CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is made as of the 18th day of July, 2000, among QNB CORP.
("Corporation"), a Pennsylvania business corporation having a place of business
at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000, THE QUAKERTOWN
NATIONAL BANK ("Bank") a national banking association having a place of business
at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000, and XXXXXX X. XXXXXX
("Executive"), an individual residing at 000 Xxxxxxxxx Xxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000.
WITNESSETH:
WHEREAS, the Corporation is a registered bank holding company;
WHEREAS, the Bank is a subsidiary of the Corporation;
WHEREAS, Corporation and Bank desire to continue to retain Executive to
serve in the capacity of Executive Vice President and Chief Operating Officer of
Bank under the terms and conditions set forth herein;
WHEREAS, Executive desires to continue to serve the Corporation and Bank in
an executive capacity under the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. EMPLOYMENT. Executive is employed by Corporation and Bank on an "at will"
basis and there is no employment agreement between them. This Agreement is
granted by Corporation and Bank in order to set forth terms and conditions
between Corporation, Bank and Executive in the event of a Change in Control
as defined herein.
2. RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL.
If Executive's employment is terminated by Corporation or Bank other than
for Cause (as defined below) on or before the three (3) year anniversary of
the date of a Change in Control (as defined below), then Corporation or
Bank shall pay to Executive, in lieu of any other severance benefits to
which Executive may be entitled, an amount equal to the product of (a) the
average annual aggregate compensation paid by Corporation and Bank to
Executive and includible in the Executive's gross income for federal income
tax purposes during the five (5) calendar years preceding the taxable year
in which the date of the termination occurs, multiplied by (b) 2, such
payment to be made in a lump sum on or before the fifth day following the
date of termination and shall be subject to applicable taxes and
withholdings. However, if the lump sum payment under this paragraph 2, 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 Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), such payment shall be reduced to the
extent necessary to avoid such excise tax imposition. Notwithstanding the
foregoing or any other provision of this Agreement 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 Code, the Corporation shall be required only to pay to Executive the
amount determined to be deductible under Section 280G. The determination of
any reduction in the lump sum payment under this paragraph 2 pursuant to
the foregoing provisions shall be made by Corporation's independent
auditors.
3. TERMINATION OF EMPLOYMENT FOR CAUSE. For purposes of this Agreement,
termination for "Cause" shall mean any of the following:
(a) Executive's conviction of or plea of guilty or nolo contendere to a
felony, a crime of falsehood or a crime involving moral turpitude, or
the actual incarceration of Executive for a period of twenty (20)
consecutive days or more;
(b) Executive's willful or intentional failure to follow the good faith
lawful instructions of the Board of Directors of Corporation or Bank
with respect to its operations, after written notice from Corporation
or Bank and a failure to cure such violation within twenty (20) days
of said written notice;
(c) Executive's willful or intentional failure to substantially perform
Executive's duties to Corporation or Bank, other than a failure
resulting from Executive's incapacity because of physical or mental
illness, after written notice from Corporation or Bank and a failure
to cure such violation within twenty (20) days of said written notice;
(d) dishonesty or negligence by the Executive in the performance of his
duties;
(e) Executive's 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;
(f) conduct on the part of the Executive as determined by an affirmative
vote of seventy percent (70%) of the disinterested members of the
Board of Directors of Corporation and Bank which brings public
discredit to Corporation or Bank; or
(g) Executive's breach of fiduciary duty involving personal profit.
4. CHANGE IN CONTROL DEFINED. As used in this Agreement, "Change in Control"
shall mean the occurrence of any of the following:
(a) (i) a merger, consolidation or division involving Corporation or Bank,
(ii) a sale, exchange, transfer or other disposition of substantially
all of the assets of Corporation or Bank, or (iii) a purchase by
Corporation or Bank of substantially all of the assets of another
entity, unless (y) such merger, consolidation, division, sale,
exchange, transfer, purchase or disposition is approved in advance by
seventy percent (70%) or more of the members of the Board of Directors
of Corporation or Bank who are not interested in the transaction and
(z) a majority of the members of the Board of Directors of the legal
entity resulting from or existing after any such transaction and of
the Board of Directors of such entity's parent corporation, if any,
are former members of the Board of Directors of Corporation or Bank;
or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), other than
Corporation or Bank or any "person" who on the date hereof is a
director or officer of Corporation or Bank is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Corporation or Bank
representing twenty-five (25%) percent or more of the combined voting
power of Corporation or Bank's then outstanding securities, or
(c) during any period of two (2) consecutive years during the term of
Executive's employment under this Agreement, individuals who at the
beginning of such period constitute the Board of Directors of
Corporation 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; or
(d) any other change in control of Corporation and Bank similar in effect
to any of the foregoing.
5. DATE OF CHANGE IN CONTROL DEFINED. For purposes of this Agreement, the date
of Change in Control shall mean:
(a) the first date on which a single person and/or entity, or group of
affiliated persons and/or entities, acquire the beneficial ownership
of twenty-five (25%) or more of the Bank or Corporation's voting
securities, or
(b) the date of the closing of an Agreement, transferring all or
substantially all of the Bank or Corporation's assets, or
(c) the date on which a merger, consolidation or business combination is
consummated, as applicable, or
(d) the date on which individuals who formerly constituted a majority
of the Board of Directors of the Bank or the Corporation under
paragraph 4(b) above, cease to be a majority.
6. NO EMPLOYMENT CONTRACT. This Agreement is not an employment contract.
Nothing contained herein shall guarantee or assure Executive of continued
employment by Corporation or Bank. Rather, Corporation's and Bank's
obligations to Executive hereunder shall arise only if Executive continues
to be employed by Corporation and Bank in his present or in a higher
capacity and then only in the event the conditions described herein for
payment to Executive have been met.
7. WAIVER. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and an executive officer specifically
designated by the Boards of Directors of Corporation and Bank. No waiver by
either party hereto at any time of any breach by the 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.
8. ATTORNEY'S FEES AND COSTS. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, each party shall bear
their own attorney's fees, costs, and necessary disbursements.
9. ENTIRE AGREEMENT. This Agreement supersedes any and all understandings and
agreements, either oral or in writing, between the parties with respect to
any severance that may become due as a result of or in connection with a
Change in Control. This Agreement contains all the covenants and agreements
between the parties with respect to any severance that may become due as a
result of or in connection with a Change in Control.
10. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of Corporation, Bank and Executive, and their
respective successors, assigns, heirs and personal representatives.
11. ARBITRATION. Corporation, 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. Consequently, each party agrees that all disputes, disagreements and
questions of interpretation concerning this Agreement are to be submitted
for resolution, in Philadelphia, 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"). Corporation, Bank or Executive
may initiate an arbitration proceeding at any time by giving notice to the
other in accordance with the Rules. Corporation and Bank and Executive may,
as a matter of 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 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, Corporation, 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.
12. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the domestic, internal laws of the Commonwealth of
Pennsylvania, without regard to its conflicts of laws principles.
14. HEADINGS. The section headings of this Agreement are for convenience only
and shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ATTEST: QNB CORP.
/s/ Xxxxxxx X. Xxxxxxxx, III By /s/ Xxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxxxxx, III, Secretary Xxxxxx X. Xxxxx, President
THE QUAKERTOWN NATIONAL BANK
/s/ Xxxxxxx X. Xxxxxxxx, III By /s/ Xxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxxxxx, III, Secretary Xxxxxx X. Xxxxx, President
WITNESS:
/s/ Xxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx
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Xxx X. Xxxxxx Xxxxxx X. Xxxxxx, Executive
