EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this 14th day of July, 1998, by and between PENN FEDERAL SAVINGS BANK, 000 Xxxxx
Xxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxxxx, a federally chartered savings bank (which,
together with any successor thereto which executes and delivers the assumption
agreement provided for in Section 11(a) hereof or which otherwise becomes bound
by the terms and provisions of this Agreement by operation of law, is
hereinafter referred to as the "Bank"), and Xxxxxxx X. Xxxxxxxx (the "Employee")
whose residence address is ____________________________________, New Jersey.
WHEREAS, the Employee is currently serving as the Senior Vice
President-Retail Banking of the Bank; and
WHEREAS, the Board of Directors of the Bank recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of PennFed Financial Services, Inc. (the "Holding Company") may exist
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of key management
personnel to the detriment of the Bank, the Holding Company and its
stockholders; and
WHEREAS, the Board of Directors of the Bank believes it is in the best
interests of the Bank to enter into this Agreement with the Employee in order to
assure continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to her assigned duties
without distraction in the face of potentially disruptive circumstances
1
arising from the possibility of a change in control of the Holding Company,
although no such change is now contemplated; and
WHEREAS, the Board of Directors of the Bank has approved and authorized
the execution of this Agreement with the Employee to take effect as stated in
Section 4 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, it is AGREED as
follows:
1. Employment. The Employee is employed as the Senior Vice
President-Retail Banking of the Bank. As such, the Employee shall render
administrative and management services as are customarily performed by persons
serving in similar capacities, and shall have such other powers and duties as
may from time to time be prescribed by the Board of Directors of the Bank,
provided that such duties are consistent under the Employee's position as Senior
Vice President-Retail Banking. The Employee shall continue to devote her best
efforts and substantially all her business time and attention to the business
and affairs of the Bank and its subsidiaries and affiliated companies.
2. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the
term of this Agreement a salary established by the Board of Directors. The
salary hereunder as of the Commencement Date (as defined in Section 4 hereof)
shall be equal to the Employee's salary as in effect immediately prior to such
date. The Employee's salary shall be payable not less frequently than monthly
and not later than the tenth day following the expiration of the month in
question. The amount of the Employee's salary shall be reviewed by
2
the Board of Directors not less often than annually, beginning not later than
the date one year after the Commencement Date (as defined in Section 4 hereof).
Any adjustments in salary or other compensation shall in no way limit or reduce
any other obligation of the Bank hereunder. The Employee's salary in effect
hereunder from time to time shall not thereafter be reduced.
(b) Discretionary Bonuses. The Employee shall be entitled to
participate in an equitable manner with all other executive officers of the Bank
in discretionary bonuses as authorized and declared by the Board of Directors of
the Bank to its executive employees. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such bonuses when and as declared by the Board of Directors.
(c) Expenses. During the term of her employment hereunder, the
Employee shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by her (in accordance with policies and procedures at least as
favorable to the Employee as those presently applicable to the executive
officers of the Bank) in performing services hereunder, provided that the
Employee properly accounts therefor in accordance with Bank policy.
3. Benefits.
(a) Participation in Retirement and Employee Benefit Plans.
The Employee shall be entitled while employed hereunder to
3
participate in, and receive benefits under, all plans relating to pension,
thrift, profit-sharing, group life insurance, medical coverage, education, cash
bonuses, and other retirement or employee benefits or combinations thereof, that
are maintained for the benefit of the Bank's executive employees or for its
employees generally.
(b) Fringe Benefits. The Employee shall be eligible while
employed hereunder to participate in, and receive benefits under, any other
fringe benefits which are or may become applicable to the Bank's executive
employees or to its employees generally.
(c) Plans Applicable to the Employee. The Employee shall be
the beneficiary of such compensation plans and benefits as may be designed
specifically for the Employee in the discretion of the Board of Directors of the
Bank.
4. Term. The term of employment under this Agreement shall be a period
of three years commencing on the date hereof (the "Commencement Date"), subject
to earlier termination as provided herein. Beginning on the first anniversary of
the Commencement Date, and on each anniversary thereafter, the term of
employment under this Agreement shall be extended for a period of one year in
addition to the then-remaining term of employment under this Agreement, unless
either the Bank or the Employee gives contrary written notice to the other not
less than 90 days in advance of the date on which the term of employment under
this Agreement would otherwise be extended.
