EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this ___th day of ______________ 1999,
("Effective Date") by and between Mechanics Savings and Loan, FSA (the "Savings
Association") and Xxxxxx X. Xxxxxxxx (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Savings
Association as the Executive Vice President and Chief Executive Officer and is
experienced in all phases of the business of the Savings Association; and
WHEREAS, the Savings Association desires to be ensured of the Executive's
continued active participation in the business of the Savings Association; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Savings Association and in consideration of the Executive's agreeing to remain
in the employ of the Savings Association, the parties desire to specify the
continuing employment relationship between the Savings Association and the
Executive;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereby agree as follows:
1. Employment. The Savings Association hereby employs the Executive in the
capacity of Executive Vice President and Chief Executive Officer. The Executive
hereby accepts said employment and agrees to render such administrative and
management services to the Savings Association and to any to-be-formed parent
holding company ("Parent") as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Executive
shall promote the business of the Savings Association and Parent. The
Executive's other duties shall be such as the Board of Directors for the Savings
Association (the "Board of Directors" or "Board") may from time to time
reasonably direct, including normal duties as an officer of the Savings
Association.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) thereafter ("Term"). Additionally, on, or before, each annual
anniversary date from the Effective Date, the Term of employment under this
Agreement shall be extended for up to an additional period beyond the then
effective expiration date upon a determination and resolution of the Board of
Directors that the performance of the Executive has met the requirements and
standards of the Board, and that the Term of such Agreement shall be extended.
References herein to the Term of this Agreement shall refer both to the initial
term and successive terms.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Savings Association shall compensate and pay the
Executive during the Term of this Agreement a minimum base salary at the rate of
$59,591.00 per annum ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall be entitled
to receive increases at such percentages or in such amounts as determined by the
Board of Directors. The base salary may not be decreased without the Executive's
express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to participate in
an equitable manner with all other senior management employees of the Savings
Association in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive shall be
entitled to participate in and receive the benefits of any plan of the Savings
Association which may be or may become applicable to senior management relating
to pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Savings Association, to the extent commensurate with his then
duties and responsibilities, as fixed by the Board of Directors of the Savings
Association.
(d) Participation in Medical Plans and Insurance Policies. The Executive
shall be entitled to participate in and receive the benefits of any plan or
policy of the Savings Association which may be or may become applicable to
senior management relating to life insurance, short and long term disability,
medical, dental, eye-care, prescription drugs or medical reimbursement plans.
Additionally, Executive's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Savings Association or
Parent with the cost of such premiums paid by the Savings Association.
(e) Vacations and Sick Leave. The Executive shall be entitled to paid
annual vacation leave in accordance with the policies as established from time
to time by the Board of Directors, which shall in no event be less than four
weeks per annum. The Executive shall also be entitled to an annual sick leave
benefit as established by the Board for senior management employees of the
Savings Association. The Executive shall not be entitled to receive any
additional compensation from the Savings Association for failure to take a
vacation or sick leave, nor shall he be able to accumulate unused vacation or
sick leave from one year to the next, except to the extent authorized by the
Board of Directors.
(f) Expenses. The Savings Association shall reimburse the Executive or
otherwise provide for or pay for all reasonable expenses incurred by the
Executive in furtherance
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of, or in connection with the business of the Savings Association, including,
but not by way of limitation, automobile and traveling expenses, and all
reasonable entertainment expenses, subject to such reasonable documentation and
other limitations as may be established by the Board of Directors of the Savings
Association. If such expenses are paid in the first instance by the Executive,
the Savings Association shall reimburse the Executive therefor.
(g) Changes in Benefits. The Savings Association shall not make any changes
in such plans, benefits or privileges previously described in Section 3(c), (d)
and (e) which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executive officers of the Savings Association and does not result in a
proportionately greater adverse change in the rights of, or benefits to, the
Executive as compared with any other executive officer of the Savings
Association. Nothing paid to Executive under any plan or arrangement presently
in effect or made available in the future shall be deemed to be in lieu of the
salary payable to Executive pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Savings Association or Parent.
