Ex-10(f)
RETIREMENT AND CHANGE OF CONTROL AGREEMENT
THIS RETIREMENT AND CHANGE OF CONTROL AGREEMENT (this "Agreement"), made as of
February 27, 2002, is by and among DNB FINANCIAL CORPORATION ("Holding
Company"), DOWNINGTOWN NATIONAL BANK, a national banking association with
principal offices at 0 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000 ("Bank")
(Holding Company and Bank are sometimes referred to individually and
collectively herein as the "Company") and Xxxxxx X. Xxxxxxxxx, an individual
residing at 000 Xxxxx Xxxx, Xxxxxxxx, XX 00000 ("Director").
Background
A. Company and Director wish to enter into an agreement pursuant to which
Company wishes to secure the future services of each director and to induce the
directors to devote their time and attention to the interests and affairs of the
Corporation and the Bank under all circumstances, including without limitation
circumstances involving the prospect of the director's retirement or a possible
change in control of the Corporation and Bank.
B. Director is willing to enter into this Agreement upon the terms and
conditions herein set forth.
C. The Boards of Directors of the Holding Company and the Bank have each
approved this Agreement and it is intended to, and shall, be maintained as part
of the official records of the Holding Company and the Bank.
NOW THEREFORE, in consideration of the mutual promises and agreements set forth
herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms when
capitalized shall have the following respective meanings:
"Aggregate Annual Cash Compensation" means the aggregate annual cash
compensation actually paid to Director for Director Services in a fiscal year
(including any compensation which, but for an election by the Director to defer
receipt, would have been paid to Director, and including any variable cash
compensation such as payments for attendance at individual meetings, but not
including the value of any stock option or other nonmonetary grants or any other
deferred compensation, and not including any payments to third parties for
benefits on behalf of Director).
"Aggregate Annual Compensation" means, for any fiscal year, the Aggregate Annual
Cash Compensation plus any noncash compensation, paid or credited to Director
during the fiscal year for Director Services, including without limitation the
value, on the later of the date of grant or vesting of any stock option or other
nonmonetary grants or any other deferred compensation granted during such fiscal
year, as well as the cash amount of any premiums paid by the Company for health
insurance, HMO or other similar medical benefits (but not any disability plans
or benefits) for the Director.
"Base Fiscal Year" means the last full fiscal year of the Company ending prior
to a Change in Control.
"Cause" when used in connection with a termination means and includes (i)
involuntary termination, prior to the expiration of a regular term of office, of
Director's status or services as a director in accordance with the provisions of
the Company's or Bank's articles or bylaws, or by court order or otherwise in
accordance with applicable law or regulations, or (ii) personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, conviction of a felony, or willful or intentional breach or neglect by
Director of his duties, or (iii) 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 (iv)
willful violation of any law, rule or regulation or final cease-and-desist order
or other regulatory agreement, which violation in the reasonable judgment of the
Board of Directors of the Company will probably cause substantial economic
damages to the Company. For purposes of this paragraph, no act, or failure to
act on Director'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 Company; provided that any act or
omission to act by Director in reliance upon an approving opinion of counsel to
the Company or counsel to the Director 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, Company shall have the burden of proof with regard
to the acts or omission of Director and the standards prevailing in the banking
industry.
"Change in Control" means and includes any one or more of the following:
(1) a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act")(or any successor provision)
as it may be amended from time to time;
(2) any "persons" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act in effect on the date of this Agreement), other than Company or
Bank, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Company or Bank
representing 25% or more of the combined voting power of Company's or Bank's
then outstanding securities; or
(3) during any period of two (2) consecutive years after a Change in Control,
individuals who at the beginning of such period constitute the Board of
Directors of Company or Bank cease for any reason to constitute at least a
majority thereof, unless the election of each director who was not a director at
the beginning of such period has been approved in advance by directors
representing at least two-thirds of the directors then in office who were
directors at the beginning of the period.
(4) the signing of a letter of intent or a formal acquisition or merger
agreement between the Holding Company or Bank, of the one part, and a third
party which contemplates a transaction which would result in a "Change of
Control" under paragraphs (1), (2) or (3) of this definition, but, as to any
Triggering Event, only if such letter of intent or agreement, or the transaction
contemplated thereby, has not been canceled or terminated at the time the
Triggering Event in question occurs.
"Director Services" means services as director for the Holding company, the Bank
and all of their subsidiaries (as opposed to services as employee)
"Good Reason" has the meaning assigned thereto in Section 3(c).
"Retirement" means (but only for a Director of age 60 years or older) a
Termination due to the Director's disability, death, voluntary retirement, or
expiration of the Director's term as director without re-election.
"Termination" means termination of Director's service as director for any of the
Holding Company, Bank or their subsidiaries, so that, immediately after such
termination, Director is not a voting director of Holding Company, Bank or any
of their subsidiaries. A "Termination" also occurs if Director's status is
changed, for any remaining director positions with the Company, the Bank and
their subsidiaries, to an emeritus, advisory or other nonvoting capacity. A
termination of Director's service as director with less than all of Bank,
Holding Company and their subsidiaries shall not be deemed a "Termination" for
purposes of this Agreement so long as Director remains a director of Holding
Company, Bank or any of their subsidiaries.
