RELEASE, CONSULTING AND NONCOMPETITION AGREEMENT
EXHIBIT
10.3
RELEASE,
CONSULTING AND NONCOMPETITION
AGREEMENT
This
Release, Consulting and
Noncompetition Agreement (this “Agreement”) is being entered into as of
September 6, 2007, by and between National Penn Bancshares, Inc., a Pennsylvania
corporation (“National Penn”), National Penn Bank, a national banking
association and a wholly-owned subsidiary of National Penn (“NPBank”), KNBT
Bancorp, Inc., a Pennsylvania corporation (“KNBT”), Keystone Nazareth Bank &
Trust Company, a wholly-owned subsidiary of KNBT and a Pennsylvania-chartered
savings bank (the “Bank”), and Xxxxxx X. Xxxxx (the “Consultant”).
RECITALS:
WHEREAS,
the
Consultant is currently the Senior Executive Vice President, Chief Financial
Officer and Treasurer of KNBT and the Bank;
WHEREAS,
pursuant to
an Agreement and Plan of Merger between National Penn and KNBT, dated as of
September 6, 2007 (the “Merger Agreement”), KNBT will merge with and into
National Penn, with National Penn being the surviving entity (the “Merger”), and
thereafter the Bank will merge with and into NPBank with NPBank being the
surviving entity;
WHEREAS,
the
Consultant currently has an amended and restated employment agreement with
KNBT
and the Bank dated as of December 28, 2006 (the “Employment Agreement”), which
entitles the Consultant to severance payments following a change in control
of
KNBT;
WHEREAS,
the parties
hereto desire to terminate the Employment Agreement and the Consultant’s
employment as of the Effective Time, as such term is defined in the Merger
Agreement;
WHEREAS,
the parties
hereto recognize and acknowledge the interest of National Penn and NPBank in
protecting the business and goodwill associated with KNBT and the Bank following
the Merger by having the Consultant enter into this Agreement; and
WHEREAS,
National Penn and NPBank desire to have the Consultant provide, and the
Consultant is willing to provide National Penn and NPBank with, the Consulting
Services (defined below) on the terms and conditions set forth
herein.
NOW
THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which
is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Defined
Terms.
Any
capitalized terms not defined in
this Agreement shall have as their meanings the definitions contained in the
Merger Agreement.
2. Consultancy.
(a) During
the period beginning at the Effective Time and ending on the eighteen-month
anniversary of the Effective Time (or such earlier date of termination pursuant
to Section 2(d) below) (such period, the “Consulting Period”), the Consultant
undertakes to provide his personal advice and counsel to National Penn and
its
subsidiaries and affiliates (including NPBank) in connection with the business
of National Penn and its subsidiaries, including, but not limited
to:
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(i) consulting
with National Penn regarding all financial and accounting functions related
to
National Penn and its subsidiaries, including, without limitation, tax
transition and preparation, SEC reporting, Xxxxxxxx-Xxxxx Act compliance and
assisting with the accounting records and financial statements of National
Penn
and its subsidiaries;
(ii) consulting
with National Penn regarding the operations and customer relationships of
National Penn and its subsidiaries;
(iii) assisting
National Penn with implementing its integration and transition plan following
the Merger and the Bank Merger;
(iv) providing
historical background and information regarding the October 2003 mutual-to-stock
conversion of Keystone Savings Bank into the Bank; and
(v) providing
introductions to customers and providing personal services similar to those
the
Consultant is currently providing KNBT and the Bank,
(collectively
the “Consulting Services”), subject to the terms and conditions which are set
forth herein. The Consultant shall provide such Consulting Services
as may be requested from time to time by either the President and Chief
Executive Officer or Senior Executive Vice President and Chief Operating
Officer of National Penn. During the Consulting Period, the
Consultant shall be available to devote up to 30 hours per week of his business
time, attention, skills and efforts (other than during holidays, vacations
and
periods of illness) to the business and affairs of National Penn and its
subsidiaries and affiliates and shall use his reasonable best efforts to promote
the interests of National Penn and its subsidiaries and
affiliates. Such Consulting Services may be provided in person,
telephonically, electronically or by correspondence as reasonably determined
by
National Penn. The Consultant shall be available for meetings at the
principal executive offices of National Penn and NPBank at such times as
National Penn shall reasonably require.
