EMPLOYMENT AGREEMENT
THIS AGREEMENT (“Agreement”)
is effective as of this 7th day of September, 2010, between QNB CORP., a Pennsylvania
business corporation (the “Corporation”), QNB BANK, a state chartered
banking association (the “Bank”), and XXXXX X. XXXXXXX, an adult
individual (“Executive”).
WITNESSETH:
WHEREAS, the Corporation and
the Bank desire to employ Executive and enter into an agreement setting forth
the terms and conditions of such employment.
WHEREAS, Executive desires to
accept such employment with the Corporation and the Bank, on the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the parties
hereto, intending to be legally bound, agree as follows:
1. Employment. The Corporation
and the Bank each hereby employs Executive and Executive hereby accepts
employment with the Corporation and the Bank, on the terms and conditions set
forth in this Agreement.
2. Duties of
Employee.
(a) Executive
shall serve as President of the Corporation and President and Chief Operating
Officer of the Bank, reporting to the Chief Executive Officer of the Corporation
(the “Corporation CEO”) and the Chief Executive Officer of the Bank (the “Bank
CEO”), respectively, and shall perform all duties and accept all
responsibilities incident to such positions as may be assigned to Executive by
the Corporation CEO and the Bank CEO. Executive shall devote
Executive’s full time, attention, and energies to the business of the
Corporation and the Bank during the Employment Period (as defined in
Section 3 of this Agreement); provided, however, that this Section 2
shall not be construed as preventing Executive from (a) engaging in
activities incident or necessary to personal investments, (b) acting as a
member of the board of directors of any non-profit association or corporation,
or (c) being involved in any other activity with the prior approval of the
Board of Directors of the Corporation (the “Board”) or the Board of Directors of
the Bank (the “Bank Board”). Executive shall not engage in any
business or commercial activities, duties, or pursuits which compete with the
business or commercial activities of the Corporation or the Bank, nor may
Executive serve as a director or officer or in any other capacity in a company
which competes with the Corporation or the Bank.
(b) No later
than the first meeting of the Bank Board following the effective date of this
Agreement, Executive shall be appointed to the Bank Board and, thereafter during
the term of this Agreement, the Bank shall cause Executive to be nominated to
the Bank Board, and use its reasonable efforts to cause Executive to be
re-elected to the Bank Board.
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3. Term of
Agreement.
(a) Employment
Period. This Agreement shall be for a period (the “Employment
Period”) beginning on the effective date of this Agreement, and if not
previously terminated pursuant to the terms of this Agreement, ending one year
later; provided, however, that the Employment Period shall be automatically
renewed on the first anniversary date of the commencement of the Employment
Period (the “Renewal Date”) for a period ending one year from the Renewal Date
unless either party shall give written notice of non-renewal to the other party
at least 90 days prior to the Renewal Date, in which event this Agreement shall
terminate at the end of the Employment Period. If this Agreement is
renewed on the Renewal Date, it will be automatically renewed on the first
anniversary date of the Renewal Date and each subsequent anniversary (the
“Annual Renewal Date”) for a period ending one year from each Annual Renewal
Date, unless either party gives written notice of non-renewal to the other party
at least 90 days prior to the Annual Renewal Date, in which case this Agreement
shall terminate at the end of the Employment Period.
(b) Termination for
Cause. Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement may be terminated by the Corporation or the Bank
for Cause (as defined herein). As used in this Agreement, “Cause”
shall mean any of the following:
(i) Executive
is convicted of or pleads 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 30 consecutive days or
more;
(ii) A
government regulatory agency recommends or orders in writing that the
Corporation or the Bank terminate the employment of Executive with the
Corporation or the Bank or relieve Executive of Executive’s duties as such
relate to the Corporation or the Bank;
(iii) Executive
willfully and continuously fails to follow the lawful instructions of the
Corporation CEO, the Bank CEO, the Board, or the Bank Board (which instructions
must be consistent with the terms of this Agreement), other than a failure
resulting from Disability;
(iv) A willful
act of material dishonesty on the part of Executive with respect to any material
matter involving the Corporation or the Bank;
(v) Executive
willfully fails to timely report to the Corporation CEO, the Bank CEO, the
Board, or the Bank Board information having a material adverse effect on
Corporation or Bank business operations;
(vi) Theft or
material misuse by Executive of Corporation or Bank property;
(vii) Executive
fails to conform in any material respect to the Corporation’s or Bank’s code of
conduct; or
(viii) A
material breach of this Agreement by Executive.
