FORM OF CHANGE IN CONTROL AGREEMENT
FORM
OF
This
AGREEMENT (“Agreement”)
is hereby entered into as of January 19, 2010, by and between FIRST CITIZENS NATIONAL BANK
(the “Bank”), Xxxxx X. Xxxxxxx (“Executive”), and CITIZENS FINANCIAL SERVICES, INC.
(the “Company”), the holding company of the Bank, as
guarantor.
WHEREAS, the Bank recognizes
the importance of Executive to the Bank’s operations and wishes to protect
Executive’s position with the Bank in the event of a change in control of the
Bank or the Company for the period provided for in this Agreement;
and
WHEREAS, Executive and the
Board of Directors of the Bank (the “Board of Directors”) desire to enter into
an agreement setting forth the terms and conditions of payments due to Executive
in the event of a Change in Control and the related rights and obligations of
each of the parties.
NOW, THEREFORE, in
consideration of the promises and mutual covenants herein contained, it is
hereby agreed as follows:
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1.
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Term of
Agreement.
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The
initial term of this Agreement shall commence on the Effective Date and continue
through January 19, 2013. This Agreement shall renew automatically on
January 19 of each year for successive terms of three years each, unless either
party notifies the other party at least 90 (ninety) days prior to such date of
such party’s determination not to renew this Agreement beyond the then existing
term. It is the intention of the parties that this Agreement be “Evergreen”
unless (i) either party gives written notice to the other party of his or its
intention not to renew this Agreement as provided above or (ii) this Agreement
is terminated by the Company for Cause or due to the Executive’s death,
termination of employment due to disability, or executive’s voluntary
termination of employment prior to a Change in Control. Each reference herein to
“the term of this Agreement” shall include the initial term and any renewal
term.
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2.
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Change in
Control.
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(a) If
a Change in Control (as defined herein) shall occur and if, between the Date of
the Change in Control (as defined herein) and one (1) year after the Date of
Change in Control (as defined herein), there shall be:
(i) any
involuntary termination of Executive’s employment (other than for death,
disability or Cause (as defined herein)); or
(ii) any
failure by the acquiring person or entity to offer employment to Executive as of
the Date of Change in Control (as defined herein), in a position having
equivalent responsibilities, title, authority, except reporting authority,
compensation and benefits as Executive received immediately prior to the Change
in Control (as defined herein); or
(iii) any
reduction in Executive’s title, responsibilities, except reporting
responsibilities, or authority, including such title, responsibilities or
authority as such may be increased from time to time during the term of this
Agreement; or
(iv) the
assignment to Executive of duties inconsistent with Executive’s office on the
date of the Change in Control or as the same may be increased from time to time
after the Change in Control; or
(v) any
reassignment of Executive to a location greater than fifty (50) miles from the
location of Executive’s office on the date of the Change in Control;
or
(vi) any
reduction in Executive’s annual direct salary in effect on the date of the
Change in Control or as the same may be increased from time to time after the
Change in Control; or
(vii) any
failure to provide Executive with benefits at least as favorable as those
enjoyed by Executive under any of Company or Bank’s retirement or pension, life
insurance plans, medical, health and accident, disability or other employee
benefit plans in which Executive participated at the time of the Change in
Control, or the taking of any action that would materially reduce any of such
benefits in effect at the time of the Change in Control, then at the option of
Executive, exercisable by Executive within sixty (60) days of the
occurrence of any of the foregoing events, Executive may resign from employment
with Company and Bank (or, if involuntarily terminated, give notice of intention
to collect benefits under this Agreement) by delivering a notice in writing (the
“Notice of Termination”) to Company and Bank and the provisions of Section 2(c)
of this Agreement shall apply.
(b) During
the period of time between the execution of an agreement to effect a Change in
Control (as defined herein) and the Date of the Change in Control (as defined
herein), Executive’s employment may only be terminated for Cause (as defined
herein). If, during that period of time, Executive’s employment is terminated
for Cause (as defined herein), then all rights of Executive under this Agreement
shall cease as of the effective date of such termination. If, during
that period of time, Executive’s employment is terminated other than for Cause
(as defined herein), then Executive may give notice of intention to collect
benefits under this Agreement by delivering a notice in writing (“Notice of
Termination”) to Company and Bank and the provisions of Section 2(c) of this
Agreement shall apply.
(c) In
the event that Executive delivers a Notice of Termination (as defined in Section
2(a) of this Agreement) to Company and Bank, following the Change in Control,
Executive shall be entitled to receive a lump sum amount equal to one time the
Executive’s then current base salary.
