Exhibit 10 (h)
RETIREMENT AND
DEATH BENEFIT AGREEMENT
THIS AGREEMENT is entered into as of December 23, 2003, by and
between DOWNINGTOWN NATIONAL BANK (the "Bank") and XXXXX X. XXXXXX (the
"Executive") to provide for payment of a death benefit and a retirement benefits
as provided herein.
ARTICLE I
TERMINATION OF PRIOR AGREEMENT
The Death Benefit Agreement between the Bank and the Executive
dated November 24, 1999, is hereby terminated and superseded in its entirety by
this Agreement.
ARTICLE II
DEFINITIONS
The following terms, as used in this Agreement, shall have the
meaning set forth below:
A. "Beneficiary" shall mean any person, corporation, trust,
estate, or combination of these, last designated in writing by Executive to
receive the death benefit set forth in Section B of Article IV, below, or, in
the absence of any such effective written designation, the Executive's surviving
spouse or, if the Executive is not married at his death, his estate.
B. "Cause" shall mean termination for personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, conviction of a felony, suspension or removal from office or prohibition
from participation in the conduct of Holding Company's or Bank's affairs
pursuant to a notice or other action by any regulatory agency, or willful
violation of any law, rule or regulation or final cease-and-desist order which
in the reasonable judgment of the Board of Directors of the Holding Company or
the Bank will probably cause substantial economic damages to the Holding Company
or the Bank, willful or intentional breach or neglect by Executive of his
duties, or material breach of any material provision of this Agreement. For
purposes of this paragraph, no act, or failure to act on Executive's part shall
be considered "willful" unless done, or omitted to be done, by him without good
faith and without reasonable belief that this action or omission was in the best
interest of the Holding Company or the Bank; provided that any act or omission
to act by Executive in reliance upon an approving opinion of counsel to the
Holding Company or the Bank or counsel to the Executive shall not be deemed to
be willful. The terms "incompetence" and "misconduct" shall be defined with
reference to standards generally prevailing in the banking industry. In
determining incompetence and misconduct, the Bank shall have the burden of proof
with regard to the acts or omission of Executive and the standards prevailing in
the banking industry.
C. "Code" shall mean the Internal Revenue Code of 1986, as
amended or replaced from time to time.
D. "Holding Company" shall mean DNB Financial Corporation, the
Bank's sole shareholder.
E. "Normal Retirement Age" shall mean the Executive's 65th
birthday.
F. "Policy" shall mean the Flexible Premium Adjustable Life
policy on the life of the Executive, Policy Number 1A2370661-0, issued by
Pacific Life Insurance Company.
ARTICLE III
RETIREMENT BENEFIT
A. If the Executive remains employed, continuously, by the
Bank until his Normal Retirement Age, he shall, upon his termination of
employment for any reason other than Cause, receive an annual retirement benefit
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of thirty-four thousand, nine hundred and fifteen dollars ($34,915) payable in
12 equal monthly installments commencing on the first day of the calendar month
following the date of his termination of employment and ending on the first day
of the calendar month of his death.
B. Upon any termination of Executive's employment with the
Bank prior to his Normal Retirement Age for any reason other than Cause,
Executive shall be entitled to an annual retirement benefit payable in 12 equal
monthly installments commencing on the first day of the calendar month following
his Normal Retirement Age, should he survive to his Normal Retirement Age, and
ending on the first day of the calendar month of his death. The amount of the
annual retirement benefit payable pursuant to this Section C shall be equal to
the annual retirement benefit set forth in Section B, above, multiplied by a
fraction, the numerator is the number of whole years of the Executive's service
with the Company prior to his termination of employment, and the denominator of
which is the number of whole years of service which the Executive would have
completed had he remained employed, continuously, by the Company until his
Normal Retirement Age.
C. In addition to the retirement benefit payable to the
Executive pursuant to this Article, the Executive shall also receive,
contemporaneously with each monthly installment of such retirement benefit, a
tax allowance sufficient to compensate Executive for his federal and state
income, employment and excise tax liabilities attributable to the retirement
benefit and the tax allowance. In computing the tax allowance, the amount of
each monthly installment of the retirement benefit shall be multiplied by a tax
allowance percentage ("TAP"). The TAP shall be determined as follows:
TAP = Tax Rate / (1 - Tax Rate)
For this purpose, the "Tax Rate" for purposes of computing the TAP shall be the
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sum of the highest marginal federal and state income, employment and excise tax
rates provided by law for the calendar year in which the payments pursuant to
this Article are subject to such taxes.
