, based upon prior approval
given by the Board of WNB or upon the instructions or with the approval of
the Executive's superior or based upon the advice of counsel for WNB, shall
be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of WNB and Company.
3. Termination Following Change in Control. (a) If a Change in control (as
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defined above) shall have occurred while the Executive is still an employee
of WNB, the Executive shall be entitled to the compensation provided in
Section 4 upon the subsequent termination of the Executive's employment
with WNB by the Executive or by WNB unless such termination is a result of
(i) the Executive's death; (ii) the Executive's Disability (as defined in
Section 3(b) below); (iii) the Executive's Retirement (as defined in
Section 3(c) below); (iv) the Executive's termination by WNB for Cause (as
defined in Section 3(d) below); or (v) the Executive's decision to
terminate employment with WNB other than for Good Reason (as defined in
Section 3(e) below).
(b) Disability. If, as a result of the Executive's incapacity due to
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physical or mental illness, the Executive shall have been absent
from his duties with WNB on a full-time basis for six months and
with 30 days after written notice of termination is thereafter
given by WNB, the Executive shall not have returned to the
full-time performance of the Executive's duties, the company may
terminate this agreement for "Disability".
(c) Retirement. The term "Retirement" as used in this Agreement shall
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mean termination by WNB or the Executive of the Executive's
employment with WNB based on the Executive having reached age 65
or such other age as shall have been fixed in any arrangement
established with the Executive's written consent with respect to
the Executive.
(d) Cause. WNB may terminate the Executive's employment for Cause.
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Without limited WNB's right to terminate Executive's employment
pursuant to Executive's Employment Agreement with WNB and for
purposes of this Agreement only, WNB shall have "Cause" to
terminate the Executive's employment, only on the basis of fraud,
misappropriation, or embezzlement on the part of the Executive.
Notwithstanding the foregoing, the Executive shall not be deemed
to have been terminated by WNB for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of WNB's Board of
Directors at a meeting of WNB's Board called and held for the
purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before WNB's Board), finding that in the
good faith opinion of said Board, the Executive was guilty of
conduct set forth in the second sentence of this Section 3(d) and
specifying the particulars thereof in detail.
(e) Good Reason. The Executive may terminate the Executive's
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employment with WNB for Good Reason at any time during the term
of this Agreement. Without limiting Executive's right to
terminate his employment pursuant to Executive's Employment
Agreement with WNB and for purposes of this Agreement only, "Good
Reason" shall mean any of the following (without the Executive's
express written consent):
(i) the assignment to the Executive by WNB of duties
inconsistent with the Executive's position, duties,
responsibilities and status with WNB immediately prior to a
Change in Control, or change in this Executive's titles or
officers in effect immediately prior to a change in control,
or any out removal of the Executive from or any failure to
reelect the Executive to any of such positions, except in
connection with the termination of his employment for
Disability, Retirement or Cause or as a result of the
Executive's death or by the Executive other than for Good
Reason,
(ii) a reduction by WNB in the Executive's base salary as in
effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement or WNB's
failure to increase (within 12 months of the Executive's
last increase in base salary) the Executive's base salary
after a Change in Control of WNB in an amount which at least
equals, on a percentage basis, the average percentage
increase in base salary for all officers of the Company
effected in the preceding 12 months;
(iii)any failure by WNB to continue in effect any benefit plan
or arrangement (including, without limitation, any profit
sharing plan, group annuity contract, group life insurance
plan, senior executive survivor life insurance supplement
and medical, dental, accident and disability plans) in which
the Executive is participating (or entitled to participate)
at the time of a Change in Control (or any other plans
providing the Executive with substantially similar benefits)
(herein referred to as "Benefit Plans"), or the taking of
any action by WNB which would adversely affect the
Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control.
(iv) Any failure by the Company or WNB to continue in effect any
incentive plan or arrangement ( including, without
limitation, WNB's bonus and contingent bonus arrangements
and credits and the right to receive performance awards and
similar incentive compensation benefits) in which the
Executive is participating at the time of a Change in
Control (or any other plans or arrangements providing him
with substantially similar benefits) (hereinafter referred
to as "Incentive Plans") or the taking of any action by the
company or WNB which would adversely affect the Executive's
participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan,
expressed as a percentage of his base salary, by more than
10 percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(v) Any failure by the Company or WNB to continue in effect any
plan or arrangement to receive securities of the company or
of WNB (including, without limitation, any plan or
arrangement to receive and exercise stock options, stock
appreciation rights, restricted stock or grants thereof) in
which the Executive is participating at the time of a Change
in Control (or plans or arrangements providing him with
substantially similar benefits) (hereinafter referred to as
"Securities Plans") or the taking of any action by the
Company or WNB which would adversely affect the Executive's
participation in, or materially reduce, the Executive's
benefits under any such Securities Plan;
(vi) A relocation of WNB's principal executive offices to a
location outside of Otsego County, New York or the
Executive's relocation to any place other than the location
at which the Executive performed the Executive's duties
prior to a Change in Control, except for required travel by
the Executive on WNB business to an extent substantially
consistent with the Executive's business travel obligations
at the time of a Change in Control.