In addition, for a period of eighteen
(18) months from the date of termination of employment, or until Executive
secures substantially similar benefits through other employment, whichever shall
first occur, Executive shall receive a continuation of health care insurance
under the same terms and conditions the Executive received coverage prior to his
termination of employment. In addition the Company shall continue for
a period of eighteen (18) months from the date of termination of employment, or
until Executive secures substantially similar benefits through other employment,
whichever shall first occur Executive’s long term disability coverage to the
extent Executive remains eligible under the Company’s long term disability
plan. In the event of a break in service and Executive becomes
employed within eighteen (18) months of termination of employment without his
new employer offering substantially similar long term disability coverage and
Executive would be eligible for the Company’s long term disability coverage but
for not being an employee of the Company, the Company shall pay Executive a
dollar amount equal to the cost to the Executive of obtaining such benefits in
effect with respect to Executive during one (1) year prior to his termination of
employment, (or substantially similar benefits) for the remainder of the one
year period, not to exceed 125% of the cost to the Company of providing long
term disability coverage under its group long term policy. If Company
cannot provide such benefits under the terms of the plans or contracts, Company
shall pay to Executive, a dollar amount equal to the cost to the Executive of
obtaining such benefits (or substantially similar benefits), not to exceed 125%
of the cost to the Company of obtaining such benefits (or substantially similar
benefits). However, in the event the payment described herein, when
added to all other amounts or benefits provided to or on behalf of the Executive
in connection with his termination of employment, would result in the imposition
of an excise tax under Code Section 4999, such payments shall be retroactively
(if necessary) reduced to the extent necessary to avoid such excise tax
imposition. Upon written notice to Executive, together with
calculations of Company’s independent auditors, Executive shall remit to Company
the amount of the reduction, plus such interest, as may be necessary to avoid
the imposition of such excise tax. Notwithstanding the foregoing or any other
provision of this contract to the contrary, if any portion of the amount herein
payable to the Executive is determined to be non-deductible pursuant to the
regulations promulgated under Section 280G of the Internal Revenue Code of 1986,
as amended (the “Code”), the Company shall be required only to pay to Executive
the amount determined to be deductible under Section 280G.
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(d) The
parties to this Agreement intend for the payments hereunder to satisfy the
short-term deferral exception under Section 409A of the Code or, in the case of
continued insurance coverage, not constitute deferred compensation (since such
amounts are not taxable to Executive). However, notwithstanding
anything to the contrary in this Agreement, to the extent payments do not meet
the short-term deferral exception of Section 409A of the Code and, in the event
Executive is a “Specified Employee” (as defined herein) no payment shall be made
to Executive under this Agreement prior to the first day of the seventh month
following the event of termination in excess of the “permitted amount” under
Section 409A of the Code. For these purposes the “permitted amount”
shall be an amount that does not exceed two times the lesser of: (A) the sum of
Executive’s annualized compensation based upon the annual rate of pay for
services provided to the Company for the calendar year preceding the year in
which Executive has an event of termination, or (B) the maximum amount that may
be taken into account under a tax-qualified plan pursuant to Section 401(a)(17)
of the Code for the calendar year in which occurs the Event of
Termination. The payment of the “permitted amount” shall be made
within sixty (60) days of the occurrence of the event of
termination. Any payment in excess of the permitted amount shall be
made to Executive on the first day of the seventh month following the event of
termination. “Specified Employee” shall be interpreted to comply with
Section 409A of the Code and shall mean a key employee within the meaning of
Section 416(i) of the Code (without regard to Section 5 thereof), but an
individual shall be a “Specified Employee” only if the Company is a
publicly-traded institution or the subsidiary of a publicly-traded holding
company.
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3.
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Definition of
Cause.
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For
purposes of this Agreement, “Cause” shall mean: (i) the willful failure by the
Executive to substantially perform his duties hereunder (other than a failure
resulting from the Executive’s incapacity because of physical or mental
illness), after notice from the Company or Bank and a failure to cure such
violation within thirty (30) days of said notice; (ii) the willful engaging by
the Executive in misconduct injurious to the Company or Bank; (iii) the
dishonesty or gross negligence of the Executive in the performance of his
duties; (iv) the breach of Executive’s fiduciary duty involving personal profit;
(v) the material violation of any law, rule or regulation governing banks or
bank officers or any final cease and desist order issued by a bank regulatory
authority; (vi) conduct on the part of Executive which brings public discredit
to the Company or Bank; (vii) unlawful discrimination by the Executive,
including harassment against Company or Bank’s employees, customers, business
associates, contractors, or visitors; (viii) theft or abuse by Executive of the
Company or Bank’s property or the property of Company or Bank’s customers,
employees, contractors, vendors, or business associates; (ix) failure of the
Executive to follow the good faith lawful instructions of the Board of Directors
of Company or Bank with respect to its operations, after notice from the Company
or Bank and a failure to cure such violation within thirty (30) days of said
notice; (x) the direction or recommendation of a state or federal bank
regulatory authority to remove the Executive’s position with Company and/or Bank
as identified herein; (xi) any final removal or prohibition order to
which the Executive is subject, by a federal banking agency pursuant to Sections
8(e) and 8(g) of the Federal Deposit Insurance Act; (xii) the Executive’s
conviction of or plea of guilty or nolo contendere to a
felony, crime of falsehood or a crime involving moral turpitude, or
the actual incarceration of Executive; (xiii) any act of fraud, misappropriation
or personal dishonesty; (xiv) insubordination; (xv) misrepresentation of a
material fact, or omission of information necessary to make the information
supplied not materially misleading, in an application or other information
provided by the Executive to the Company or any representative of the Company in
connection with the Executive’s employment with Company; (xvi) the existence of
any material conflict between the interests of Company and the Executive that is
not disclosed in writing by the Executive to the Company and approved in writing
by the Board of Directors of Company; or (xvii) the Executive takes action that
is clearly contrary to the best interest of the Company.