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For
purposes of this Agreement, “code of conduct” means the policies and procedures
related to employment of employees by the Corporation or the Bank set forth in
the Corporation’s or Bank’s employee handbook or any similar
document. The code of conduct may be amended and updated at any
time. The term “code of conduct” shall also include any other policy
or procedure that may be adopted by the Corporation or the Bank and communicated
to Executive.
Anything
herein to the contrary notwithstanding, Executive’s employment shall not be
terminated for Cause, within the meaning of clauses (iii) — (viii) above unless
written notice stating the basis for the termination is provided to Executive
and Executive (together with Executive’s own counsel) has an opportunity to be
heard before the Board or the Bank Board, as applicable, and, after such
hearing, a majority of the Board or the Bank Board (excluding Executive), as
applicable, duly votes to terminate Executive for Cause.
If this
Agreement is terminated for Cause, all of Executive’s rights under this
Agreement shall cease as of the effective date of such termination, except
that:
(i) the Bank
shall pay to Executive the unpaid portion, if any, of Executive’s Annual Base
Salary through the date of termination; and
(ii) the Bank
shall provide to Executive such post-employment benefits, if any, as may be
provided for under the terms of the employee benefit plans of the Corporation
and the Bank then in effect.
(c) Termination for Good
Reason. Notwithstanding the provisions of Section 3(a) of
this Agreement, this Agreement shall terminate automatically upon Executive’s
termination of employment for Good Reason. The term “Good Reason”
shall mean, without Executive’s express written consent, (i) a material
reduction in Executive’s Annual Base Salary; (ii) a material diminution in
Executive’s authority, duties, or responsibilities; (iii) a material change in
the geographic location at which Executive must perform the services under this
Agreement; or (iv) any other action or inaction that constitutes a material
breach by the Corporation or the Bank of this Agreement, in all cases after
notice from Executive to the Corporation or the Bank within ninety (90) days
after the initial existence of any such condition that the condition constitutes
Good Reason and the failure of the Corporation or the Bank to cure such
situation within thirty (30) days after said notice.
If such
termination occurs for Good Reason, then the Bank shall pay Executive such
benefits as are set forth in Section 5 of this Agreement.
(d) Death. Notwithstanding
the provisions of Section 3(a) of this Agreement, this Agreement shall
terminate automatically upon Executive’s death and Executive’s rights under this
Agreement shall cease as of the date of such termination, except that
(i) the Bank shall pay to Executive’s spouse, personal representative, or
estate the unpaid portion, if any, of Executive’s Annual Base Salary through
date of death and the balance of the payments (if any) owing pursuant to
Section 14(b) below, and (ii) the Bank shall provide to Executive’s
dependents any benefits due under the Corporation’s and the Bank’s employee
benefit plans.
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(e) Disability. Executive,
the Corporation, and the Bank agree that if, in the judgment of the Board,
Executive is unable, as a result of illness or injury, to perform the essential
functions of Executive’s position on a full-time basis with or without a
reasonable accommodation and without posing a direct threat to Executive or
others for a period of six months (a “Disability”), the Corporation and the Bank
will suffer an undue hardship in continuing Executive’s employment as set forth
in this Agreement. Accordingly, this Agreement shall terminate at the
end of the six-month period, and all of Executive’s rights under this Agreement
shall cease, with the exception of those rights which Executive may have under
the Corporation’s and the Bank’s benefit plans.
(f) Resignation from Board of
Directors. In the event Executive’s employment under this
Agreement is terminated for any reason, if applicable, Executive’s service as a
Director of the Corporation, the Bank, and any affiliate or subsidiary thereof
shall immediately terminate. This Section 3(f) shall constitute
a resignation notice for such purposes.
4. Employment Period
Compensation. Benefits and Expenses.
(a) Annual Base
Salary. For services performed by Executive under this
Agreement, the Bank shall pay Executive an annual base salary during the
Employment Period at the rate of $240,000.00 per year, minus applicable
withholdings and deductions, payable at the same times as salaries are payable
to other executive employees of the Bank (the “Annual Base
Salary”). The Annual Base Salary shall be reviewed annually by the
Board or the Bank Board and either may, from time to time, increase Executive’s
Annual Base Salary, and any and all such increases shall be deemed to constitute
amendments to this Section 4(a) to reflect the increased amounts, effective
as of the date established for such increases.