(b) During
the Consulting Period, National Penn or NPBank shall reimburse the Consultant
or
otherwise provide for or pay for all reasonable expenses incurred by the
Consultant at the request of National Penn or NPBank, subject to such
documentation and prior approval as may be required by National Penn or
NPBank. In addition, during the Consulting Period, NPBank shall
provide the Consultant with an automobile allowance of $900 per month, payable
monthly. For the avoidance of doubt, except for (i) the automobile
allowance payable to the Consultant pursuant to the immediately preceding
sentence and (ii) tolls and parking expenses incurred in the ordinary course
of
business, the Consultant shall not be entitled to reimbursement under this
Section 2(b) for any expenses incurred for automobile travel, including, without
limitation, mileage expense.
(c) During
the Consulting Period, the Consultant shall be treated as an independent
contractor and shall not be deemed to be an employee of National Penn or any
subsidiary or affiliate of National Penn.
(d) The
Consulting Period may terminate before the eighteen-month anniversary of the
Effective Time as follows:
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(i) From
and after the Effective Time, either National Penn and NPBank or the Consultant
may terminate this Agreement for Cause (as hereinafter defined), in which event
the Consulting Period will end as of the date of termination. “Cause”
shall mean (x) where the Consultant is the terminating party, National Penn
and
NPBank shall have materially breached the terms of this Agreement and
failed to cure such material breach during a 15-day period following the date
on
which the Consultant gives written notice to National Penn of such material
breach; or (y) where National Penn and NPBank are the terminating parties,
the
Consultant shall have (A) willfully failed to perform the Consulting
Services, other than any failure resulting from his incapacity due to physical
or mental injury or illness; (B) committed an act involving moral turpitude
in
connection with the Consulting Services; (C) engaged in willful misconduct;
(D) willfully violated, in any material respect, any law, rule or
regulation (other than traffic violations or similar offenses), written
agreement or final cease-and-desist order with respect to his performance of
the
Consulting Services; or (E) materially breached the terms of this Agreement
and failed to cure such material breach during a 15-day period following the
date on which National Penn gives written notice to the Consultant of such
material breach.
(ii) From
and after the twelve-month anniversary of the Effective Time, either National
Penn and NPBank or the Consultant may terminate the Consulting Period by
providing sixty (60) days written notice to other party.
(iii) The
Consulting Period shall automatically terminate by reason of the death of the
Consultant and no notice of termination shall be required.
(e) The
obligations of National Penn and NPBank under this Agreement are subject to
and
contingent upon the Consultant continuing to be employed by KNBT and the Bank
from the date hereof until the Effective Time.
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3.
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Non-Disclosure
of Confidential
Information.
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Except
in
the course of performing the Consulting Services hereunder, and in the pursuit
of the business of National Penn or any of its subsidiaries or affiliates,
the
Consultant shall not, except as required by law, at any time during or following
the Consulting Period, disclose or use any confidential information or
proprietary data of National Penn or any of its subsidiaries or affiliates
or
predecessors, unless such confidential information or proprietary data become
publicly known through no fault of the Consultant. Without limiting
the generality of the foregoing, the Consultant agrees that all information
concerning the identity of the customers of National Penn and its subsidiaries
and affiliates and the relations of such entities with their customers is
confidential information. This Section 3 shall survive the
termination or expiration of the Consulting Period.
4. Non-Competition
Provisions.
