AMENDMENT TO SEVERANCE AGREEMENT
EXHIBIT 10.2
AMENDMENT TO SEVERANCE AGREEMENT
THIS
AMENDMENT TO SEVERANCE AGREEMENT (“Amendment”) is made this 7th of November, 2007, by
and between Omega Financial Corporation, a Pennsylvania corporation (“Employer”) and Xxxxxx X.
Xxxxxx (“Employee”).
BACKGROUND
Employer and Employee entered into a Severance Agreement (“Agreement”) dated December 23,
2003. In accordance with Section 16 (b) of the Agreement, the Employer and the Employee desire to
amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. The second sentence of the second unnumbered paragraph of Section 1 of the Agreement is
hereby amended to read as follows: “In the event the Employee’s employment with Employer is
terminated during the Term other than (i) as set forth in Section 2 hereof and (ii) prior to the
date of a Change in Control, as defined below, the Employee shall have no rights or benefits under
this Agreement, but shall be entitled to other rights or benefits to which he might otherwise be
entitled.”
2. Section 2 of the Agreement is hereby amended to read as follows:
“2 Termination. If during the Term, Employee’s employment with Employer is
terminated as set forth below, Employer will pay to Employee the amounts set forth in
Sections 3 and 4 hereof and Employee shall be entitled to the benefits set forth in
Section 4 hereof:
(i) Employer terminates Employee’s employment with Employer without cause; or
(ii) the Employee terminates Employee’s employment with Employer due to the fact
that without Employee’s consent, the nature and scope of Employee’s authority with
Employer are materially reduced to a level below that which he enjoys on the date
hereof, the duties or responsibilities assigned to him are materially inconsistent
with that which he has on the date hereof, him then current base annual salary is
materially reduced to a level below that which he enjoys on the date hereof or at any
time hereafter (whichever may be greater), the fringe benefits which Employer
provides Employee on the date hereof or at any time hereafter (whichever may be
greater) are materially reduced, Employee’s position or title with Employer is
reduced from him current position or title with Employer, or Employee’s principal
place of employment with Employer is changed to a location greater than forty miles
from him current principal place of residence, provided, however, that for any
termination by Employee, the Employee shall have first given Employer ten (10)
days, written
notice of him intention to terminate him employment pursuant to this subsection (ii),
specifying the reason(s) for such termination, and provided further, that Employer
shall not have cured or remedied the reason(s) specified in such notice prior to the
expiration of such ten (10) day period.
Notwithstanding anything contained in this Agreement to the contrary, a termination
of employment with the Employer shall not occur if the Employee continues to be
employed by any other entity with which the Employer would be considered a single
employer under Section 414(b) (employees of controlled group of corporations) of the
Internal Revenue Code of 1986, as amended (“Code”) or Code Section 414(c) (employees
of partnerships etc. under common control). In the event that a termination occurs
under subparagraph (ii) above, such termination shall constitute a termination of
employment as described in this paragraph. ”
3. Section 2A is hereby added to the Agreement which shall read as follows:
“2A Change in Control Benefit. In lieu of the benefit payable under Section
3 of this Agreement, upon a Change in Control, as defined below, with regard to
Employer that occurs on or prior to the date that the Term ends, the Employer shall
pay a change in control benefit to the Employee in a single sum equal to three (3)
times the Employee’s Highest Annual Compensation (as defined in Section 3) during
the three (3) calendar years ending immediately prior to the calendar year in which
the Change in Control occurs, which shall be the “Measurement Period” as used in the
definition of Highest Annual Compensation. Payment shall be made on the date of the
Change in Control.
“Change in Control” means as defined herein: (a) a Change in the Ownership of a
Corporation; (b) a Change in the Effective Control of a Corporation; or (c) a Change
in the Ownership of a Substantial Portion of a Corporation’s Assets. These events
are intended to be coterminous with the definitions thereof in Treas. Reg. 1.409A-3,
except as modified herein with regard to certain threshold percentages and shall
otherwise be construed in a manner that complies with Code Section 409A.
