EXHIBIT 10.11
COMMUNITY BANKS, NATIONAL ASSOCIATION
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made effective this 1st day of July, 1999, by COMMUNITY
BANKS, NATIONAL ASSOCIATION, a Pennsylvania national banking association located
in Millersburg, Pennsylvania (the "Company") and XXXXXX X. XXXXXX (the
"Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified:
1.1.1 "Change of Control" shall mean any of the following:
(A) An acquisition by any "person" or "group" (as those
terms are defined or used in Section 13(d) of the Exchange Act,
as enacted and in force on the date hereof) of "beneficial
ownership" (within the meaning of Rule 13d-3 under the Exchange
Act, as enacted and in force on the date hereof) of securities of
Company representing 24.99% or more of the combined voting power
of Company's securities then outstanding;
(B) A merger, consolidation or other reorganization of Compa
ny, except where the resulting entity is controlled, directly or
indirectly, by Company;
(C) A merger, consolidation or other reorganization of Compa
ny, except where shareholders of Company immediately prior to
consummation of any such transaction continue to hold at least a
majority of the voting power of the outstanding voting securities
of the legal entity resulting from or existing after any
transaction and a majority of the members of the Board of
Directors of the legal entity resulting from or existing after a
transaction are former members of Company's Board of Directors;
(D) A sale, exchange, transfer or other disposition of
substantially all of the assets of Company to another entity,
except to an entity controlled, directly or indirectly, by
Company or a corporate division involving Company;
(E) A contested proxy solicitation of Company's shareholders
that results in the contesting party obtaining the ability to
cast twenty-five percent (25%) or more of the votes entitled to
be cast in an election of directors of Company.
Notwithstanding anything else to the contrary set forth in this
Agreement, if (i) an agreement is executed by the Corporation or the
Company providing for any of the transactions or events constituting a
Change of Control as defined herein, and the agreement subsequently expires
or is terminated without the transaction or event being consummated, and
(ii) Executive's employment did not terminate during the period after the
agreement and prior to such expiration or termination, for purposes of this
Agreement it shall be as though such agreement was never executed and no
Change of Control event shall be deemed to have occurred as a result of the
execution of such agreement.
1.1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.3 "Corporation" means Community Banks, Inc.
1.1.4 "Disability" means the Executive suffering a sickness, accident
or injury which, in the judgment of a physician satisfactory to
the Company, prevents the Executive from performing substantially
all of the Executive's normal duties for the Company for a period
of nine (9) months of any twelve (12) consecutive month period.
As a condition to any benefits, the Company may require the
Executive to submit to such physical or mental evaluations and
tests as the Company's Board of Directors deems appropriate.
1.1.5 "Early Termination" means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability,
Termination for Cause or following a Change of Control.
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1.1.6 "Early Termination Date" mean the month, day and year in which
Early Termination occurs.
1.1.7 "Normal Retirement Age" means the Executive's 62nd birthday.
1.1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.9 "Plan Year" means each twelve-month period commencing with the
effective date of this Agreement.
1.1.10 "Termination for Cause" See Section 5.2.
1.1.11 "Termination of Employment" means that the Executive ceases to
be employed by the Company for any reason whatsoever other than
by reason of a leave of absence which is approved by the Company.
For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive's
Termination of Employment, the Company shall have the sole and
absolute right to decide the dispute.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the Executive the benefit described in this Section 2.1 in lieu of any other
benefit under this Agreement.
2.1.1 Amount of Benefit. The annual Normal Retirement Benefit under
this Section 2.1 is Thirty-five Thousand ($35,000) Dollars. The
annual benefit amounts on Schedule A are calculated by amortizing
the annual normal retirement benefit using the interest method of
accounting, a 7.00% discount rate, monthly compounding and
monthly payments.
2.1.2 Payment of Benefit. The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's Normal Retirement Date and continuing for 239
additional months.
2.2 Early Termination Benefits. Upon Early Termination, the Company shall
pay to the Executive the benefit described in this Section 2.2 in lieu of any
other benefit under this Agreement.
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2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is
the Early Termination Annual Benefit set forth in Schedule A for
the Plan Year ending immediately prior to the Early Termination
Date.
2.2.2 Payment of Benefit. The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's Normal Retirement Age and continuing for 239
additional months.
2.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.
2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is
the Disability Benefit amount set forth in Schedule A for the
Plan Year ending immediately prior to the date in which
Termination of Employment occurs.
2.3.2 Payment of Benefit. The Company shall have the option to pay the
accrued benefit equivalent of the Disability Annual Benefit to
the Executive in a lump sum within sixty (60) days after the
Executive's termination of employment. The Company shall pay the
benefit to the Executive in 12 equal monthly installments
commencing within 90 days after the date of the Executive's
Termination of Employment and continuing for 239 additional
months.
2.4 Change of Control Benefit. If the Executive is in the active service of
the Company at the time of a Change of Control, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.
2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is
the Early Termination Benefit set forth in Schedule A, based on
two (2) years plus the number of Plan Years completed on the date
of the Executive's termination of employment, not to exceed
seventeen (17) years.
2.4.2 Payment of Benefit. The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's Normal Retirement Age and continuing for 239
additional months or at the Company's option pay the Accrued
Benefit set forth on Schedule "A" within sixty (60) days after
the Executive's termination of employment.
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Article 3
Death Benefits
3.1 Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1. This benefit shall be paid in lieu of the
Lifetime Benefits of Article 2.
3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is
the Normal Retirement Benefit described in Section 2.1.1.