(b) Bonus. The
Board and the Bank Board may provide for the payment of an annual bonus to
Executive as it deems appropriate to provide incentive to Executive and to
reward Executive for Executive’s performance. Such bonus may, but
need not be, determined in accordance with any incentive bonus programs for
executive officers as approved by the Board and the Bank Board.
(c) Vacations, Holidays,
etc. In 2010, Executive shall be entitled to two weeks
vacation. Each year thereafter, Executive shall be entitled to five
weeks vacation. Such vacation time shall be subject to the policies
as established from time to time by the Bank Board. Executive shall
also be entitled to all paid holidays, sick days, and personal days provided by
the Bank to its regular full-time employees and executive officers.
(d) Stock Based
Incentives. During the term of this Agreement, Executive shall
be eligible for such stock based incentives as may be granted from time to time
by the Board under the Corporation’s stock based incentive plans and as are
consistent with Executive’s responsibilities and performance.
(e) Employee Benefits
Plans. Effective November 7, 2010, Executive shall be entitled
to participate in all health, dental, vision, life insurance, and disability
benefit plans available on a general basis to other executive officers of the
Corporation and the Bank; provided, however, that the Corporation and the Bank
reserve the right, from time to time, to amend in any respect and to terminate
all such benefit plans; and provided further that any reduction in such benefits
must be applicable to all employees generally.
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(f) Additional
Benefits.
(i) Effective
November 7, 2010, Executive shall be entitled to participate in the [Bank’s]
long-term disability and accidental death benefit plans; provided, however, that
the [Bank] reserves the right, from time to time, to amend in any respect and to
terminate such benefit plans; and provided further that any reduction in such
benefits must be applicable to all employees generally.
(ii) The
Executive shall be eligible to participate in the Corporation’s retirement
savings plan effective on the first plan entry date following March 7, 2011, and
in accordance with the terms of the plan; provided, however, that the
Corporation reserves the right, from time to time, to amend in any respect and
to terminate such benefit plan; and provided further that any reduction in such
benefits must be applicable to all employees generally.
(g) Business
Expenses. During the term of this Agreement, Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by Executive, which are properly accounted for, in accordance with the policies
and procedures established by the Board or the Bank Board for its executive
officers.
(h) Long-Term Incentive
Grant. Within 30 days following the effective date of this
Agreement, the Corporation shall grant to Executive incentive stock options to
acquire 3,000 shares of the Corporation’s common stock, which shall become 100%
vested on the third anniversary of the date of grant. The foregoing grant shall
be governed by the terms and conditions of the QNB Corp. 2005 Stock Incentive
Plan which was filed with the Corporation’s 2005 proxy statement on April 15,
2005 and is incorporated herein by reference.
(i) Club Membership and
Dues. During the term of this Agreement, the Bank agrees to
pay the initiation fees and dues for Executive to be a member of a country club
to be agreed upon by the Bank and Executive. The Bank also agrees to
reimburse Executive for all ordinary, necessary, and reasonable business-related
expenses incurred by Executive on Bank business at such country
club. As a condition to receiving such reimbursements, the Executive
shall submit to the Bank on a timely basis business expense reports, including
substantiation sufficient to enable the Bank to deduct the reimbursed expenses
for tax purposes.
5. Rights in Event of
Termination of Employment.
(a) In the
event Executive’s employment is involuntarily terminated by the Corporation or
the Bank without Cause (other than for death or Disability) or is voluntarily
terminated by Executive for Good Reason, Executive shall be entitled to
receive:
(i) Continuation
of Executive’s Annual Base Salary then in effect (or immediately prior to any
reduction resulting in a termination by Executive for Good Reason) for a period
of 12 months commencing on or within 30 days following the date of such
termination, in accordance with the Bank’s normal payroll practices then in
effect; and
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(ii) Continuation
of employer-provided healthcare benefits for one year at the levels and cost to
Executive and his qualified dependents in effect on the date of Executive’s
termination, and thereafter to elect, at Executive’s or his qualified
dependents’ cost, COBRA continuation for the remainder of Executive’s or his
qualified dependents’ COBRA eligibility, if any, it being understood that
Executive’s and his dependents’ COBRA eligibility period will include the period
during which the Company is providing benefits under this
Section. Notwithstanding the foregoing, in the event the Bank is
unable to provide such healthcare benefits due to the applicable
nondiscrimination requirements of Section 105(h) of the Internal Revenue Code of
1986, as amended (the “Code”), Executive shall receive a dollar amount equal to
the cost to Executive of obtaining such benefits (or substantially similar
benefits) on or within 30 days following the date of termination.