ARTICLE IV
DEATH BENEFIT
A. The Executive shall take such steps as may be necessary to
transfer ownership of the Policy to the Bank as of January 1, 2004, or as soon
as practicable thereafter. Following such transfer, the Bank shall be the sole
and absolute owner of the Policy, shall be solely responsible for paying
premiums with respect to the Policy in an amount that is sufficient, at least,
to maintain the death benefit set forth in Section B, below, and may exercise
all ownership rights granted to the owner thereof by the terms of the Policy,
except as may otherwise be provided herein.
B. The Executive shall be entitled to select the Beneficiary
to receive seven hundred and fifty-thousand dollars ($750,000) of the death
benefits payable under the Policy upon his death. Contemporaneously with the
execution of this Agreement, or as soon as practicable hereafter, the Bank and
the Executive shall execute a Beneficiary designation in the form of an
endorsement acceptable to the issuer of the Policy for such purpose. Such
Beneficiary designation shall not be terminated, altered or amended by the Bank,
without the express written consent of the Executive. The parties hereto agree
to take all action necessary to cause the Beneficiary designation and settlement
election provisions of the Policy to conform to the provisions hereof. The Bank
shall not terminate, alter or amend such designation or election without the
express written consent of the Executive.
C. The Bank shall annually furnish the Executive a statement
of the amount of income reportable by the Executive for federal and state income
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tax purposes as a result of the Bank's payment of premiums with respect to the
Policy for the insurance protection provided hereunder for the Beneficiary. The
Bank shall make an annual cash payment to the Executive in recognition of the
federal and state taxes for which he is liable as a result of both the Bank's
payment of premiums and such reimbursement. The amount of such reimbursement
shall be equal to 56.25% of the portion of the annual premium taxable to the
Executive.
D. Except as otherwise provided herein, the Bank shall not
sell, assign, transfer, surrender or cancel the Policy, or change the
beneficiary designation provision thereof, without, in any such case, the
express written consent of the Executive.
E. The Bank may pledge or assign the Policy, subject to the
terms and conditions of this Agreement, for the sole purpose of securing a loan
from the issuer of the Policy or from a third party. Interest charges on such
loan shall be paid by the Bank. If the Bank so encumbers the Policy, other than
by a policy loan from the issuer, then, upon the death of the Executive, the
Bank shall promptly take all action necessary to secure the release or discharge
of such encumbrance.
F. Upon the death of the Executive, the Bank shall cooperate
with the Beneficiary to take whatever action is necessary to collect the death
benefit provided under the Policy. The amount payable to the Beneficiary
pursuant to Section B, above, shall be paid directly to the Beneficiary, and the
Bank, or such other beneficiary designated by the Bank, shall have the
unqualified right to receive the balance, if any, of the death benefit payable
under the Policy.
G. Except as the parties may otherwise provide by means of an
amendment to this Agreement, the provisions of this Article IV shall remain in
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force for the life of the Executive, unless the Executive's employment is
terminated by the Bank for Cause. If the Executive's employment is terminated by
the Bank for Cause, the Bank shall retain ownership of the Policy and all rights
associated therewith, including, but not limited to, the right to receive, or to
designate a beneficiary to receive, the entire death benefit provided under the
Policy, or to terminate the Policy, and neither the Executive nor the
Beneficiary shall have any interest in or rights under the Policy.
ARTICLE V
EXECUTIVE'S RIGHTS AS A GENERAL CREDITOR
A. Except as provided in Article IV, above, the Executive, any Beneficiary, or
any other person claiming through the Executive under this Agreement, shall have
solely the rights of an unsecured general creditor of the Bank and shall have no
right to look to any specific or special property of the Bank to satisfy a claim
for benefit payments.