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4.
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Change in Control
Definitions.
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(a) For
purposes of this Agreement, the term Change in
Control shall mean: A change in control (other than one
occurring by reason of an acquisition of the Company or Bank by Executive) of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A and any successor rule or regulation promulgated
under the Securities Exchange Act of 1934 (the “Exchange Act”) if Company or
Bank were subject to the Exchange Act reporting requirements; provided that,
without limiting the foregoing, such a change in control shall be deemed to have
occurred if the Board of Directors certifies that one of the following has
occurred:
(i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than the Company or Bank or any “person” who on the date hereof is a
director or officer of the 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 the Company or Bank representing fifty percent (50%) or more of
the combined voting power of the Company’s or Bank’s then outstanding
securities, or
(ii) during
any period of one (1) year during the term of Executive’s employment under this
Agreement, individuals who at the beginning of such period constitute the Board
of Directors of the 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;
(iii) a
merger, consolidation or business combination with the Company and/or Bank
occurs.
(iv) Notwithstanding
any other provision in this section, in the event that Executive is determined
to be a key employee as that term is defined by Section 409A of the IRC no
payment shall be made until one day following six months from the date of
separation from service as that term is defined by Section 409A of the
IRC.
(b) For
purposes of this Agreement, the Date of Change in
Control shall mean:
(i) the
first date on which a single person and/or entity, or group of affiliated
persons and/or entities, acquire the beneficial ownership of fifty percent (50%)
or more of the Company’s voting securities, or more than fifty percent (50%) of
the total fair market value of the Company, or
(ii) the
date of the closing of an Agreement, transferring all or substantially all of
the Bank or Company’s assets, or
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(iii) the
date on which a merger, consolidation or business combination is consummated, as
applicable, or
(iv) the
date on which individuals who formerly constituted a majority of the Board of
Directors of the Bank or Company under Section 4(a)(ii) hereof and the
replacement Directors otherwise approved under Section 4(a)(ii), ceased to be a
majority within a one year period.
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5.
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Source of
Payments.
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The Bank
shall make all payments provided for under this Agreement. The
Company, however, unconditionally guarantees all amounts and benefits due to
Executive and, if the Bank does not timely pay or provide such amounts and
benefits, the Company shall pay or provide such amounts and
benefits.
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6.
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Effect on Prior
Agreements and Existing Benefit
Plans.
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This Agreement contains the entire
understanding between the parties hereto and supersedes any prior agreement
between the Bank and Executive, except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to Executive of a kind
elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to Executive without reference to this
Agreement. Nothing in this Agreement shall confer upon Executive the
right to continue in the employ of the Bank or shall impose on the Bank any
obligation to employ or retain Executive in its employ for any
period.
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7.
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No
Attachment.
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(a) Except
as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation or to execution, attachment, levy or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to affect any such action shall be null, void and of no
effect.
(b) This
Agreement shall be binding upon, and inure to the benefit of, Executive, the
Bank and their respective successors and assigns.
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8.
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Modification and
Waiver.
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(a) This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.
(b) No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
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9.
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Severability.
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If, for any reason, any provision of
this Agreement, or any part of any provision, is held invalid, such invalidity
shall not affect any other provision of this Agreement or any part of such
provision not held so invalid, and each such other provision and part thereof
shall to the full extent consistent with law continue in full force and
effect.
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10.
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Headings for Reference
Only.
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The headings of sections and paragraphs
are included in this Agreement solely for convenience of reference and shall not
control the meaning or interpretation of any of the provisions of this
Agreement. In addition, references to the masculine in this Agreement
shall apply to both the masculine and the feminine.
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11.
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Governing
Law.
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Except to the extent preempted by
federal law, the validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania,
without regard to principles of conflicts of law of that state.
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12.
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Arbitration.