3.1.2 Payment of Benefit. The Company shall pay the annual benefit to
the beneficiary in 12 equal monthly installments payable on the
first day of each month commencing with the month following the
Executive's death and continuing for 239 additional months.
3.2 Death During Benefit Period. If the Executive dies after the benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
3.3 Death Following Termination of Employment But Before Benefits Commence.
If the Executive is entitled to benefits under this Agreement, but dies prior to
receiving said benefits, the Company shall pay to the Executive's beneficiary
the same benefits, in the same manner, they would have been paid to the
Executive had the Executive survived; however, said benefit payments will
commence upon the Executive's death.
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incapacitated
person or incapable person. The Company may require proof of incapacity,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
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Article 5
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
5.1 Termination for Cause. Notwithstanding any provision of this Agreement
to the contrary, the Company shall not pay any benefit under this Agreement, if
the Company terminates the Executives employment for:
5.1.1 Gross negligence or gross neglect of duties;
5.1.2 Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
5.1.3 Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
5.1.4 Removal. Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay any benefit under this
Agreement if the Executive is subject to a final removal or
prohibition order issued by an appropriate federal banking agency
pursuant to Section 8(e) of the Federal Deposit Insurance Act.
5.2 Competition After Termination of Employment. No benefits shall be
payable, except for benefits paid due to a Change of Control, if the Executive,
without the prior written consent of the Company, engages in conduct which is
deemed to violate the non-competition clause of the Executive's Employment
Contract, which clause is hereby incorporated herein by reference, both parties
further hereby acknowledging having received, read and understood a copy of said
Employment Contract.
5.3 Suicide or Misstatement. If the Executive commits suicide within two
years after the date of this Agreement, or if the insurance company denies
coverage for material misstatements of fact made by the Executive on any
application for life insurance purchased by the company, or any other reason,
provided however that the Company shall evaluate the reason for the denial, and
upon advice of Counsel and in its sole discretion, consider judicially
challenging any denial.
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Article 6
Claims and Review Procedures
6.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Claimant") in writing, within ninety
(90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety- day
period.
6.2 Review Procedure. If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Claimant and the specific provisions of the Agreement on which
the decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Company, but notice of this deferral
shall be given to the Claimant.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
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Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
8.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the Commonwealth of Pennsylvania, except to the extent
preempted by the laws of the United States of America.
8.6 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
8.7 Recovery of Estate Taxes. If the Executive's gross estate for federal
estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than the Executive's
estate, then the Executive's estate shall be entitled to recover from the
beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by the Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.
8.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
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8.9 Administration. The Company shall have power which are necessary to
administer this Agreement, including but not limited to:
8.9.1 Interpreting the provisions of the Agreement;
8.9.2 Establishing and revising the method of accounting for the
Agreement;
8.9.3 Maintaining a record of benefit payments; and
8.9.4 Establishing rules and prescribing an forms necessary or
desirable to administer the Agreement.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
COMMUNITY BANKS, NATIONAL
ASSOCIATION
/S/ Xxxxxx X. Xxxxxx By /S/ Xxxxxx X. Xxxx
------------------------------------------ ------------------------
Xxxxxx X. Xxxxxx Title Chairman
------------------
By execution hereof, Community Banks, Inc. consents to and agrees to be
bound by the terms and condition of this Agreement.
ATTEST: CORPORATION:
COMMUNITY BANKS, INC.
/S/ Xxxxxxxx X. Xxxx By /S/ Xxxxxx X. Xxxx
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Title Chairman
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AGREEMENT TO MODIFY SALARY CONTINUATION AGREEMENT
THIS AGREEMENT TO MODIFY SALARY CONTINUATION AGREEMENT ("Modification") is
entered into on this 14th day of January, 2002, by COMMUNITY BANKS, a bank and
trust company organized and existing under the laws of the Commonwealth of
Pennsylvania, successor by merger to Community Banks, N.A. and located in
Millersburg, Pennsylvania ("Bank"), and XXXXXX X. XXXXXX (the "Executive").
BACKGROUND
A. Bank and Executive entered into an Amended and Restated Salary
Continuation Agreement on or about July 1, 1999 (the "Agreement").
B. Bank and Executive wish to clarify that the definition of "Change of
Control" in the Agreement applies to Community Banks, Inc. ("Corporation").
NOW, THEREFORE, in consideration of the foregoing premises and intending to
be legally bound, the parties hereby agree as follows:
1. Modification of Change of Control Definition. The term "Company", as
used in the definition of "Change of Control" in Section 1.1.1 of the Agreement,
is hereby changed to "Corporation" and shall be deemed to refer to Community
Banks, Inc.
2. Effective Date. This Modification shall be deemed to be effective as of
the date on which the parties first entered into the Agreement.
3. No Other Changes. Except as specifically modified herein, all terms and
conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have
signed this Agreement.
EXECUTIVE: COMMUNITY BANKS
/S/ Xxxxxx X. Xxxxxx By /S/ Xxxxx X. Xxxxxxxxxxxx
------------------------------------ ------------------------
Xxxxxx X. Xxxxxx Title President & CEO
By execution hereof, Community Banks, Inc. consents to and agrees to be
bound by the terms and condition of this Modification.
WITNESS/ATTEST: COMMUNITY BANKS, INC.
/S/ Xxxxxxxx X. Xxxx By /S/ Xxxxx X. Xxxxxxxxxxxx
------------------------------------- -------------------------
Title Chairman & CEO
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