"Triggering Event" has the meaning assigned thereto in Section 3(c).
2. Service as a Director; Compensation; Other Agreements; Employee Directors.
(a) Director shall not be deemed to have received any vested rights to continued
service as a Director by virtue of this Agreement. This Agreement is not an
employment agreement, but shall only be interpreted as governing the making of
certain payments in recognition of past service as director (but not as
employee) which may be due to Director upon termination of Director's service as
director with Company under the specific circumstances described in this
Agreement. No provision of this Agreement shall be interpreted to derogate from
the power of the Company or its Board of Directors to terminate the service or
status of a Director in accordance with the articles of incorporation and bylaws
of the Company and applicable laws and regulations, subject nevertheless to the
terms of this Agreement.
(b) The compensation to be paid by Company to Director from time to time for
current services as Director, including any fringe benefits, shall not be
governed by this Agreement. This Agreement shall not be deemed to affect the
terms of any stock options or other agreements between the Company and Director.
If Director is also an employee of the Company, this Agreement is not intended
to address or affect Director's employment with the Company as an employee, or
the termination of such employment, or any matters relating to termination of
employment; likewise, termination of Director's employment with the Company for
any reason shall not give Director any claim for payments under this Agreement
except solely to the extent Director's service as a director of the Holding
Company or Bank shall be terminated in circumstances giving Director a right to
payment under the terms of this Agreement. This Agreement shall not be
considered, in any respect, a benefit or perquisite of any employment
relationship between Director and Company and is not given in consideration of
employment.
3. Termination of Director Status; Compensation.
(a) Termination at the Instance of Parties other than the Director.
(i) If Director's service as a director for the Holding Company, Bank or any of
their subsidiaries is terminated for Cause at any time before or after a Change
in Control, then Director shall have no right to any payments under this
Agreement due to such termination.
(ii) If Termination occurs either (I) due to Retirement before or after a Change
in Control, or (II) within three (3) years after a Change in Control and other
than for Cause, then in either such case Director's right to severance payments
under this Agreement shall be as set forth in subsection (g) of this Section.
(b) Termination at the Instance of the Director.
(i) If a Termination (not a Retirement) occurs voluntarily by the Director at
his or her own instance, either prior to a Change in Control for any reason, or
within three (3) years after a Change in Control without Good Reason, or more
than three (3) years after a Change in Control, Director shall have no right to
any payments under this Agreement due to such Termination.
(ii) If a Termination occurs either (I) at any time as a Retirement, or (II) for
Good Reason within three (3) years after a Change in Control, Director's right
to severance payments under this Agreement shall be as set forth in subsection
(g) of this Section.
(c) "Good Reason." For purposes of this Agreement, Director shall have "Good
Reason" for causing a Termination if the Termination occurs within one (1) year
after any of the following events described in (i), (ii) or (iii) of this
subsection (a "Triggering Event") shall have occurred without Director's
consent:
(i) a reduction (for reasons other than the actions of the Director) in the
Aggregate Annual Compensation paid to Director for Director Services during any
fiscal year of the Company, as compared to the greater of (I) the Aggregate
Annual Compensation paid to Director for all Director Services during the Base
Fiscal Year, or (II) the Aggregate Annual Compensation paid to Director for all
Director Services during any fiscal year of the Company after the Base Fiscal
Year; or
(ii) the Company's failure to give Director increases in Aggregate Annual
Compensation for Director Services at least equal to any increases given to
other directors of the Holding Company, the Bank or any of their subsidiaries in
their compensation for comparable services as director;
(iii) the imposition by the Company of changes in duties or schedule or location
of attendance at board or committee meetings that, singly or in the aggregate,
impose additional unreimbursed expense, or other unreasonable burdens, on the
Director in attending or participating in board or committee meetings or
otherwise fulfilling his or her responsibilities.
(d) Severance. If Director is entitled to severance payments under subsection
(a) or (b) of this Section, and if Director shall have signed a release or
releases as more fully described in Section 4 of this Agreement, Company shall
pay as severance to Director the following:
(I) Base Severance. An amount equal to the product obtained by multiplying (A)
2.99 times (B) either:
(i) if a change of control has occurred prior to the date of Termination, the
greater of (I) the Aggregate Annual Cash Compensation paid to Director for
Director Services during the Base Fiscal Year, or (II) the Aggregate Annual Cash
Compensation paid to Director for Director Services during any fiscal year of
the Company after the Base Fiscal Year, or
(ii) if a change of control has not occurred prior to the date of Termination,
the Aggregate Annual Cash Compensation paid to Director during the last full
fiscal year of the Company prior to the date of Termination.
Such amount shall be payable in equal installments over a period of three (3)
years following the date of Termination, subject to withholding of any taxes by
the Company as required by applicable law and regulations. Unless the Company
shall have elected to pay in more frequent installments, such installments shall
be monthly.