A Change in the Ownership of a Corporation occurs on the date that any
one person, or more than one person acting as a group (as described below), acquires
ownership of stock of Employer that, together with stock held by such person or
group, constitutes more than fifty percent (50%) of the total fair market value or
total voting power of the stock of Employer. However, if any one person, or more
than one person acting as a group, is considered to own more than fifty percent
(50%) of the total fair market value or total voting power of the stock of Employer,
the acquisition of additional stock by the same person or persons is not considered
to cause a change in the ownership of the corporation (or to cause a Change in the
Effective Control of a Corporation). An increase in the percentage of stock owned
by any one person, or persons acting as a group, as a result of a transaction in
which the corporation acquires its stock in exchange for property shall constitute
an
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acquisition
of stock for purposes of this definition. The event described herein shall
occur when there is a transfer of stock of Employer (or issuance of stock of
Employer) and stock in Employer remains outstanding after the transaction. The
event described herein shall not occur if any one person, or more than one person
acting as a group, is considered to effectively control Employer (ownership of stock
of Employer possessing 30% or more of the total voting power of the stock of
Employer) and the same person or persons acquire additional control of Employer.
A Change in the Effective Control of a Corporation occurs on the date
that either (a) any one person, or more than one person acting as a group (as
described below) acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition by such person or persons) ownership of stock of
Employer possessing thirty percent (30%) or more of the total voting power of the
stock of Employer; or (b) a majority of members of Employer’s board of directors is
replaced during any 12-month period by directors whose appointment or election is
not endorsed by a majority of the members of Employer’s board of directors before
the date of the appointment or election. If any one person, or more than one person
acting as a group, is considered to effectively control Employer as described
herein, the acquisition of additional control of Employer by the same person or
persons does not constitute a Change in the Effective Control of a Corporation.
For purposes of Change in the Ownership of a Corporation and Change in the Effective
Control of a Corporation, persons will not be considered to be acting as a group
solely because they purchase stock of Employer at the same time. However, persons
will be considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of stock, or similar
business transaction with Employer. If a person, including an entity, owns stock in
both a corporations that enter into a merger, consolidation, purchase or acquisition
of stock, or similar transaction, such shareholder is considered to be acting as a
group with other shareholders only with respect to the ownership in that corporation
before the transaction giving rise to the change and not with respect to the
ownership interest in the other corporation.
A Change in the Ownership of a Substantial Portion of a Corporation’s
Assets occurs on the date that any one person or more than one person acting as a
group (as described below) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons) assets
from Employer that have a total gross fair market value equal to or more than
ninety-five percent (95%) of the total gross fair market value of all of the assets
of Employer immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of Employer, or the
value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
No Change in the Ownership of a Substantial Portion of a Corporation’s Assets
occurs: (a) if there is a transfer to an entity that is controlled by the
shareholders of the transferring corporation immediately after the transfer or (b)
if the assets are
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transferred to – (1) a shareholder of the corporation (immediately before the asset
transfer) in exchange for or with respect to its stock; (2) an entity, fifty percent
(50%) or more of the total value or voting power of which is owned, directly or
indirectly, by the corporation; (3) a person, or more than one person acting as a
group, that owns, directly or indirectly, fifty percent (50%) or more of the total
value or voting power of all the outstanding stock of the corporation; or (4) an
entity, at least fifty percent (50%) of the total value or voting power of which is
owned directly or indirectly, by a person described in clause (3).
For purposes of a Change in the Ownership of a Substantial Portion of a
Corporation’s Assets, persons will not be considered to be acting as a group solely
because they purchase assets of the corporation at the same time. However, persons
will be considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of assets, or similar
business transaction with the corporation. If a person, including an entity
shareholder, owns stock in both corporations that enter into a merger,
consolidation, purchase or acquisition of assets, or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in a
corporation only to the extent of the ownership in that corporation before the
transaction giving rise to the change and not with respect to the ownership interest
in the other corporation.”