Notwithstanding any other statement or provision in this Agreement to
the contrary, this Agreement will not be automatically extended unless, prior
thereto, the Board of Directors of the Bank
4
reviews a formal performance evaluation of the Employee performed by
disinterested members of the Board of Directors of the Bank, which is reflected
in the minutes of the Board of Directors, and affirmatively approves the
extension. Reference herein to the term of employment under this Agreement shall
refer to both such initial term and such extended terms.
5. Vacations. The Employee shall be entitled, without loss of pay, to
absent herself voluntarily from the performance of her employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) During the term of employment under this Agreement, the
Employee shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs or practices of the Bank and its affiliated
companies as in effect for the Employee at any time during the six-month period
immediately preceding the Commencement Date or, if more favorable to the
Employee, as in effect generally at any time thereafter with respect to other
executives of the Bank and its affiliated companies; and
(b) The timing of vacations shall be scheduled in a reasonable
manner by the Employee.
6. Termination of Employment; Death.
(a) The Bank's Board of Directors may terminate the Employee's
employment at any time, but any termination by the Bank's Board of Directors
other than termination for cause, shall not prejudice the Employee's right to
compensation or other benefits under this Agreement. If the employment of the
Employee is involuntarily terminated, other than for "cause" as provided in this
Section 6(a) or by reason of death or disability as provided
5
in Sections 6(c) or 7, the Bank shall pay the Employee her salary and provide to
the Employee the same insurance benefits as she was receiving before the date of
termination through the remaining term of this Agreement.
The terms "termination" or "involuntarily terminated" in this Agreement
shall refer to the termination of the employment of Employee without her express
written consent. In addition, a material diminution of or interference with the
Employee's duties, responsibilities and benefits as Senior Vice President-Retail
Banking of the Bank shall be deemed and shall constitute an involuntary
termination of employment to the same extent as express notice of such
involuntary termination. Any of the following actions shall constitute such
diminution or interference unless consented to in writing by the Employee: (1) a
change in the principal workplace of the Employee to a location outside of a 35
mile radius from the Bank's headquarters office as of the date hereof; (2) a
material demotion of the Employee, a material reduction in the number or
seniority of other Bank personnel reporting to the Employee, or a material
reduction in the frequency with which, or in the nature of the matters with
respect to which, such personnel are to report to the Employee, other than as
part of a Bank- or Holding Company-wide reduction in staff; (3) a reduction or
adverse change in the salary, perquisites, benefits, contingent benefits or
vacation time which had theretofore been provided to the Employee, other than as
part of an overall program applied uniformly and with equitable effect to all
members of the senior management of the Bank or the Holding Company; and (4) a
material
6
increase in the required hours of work or the workload of the Employee.
In case of termination of the Employee's employment for cause, the Bank
shall pay the Employee her salary through the date of termination, and the Bank
shall have no further obligation to the Employee under this Agreement. For
purposes of this Agreement, termination for "cause" shall include termination
for personal dishonesty, incompetence, willful misconduct, breach of a 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 this Agreement. Notwithstanding the foregoing, the Employee shall
not be deemed to have been terminated for cause unless and until there shall
have been delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than a disinterested majority of the entire
membership of the Board of Directors of the Bank at a meeting of the Board
called and held for such purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's counsel, to be heard
before the Board), stating that in the good faith opinion of the Board the
Employee was guilty of conduct constituting "cause" as set forth above and
specifying the particulars thereof in detail.
(b) The Employee's employment may be voluntarily terminated by the
Employee at any time upon 90 days written notice to the Bank or upon such
shorter period as may be agreed upon between the Employee and the Board of
Directors of the Bank. In the event of
7
such voluntary termination, the Bank shall be obligated to continue to pay the
Employee her salary and benefits only through the date of termination, at the
time such payments are due, and the Bank shall have no further obligation to the
Employee under this Agreement.
(c) In the event of the death of the Employee during the term
of employment under this Agreement and prior to any termination hereunder, the
Employee's estate, or such person as the Employee may have previously designated
in writing, shall be entitled to receive from the Bank the salary of the
Employee through the last day of the calendar month in which her death shall
have occurred, and the term of employment under this Agreement shall end on such
last day of the month.
(d) If the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA"), 12
U.S.C. ss. 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Employee all or part of the compensation withheld while
its obligations under this Agreement were suspended and (ii) reinstate in whole
or in part any of its obligations which were suspended.