(b) Executive
shall not be required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the amount of
payment provided for in this Section 5 be reduced by any compensation
earned by Executive as the result of employment by another employer or by reason
of Executive’s receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise.
6. Covenant Not to
Compete.
(a) Executive
hereby acknowledges and recognizes the highly competitive nature of the business
of the Corporation and the Bank and accordingly agrees that, during and for the
applicable period set forth in Section 6(c) hereof, Executive shall
not:
(i) enter
into or be engaged (other than by the Corporation or the Bank), directly or
indirectly, either for Executive’s own account or as agent, consultant,
employee, partner, officer, director, proprietor, investor (except as an
investor owning less than 5% of the stock of a publicly owned company), or
otherwise of any person, firm, corporation, or enterprise engaged in
(A) the banking (including bank holding company) or financial services
industry or (B) any other activity in which Corporation or the Bank or any
of their subsidiaries are engaged during the Employment Period, in any county in
which, at the date of termination of Executive’s employment, a branch location,
office, loan production office, or trust or asset and wealth management office
of Corporation, the Bank, or any of their subsidiaries are located
(“Non-Competition Area”); or
(ii) solicit,
directly or indirectly, any “person” (as such term is defined under Section 3 of
the Employee Retirement Income Security Act of 1974, as amended) who is, or was
during the then most recent 12-month period, a customer of the Corporation or
the Bank or any of their respective subsidiaries to divert their business from
the Corporation and/or the Bank; or
(iii) solicit,
directly or indirectly, any person who is, or was during the then most recent
12-month period, employed by the Corporation or the Bank or any of their
respective subsidiaries to leave the employ of the Corporation or the
Bank.
(b) It is
expressly understood and agreed that, although the parties consider the
restrictions contained in Section 6(a) hereof reasonable for the purpose of
preserving for the Corporation, the Bank, and their subsidiaries their good will
and other proprietary rights, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other restriction
contained in this Section 6(a) hereof is an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of Section 6(a)
hereof shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such other extent as such court may
judicially determine or indicate to be reasonable.
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(c) The
provisions of this Section 6 shall be applicable commencing on the
effective date of this Agreement and continuing for 12 months after the
effective date of the termination of Executive’s employment; provided, however,
that in the event Executive’s employment terminates as a result of delivery of a
notice of non-renewal by the Corporation or the Bank in accordance with Section
3(a), Executive shall not be subject to the restrictions contained in Section
6(a)(i). Notwithstanding the above provisions, if Executive violates
the provisions of this Section 6 and the Corporation or the Bank must seek
enforcement of the provisions of Section 6 and is successful in enforcing
the provisions, either pursuant to a settlement agreement, or pursuant to court
order, the restrictions set forth in this Section 6 shall remain in effect for
one full year following the date of the settlement agreement or court
order.
(d) Executive
hereby agrees that the provisions of this Section 6 are fully assignable by
the Corporation and the Bank to any successor. Executive also
acknowledges that the terms and conditions of this Section 6 will not be
affected by the circumstances surrounding Executive’s termination of
employment.
(e) Executive
acknowledges and agrees that any breach of the restrictions set forth in this
Section 6 will result in irreparable injury to the Corporation and the Bank
for which it shall have no meaningful remedy at law, and the Corporation and the
Bank shall be entitled to injunctive relief in order to enforce provisions
hereof. Upon obtaining any such final and nonappealable injunction,
the Corporation and the Bank shall be entitled to pursue reimbursement from
Executive and/or Executive’s employer of attorney’s fees and costs reasonably
incurred in obtaining such final and nonappealable injunction. In
addition, the Corporation and the Bank shall be entitled to pursue reimbursement
from Executive and/or Executive’s employer of costs reasonably incurred in
securing a qualified replacement for any employee enticed away from the
Corporation and the Bank by Executive. Further, the Corporation and
the Bank shall be entitled to set off against or obtain reimbursement from
Executive of any payments owed or made to Executive hereunder.
