EXHIBIT 10.11
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 29th day of November, 2000,
between Sterling Financial Corporation, a Pennsylvania business corporation (the
"Corporation"), Bank of Hanover, a national banking association (the "Bank" and,
with the Corporation, the "Employers") and D. Xxxxxxxx Xxxxxxxx, an individual
(the "Executive").
WITNESSETH:
WHEREAS, the Executive is serving as a Chief Technology Officer of the
Employers; and
WHEREAS, the Employers consider the continued services of the Executive
to be in the best interest of the Employers and the shareholders of the
Corporation; and
WHEREAS, the Employers desire to induce the Executive to remain in the
employ of their Employers on an impartial and objective basis in the event of a
transaction pursuant to which a Change in Control (as defined in Section 2(c))
of the Employers occurs.
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 commence on the date hereof
and terminate on December 31, 2002 unless the Executive's
employment is sooner terminated as provided herein (as may
be extended pursuant to this Agreement, the "Term"). On each
December 31st hereafter, the Term shall automatically be
extended for an additional calendar year unless either party
gives written notice to the other, by no later than the
preceding November 30th, that he or she does not concur in
such extension. For the purposes of the preceding sentence,
the Employers shall be considered one party.
(b) Termination for Cause. Notwithstanding the provisions of
Section 1(a), this Agreement will terminate automatically
upon termination of the Executive's employment by his/her
Employer for Cause. As used in this Agreement, the term
"Cause" means:
84
(i) prior to a Change in Control, termination for any reason;
and
(ii) concurrent with or following a Change in Control,
termination following (A) the Executive's conviction or 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 45
consecutive days, (B) the Executive's failure to follow the
lawful instructions of the Employers after receipt of
written notice of such instructions from an appropriate
corporate official, other than a failure resulting from the
Executive's incapacity because of physical or mental
illness, or (C) a government regulatory agency recommends or
orders in writing that the employment of the Executive be so
terminated.
If the Executive's employment is terminated for Cause, his/her
rights under this Agreement will cease as of the effective date of such
termination.
(c) Voluntary Termination, Retirement, or Death. Notwithstanding
the provisions of Section 1(a), this Agreement will
terminate automatically upon the voluntary termination of
the Executive's employment (other than in accordance with
Section 2), his/her retirement or his/her death. In any such
event, the Executive's rights under this Agreement will
cease as of the effective date of such termination;
provided, however, that if the Executive dies after a Notice
of Termination (as defined in Section 2(b)) is delivered by
him/her in accordance with such section, the payments
described in Section 3 will nonetheless be made to the
person or persons determined pursuant to Section 9(b).
(d) Disability. Notwithstanding the provisions of Section 1(a),
this Agreement will terminate automatically upon the
termination of the Executive's employment by reason of
his/her Disability. In such event, the Executive's rights
under this Agreement will cease as of the effective date of
such termination; provided, however, that if the Executive
becomes disabled after a Notice of Termination is delivered
by him/her in accordance with Section 2(b), he/she will
nonetheless be entitled to receive the payments described in
Section 3. As used in this Agreement, the term "Disability"
means incapacitation, by accident, sickness or other wise,
such that the Executive is rendered unable to perform the
services required of his/her by him/her then position with
the Employers for a period of six consecutive months.
85
2. Termination Following a Change in Control.
(a) Termination For Good Reason After a Change in Control. If a
Change in Control occurs and, in anticipation thereof,
concurrently therewith or thereafter during the Term an
event constituting Good Reason also occurs with respect to
the Executive, he/she may terminate his/her employment in
accordance with the provisions of Section 2(b) and,
thereupon, will become entitled to the payments described in
Section 3.
(b) Notice of Termination. Upon the occurrence of a Change in
Control and an event of Good Reason, the Executive may,
within 90 days of the occurrence of any such event, resign
from employment by a notice in writing ("Notice of
Termination") delivered to the Bank, whereupon he/she will
become entitled to the payments described in Section 3. In
the case of a termination described in Clause (i) of Section
2(d), the Executive will confirm his/her involuntary
termination, in writing, within 90 days of the date of such
termination, and such confirmation will be deemed a Notice
of Termination.
(c) Change in Control Defined. As used in this Agreement, the
term "Change in Control" means any of the following:
(i) any "person" (as such term is used in Sections
13(d) and 14(d) (2) of the Securities and Exchange
Act of 1934 (the "Exchange Act")), other than the
Employers, a subsidiary of the Employers, an
employee benefit plan of the Employers or a
subsidiary of the Employers (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Employers representing more than 20% of the
combined voting power of the Employers' then
outstanding securities;
(ii) the occurrence of, or execution of an agreement
providing for, a sale of all or substantially all
of the assets of the Employers to an entity which
is not a direct or indirect subsidiary of the
Employers;
(iii) the occurrence of, or execution of an agreement
providing for, a reorganization, merger,
consolidation or similar transaction involving the
Employers, unless (A) the shareholders of the
Corporation immediately prior to the consummation
of any such transaction will initially own
securities representing a majority of the voting
power of the
86
surviving or resulting corporation, and (B) the
directors of the Employers immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the
surviving or resulting corporation; or
(iv) any other event which is at any time irrevocably
designated as a "Change in Control" for purposes of
this Agreement by resolution adopted by a majority
of the then non-employee directors of the
Employers.