(b) Nothing contained in this Section 4 shall be deemed to prevent or limit
the right of Executive to invest in the capital stock or other securities of any
business dissimilar from that of the Savings Association or Parent, or, solely
as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under this
Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement, in which
event the Executive's estate shall be entitled to receive the compensation due
the Executive through the last day of the calendar month in which Executive's
death shall have occurred.
(b) The Board of Directors may terminate the Executive's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Executive's right to compensation or other
benefits under the Agreement. The Executive shall have no right to receive
compensation or other benefits for any period after
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termination for Just Cause. The Board may within its sole discretion, acting in
good faith, terminate the Executive for Just Cause and shall notify such
Executive accordingly. Termination for "Just Cause" shall include termination
because of the Executive's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Savings Association shall be obligated to
continue to pay the Executive the salary provided pursuant to Section 3(a)
herein, up to the date of termination of the remaining Term of this Agreement,
but in no event for a period of less than twelve months, and the cost of
Executive obtaining all health, life, disability, and other benefits which the
Executive would be eligible to participate in through such date based upon the
benefit levels substantially equal to those being provided Executive at the date
of termination of employment.
(d) The voluntary termination by the Executive during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 9(b), in which case the Executive
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
7. Regulatory Exclusions.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Association's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and
(g)(1)), the Savings Association's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Savings Association may within
its discretion (i) pay the Executive all or part of the compensation withheld
while its contract obligations were suspended and (ii) reinstate any of its
obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Savings Association's affairs by an order
issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act
("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings
Association under this Agreement shall terminate, as of the effective date of
the order, but the vested rights of the parties shall not be affected.
(c) If the Savings Association is in default (as defined in Section 3(x)(1)
of FDIA) all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.
(d) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of this Agreement is necessary for the
continued operation of the
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Savings Association: (i) by the Director of the Office of Thrift Supervision
("Director of OTS"), or his or her designee, at the time that the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of the Savings Association under the authority
contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his
or her designee, at the time that the Director of the OTS, or his or her
designee approves a supervisory merger to resolve problems related to operation
of the Savings Association or when the Savings Association is determined by the
Director of the OTS to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made to
the Executive pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC Section 1828(k) and any regulations
promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 100% of such compensation and benefits for a period of 12 months,
but not exceeding the remaining term of the Agreement, and 65% thereafter for
the remainder of the term of the Agreement. Such benefits noted herein shall be
reduced by any benefits otherwise provided to the Executive during such period
under the provisions of disability insurance coverage in effect for Savings
Association employees. Thereafter, Executive shall be eligible to receive
benefits provided by the Savings Association under the provisions of disability
insurance coverage in effect for Savings Association employees. Upon returning
to active full- time employment, the Executive's full compensation as set forth
in this Agreement shall be reinstated as of the date of commencement of such
activities. In the event that the Executive returns to active employment on
other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Executive's employment during the term of this
Agreement following any Change in Control of the Savings Association or Parent,
or within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.999 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination of service or in
periodic payments over the next 36 months or the remaining term of this
Agreement, whichever is less, as if Executive's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Executive would be otherwise entitled to receive under Section 6 of
this
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Agreement. Notwithstanding the forgoing, all sums payable hereunder shall be
reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments to be made to the Executive by
the Savings Association or the Parent shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "Change in Control"
shall refer to (i) the control of voting proxies whether related to stockholders
or mutual members by any person, other than the Board of Directors of the
Savings Association, to direct more than 25% of the outstanding votes of the
Savings Association, the control of the election of a majority of the Savings
Association's directors, or the exercise of a controlling influence over the
management or policies of the Savings Association by any person or by persons
acting as a group within the meaning of Section 13(d) of the Exchange Act, (ii)
an event whereby the OTS, FDIC or any other department, agency or quasi-agency
of the federal government cause or bring about, without the consent of the
Savings Association, a change in the corporate structure or organization of the
Savings Association; (iii) an event whereby the OTS, FDIC or any other agency or
quasi-agency of the federal government cause or bring about, without the consent
of the Savings Association, a taxation or involuntary distribution of retained
earnings or proceeds from the sale of securities to depositors, borrowers, any