7. Unauthorized
Disclosure. During the term
of Executive’s employment hereunder, or at any later time, Executive shall not,
without the written consent of the Board and the Bank Board or a person
authorized thereby (except as may be required pursuant to a subpoena or other
legal process), knowingly disclose to any person, other than an employee of the
Corporation and the Bank or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by Executive of Executive’s
duties as an executive of the Corporation and the Bank, any material
confidential information obtained by Executive while in the employ of the
Corporation and the Bank with respect to any of the Corporation’s and the Bank’s
or any of their subsidiaries’ services, products, improvements, formulas,
designs or styles, processes, customers, methods of business, or any business
practices the disclosure of which could be or will be damaging to the
Corporation and the Bank; provided, however, that confidential information shall
not include any information known generally to the public (other than as a
result of unauthorized disclosure by Executive or any person with the
assistance, consent, or direction of Executive) or any information of a type not
other considered confidential by persons engaged in the same business or a
business similar to that conducted by the Corporation and the Bank or any
information that must be disclosed as required by law.
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8. Cessation
and Recovery on Competition. If, during the applicable period
set forth in Section 6(c), Executive, in the good faith judgment of the
Board, breaches, in any material respect, any of the restrictions contained in
Section 6, the Corporation shall have the right, upon written notice to
Executive, to cease to make any further payments under Section 5 in addition to
any other remedies available the Corporation.
9. Indemnification;
Liability Insurance. The Corporation
and the Bank shall indemnify Executive, to the fullest extent permitted by
Pennsylvania law, with respect to any threatened, pending, or contemplated
action, suit, or proceeding brought against Executive by reason of the fact that
Executive is or was a director, officer, employee, or agent of the Corporation
and the Bank or is or was serving at the written request of the Corporation or
the Bank as a director, officer, employee, or agent of another person or
entity. Executive’s right to indemnification provided herein is not
exclusive of any other rights to which Executive may be entitled under any
bylaw, agreement, vote of shareholders, or otherwise, and shall continue beyond
the term of this Agreement.
10. Notices. Except as
otherwise provided in this Agreement, 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 Executive’s address, in the case of notices to Executive, and to
the principal executive office of the Corporation, in the case of notice to the
Corporation or the Bank.
11. 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 Board. 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.
12. Assignment. This Agreement
shall not be assignable by any party, except by the Bank and the Corporation to
any successor in interest to its business.
13. Entire
Agreement. This Agreement
contains the entire agreement of the parties relating to the subject matter of
this Agreement and supersedes and replaces any prior written or oral agreements
between them respecting the within subject matter.
14. Successors; Binding
Agreement.
(a) The
Corporation and the Bank 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 the Corporation and/or the Bank to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation and the Bank would be required to perform it if no
such succession had taken place. As used in this Agreement,
“Corporation” and “Bank” shall mean the Corporation and the Bank as defined
previously and any successor to its respective business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
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(b) This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, heirs,
distributees, devisees, or legatees. If Executive should die after a
notice of termination for Good Reason is delivered by Executive, or following
termination of Executive’s employment without Cause, and any amounts would be
payable to Executive under this Agreement if Executive had continued to live,
all such amounts shall be paid in accordance with the terms of this Agreement to
Executive’s devisee, legatee, or other designee, or, if there is no such
designee, to Executive’s estate.
15. Arbitration. The Corporation,
the 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, with the
exception of the covenant provisions in Section 6, which the Corporation
and/or the Bank may seek to enforce in any court of competent jurisdiction, each
party agrees that all disputes, disagreements, and questions of interpretation
concerning this Agreement are to be submitted to 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”). The Corporation, the Bank, or Executive may initiate an
arbitration proceeding at any time by giving notice to the other in accordance
with the Rules. The Corporation, the Bank, and Executive may, as a
matter or 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 act, 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,
the Corporation, the 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.
16. 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.
17. 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.
18. 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.
19. Regulatory
Matters. The obligations of the Corporation and the Bank under
this Agreement shall in all events be subject to any required limitations or
restrictions imposed by or pursuant to the Federal Deposit Insurance Act or the
Pennsylvania Banking Code of 1965 as the same may be amended from time to
time.