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Company, 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. Therefore, each party agrees that all disputes,
disagreements and questions of interpretation concerning this Agreement are to
be submitted for resolution, in Williamsport, 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”). Company, Bank or Executive may initiate an
arbitration proceeding at any time by giving notice to the other in accordance
with the Rules. Company, 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
arbitration proceeding and all filing, testimony, documents, and information,
relating to or presented during the evaluation proceeding, shall be disclosed
exclusively for the purpose of facilitating the arbitration process and for no
other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement. The decision of the
arbitrator, absent fraud, duress, incompetence or gross and obvious error of
fact, 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, Company, 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. The Arbitrator or the Court, (which ever is applicable) may
award the prevailing party in a dispute reasonable counsel fees not to exceed
$25,000.
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13.
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Payment of Legal
Fees.
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All reasonable legal fees and expenses
paid or incurred by Executive pursuant to any dispute or question of
interpretation relating to this Agreement shall be paid or reimbursed by the
Bank, only if Executive is successful in arbitration.
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14.
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Indemnification.
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The Company or the Bank shall provide
Executive (and Executive’s heirs, executors and administrators) with coverage
under a standard directors’ and officers’ liability insurance policy at its
expense and shall indemnify Executive (and Executive’s heirs, executors and
administrators) to the fullest extent permitted under applicable law against all
expenses and liabilities reasonably incurred in connection with or arising out
of any action, suit or proceeding in which Executive may be involved by reason
of having been a director or officer of the Company or the Bank (whether or not
Executive continues to be a director or officer at the time of incurring such
expenses or liabilities), such expenses and liabilities to include, but not be
limited to, judgments, court costs, attorneys’ fees and the costs of reasonable
settlements.
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15.
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Successors to the Bank
and the Company.
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The Bank and the Company shall require
any successor or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all of the business or
assets of the Bank or the Company, expressly and unconditionally to assume and
agree to perform the Bank’s and the Company’s obligations under this Agreement,
in the same manner and to the same extent that the Bank and the Company would be
required to perform if no such succession or assignment had taken
place.
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16.
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Miscellaneous.
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In the event any of the foregoing
provisions of this Section 16 are in conflict with the terms of this Agreement,
this Section 16 shall prevail.
(a) Any
payments made to Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC
regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.
(b) The
parties to this Agreement intend for the payments hereunder to satisfy the
short-term deferral exception under Section 409A of the Code or, in the case of
continued insurance coverage, not constitute deferred compensation (since such
amounts are not taxable to Executive). However, notwithstanding
anything to the contrary in this Agreement, to the extent payments do not meet
the short-term deferral exception of Section 409A of the Code and, in the event
Executive is a “Specified Employee” (as defined herein) no payment shall be made
to Executive under this Agreement prior to the first day of the seventh month
following the event of termination in excess of the “permitted amount” under
Section 409A of the Code. For these purposes the “permitted amount”
shall be an amount that does not exceed two times the lesser of: (A) the sum of
Executive’s annualized compensation based upon the annual rate of pay for
services provided to the Company for the calendar year preceding the year in
which Executive has an event of termination, or (B) the maximum amount that may
be taken into account under a tax-qualified plan pursuant to Section 401(a)(17)
of the Code for the calendar year in which occurs the Event of
Termination. The payment of the “permitted amount” shall be made
within sixty (60) days of the occurrence of the event of
termination. Any payment in excess of the permitted amount shall be
made to Executive on the first day of the seventh month following the event of
termination. “Specified Employee” shall be interpreted to comply with
Section 409A of the Code and shall mean a key employee within the meaning of
Section 416(i) of the Code, but an individual shall be a “Specified Employee”
only if the Company is a publicly-traded institution or the subsidiary of a
publicly-traded holding company.
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SIGNATURES
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement effective as of the date first set
forth above.
| ATTEST: | FIRST CITIZENS NATIONAL BANK | |||
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/s/
Xxxxxx X. Xxxxxxxx
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/s/
Xxxxxxx X. Xxxxx
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Xxxxxx
X. Xxxxxxxx
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By: Xxxxxxx
X. Xxxxx
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Assistant
Corporate Secretary
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For
the Entire Board of Directors
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| ATTEST: |
CITIZENS FINANCIAL SERVICES,
INC.
(Guarantor)
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/s/
Xxxxxx X. Xxxxxxxx
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/s/
Xxxxxxx X. Xxxxx
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Xxxxxx
X. Xxxxxxxx
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By: Xxxxxxx
X. Xxxxx
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Assistant
Corporate Secretary
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For
the Entire Board of Directors
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| WITNESS: | EXECUTIVE | |||
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/s/
Xxxxxx X. Xxxxxxxx
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/s/
Xxxxx X. Xxxxxxx
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Xxxxxx
X. Xxxxxxxx
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Xxxxx
X. Xxxxxxx
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Assistant
Corporate Secretary
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Executive
Vice President
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