government agency or organization or civic or charitable organization; or (iv) a
merger or other business combination between the Savings Association and another
corporate entity whereby the Savings Association is not the surviving entity. In
the event that the Savings Association shall convert in the future from
mutual-to-stock form, the term "Change in Control" shall also refer to: (i) the
sale of all, or a material portion, of the assets of the Savings Association or
the Parent; (ii) the merger or recapitalization of the Savings Association or
the Parent whereby the Savings Association or the Parent is not the surviving
entity; (iii)a change in control of the Savings Association or the Parent, as
otherwise defined or determined by the Office of Thrift Supervision or
regulations promulgated by it; or (iv) the acquisition, directly or indirectly,
of the beneficial ownership (within the meaning of that term as it is used in
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Savings Association or the Parent by any
person, trust, entity or group. The term "person" means an individual other than
the Executive, or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Executive may voluntarily terminate his employment during the term of this
Agreement following a Change in Control of the Savings Association or Parent, or
within twenty-four months following such Change in Control, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Savings Association, Executive would be
required to report to a person or persons other than the Board of Directors of
the Savings Association; (iii) if the Savings Association should fail to
maintain Executive's base compensation in effect as of the date of the Change in
Control and
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the existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Executive would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; (v) if Executive's responsibilities or
authority have in any way been materially diminished or reduced; or (vi) if
Executive would not be reelected to the Board of Directors of the Savings
Association.
10. Withholding. All payments required to be made by the Savings
Association hereunder to the Executive shall be subject to the withholding of
such amounts, if any, relating to tax and other payroll deductions as the
Savings Association may reasonably determine should be withheld pursuant to any
applicable law or regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Savings Association or Parent which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Savings
Association or Parent.
(b) Since the Savings Association is contracting for the unique and
personal skills of the Executive, the Executive shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Savings Association.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Savings Association to
sign on its behalf. No waiver by any party hereto at any time of any breach by
any other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
14. Nature of Obligations. Nothing contained herein shall create or require
the Savings Association to create a trust of any kind to fund any benefits which
may be payable hereunder, and to the extent that the Executive acquires a right
to receive benefits from the Savings Association hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Savings
Association.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or
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enforceability of the other provisions of this Agreement, which shall remain in
full force and
effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Savings
Association, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof, except to the extent that the parties may otherwise
reach a mutual settlement of such issue. Further, the settlement of the dispute
to be approved by the Board of the Savings Association may include a provision
for the reimbursement by the Savings Association to the Executive for all
reasonable costs and expenses, including reasonable attorneys' fees, arising
from such dispute, proceedings or actions, or the Board of the Savings
Association or the Parent may authorize such reimbursement of such reasonable
costs and expenses by separate action upon a written action and determination of
the Board following settlement of the dispute. Such reimbursement shall be paid
within ten (10) days of Executive furnishing to the Savings Association or
Parent evidence, which may be in the form, among other things, of a canceled
check or receipt, of any costs or expenses incurred by Executive.
18. Confidential Information. The Executive acknowledges that during his or
her employment he or she will learn and have access to confidential information
regarding the Savings Association and the Parent and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Association or the Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Executive shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Association, the
Parent, or any subsidiaries or affiliates, or to any of the businesses operated
by them, and the Executive confirms that such information constitutes the
exclusive property of the Savings Association and the Parent. The Executive
shall not otherwise knowingly act or conduct himself (a) to the material
detriment of the Savings Association or the Parent, or its subsidiaries, or
affiliates, or (b) in a manner which is inimical or contrary to the interests of
the Savings Association or the Parent. Executive acknowledges and agrees that
the existence of this Agreement and its terms and conditions constitutes
Confidential Information of the Savings Association, and the Executive agrees
not to disclose the Agreement or its contents without the prior written consent
of the Savings Association. Notwithstanding the foregoing, the Savings
Association reserves the right in its sole discretion to make disclosure of this
Agreement as it deems necessary or appropriate in compliance with its regulatory
reporting requirements. Notwithstanding anything herein to the contrary, failure
by the Executive to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the Savings
Association, disciplinary action against the Executive taken by the Savings
Association, including but not limited to the termination of employment of the
Executive for breach of the Agreement and the provisions of this Section, and
other remedies that may be available in law or in equity.
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19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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