The
Consultant agrees that during the
eighteen-month period immediately following the Effective Time, the Consultant
will not (i) without the prior written consent of National Penn (which consent
may be given or withheld, in National Penn’s sole discretion), directly or
indirectly, engage in, become interested in, or become associated with, in
the
capacity of employee, consultant, director, officer, owner, principal, agent,
trustee or in any other capacity whatsoever, any proprietorship, partnership,
corporation, enterprise or entity located in any county in which National Penn,
NPBank or any of their subsidiaries maintains an office (collectively, the
“Counties” and individually a “County”), which proprietorship, partnership,
corporation, enterprise or other entity is, or may be deemed to be by NPBank,
competitive with any business carried on by National Penn, NPBank or any of
their subsidiaries, including but not limited to entities which lend money
and
take deposits (in each case, a “Competing Business”), provided, however, that
this provision shall not prohibit the Consultant from owning bonds, non-voting
preferred stock or up to five percent (5%) of the outstanding common stock
of
any Competing Business if such common stock is publicly traded, (ii) solicit
or
induce, or cause others to solicit or induce, any employee of National Penn
or
any of its subsidiaries to leave the employment of such entities, or (iii)
solicit (whether by mail, telephone, personal meeting or any other means,
excluding general solicitations of the public that are not based in whole or
in
part on any list of customers of National Penn or any of its subsidiaries)
any
customer of National Penn or any of its subsidiaries to transact business with
any other entity, whether or not a Competing Business, or to reduce or refrain
from doing any business with National Penn or its subsidiaries, or interfere
with or damage (or attempt to interfere with or damage) any relationship between
National Penn or its subsidiaries and any such customers. This
Section 4 shall survive the termination or expiration of the Consulting Period
in accordance with its terms.
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5. Compensation.
(a) Immediately
prior to the Effective Time, and in consideration for the termination of the
Employment Agreement (other than Sections 12, 15 and 16 thereof, which shall
remain in effect) and the Consultant’s employment thereunder as of the Effective
Time, KNBT or the Bank shall pay to the Consultant a lump sum cash amount equal
to three times the Consultant’s “base amount” (as defined in Section 280G(b)(3)
of the Code), minus the sum of (i) the parachute amounts associated with the
accelerated vesting of the Consultant’s stock options and restricted stock
awards with respect to the common stock of KNBT, (ii) $1.00 and (iii) applicable
tax withholding.
(b) In
consideration of the obligations and commitments of the Consultant under this
Agreement, including Sections 2, 3 and 4 hereof, National Penn or NPBank shall
pay to the Consultant a lump sum cash amount of $100,000 promptly after the
Effective Time, plus an amount equal to $16,000 per month on the last business
day of each month during the Consulting Period.
(c) During
the Consulting Period, National Penn or NPBank shall provide medical and dental
coverage to the Consultant under the policies offered by National Penn and
NPBank to their employees, on the same terms and conditions as if the Consultant
was an employee of NPBank, with the Consultant responsible for paying the
employee share of any premiums, copayments or deductibles. For
purposes of determining eligibility under such plans, the Consultant shall
be
credited with his service as a Bank employee and shall not be subject to any
pre-existing condition limitation for conditions covered under such plans.
In
addition, each such plan which provides health insurance benefits shall honor
any deductible and out-of-pocket expenses incurred by the Consultant under
any
comparable Bank plan for the plan year in which the Effective Time
occurs. The Consultant shall not be entitled to participate in any
other employee benefit plans, programs or arrangements of National Penn or
NPBank.
6. Successors
and Assigns.
(a) During
the first twelve months of the Consulting Period, each of National Penn and
NPBank will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
its
business and/or assets, by agreement in form and substance satisfactory to
the
Consultant, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that National
Penn or NPBank would be required to perform it if no such succession or
assignment had taken place. Any failure of National Penn or NPBank to
obtain such agreement prior to the effectiveness of any such succession or
assignment during this twelve-month period shall be a material breach of this
Agreement.