(e) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. ss. 1818(e)(4) and (g)(1), all
obligations of the Bank under
8
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(f) If the Bank is in default (as defined in Section 3(x)(1)
of the FDIA, all obligations under this Agreement shall terminate as of the date
of default, but this provision shall not affect any vested rights of the
contracting parties.
(g) 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 Bank: (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee, at the time the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the FDIA; or (ii) by the Director or his or her designee, at
the time the Director or his or her designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is determined
by the Director to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by any such
action.
(h) In the event the Bank purports to terminate the Employee
for cause, but it is determined by a court of competent jurisdiction or by an
arbitrator pursuant to Section 17 that cause did not exist for such termination,
or if in any event it is determined by any such court or arbitrator that the
Bank has failed to make timely payment of any amounts owed to the Employee under
this Agreement, the Employee shall be entitled to reimbursement for
9
all reasonable costs, including attorneys' fees, incurred in challenging such
termination or collecting such amounts. Such reimbursement shall be in addition
to all rights to which the Employee is otherwise entitled under this Agreement.
7. Disability. If the Employee shall become disabled as defined in the
Bank's then current disability plan or if the Employee shall be otherwise unable
to serve as Senior Vice President-Retail Banking, the Employee shall be entitled
to receive group and other disability income benefits of the type then provided
by the Bank for other executive employees. In the event of such disability, this
Agreement shall not be suspended. However, the Bank shall be obligated to pay
the Employee compensation pursuant to Sections 2(a) and (b) hereof only to the
extent of the difference between the Employee's salary and the disability income
benefits received pursuant to this paragraph. In addition, the Bank shall have
the right, upon resolution of the majority of the disinterested members of the
Board of Directors, to discontinue paying cash compensation pursuant to Sections
2(a) and (b) beginning six months following a determination that Employee
qualifies for the foregoing disability income benefits.
8. Change in Control.
(a) Involuntary Termination. If the Employee's employment is
involuntarily terminated (other than for cause or pursuant to any of Sections
6(c) through 6(g) or Section 7 of this Agreement) in connection with or within
12 months after a change in control which occurs at any time during the term of
employment under this Agreement, the Employee shall be entitled to the benefits
provided below:
10
(i) The Bank shall pay the Employee her salary in accordance
with Section 2 for the remaining term of employment under this
Agreement; plus
(ii) The Bank shall pay to the Employee in a lump sum in cash
within 25 business days after the Date of Termination (as hereinafter
defined) of employment an amount equal to 299 percent of the Employee's
"base amount" of compensation, as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended ("Code"); plus
(iii) The Bank shall continue to provide the Employee with
health benefits in accordance with Section 6 for the remaining term of
employment under this Agreement.
Notwithstanding any other provision or statement herein to the contrary, the
amounts payable to the Employee pursuant to subsec tions (i), (ii) and (iii)
above shall be limited, such that these amounts will not exceed three times the
Employee's average annual compensation over the most recent five year period or
be nondeductible by the Bank for Federal income tax purposes pursuant to Section
280G of the Code.
(b) Definitions. For purposes of Section 8, 9 and 11 of this
Agreement, "Date of Termination" means the earlier of (i) the date upon which
the Bank gives notice to the Employee of the termination of her employment with
the Bank or (ii) the date upon which the Employee ceases to serve as an Employee
of the Bank, and "change in control" is defined solely as any acquisition of
control (other than by a trustee or other fiduciary holding securities under an
employee benefit plan of the Holding Company or a subsidiary of the Holding
Company), as defined in 12 C.F.R.
11
ss. 574.4, or any successor regulation, of the Bank or Holding Company which
would require the filing of an application for acquisition of control or notice
of change in control in a manner as set forth in 12 C.F.R. ss. 574.3, or any
successor regulation.