(vii)Any failure of WNB to provide the Executive with the number
of paid vacation days to which the Executive is entitled at
the time of a Change in Control
(viii) Any material breach by the Company of any provision of
this Agreement;
(ix) Any failure by the Company to obtain the assumption of this
Agreement by any successor or assignee of the Company, or
(x) Any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(f), and for
purposes of this Agreement, no such purported termination
shall be effective.
(f) Notice of Termination. Any termination by WNB pursuant to Section 3(b),
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3(c) or 3(d) shall be communicated by a Notice of Termination. Any
termination of Executive's employment with WNB for Good Reason shall be
communicated by a Notice of Termination To WNB and to Company. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice
which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. For purposes of
this Agreement, no such purported termination by WNB or by Executive shall
be effective without such Notice of Termination.
(g) Date of Termination
(i) "Date of Termination" shall mean (a) if this Agreement is
terminated by the Company for Disability, 30 days after Notice of
Termination is given to the Executive by WNB (provided that the
Executive shall not have returned to the performance of the
Executive's duties with WNB on a full-time basis during such
30-day period) or (b) if the Executive's employment is terminated
by WNB for any other reason, the date on which a Notice of
Termination is given by WNB; provided that if within 30 days
after any Notice of Termination is given to the Executive by WNB
the Executive notifies WNB that a dispute exists concerning the
termination, the Date of Termination shall be the date the
dispute is finally determined, whether by mutual agreement of
Company, WNB and Executive or upon final judgment, order or
decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected)
(ii) "Date of Termination" shall mean if Executive's employment with
WNB is terminated by Executive for Good Reason the date on which
a Notice of Termination is given by Executive to WNB and the
Company; provided that if within 30 days after any Notice of
Termination is given to WNB and to Company by Executive, for Good
Reason, the Date of Termination shall be the date the dispute is
finally determined, whether by mutual agreement of Company, WNB
and Executive or upon final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
4. Severance Compensation upon Termination of Employment. If after a Change in
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Control WNB shall terminate the Executive's employment other than pursuant
to the provisions of Section 3(b) (Disability), 3(c) (Retirement) or 3(d)
(Cause) or if the Executive shall terminate his employment for Good Reason,
then the company shall pay, or cause WNB to pay, to the Executive as
severance pay, in three equal installments, in cash, less any required tax
withholdings, on the fifth business day following the Date of Termination
and the first and second anniversary thereof, a total amount equal to three
(3) times the average of the aggregate annual compensation subject to
United States income taxes paid by WNB to the Executive during the three
calendar years preceding the Change in Control, provided however there
shall be subtracted from said total the amount, if any, which shall have
been paid to Executive by WNB for any period after the effective date of
the termination of Executive's Employment Agreement with WNB; the
"aggregate annual compensation" "subject to United States income taxes"
shall be the total taxable amounts shown on Executive's W2 statements and
any deferred salary and deferred bonuses for the applicable calendar years
(or, if it is a higher amount, an amount calculated in the same manner
using the aggregate annual compensation paid in the three (3) calendar
years preceding the Date of Termination); provided, however, that if the
total severance payment under this Section 4, either alone or together with
other payments which the Executive has the right to receive from the
Company or WNB would constitute a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1954, as amended (the
"Code")), such severance payment shall be reduced to the largest amount as
will result in no portion of the severance payment under this Section 4
being subject to the excise tax imposed by Section 4999 of the Code. The
determination of any reduction in the severance payment under this section
4 pursuant to the foregoing proviso shall be made by the Executive in good
faith, and such determination shall be conclusive and binding on the
Company.
If required to pay the aforesaid severance, the Company shall in addition
pay or cause WNB to pay:
(a) Commencing on the third anniversary of his Date of Termination and
continuing until Executive's sixty-second birthdate, an annual amount
to Executive equal to the difference between the annual amount
Executive would have been entitled to receive as an early retirement
benefit at age 62 had he continued employment with WNB (at the same
compensation he was receiving on the Date of Termination) and the
annual amount Executive actually receives as an early retirement
benefit if he takes early retirement effective on or after the third
anniversary of his Date of Termination and prior to his sixty-second
birthdate; and
(b) An amount to the Trustee of WNB's pension plan to provide to Executive
at age sixty-two (62) an early retirement benefit equal to what
Executive would have been entitled to receive upon retirement at age
62 had he continued employment with WNB (at the same compensation he
was receiving on the Date of Termination); provided however that,
alternatively, the Company may purchase and provide to Executive an
annuity to supplement the amount Executive will be entitled to receive
upon early retirement at age 62 so that the total of the annual
annuity payment and such annual early retirement benefit will equal
the annual retirement benefit Executive would have been entitled to
receive had he remained employed with WNB to age 62.
5. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights.
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(a) The Executive shall not be required to mitigate damages or the amount
of any payment provided for under this Agreement by seeking other
employment of otherwise, not shall the amount of any payment provided for
under this Agreement be reduced by any compensation earned by the Executive
as the result of employment by another employer after the Date of
Termination, or otherwise, except that such compensation shall be reduced
by any compensation earned by the Executive within three (3) years of the
Date of Termination as a result of employment by a competitor of WNB at any
office of such competitor which is located within seventy-five (75) miles
of Oneonta, NY.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish the Executive's existing rights, or rights which
would accrue solely as a result of the passage of time, under any
Benefit Plan, Incentive Plan or Securities Plan, employment
agreement or other contract, plan or arrangement.
6. Successor to the Company. (a) The Company will require any successor to or
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assignee of (whether direct or indirect, by purchase, merger, consolidation
or otherwise) all or substantially all of the business and/or assts of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that the company
would be required to perform it if no such succession or assignment had
taken place. Any failure of the Company to obtain such agreement prior to
the effectiveness of any such succession or assignment shall be a material
breach of this Agreement and shall entitle the Executive to proceed
hereunder as though he had the right to terminate the Executive's
employment with WNB for Good Reason. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to or
assignee of its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law. If at any time during the term of this Agreement the
Executive is employed by any corporation a majority of the voting
securities of which is then owned by the Company, "Company" as used in
Sections 3, 4 11 and 12 hereof shall in addition include such employer. In
such event, the company agrees that it shall pay or shall cause such
employer to pay any amounts owed to the Executive pursuant to Section 4
hereof.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts are still
payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee, or other
designee, or if there be no such designee, to the Executive's
estate.
7. Notice. For purposes of this Agreement, notices and all other
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communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company or to WNB:
The Xxxxxx Corporation
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
If to the Executive:
Xxxxxx X. Xxxxxxx
000 Xxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
Or 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 receipt.
8. Miscellaneous. No provisions of this Agreement may be modified, waived or
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discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, 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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
9. Validity. The invalidity or unenforceability of any provisions of this
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Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one or more counterparts,
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each of which shall be deemed to be an original but all of which together
will constitute one and the same instrument.
11. Legal fees and Expenses. In the event Executive prevails in any such
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contest, the Company shall pay all reasonable legal fees and expenses which
the Executive may incur as a result of the Company's contesting the
validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
12. Confidentiality. The Executive shall retain in confidence any and all
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confidential information known to the Executive concerning the Company and
WNB and its business so long as such information is not otherwise publicly
disclosed.
13. Death. This Agreement shall inure to the benefit of and be enforceable by
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the Executive's personal or legal representative, executors,
administrators, successors, heirs, distributes, devisees and legatees. If
the Executive shall die while any amount would still be payable to the
Executive hereunder (other than the amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
14. Arbitration Procedures. All disputes relating to this Agreement shall be
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submitted to expedited commercial arbitration under the rules of the
American Arbitration Association in Binghamton, New York, with an
arbitrator who is mutually acceptable to both parties being selected to
preside over such arbitration. The Federal Rules of Evidence shall apply,
and the arbiter shall establish the applicable rules of discovery. The
prevailing party in any arbitration shall be entitled to recover from the
other party all fees and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred in connection with
such arbitration. The arbiter shall determine the scope of arbitrability.
The only judicial relief shall be (a) interim equitable relief and (b)
relief in aid or to enforce arbitration.
15. No Right to Continued Employment. Nothing in this Agreement shall be deemed
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to give Executive the right to be retained in the employ of WNB or to
interfere with the right of WNB to discharge the Executive at any time and
for any lawful reason, subject in all cases to the terms of the Agreement.
16. No Assignment of Benefits. Except as otherwise provided herein or by law,
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no right or interest of any Executive under the Agreement shall be
assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution,
levy, garnishment, attachment, pledge or in any manner; no attempted
assignment or transfer thereof shall be effective; and no right or interest
of any Executive under this Agreement shall be liable for, or subject to,
any obligation or liability of such Executive.
17. Reduction of Benefits by Legally Required Benefits. Notwithstanding any
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other provision of this Agreement to the contrary, if WNB is obligated by
law or by contract (other than under this Agreement) to pay severance pay,
a termination indemnity, notice pay, or the like, or if WNB is obligated by
law or by contract to provide advance notice of separation ("Notice
Period"), then any severance benefits hereunder shall be reduced by the
amount of any such severance pay, termination indemnity, notice pay of the
like, as applicable, and by the amount of any pay received with respect to
any Notice Period.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE XXXXXX CORPORATION
By /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chairman
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Executive