4. Section 3 of the Agreement is hereby amended to read as follows:
“3. Compensation Payments to Employee. In the event that the Employee’s
employment with the Employer is terminated pursuant to Section 2 hereof prior to the
date that a Change in Control occurs, and subject to the Employee’s compliance with
Section 8 hereof, and the Employee’s delivery to the Employer of a general release
within such time as designated by the Employer and the Employer’s determination that
the general release is legally binding on the Employee, the Employer shall pay a
severance benefit to the Employee in a single sum equal to three (3) times the
Employee’s Highest Annual Compensation (as defined below) during the three (3)
calendar years ending prior to the date that the Employee’s employment with the
Employer is terminated pursuant to Section 2 hereof (“Termination Date”) (the
foregoing three (3) calendar year period is referred to herein as the “Measurement
Period”). Payment shall be made within the ninety (90) day period after the
Termination Date (the Employee cannot designate the taxable year of payment). The
severance benefit required by this Section 3 shall not be offset or reduced by any
income or earnings received from any other employment or other activity in which the
Employee may engage. The Employee shall have no duty to mitigate damages. If the
Employee fails to deliver such legally binding general release by the due date
designated by the Employer, the Employer shall not have any obligation to make any
payments or provide benefits under this Agreement. In addition, if the Employee is
a “specified employee” as defined in Code Section 409A with regard to the payments
or benefits under this Agreement, as determined by the Employer in its sole
discretion, and delayed payment is necessary to avoid the imposition of taxes
on the Employee under Code Section 409A, such payments or benefits shall not
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be paid
or provided before the date that is six (6) months plus one day after the
Termination Date or other applicable date (or if earlier than the end of the six
months plus one day period, the date of the Employee’s death) and shall be paid or
provided by the Employer on the first regular payroll date following the expiration
of that six months plus one day period or date of death, if earlier. For purposes of
this Agreement, Highest Annual Compensation means the Employee’s highest paid base
salary and annual incentive bonus (based on prior year performance) unreduced by the
Employee’s pre-tax elective contributions to a Code Section 401(k) or Section 125
plan, but excluding other fringe benefits, during a calendar year that is within the
Measurement Period. The general release shall be in the form provided by the
Employer and shall not effect the Employee’s entitlement to other amounts to which
the Employee may be entitled under other benefit plans of the Employer and shall
be consistent with the requirements of the OWBPA and other pertinent law.”
5. Section 4 of the Agreement is hereby amended by deleting the first sentence thereof, and
inserting the following in lieu thereof.
“In addition to the compensation set forth in Section 2A or 3 hereof, as applicable,
and subject to the Employee’s compliance with Section 8 hereof and the Employee’s
delivery of the general release as provided in Section 3 hereof, Employee shall be
entitled to receive benefits from Employer as set forth in this Section 4.”
6. Section 4 of the Agreement is hereby amended by adding the following flush paragraph at the
end thereof:
“The in-kind life insurance benefit payable with respect to a taxable year of the
Employee shall not affect the amount of in-kind life insurance benefit payable in
any other taxable year. Subject to the six month plus one day delay described in
Section 3 above, if applicable, any such in-kind life insurance benefit shall be
paid by the Employer on or before the applicable due date to avoid a lapse of the
life insurance policy but in no event shall an in kind life insurance benefit or
medical/hospitalization be paid later than the last day of the Employee’s taxable
year following the taxable year in which the premium for the life insurance or
medical/hospitalization expense was incurred. Employee acknowledges that he may be
required to pay premiums on the life insurance policies insuring him life prior to
the time that the Employer may pay such premiums in order to avoid adverse tax
consequences under Section 409A. The reasonable relocation expense shall be paid
as soon as practicable, but in no event later than the end of the Employee’s first
taxable year following the taxable year in which the Employee experienced the
termination of employment.”
7. The Agreement is hereby amended by adding the following Section 4A after Section 4:
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“4A. Tax Gross-Up. (a) If any of the payments or benefits received or to
be received by the Employee in connection with a Change in Control, as defined
above, under this Agreement, the Employee’s Omega Financial Corporation/Omega Bank,
National Association Salary Continuation Agreement, and any other plan, program,
agreement or arrangment (such payment or benefits, excluding the Gross-Up Payment,
being referred to herein as “Total Payments”) would be subject to the excise tax
under Code Section 4999 (“Excise Tax”), the Employer shall pay to the Employee an
additional amount (the “Gross-Up Payment”) equal to the Excise Tax plus any related
federal, state and local income, excise, and employment taxes. The intent of the
Gross-Up Payment is to ensure that the Employee does not bear the cost of the Excise
Tax or tax associated with the Employer’s reimbursement of the Excise Tax.