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(b) This
Agreement and all rights of the Consultant shall inure to the benefit of and
be
enforceable by the Consultant’s personal or legal representatives, estate,
executors, administrators, heirs and beneficiaries. In the event of
the Consultant’s death, any amounts accrued and unpaid through the date of death
shall be paid to the Consultant’s estate, heirs and
representatives. Except as provided in this Section 6, no party may
assign this Agreement or any rights, interests, or obligations hereunder without
the prior written approval of the other party; provided,
however, that after the twelve-month anniversary of the
Effective Time, National Penn and NPBank may assign its rights, interest and
obligations hereunder to any purchaser or other transferee (whether direct
or
indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of its business and/or assets. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to
the
benefit of the parties hereto and their respective successors and permitted
assigns.
7. Enforcement.
(a) This
Agreement shall be construed, enforced and interpreted in accordance with and
governed by the laws of the Commonwealth of Pennsylvania, without reference
to
its principles of conflict of laws, except to the extent that federal law shall
be deemed to preempt such state laws.
(b) It
is the intention of the parties hereto that the provisions of this Agreement
shall be enforced to the fullest extent permissible under all applicable laws
and public policies, but that the unenforceability or the modification to
conform with such laws or public policies of any provision hereof shall not
render unenforceable or impair the remainder of the Agreement. The
covenants in Section 4 of this Agreement with respect to the Counties shall
be
deemed to be separate covenants with respect to each County, and should any
court of competent jurisdiction conclude or find that this Agreement or any
portion is not enforceable with respect to any of the Counties, such conclusion
or finding shall in no way render invalid or unenforceable the covenants herein
with respect to any other County. Accordingly, if any provision shall
be determined to be invalid or unenforceable either in whole or in part, this
Agreement shall be deemed amended to delete or modify as necessary the invalid
or unenforceable provisions to alter the balance of this Agreement in order
to
render the same valid and enforceable.
(c) The
Consultant acknowledges that National Penn and NPBank would not have entered
into the Merger Agreement or intend to consummate the Merger unless the
Consultant had, among other things, entered into this Agreement. Any
breach of Sections 3 or 4 of this Agreement will result in irreparable damage
to
National Penn and NPBank for which National Penn and NPBank will not have an
adequate remedy at law. In addition to any other remedies and damages
available to National Penn and NPBank, the Consultant further acknowledges
that
National Penn and NPBank shall be entitled to seek injunctive relief hereunder
to enjoin any breach of Sections 3 or 4 of this Agreement, and the parties
hereby consent to any injunction issued in favor of National Penn and NPBank
by
any court of competent jurisdiction, without prejudice to any other right or
remedy to which National Penn and NPBank may be entitled. The
Consultant represents and acknowledges that, in light of his experience and
capabilities, the Consultant can obtain employment with other than a Competing
Business or in a business engaged in other lines and/or of a different nature
than those engaged in by National Penn or its subsidiaries or affiliates, and
that the enforcement of a remedy by way of injunction will not prevent the
Consultant from earning a livelihood. In the event of a breach of
this Agreement by the Consultant, the Consultant acknowledges that in addition
to or in lieu of National Penn or NPBank seeking injunctive relief, National
Penn or NPBank may also seek to recoup any or all amounts paid by National
Penn
or NPBank to the Consultant pursuant to Section 5(b) hereof. Each of
the remedies available to National Penn and NPBank in the event of a breach
by
the Consultant shall be cumulative and not mutually exclusive.
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8. Amendment.
This
Agreement may be amended or
modified at any time by a written instrument executed by the parties prior
to
the Effective Time and thereafter by National Penn, NPBank and the
Consultant.
9. Withholding.
National
Penn and NPBank shall be
entitled to withhold from amounts to be paid to the Consultant hereunder any
federal, state or local withholding or other taxes, or charge which it is from
time to time required to withhold. National Penn and NPBank shall be
entitled to rely on an opinion of counsel if any question as to the amount
or
requirement of any such withholding shall arise.