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20. Limitations
on Payments. Notwithstanding anything in this Agreement to the
contrary, in the event the payments and benefits payable hereunder to or on
behalf of Executive, when added to all other amounts and benefits payable to or
on behalf of Executive, would result in the imposition of an excise tax under
Code Section 4999, the amounts and benefits payable hereunder shall be reduced
to such extent as may be necessary to avoid such imposition. All
calculations required to be made under this Section will be made by the
Corporation’s independent public accountants, subject to the right of
Executive’s representative to review the same. The parties recognize
that the actual implementation of the provisions of this Section are complex and
agree to deal with each other in good faith to resolve any questions or
disagreements arising hereunder.
21. Recovery
of Bonuses and Incentive Compensation. Notwithstanding
anything in this Agreement to the contrary, all bonuses and incentive
compensation paid hereunder (whether in equity or in cash) shall be subject to
recovery by the Corporation or the Bank in the event that such bonuses or
incentive compensation are based on materially inaccurate financial statements
or other materially inaccurate performance metric criteria; provided that a
determination as to the recovery of a bonus or incentive compensation shall be
made within 36 months following the date such bonus or incentive compensation
was paid. In the event that the Board or the Bank Board, as
applicable, determines by at least a majority vote that a bonus or incentive
compensation payment to Executive is recoverable pursuant to this Section,
Executive shall reimburse all or a portion of such bonus or incentive
compensation, to the fullest extent permitted by law, as soon as practicable
following written notice to Executive by the Corporation or the Bank of the
same.
22. Application
of Code Section 409A.
(a) Notwithstanding
anything in this Agreement to the contrary, the receipt of any benefits under
this Agreement as a result of a termination of employment shall be subject to
satisfaction of the condition precedent that Executive undergo a “separation
from service” within the meaning of Treas. Reg. § 1.409A-1(h) or any successor
thereto. In addition, if Executive is deemed to be a “specified
employee” within the meaning of that term under Code Section 409A(a)(2)(B), then
with regard to any payment or the provisions of any benefit that is required to
be delayed pursuant to Code Section 409A(a)(2)(B), such payment or benefit shall
not be made or provided prior to the earlier of (i) the expiration of the six
(6) month period measured from the date of Executive’s “separation from service”
(as such term is defined in Treas. Reg. § 1.409A-1(h)), or (ii) the date of
Executive’s death (the “Delay Period”). Within ten (10) days
following the expiration of the Delay Period, all payments and benefits delayed
pursuant to this Section (whether they would have otherwise been payable in a
single sum or in installments in the absence of such delay) shall be paid or
reimbursed to Executive in a lump sum, and any remaining payments and benefits
due under this Agreement shall be paid or provided in accordance with the normal
payment dates specified for them herein.
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(b) Except as
otherwise expressly provided herein, to the extent any expense reimbursement or
other in-kind benefit is determined to be subject to Code Section 409A, the
amount of any such expenses eligible for reimbursement or in-kind benefits in
one calendar year shall not affect the expenses eligible for reimbursement or
in-kind benefits in any other taxable year (except under any lifetime limit
applicable to expenses for medical care), in no event shall any expenses be
reimbursed or in-kind benefits be provided after the last day of the calendar
year following the calendar year in which Executive incurred such expenses or
received such benefits, and in no event shall any right to reimbursement or
in-kind benefits be subject to liquidation or exchange for another
benefit.
(c) Any
payments made pursuant to Section 5, to the extent of payments made from the
date of termination through March 15th of the calendar year following such date,
are intended to constitute separate payments for purposes of Treas. Reg.
§1.409A-2(b)(2) and thus payable pursuant to the “short-term deferral” rule set
forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made
following said March 15th, they are intended to constitute separate payments for
purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination
from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the
maximum extent permitted by said provision.
(d) To the
extent it is determined that any benefits described in Section 5 are taxable to
Executive, they are intended to be payable pursuant to Treas. Reg.
§1.409A-1(b)(9)(v), to the maximum extent permitted by said
provision.
IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above
written.
|
ATTEST:
|
|||
|
/s/
Xxxx X. Xxxxxx
|
By:
/s/ Xxxxxx X. Xxxxx
|
||
|
Assistant
Secretary
|
|||
|
ATTEST:
|
QNB
BANK
|
||
|
/s/
Xxxx X. Xxxxxx
|
By:
/s/ Xxxxxx X. Xxxxx
|
||
|
Assistant
Secretary
|
|||
|
WITNESS:
|
EXECUTIVE
|
||
|
/s/
Xxx X. Xxxxxx
|
/s/
Xxxxx X. Xxxxxxx
|
11