(b) For purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of the Excise Tax, (1) all of the Total Payments shall
be treated as “parachute payments” within the meaning of Code Section 280G(b)(2)
unless, in the opinion of tax counsel selected by the Employer and reasonably
acceptable to the Employee (“Tax Counsel”), such payments in whole or in part do
not constitute parachute payments, including by reason of Code Section
280G(b)(4)(A), (2) all “excess parachute payments” within the meaning of Code
Section 280G (b) (1) shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered (within the meaning
of Code Section 280G(b)(4)(B)) in excess of the “base amount” (as defined in Code
Section 280G(b)(3)) allocable to such payment, or are otherwise not subject to the
Excise Tax, and (3) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Tax Counsel in accordance with the principles of Code
Sections 280G(d)(3) and (4). For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of the Employee’s residence on the Termination
Date net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Gross-Up Payment, the
Employee shall repay the Employer, within five (5) business days following the time
that the amount of such reduction in the Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by the
Employee, to the extent that such repayment results in a reduction in the Excise Tax
and a dollar-for-dollar reduction in the Employee’s taxable income and wages for
purposes of federal, state and local income and employment
taxes, plus interest on the amount of such repayment at 120% of the
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rate provided in
Code Section 1274(b)(2)(B). In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Employer shall make an
additional Gross-Up Payment in respect of such excess plus any interest, penalties
or additions payable by the Employee with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally
determined. The Employee and the Employer shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total Payments.
The Gross-Up Payment or additional Gross-Up Payment shall be made by the end of the
Employee’s taxable year next following the Employee’s taxable year in which the
Employee remits the related taxes.”
8. Section 6 of the Agreement is hereby amended by deleting the phrase: “Except as set forth
in Section 14 hereof,” and capitalizing the first word of this Section “All.”
9. The first paragraph of Section 8 of the Agreement (the paragraph that precedes subparagraph
(a)) is hereby amended by deleting the second sentence thereof.
10. Section 8 (d) of the Agreement is hereby amended by adding the following to the end
thereof:
“In consideration that a breach of any of the covenants or agreements contained in
this Section 8 may occur after the Employer has paid the full amount under Section
2A or 3, as applicable (“Total Payment”), at the time that a court shall enter an
order finding that the Employee has breached any of the covenants or agreements
contained in this Section 8, the court may require the Employee to repay a portion
of the Total Payment in an amount not to exceed 1/36th of the Total
Payment for each calendar month in which such breach occurred.”
11. Section 13 of the Agreement is hereby amended to read as follows:
“13. Code Section 409A Matters. This Agreement is intended to comply with
Section 409A of the Internal Revenue Code of 1986, as amended, and applicable
guidance thereunder, including but not limited to Notice 2007-86 and Notice 2007-78,
and the provisions of this Agreement shall be construed in accordance with that
intention so as to avoid any adverse tax consequence to the Officer. Any
provision required for compliance with Code Section 409A that is omitted from this
Agreement shall be incorporated herein by reference and shall apply retroactively,
if necessary, and be deemed a part of this Agreement to the same extent as though
expressly set forth herein. Notwithstanding anything contained herein to the
contrary, no payment hereunder shall be made prior to January 15, 2008 if such
payment would violate the transition rules regarding the time and form of payment as
set forth in Notice 2007-86.”
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12. Section 14 and Exhibit “A” of the Agreement are hereby deleted.
13. This Amendment shall be effective as of the date of execution.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment the day and year written
above.
| OMEGA FINANCIAL CORPORATION | ||||||||||
Attest:
|
/s/ Xxxxxx X. Xxxxxxxx
|
By: | /s/ Xxxxx X. Xxx
|
|||||||
| Title: Chairman, Compensation Committee | Title: Chairman | |||||||||
Witness:
|
/s/ Xxxxxx X. Xxxxx
|
/s/ Xxxxxx X. Xxxxxx
|
||||||||
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