9. Certain Reduction of Payments by the Bank. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Bank to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be nondeductible
(in whole or part) by the Bank for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of the Employee pursuant to this Agreement
(such amounts payable or distributable pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. The "Reduced Amount" shall be an amount, not less than zero, expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Bank because of
Section 280G of the Code. For purposes of this Section 9, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section
9 shall be made by the Bank's independent auditors, or at the election of such
auditors by such other firm or individuals of recognized expertise as such
auditors may select (such auditors or, if applicable, such other firm or
individual, are hereinafter referred to as the "Advisory Firm"). The Advisory
Firm shall
12
within ten business days of the Date of Termination, or at such earlier time as
is requested by the Bank, provide to both the Bank and the Employee an opinion
(and detailed supporting calculations) that the Bank has substantial authority
to deduct for federal income tax purposes the full amount of the Agreement
Payments and that the Employee has substantial authority not to report on her
federal income tax return any excise tax imposed by Section 4999 of the Code
with respect to the Agreement Payments. Any such determination and opinion by
the Advisory Firm shall be binding upon the Bank and the Employee. The Employee
shall determine which and how much, if any, of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section 9,
provided that, if the Employee does not make such determination within ten
business days of the receipt of the calculations made by the Advisory Firm, the
Bank shall elect which and how much, if any, of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section 9 and
shall notify the Employee promptly of such election. Within five business days
of the earlier of (i) the Bank's receipt of the Employee's determination
pursuant to the immediately preceding sentence of this Agreement or (ii) the
Bank's election in lieu of such determination, the Bank shall pay to or
distribute to or for the benefit of the Employee such amounts as are then due
the Employee under this Agreement. The Bank and the Employee shall cooperate
fully with the Advisory Firm, including without limitation providing to the
Advisory Firm all information and materials reasonably requested by it, in
connection with the making of the determinations required under this Section 9.
13
(c) As a result of uncertainty in application of Section 280G
of the Code at the time of the initial determination by the Advisory Firm
hereunder, it is possible that Agreement Payments will have been made by the
Bank which should not have been made ("Overpayment") or that additional
Agreement Payments will not have been made by the Bank which should have been
made ("Underpayment"), in each case, consistent with the calculations required
to be made hereunder. In the event that the Advisory Firm, based upon the
assertion by the Internal Revenue Service against the Employee of a deficiency
which the Advisory Firm believes has a high probability of success determines
that an Overpayment has been made, any such Overpayment paid or distributed by
the Bank to or for the benefit of Employee shall be treated for all purposes as
a loan ab initio which the Employee shall repay to the Bank together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that no such loan shall be deemed to have been made
and no amount shall be payable by the Employee to the Bank if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Employee is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Advisory Firm, based upon
controlling precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Bank to or for the benefit of the Employee together with interest at the
14
applicable federal rate provided for in Section 7872(f)(2) of the Code.
10. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation earned by
the Employee as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
11. No Assignments. (a) This Agreement is personal to each of the
parties hereto, and neither party may assign or delegate any of its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Bank will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Bank, by an
assumption agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Bank would be required to perform it if no such
succession or assignment had taken place. Failure of the Bank to obtain such an
assumption agreement prior to the effectiveness of any such succession or
assignment shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Bank in the same amount and on the same terms as the
compensation pursuant to Section 8(a) hereof. For purposes of implementing the
provisions of this Section 11(a), the date on which any such succession becomes
effective shall be deemed the Date of Termination.
15
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee or if there is no such designee, to the Employee's
estate.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Bank shall be directed to the attention of the Board of Directors
of the Bank with a copy to the Secretary of the Bank), or to such other address
as either party may have furnished to the other in writing in accordance
herewith.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided. The parties hereto agree to amend this Agreement to comply with any
required provisions of 12 C.F.R. ss. 563.39(b), as the same may be amended.
14. Paragraph Headings. The paragraph headings used in this Agreement
are included solely for convenience and shall not affect,
16
or be used in connection with, the interpretation of this Agreement.
15. 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.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
New Jersey.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
18. Regulatory Compliance. Any payments made to the Employee pursuant
to this Agreement, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. ss. 1828(k) and any regulations promulgated
thereunder. Notwithstanding anything in this Agreement to the contrary, no
payments may be made pursuant to this Agreement without the prior approval of
the OTS if the Bank is not in compliance with its regulatory capital
requirements, or if such payment would cause the Bank to fail its regulatory
capital requirements.
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
PENN FEDERAL SAVINGS BANK
By: /s/Xxxxxx X. XxXxxxxx
---------------------
Xxxxxx X. XxXxxxxx
President and Chief
Executive Officer
EMPLOYEE
/s/Xxxxxxx X. Xxxxxxxx
----------------------
Xxxxxxx X. Xxxxxxxx
18