10. Notice.
Any
communication required or permitted
to be given under this Agreement, including any notice, direction, designation,
consent, instruction, objection or waiver, shall be in writing and shall be
deemed to have been given at such time as it is delivered personally, or five
days after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below
or
at such other address as one such party may by written notice specify to the
other party:
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If
to the
Consultant:
Xxxx
X.
Xxxxx
At
the
address last appearing
on
the
records of KNBT or National Penn
If
to
KNBT and the Bank:
KNBT
Bancorp, Inc.
Keystone
Nazareth Bank & Trust Company
Xxxxx
000
xxx Xxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Chairman of the Compensation Committee of the Board
If
to
National Penn and NPBank:
National
Penn Bancshares,
Inc.
National
Penn Bank
Philadelphia
and Xxxxxxx Xxxxxxx
X.X.
Xxx
000
Xxxxxxxxx,
Xxxxxxxxxxxx 00000-0000
Attention:
President and Chief Executive Officer
11. Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant or
condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or
power hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
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12.
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Counterparts.
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This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
Agreement.
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13.
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Headings
and Construction.
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The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any section. Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.
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14.
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Entire
Agreement.
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This
instrument contains the entire
agreement of the parties relating to the subject matter hereof, and supersedes
in its entirety any and all prior agreements, understandings or representations
relating to the subject matter hereof, including but not limited to the
Employment Agreement, except that Sections 12, 15 and 16 of the Employment
Agreement shall remain in effect.
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15. Effectiveness.
Notwithstanding
anything to the
contrary contained in this Agreement, the effectiveness of this Agreement shall
be subject to consummation of the Merger in accordance with the terms of the
Merger Agreement, as the same may be amended by the parties thereto in
accordance with its terms. In the event the Merger Agreement is
terminated for any reason, this Agreement shall be deemed null and
void.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, each of National
Penn, NPBank, KNBT and the Bank has caused this Agreement to be executed by
its
duly authorized officer, and the Consultant has signed this Agreement, all
as of
the date first written above.
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WITNESS:
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CONSULTANT:
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/s/
Xxxxxxx X. Xxxxxx
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/s/
Xxxxxx X. Xxxxx
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Name:
Xxxxxxx X. Xxxxxx
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Xxxxxx
X. Xxxxx
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Title:
Corporate Secretary
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ATTEST:
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NATIONAL
PENN BANCSHARES, INC.
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/s/
Xxxxxx X. Xxxxx
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By:
/s/ Xxxxx X. Xxxxx
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Name:
Xxxxxx X. Xxxxx
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Name:
Xxxxx X. Xxxxx
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Title:
Corporate Secretary
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Title:
President and CEO
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ATTEST:
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NATIONAL
PENN BANK
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/s/
Xxxxxx X. Xxxxx
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By:
/s/ Xxxxx X. Xxxxx
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Name:
Xxxxxx X. Xxxxx
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Name:
Xxxxx X. Xxxxx
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Title:
Corporate Secretary
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Title:
President and CEO
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ATTEST:
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KNBT
BANCORP, INC.
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/s/
Xxxxxxx X. Xxxxxx
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By:
/s/ Xxxxxxx X. Xxxxxxx
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Name:
Xxxxxxx X. Xxxxxx
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Name:
Xxxxxxx X. Xxxxxxx
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Title:
Corporate Secretary
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Title:
Chairman of the Board
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ATTEST:
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KEYSTONE
NAZARETH BANK
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&
TRUST COMPANY
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/s/
Xxxxxxx X. Xxxxxx
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By:
/s/ Xxxxxxx X. Xxxxxxx
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Name:
Xxxxxxx X. Xxxxxx
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Name:
Xxxxxxx X. Xxxxxxx
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Title: Corporate
Secretary
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Title:
Chairman of the Board
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