(d) Good Reason Defined. As used in this Agreement, the term
"Good Reason" means any of the following events:
(i) the involuntary termination of the Executive, other
than an involuntary termination permitted in
Sections 1(b) and (d);
(ii) a reduction in the Executive's title,
responsibility (including reporting responsibility)
or authority as in effect immediately prior to the
Change in Control; provided, however, that the
assignment of the Executive to a position with a
reasonably similar title, responsibility and
authority will not constitute an event of Good
Reason if the Executive's actual or targeted
compensation in such new position is not less than
the Executive's actual and targeted compensation
immediately prior to the Change in Control;
(iii) the assignment to the Executive of duties
inconsistent with his/her position immediately
prior to the Change in Control, except for an
assignment of duties consistent with a position
permitted in Clause (ii);
(iv) a reduction in the Executive's annual base salary
in effect immediately prior to the Change in
Control;
(v) reassignment of the Executive to a principal office
which is more than 30 miles from the Executive's
principal office in Lancaster, Pennsylvania;
(vi) the failure to provide the Executive with welfare,
pension, incentive compensation, fringe and other
benefits to which he/she was entitled immediately
prior to the Change in Control, unless such failure
occurs by reason of a reduction or change in such
benefits for employees generally or similarly
situated executive employees of the corporation
which is the acquiring, resulting or successor
corporation in the Change in Control (or an
affiliate thereof); or
87
(vii) any material breach of this Agreement by the
Employers which is not cured within 30 days after
receipt of written notice of such breach from the
Executive.
3. Rights in the Event of Certain Terminations Following Change in
Control. In the event the Executive validly and timely delivers a
Notice of Termination to the Bank, he/she will be entitled to
receive the following payments and benefits:
(a) Basic Payments. The Executive will be paid an amount equal
to two (2) times the Base Amount. "Base Amount" shall mean
an amount equal to the average annual compensation payable
by the Employers to the Executive and includable by the
Executive in gross income for the most recent five (5)
taxable years, or such shorter period as the Executive shall
have been employed by the Employers, ending before the date
on which the Change of Control occurred. The Executive at
his election, will be paid the Basic Payments in either (i)
24 equal monthly installments, or (ii) a lump sum equal to
the present value of the amounts payable under this
subsection; commencing within 30 days after his termination
of employment. For purposes of the preceding sentence,
present value will be determined by using the short-term
applicable federal rate under Section 1274 of the Internal
Revenue Code of 1986, as amended (the "Code"), in effect on
the date of termination of employment. For purposes of this
subsection, to the extent necessary, base salary and bonuses
with any predecessor of the Employers or an affiliate
thereof shall be taken into account.
(b) Supplemental Payment in Lieu of Certain Benefits. In lieu of
continued pension, welfare and other benefits, a one-time
lump sum cash payment equaling 25% of the Basic Payments
calculated above will be paid to the Executive within 30
days following the date of termination
(c) Stock Options. Upon a Change in Control, all stock options
theretofore granted to the Executive by the Corporation and
not previously exercisable shall become fully exercisable to
the same extent and in the same manner as if they had become
exercisable by passage of time or by virtue of the Employers
achieving certain performance objectives in accordance with
the relevant provisions of any plan and any agreement.
(d) Section 280G. Notwithstanding any other provisions of this
Agreement or any other agreement entered into by the
Executive and the Employers ("Other Agreement"), and
notwithstanding any formal or informal plan or other
arrangement heretofore or hereafter adopted by the Company
for the direct or indirect provision of compensation to
88
the Executive (including groups of participants or
beneficiaries of which the Executive is a member), whether
or not such compensation is deferred, is in cash, or is in
the form of a benefit to or for the Executive (a "Benefit
Plan"), the Executive shall not have any right to receive
any payment or other benefit under this Agreement, any Other
Agreement, or any Benefit Plan if such payment or benefit,
taking into account all other payments or benefits to or for
the Executive under this Agreement, all Other Agreements,
and all Benefit Plans, would cause any payment to the
Executive under this Agreement to be considered a "parachute
payment" within the meaning of Section 280G of the Code as
then in effect (a "Parachute Payment"). In the event that
the receipt of any such payment or benefit under this
Agreement, any Other Agreement, or any Benefit Plan would
cause the Executive to be considered to have received a
Parachute Payment under this Agreement, then the Executive
shall have the right, in the Executive's sole discretion, to
designate those payments or benefits under this Agreement,
any Other Agreements and/or any Benefit Plans, which should
be reduced or eliminated so as to avoid having the payment
to the Executive under this Agreement to be deemed to be a
Parachute Payment.
4. Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees,
costs, and necessary disbursements in addition to any other relief
that may be proper; provided, however, that the Executive shall not
be responsible for the Employers' attorney's fees and costs if the
Executive's action is brought in good faith.
5. Notices. Any notice required or permitted to be given under this
Agreement will, to be effective hereunder, be given to the
Employers, in the case of notices given by the Executive, and will,
to be effective hereunder, be given by the Employers, in the case of
notices given to the Executive. Any such notice will 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 the Employers, in the case
of notices to the Employers.
6. 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 the Employers specifically designated by the Boards of Directors
of the Employers. No waiver by any party hereto at any time of any
breach by another party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
89
7. Assignment. This Agreement is not assignable by any party hereto;
the Employers provided, however, that the Employers may assign their
rights hereunder, including, without limitation, the restrictive
covenants in Sections 9 and 10, to any successor in interest to the
respective businesses of the Employers.
8. Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter of this Agreement and, in
accordance with the provisions of Section 18, supersedes any prior
agreement of the parties.
9. Successors; Binding Agreement.
(a) The Employers 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 Employers to expressly assume and agree to perform this
Agreement (or cause it to be performed) in the same manner
and to the same extent that the Employers, or any affiliated
company of either would be required to perform it if no such
succession had taken place. Failure by the Employers to
obtain such assumption and agreement prior to the
effectiveness of any such succession will constitute a
material breach of this Agreement. As used in this
Agreement, the "Employers" means the Employers as herein
before defined and any successor to the business and/or
assets of the Employers as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
(b) This Agreement will 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 while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
10. Continuation of Certain Provisions. Any termination of the
Executive's employment under this Agreement or of this Agreement
shall be subject to the provisions of Section 3 or 4, which will, if
relevant, survive any such termination and remain in full force and
effect in accordance with their respective terms.
11. Other Rights. Except as provided in Section 18, nothing herein will
be construed as limiting, restricting or eliminating any rights the
Executive may
90
have under any plan, contract or arrangement to which he/she is a
party or in which he/she is a vested participant; provided, however,
that any termination payments required hereunder will be in lieu of
any severance benefits to which she may be entitled under a
severance plan or arrangement of the Employers or any affiliated
company of either; and provided further, that if the benefits under
any such plan or arrangement may not legally be eliminated, then the
payments hereunder will be correspondingly reduced in such equitable
manner as the Board of Directors of the Employers may determine.
12. No Mitigation or Offset. The Executive will not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking employment or otherwise; nor will any amounts or benefits
payable or provided hereunder be reduced in the event he/she does
secure employment.
13. Validity. The invalidity or unenforceability of any provisions of
this Agreement will not affect the validity or enforceability of any
other provision of this Agreement, which will remain in full force
and effect.
14. Applicable Law. Except to the extent preempted by federal law, this
Agreement will be governed by and construed in accordance with the
domestic internal law of the Commonwealth of Pennsylvania.
15. Number. Words used herein in the singular will be construed as being
used in the plural, as the context requires, and vice versa.
16. Headings. The headings of the sections and subsections of this
Agreement are for convenience only and will not control or affect
the meaning or construction or limit the scope or intent of any of
the provisions of this Agreement.
17. References to Entities. All references to the Employers will be
deemed to include a reference to the Employers and/or the
Corporation, individually or collectively, as appropriate in the
relevant context.
18. Effective Date; Termination of Prior Agreement. This Agreement will
become effective immediately upon the execution and delivery of this
Agreement by the parties hereto. Upon the execution and delivery of
this Agreement, any prior agreement relating to the subject matter
hereof will be deemed automatically terminated and be of no further
force or effect.
19. Withholding For Taxes. All amounts and benefits paid or provided
hereunder will be subject to withholding for taxes as required by
law.
20. Individual Agreement. This Agreement is an agreement solely between
and among the parties hereto. It is intended to constitute a
nonqualified unfunded
91
arrangement for the benefit of a key management employee and will be
construed and interpreted in a manner consistent with such
intention.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Sterling Financial Corporation
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Attest: /s/ J. Xxxxx Xxxxx, Xx.
----------------------------
Bank of Hanover
By: /s/ J. Xxxxxxx Xxxxxxx
-------------------------------
Attest: /s/ Xxxx X. Xxxxxxxx
----------------------------
Witness:
/s/ Xxxxxx X. Xxxxxxxx /s/ D. Xxxxxxxx Xxxxxxxx
-------------------------- ------------------------------------
D. Xxxxxxxx Xxxxxxxx
("Executive")
92
