EXHIBIT 10.4
CHANGE OF CONTROL SEVERANCE AGREEMENT OF XXXXX X. XXXXXXXX
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
XXXXX X. XXXXXXXX
-----------------
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 4th day of November 1997 ("Effective Date"), by and between First Federal
Savings Bank of New Castle (the "Savings Bank") and Xxxxx X. Xxxxxxxx (the
"Employee").
WHEREAS, the Employee is currently employed by the Savings Bank as Vice
President and Treasurer and is experienced in certain phases of the business of
the Savings Bank; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Savings Bank and Employee if the Savings Bank should
undergo a change in control (as defined hereinafter in the Agreement) after the
Effective Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the Vice
President and Treasurer of the Savings Bank. The Employee shall render such
administrative and management services to the Savings Bank and any parent
savings and loan holding company ("Parent") as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Employee's other duties shall be such as the Board of Directors for the Savings
Bank (the "Board of Directors" or "Board") may from time to time reasonably
direct, including normal duties as an officer of the Savings Bank and the
Parent.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter ("Term").
3. Termination of Employment in Connection with or Subsequent to
--------------------------------------------------------------
a Change in Control.
-------------------
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within thirty-six (36) months after,
any Change in Control of the Savings Bank or Parent, Employee shall be paid an
amount ("Severance Payment") equal to 2.99 times such Employee's five year
average taxable compensation paid to the Employee by the Savings Bank (whether
said amounts were received or deferred by the Employee) and the costs associated
with maintaining coverage under the Savings Bank's medical and dental insurance
reimbursement plans similar to that in effect on the date of termination of
employment for a period of one year thereafter. Said sum shall be paid, at the
option of Employee, either in one (1) lump sum within thirty (30) days of such
termination or in periodic payments over the next
1
36 months, and such payments shall be in lieu of any other future payments which
the Employee would be otherwise entitled to receive. Notwithstanding the
foregoing, such amounts payable hereunder shall be reduced by 1/36 for each full
month that Employee remains employed beyond the date of such Change in Control;
provided however, that such Severance Amount shall in no event be less than 150%
of the annualized base salary in effect for such Employee as of the date of such
Change in Control. 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 Employee by
the Savings Bank or the Parent shall be deemed an "excess parachute payment" in
accordance with Section 280G of the Internal Revenue Codes of 1986, as amended
(the "Code") and be subject to the excise tax provided at Section 4999(a) of the
Code. The term "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Savings Bank or the Parent; (ii) the
merger or recapitalization of the Savings Bank or the Parent whereby the Savings
Bank or the Parent is not the surviving entity; (iii) a change in control of the
Savings Bank 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 Bank or the Parent
by any person, trust, entity or group. The term "person" means an individual
other than the Employee, 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 except as provided at Sections 4 and 5, Employee may voluntarily
terminate his employment under this Agreement within thirty-six months following
a Change in Control of the Savings Bank or Parent, and Employee shall thereupon
be entitled to receive the payment and benefits described in Section 3(a) of
this Agreement, upon the occurrence, or within ninety (90) days thereafter, of
any of the following events, which have not been consented to in advance by the
Employee in writing: (i) if Employee would be required to move his personal
residence or perform his principal executive functions more than thirty-five
(35) miles from the Employee's primary office as of the signing of this
Agreement; (ii) if in the organizational structure of the Savings Bank or
Parent, Employee would be required to report to a person or persons other than
the Board, the President or a Vice President of the Savings Bank or Parent;
(iii) if the Savings Bank or Parent should fail to maintain the Employee's base
compensation in effect as of the date of the Change in Control and existing
employee benefits plans, including material fringe benefit, stock option and
retirement
2
plans, except to the extent that such reduction in benefit programs is part of
an overall adjustment in benefits for all employees of the Savings Bank or
Parent and does not disproportionately adversely impact the Employee; (iv) if
Employee would be assigned duties and responsibilities other than those normally
associated with his position as referenced at Section 1, herein; or (v) if
Employee's responsibilities or authority have in any way been materially
diminished or reduced.
4. Other Changes in Employment Status.
----------------------------------
Except as provided for at Section 3, herein, the Board of Directors may
terminate the Employee's employment at any time with or without Just Cause
within its sole discretion. This Agreement shall not be deemed to give Employee
any right to be retained in the employment or service of the Bank, or to
interfere with the right of the Bank to terminate the employment of the Employee
at any time. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. Termination for "Just
Cause" shall include termination because of the Employee'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.
5. Regulatory Exclusions.
---------------------
(a) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank'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 Bank under
this Agreement shall terminate, as of the effective date of the order, but the
vested rights of the parties shall not be affected.
(b) If the Savings Bank 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.
(c) 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 Savings Bank: (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 Bank 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
3
resolve problems related to operation of the Savings Bank or when the Savings
Bank 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.
(d) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank'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 Bank'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 Bank may within its discretion (i) pay the
Employee all or part of the compensation withheld while its contract obligations
were suspended and (ii) reinstate any of its obligations which were suspended.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
6. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Savings Bank 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 Bank
or Parent.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Savings Bank.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the Commonwealth of Pennsylvania, except to the extent that Federal law
shall be deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
4
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 Bank, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof, except to the extend that the parties
may otherwise reach a mutual settlement of such issue. The Savings Bank shall
reimburse Employee for all reasonable costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, following
the delivery of the decision of the arbitrator finding in favor of the Employee.
Further, the settlement of the dispute to be approved by the Board of the
Savings Bank or the Parent may include a provision for the reimbursement by the
Savings Bank or Parent to the Employee for all reasonable costs and expenses,
including reasonable attorneys' fees, arising from such dispute, proceedings or
actions, or the Board of the Savings Bank 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.
11. Confidential Information. The Employee acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Bank and the Parent and its customers and businesses
("Confidential Information"). The Employee 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 Bank or tthe 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 Employee shall
not knowingly disclose or reveal to any unauthorized person any Confidential
Information relating to the Bank, the Parent, or any subsidiaries or affiliates,
or to any of the businesses operated by them, and the Employee confirms that
such information constitutes the exclusive property of the Bank and the Parent.
The Employee shall not otherwise knowingly act or conduct himself (a) to the
material detriment of the Bank or the Parent, or its subsidiaries, or
affiliates, or (b) in a manner which is inimical or contrary to the interests of
the Bank or the Parent. Employee acknowledges and agrees that the existence of
this Agreement and its terms and conditions constitutes Confidential Information
of the Bank, and the Employee agrees not to disclose the Agreement or its
contents without the prior written consent of the Bank. Notwithstanding the
foregoing, the Bank 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 Employee to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Bank, disciplinary action against the Employee taken by the
Bank, including but not limited to the termination of employment of the Employee
for breach of the Agreement and the provisions of this
5
Section, and other remedies that may be available in law or in equity.
12. 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.
6