B. The Bank may establish a trust for the purpose of funding
the benefits to be provided hereunder, or its obligations under this Agreement
and similar agreements or plans which it may entire into or establish for the
benefit of the Executive, other employees of the Bank, or both. Such trust shall
include such terms, restrictions and limitations as necessary to ensure that it
will be treated as a "grantor trust" within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Code, with respect to the Bank. The
Bank may make contributions to the trust from time to time as necessary to
provide for the payment of benefits hereunder.
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ARTICLE VI
CLAIMS PROCEDURE
The following claims procedure shall apply for purposes of
this Agreement.
A. Filing of a Claim for Benefits: Executive or his
Beneficiary shall make a claim for the benefits provided under this Agreement to
the Bank.
B. Claim Denial: With respect to a claim for benefits under
this Agreement, the Bank shall review and make all decisions related to claim
approvals or claim denials.
C. Notification to Claimant of Decision: If a claim is wholly
or partially denied, notice of the decision, meeting the requirements of
paragraph D of this Article, shall be furnished to the claimant within thirty
(30) days after the claim has been filed.
D. Content of Notice: The Bank shall provide to any claimant
who is denied a claim for benefits written notice setting forth in a manner
calculated to be understood by the claimant, the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to the Agreement provisions on which
the denial is based;
(3) A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(4) An explanation of this Agreement's claim review procedure,
as set forth in paragraph E and F following.
E. Review Procedure: In order to provide a procedure by which
a claimant under this Agreement may have a reasonable opportunity to appeal a
denial of a claim for a full and fair review, the claimant or his duly
authorized representative:
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(1) May request a review upon written application to the Bank;
(2) May review pertinent documents or agreements relating to
this Agreement; and
(3) May submit issues and comments in writing. A claimant, or
his duly authorized representative, shall request a review by filing a written
application for review at any time within thirty (30) days after receipt by the
claimant of written notice of the denial of his claim.
F. Decision on Review: A decision on review of a denial of
claim shall be made in the following manner:
(1) The decision on review shall be made by the Bank, which
may, in its sole discretion, hold a hearing on the denied claim. The Bank shall
make its decision on the appeal promptly, unless special circumstances (such as
the need to hold a hearing) require an extension of time for processing, in
which case a decision shall be rendered as soon as possible, but not later than
ninety (90) days after receipt of the request for review.
(2) The decision on review shall be in writing and shall
include specific reasons for the decisions, written in a manner calculated to be
understood by the claimant, and specific references to the Agreement provisions
on which the decision is based.
ARTICLE VII
AMENDMENTS; BINDING EFFECT
A. Amendments: The provisions of this Agreement may only be
terminated or modified if in a writing signed by both parties.
B. Binding Effect: This Agreement shall be binding upon the
heirs and personal representatives of Executive and the successors and assigns
of the Bank.
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ARTICLE VIII
NO ASSIGNMENT
No amounts held by the Bank for the benefit of Executive or
otherwise due to Executive pursuant to this Agreement may be assigned, pledged,
encumbered, alienated, anticipated or committed by Executive or his personal
representative or his designated Beneficiary, and to the extent permitted by
law, no such amounts shall be subject to the debts, contracts or obligations of
Executive or his personal representative or Beneficiary nor in any way subject
to any legal process to levy upon, attach or garnish such amounts.
ARTICLE IX
GOVERNING LAW
This Agreement has been executed and delivered in the
Commonwealth of Pennsylvania and its validity, interpretation, performance and
enforcement shall be governed in all respects under and by the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by federal law. If
any provision of this Agreement shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provision hereof
shall continue to be fully effective.
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ARTICLE X
RETENTION OF SERVICES
This Agreement shall not be construed as giving Executive any
right to have his services retained or continued by the Bank.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be
executed and its seal affixed hereto by its duly authorized officers, and the
undersigned Executive has signed and sealed this Agreement, all as of the day
and year first above written.
ATTEST: DOWNINGTOWN NATIONAL BANK
By:/s/ Xxxxxxx X. Xxxxxx
Name:/s/ Xxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxxx
Title: SVP/CFO Title: Chairman of the Board of Directors
EXECUTIVE
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxx
Witness Xxxxx X. Xxxxxx
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