(II) Medical/Health Benefits. If the Company paid for Director's health
insurance, HMO or other similar medical provider benefits (excluding any
disability plans or benefits) immediately prior to the date of Termination, the
Company shall continue to pay for or reimburse Director's payments such benefits
for a period of one (1) year after the date of Termination but in an aggregate
amount not exceeding the Company's payments therefor in the year preceding the
date of Termination.
(III) Reduction to Avoid Excise Tax. Notwithstanding any provision of this
Agreement or any other agreement of the parties, if the severance payment or
payments under this Agreement, either alone or together with other payments
which the Director has the right receive from the Company, would constitute a
"parachute payment" (as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") or any successor provision, such severance payment
or payments shall be reduced to the largest amount as will result in no portion
of the severance payment under this Agreement being subject to the excise tax
imposed by Section 4999 of the Code.
(e) Any termination of Director's service as a director of Holding Company, Bank
or any of their subsidiaries, whether by Company or by Director, shall be
communicated by a dated, written notice, signed by the party giving the notice,
which shall (A) indicate the specific termination provision in this Agreement
relied upon or applicable; (B) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Director's service
under the provision so indicated; (C) specify the effective date of termination.
(f) All obligations under this Agreement are subject to termination by any bank
regulatory agency having jurisdiction over Holding Company or Bank ("Regulatory
Agency") in accordance with any applicable provisions of law or regulations
granting such authority, but rights of the Director to compensation earned as of
the date of termination shall not be affected.
(g) Director shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise. The
severance payments provided for in this Agreement shall not be reduced by any
compensation or other payments received by Director from any source, except to
the extent that a determination is made that Director's receipt of any such
compensation or other payments from another source constitute a breach of
Director's obligations to the Company.
4. Execution of Release Required. Director agrees that, as a precondition to
receiving the payments provided for in this Agreement, Director shall have
executed and delivered to Holding Company and Bank a release or releases, in
form satisfactory to Holding Company and Bank, releasing all claims which
Director may then have against Holding Company or Bank, including without
limitation any claims related to termination of service, discrimination,
harrassment, compensation or benefits, but excluding any claims for payments due
or to become due under this Agreement.
5. Payment Obligations Absolute. Provided that the preconditions for payment set
forth in this Agreement are fully satisfied, Company's obligation to pay
Director the severance payments provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off counter claim, recoupment, defense or other right which
Company may have against Director. All amounts payable by Company hereunder
shall be paid without notice or demand.
6. Continuing Obligations. Director shall retain in confidence any confidential
information known to him concerning Company and its business so long as such
information is not publicly disclosed.
7. Amendments. No amendments to this Agreement shall be binding unless in a
writing, signed by both parties, which states expressly that it amends this
Agreement.
8. Notices. Notices under this Agreement shall be deemed sufficient and
effective if (i) in writing and (ii) either (A) when delivered in person or by
facsimile, telecopier, telegraph or other electronic means capable of being
embodied in written form or (B) forty-eight (48) hours after deposit thereof in
the U.S. mails by certified or registered mail, return receipt requested,
postage prepaid, addressed to each party at such party's address first set forth
above and, in the case of Company, to the attention of the Chairman of the
Board, or to such other notice address as the party to be notified may have
designated by written notice to the sending party.
9. Prior Agreements. This Agreement is the entire agreement of the parties with
respect to its subject matter and supersedes any and all prior or
contemporaneous discussions, representations, understandings or agreements
regarding its subject matter.
10. Assigns and Successors. The rights and obligations of Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Company and Director, provided, however, that Director shall not
assign or anticipate any of his rights hereunder, whether by operation of law or
otherwise. For purposes of this Agreement, "Company" shall also refer to any
successor to Holding Company or Bank, whether such succession occurs by merger,
consolidation, purchase and assumption, sale of assets or otherwise.
11. Director's Acknowledgment of Terms. Director acknowledges that he or she has
read this Agreement fully and carefully, understands its terms and that it has
been entered into by Director voluntarily. Director acknowledges that any
payments to be made hereunder will constitute additional compensation to
Director and may be subject to taxation or withholding. Director further
acknowledges that Director has had sufficient opportunity to consider this
Agreement and discuss it with Director's own advisors, including Director's
attorney and accountants. Director has been informed that Director has the right
to consider this Agreement for a period of at least twenty one (21) days prior
to entering into it. Director acknowledges that Director has taken sufficient
time to consider this Agreement before signing it. Director also acknowledges
that Director has the right to revoke this Agreement for a period of seven (7)
days following this Agreement's execution by giving written notice of revocation
to Company.
IN WITNESS WHEREOF, the parties hereto have caused the due execution of this
Agreement as of the date first set forth above.
Holding Company: Bank:
DNB FINANCIAL CORPORATION DOWNINGTOWN NATIONAL BANK
By: ___________________________ By: ______________________
Title: Title:
Witness: Director:
______________________________ Xxxxxx X. Xxxxxxxxx/S/
Print Name: Print Name:
