EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December
28, 2006 by and among Keystone Nazareth Bank & Trust Company (the “Bank”),
KNBT Bancorp, Inc. (the “Company”) (the Bank and the Company are collectively
referred to as the “Employer”), and Xxxxxx X. Xxxxxx (the
“Executive”).
W
I T N E
S S E T H :
WHEREAS,
the Employer desires to ensure that the Company and the Bank are assured of
the
continued availability of the Executive's services as provided in this
Agreement; and
WHEREAS,
the Executive is willing to serve the Company and the Bank on the terms and
conditions hereinafter set forth.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
conditions hereinafter set forth, the Employer and the Executive hereby agree
as
follows:
SECTION
1. EFFECTIVE
DATE; EMPLOYMENT.
For
purposes of this Agreement, “Effective Date” shall mean December 31, 2004,
provided
that
this
Agreement shall be effective as of the date first written above. The Employer
agrees to employ the Executive, and the Executive hereby agrees to such
employment, during the period and upon the terms and conditions set forth in
this Agreement.
SECTION
2. EMPLOYMENT
PERIOD.
(a) The
terms
and conditions of this Agreement shall be and remain in effect through December
31, 2008 plus such extensions, if any, as are provided pursuant to Section
2(b)
hereof (the "Employment Period").
(b) Except
as
provided in Section 2(c), beginning on December 31, 2007 and on each subsequent
December 31st
during
the Employment Period, the Employment Period shall automatically be extended
for
one additional year, unless either the Company or the Bank, on the one hand,
or
the Executive, on the other hand, elects not to extend the Agreement further
by
giving written notice thereof to the other parties at least 30 days prior to
such annual anniversary date. Upon termination of the Executive's employment
with either of the Employer for any reason whatsoever, any annual extensions
provided pursuant to this Section 2(b), if not theretofore discontinued, shall
automatically cease.
(c) Nothing
in this Agreement shall be deemed to prohibit the Employer at any time from
terminating the Executive's employment during the Employment Period for any
reason upon at least 30 days written notice to the Executive, other than
termination for Cause which shall be governed by Section 10 hereof, provided
that
the
relative rights and obligations of the Employer and the Executive in the event
of any such termination shall be determined under this Agreement. Furthermore,
notwithstanding anything to the contrary herein, no extension of this Agreement
pursuant to Section 2(b) shall occur that would extend the term of this
Agreement beyond December 31st
of the
year in which the Executive reaches age 64.
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SECTION
3. DUTIES.
(a) Throughout
the Employment Period, the Executive shall serve as the Senior Executive Vice
President and the Chief Risk Officer of each of the Employer, having such power,
authority and responsibility and performing such duties as are prescribed by
or
under the Bylaws of each of the Company and the Bank and as are customarily
associated with such positions. The Executive shall devote her full business
time, attention, skills and efforts (other than during weekends, holidays,
vacation periods, and periods of illness or leaves of absence and other than
as
permitted or contemplated by Section 7 hereof) to the business and affairs
of
the Employer and shall use her best efforts to advance the interests of the
Employer.
SECTION
4. CASH
AND
OTHER COMPENSATION.
(a) In
consideration for the services to be rendered by the Executive hereunder, the
Employer shall pay to her a salary of two hundred thousand dollars ($200,000)
annually (“Base Salary”). The Executive's Base Salary shall be payable in
approximately equal installments in accordance with the Company’s and the Bank’s
customary payroll practices for senior officers. Base Salary shall include
any
amounts of compensation deferred by the Executive under any tax-qualified
retirement or welfare benefit plan or any other deferred compensation
arrangement. The Company Board and the Bank Board shall review the Executive's
annual rate of salary at such times during the Employment Period as they deem
appropriate, but not less frequently than once every twelve months, and may,
in
their respective discretion, approve an increase therein. In addition to salary,
the Executive may receive other cash compensation from the Employer for services
hereunder at such times, in such amounts and on such terms and conditions as
the
Company Board or the Bank Board may determine from time to time. Any increase
in
the Executive’s annual salary shall become the Base Salary of the Executive for
purposes hereof. The Executive’s Base Salary as in effect from time to time
cannot be decreased by the Employer without the Executive’s express prior
written consent.
(b) The
Executive shall be entitled to participate in an equitable manner with all
other
executive officers of the Employer in discretionary bonuses as authorized by
the
Company Board and/or the Bank Board to executive officers. No other compensation
provided for in this Agreement shall be deemed a substitute for the Executive’s
right to participate in such bonuses when and as declared by the Company Board
and/or the Bank Board.
SECTION
5. EMPLOYEE
BENEFIT PLANS AND PROGRAMS.
During
the Employment Period, the Executive shall be treated as an employee of the
Company and the Bank and shall be entitled to participate in and receive
benefits under any and all qualified or non-qualified retirement, pension,
savings or profit-sharing plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans, and any other employee benefit and compensation
plans (including, but not limited to, any incentive compensation plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover employees of, the Company
and the Bank, in accordance with the terms and conditions of such employee
benefit plans and programs and compensation plans and programs and consistent
with the Company's and the Bank’s customary practices. The level of
participation in any restricted stock plan shall be at a level which is deemed
appropriate by the Company Board or the committee that administers such plan.
Nothing paid to the Executive under any such plan or program will be deemed
to
be in lieu of other compensation to which the Executive is entitled under this
Agreement.
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SECTION
6. INDEMNIFICATION
AND INSURANCE.
(a) During
the Employment Period and for a period of six years thereafter, the Employer
shall cause the Executive to be covered by and named as an insured under any
policy or contract of insurance obtained by them to insure their directors
and
officers against personal liability for acts or omissions in connection with
service as an officer or director of the Employer or service in other capacities
at the request of the Employer. The coverage provided to the Executive pursuant
to this Section 6 shall be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other officers or directors
of
the Employer or any successors.
(b) To
the
maximum extent permitted under applicable law, the Employer shall indemnify
the
Executive against and hold her harmless from any costs, liabilities, losses
and
exposures that may be incurred by the Executive in her capacity as a director
or
officer of the Employer or any subsidiary or affiliate.
SECTION
7. OUTSIDE
ACTIVITIES.
The
Executive may (a) serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by the Employer (which approval shall not be unreasonably withheld),
and (b) perform duties as a trustee or personal representative or in any other
fiduciary capacity, provided
that
in each
case such service shall not materially interfere with the performance of her
duties under this Agreement or present any conflict of interest. The Executive
may also engage in personal business and investment activities which do not
materially interfere with the performance of her duties hereunder, provided
that
such
activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Employer and generally applicable
to all similarly situated executives. If the Executive is discharged or
suspended, or is subject to any regulatory prohibition or restriction with
respect to participation in the affairs of the Bank, he shall continue to
perform services for the Company in accordance with this Agreement but shall
not
directly or indirectly provide services to or participate in the affairs of
the
Bank in a manner inconsistent with the terms of such discharge or suspension
or
any applicable regulatory order.
SECTION
8. WORKING
FACILITIES AND EXPENSES.
It
is
understood by the parties that the Executive's principal place of employment
shall be at the Employer’s principal executive office located in Bethlehem,
Pennsylvania, or at such other location within 25 miles
of
the address of such principal executive office, or at such other location as
the
Employer and the Executive may mutually agree upon. The Employer shall provide
the Executive at her principal place of employment with a private office,
secretarial services and other support services and facilities suitable to
her
position with the Employer and necessary or appropriate in connection with
the
performance of her assigned duties under this Agreement. The Employer shall
reimburse the Executive for her ordinary and necessary business expenses
attributable to the Employer’s business, including, without limitation, the
Executive's travel and entertainment expenses incurred in connection with the
performance of her duties for the Employer under this Agreement, in each case
upon presentation to the Employer of an itemized account of such expenses in
such form as the Employer may reasonably require.
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SECTION
9. TERMINATION
OF EMPLOYMENT WITH BENEFITS.
(a) The
Executive shall be entitled to the benefits described in Section 9(b) in the
event that either prior to a Change in Control or more than two years after
a
Change in Control as defined in Section 11(a):
(i) her
employment with the Employer terminates during the Employment Period as a result
of the Executive's resignation within six full calendar months
following:
(A) the
failure of either the Company Board or the Bank Board to appoint or re-appoint
the Executive to the positions with the Company stated in Section 3 of this
Agreement;
(B) the
expiration of a 30-day period following the date on which the Executive gives
written notice to the Employer of its material failure, whether by amendment
of
the Articles of Incorporation or Bylaws of either the Company or the Bank,
or by
action of the Company Board, the Company's shareholders, the Bank Board, the
Bank’s shareholder(s), or otherwise, to vest in the Executive the functions,
duties or responsibilities prescribed in Section 3 of this Agreement, unless,
during such 30-day period, the Employer cures such failure;
(C) the
expiration of a 30-day period following the date on which the Executive gives
written notice to the Employer of its material breach of any term, condition
or
covenant contained in this Agreement (including, without limitation, any
reduction of the Executive's rate of Base Salary in effect from time to time
and
any change in the terms and conditions of any compensation or benefit program
in
which the Executive participates which, either individually or together with
other changes, has a material adverse effect on the aggregate value of her
total
compensation package), unless, during such 30-day period, the Employer cures
such failure;
(D) a
change
in the Executive's principal place of employment by a distance in excess
of 25
miles
from the Employer’s principal executive office in Bethlehem,
Pennsylvania;
(E) the
receipt by the Executive of written notice pursuant to Section 2(b) hereof
that
the Employment Period is not being extended as of any annual anniversary date
of
the Effective Date; or
(F) the
termination of the Executive’s employment by either the Company or the Bank for
reasons other than those specified in Section 10 hereof; or
(ii) the
Executive's employment with the Employer is terminated (A) by the Employer
during the Employment Period for any reason other than for "cause," death or
“Disability,” as provided in Section 10(a) or (B) pursuant to the provisions of
Section 9(c).
(b) Upon
the
termination of the Executive’s employment pursuant to Section 9(a) of this
Agreement either prior to a Change in Control as defined in Section 11(a) or
more than two years after a Change in Control, the Employer shall pay and
provide to the Executive (or, in the event of her subsequent death, to her
estate):
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(i) her
earned but unpaid Base Salary (including, without limitation, all items which
constitute wages under applicable law and the payment of which is not otherwise
provided for in this Section 9(b)) as of the date of the termination of her
employment, such payment to be made at the time and in the manner prescribed
by
law applicable to the payment of wages but in no event later than 30 days after
termination of employment;
(ii) the
benefits, if any, to which she is entitled under the employee benefit plans
and
programs and compensation plans and programs maintained for the benefit of
the
Company's and the Bank’s officers and employees through the date of the
termination of her employment;
(iii) continued
group life, health, dental, accident and long term disability insurance
benefits, in addition to that provided pursuant to Section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer, if and
to
the extent necessary to provide for the Executive, for the period beginning
on
the date on which her employment terminates and ending on the earlier of (A)
the
last day of the Employment Period (the “Remaining Employment Period”) or (B) 18
months from the date of termination (with such lesser period being the “Coverage
Period”), coverage equivalent to the coverage to which she would have been
entitled under such plans if he had continued to be employed during such period
at the highest annual rate of salary achieved during the Employment
Period;
(iv) within
30
days following the date on which her employment terminates, a lump sum payment,
in an amount equal to the present value of the Base Salary that the Executive
would have earned if she had continued to be employed during the Coverage Period
at the highest annual rate of Base Salary achieved during the Employment Period,
such present value to be determined using a discount rate equal to the
applicable short-term federal rate prescribed under Section 1274(d) of the
Code,
compounded using the compounding periods corresponding to the Company's and
the
Bank’s regular payroll periods for their officers, and such lump sum to be paid
in lieu of all other payments of Base Salary provided for under this Agreement
in respect of the Coverage Period;
(v) within
30
days following the date on which her employment terminates, a lump sum payment
in an amount equal to the excess, if any, of:
(A) the
present value of the aggregate benefits to which she would be entitled under
any
and all qualified defined benefit pension plans and non-qualified plans related
thereto maintained by, or covering employees of, the Company and the Bank if
she
were 100% vested thereunder and had continued to be employed during the Coverage
Period at the highest annual rate of Base Salary achieved during the Employment
Period; over
(B) the
present value of the benefits to which she is actually entitled under such
defined benefit pension plans as of the date on which her employment terminates;
such present values to be determined using the mortality tables prescribed
under
Section 415(b)(2)(E)(v) of the Code and a discount rate, compounded monthly,
equal to the annualized rate of interest prescribed by the Pension Benefit
Guaranty Corporation for the valuation of immediate annuities payable under
terminating single-employer defined benefit plans for the month in which the
Executive's employment terminates ("Applicable PBGC Rate");
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(vi) within
30
days following the date on which her employment terminates, a lump sum payment
in an amount equal to the present value of the additional employer contributions
to which she would have been entitled under any and all qualified defined
contribution plans and non-qualified plans related thereto maintained by, or
covering employees of, the Company and the Bank as if she were 100% vested
thereunder and had continued to be employed during the Coverage Period at the
highest annual rate of Base Salary achieved during the Employment Period and
making the maximum amount of employee contributions, if any, required or
permitted under such plan or plans, such present value to be determined on
the
basis of a discount rate, compounded using the compounding period that
corresponds to the frequency with which employer contributions are made to
the
relevant plan, equal to the applicable short-term federal rate prescribed under
Section 1274(d) of the Code, provided that no payments shall be made pursuant
to
this subsection (vi) with respect to the Company’s Employee Stock Ownership Plan
(“ESOP”) if the ESOP is terminated effective as of a date within one year of the
date of the termination of the Executive’s employment;
(vii) within
30
days following the date on which her employment terminates, a lump sum payment
in an amount equal to the present value of the payments that would have been
made to the Executive under any cash bonus or long-term or short-term cash
incentive compensation plan maintained by, or covering employees of, the Company
and the Bank if she had continued to be employed during the Coverage Period
and
had earned in each calendar year that ends during the Coverage Period a bonus
or
incentive award that equals the highest annual bonus or incentive award paid
to
the Executive during the preceding 36 calendar months, with the present value
of
such payments to be determined using a discount rate equal to the applicable
short-term federal rate prescribed under Section 1274(d) of the Code, compounded
using the compounding periods corresponding to the Company’s and the Bank’s
schedule of paying bonuses;
(viii) for
the
first year following the date on which her employment terminates, reimbursement
for all reasonable expenses incurred by the Executive in connection with the
search for new employment, including without limitation those of a placement
agency or service, and reimbursement for all reasonable relocation expenses
incurred by the Executive in connection with securing new employment; provided,
however, that the amounts payable by the Employer pursuant to this subsection
(viii) shall not exceed $25,000; and
(ix) within
30
days following the occurrence of an event described in Section 9(a), upon the
surrender of then outstanding options or appreciation rights (other than options
or appreciation rights which do not, by their terms, vest in the event of a
Change in Control as defined in Section 11(a) hereof) previously issued to
the
Executive under any stock option and appreciation rights plan or program
maintained by, or covering employees of, the Employer, a lump sum payment in
an
amount equal to the product of:
(A) the
excess of (I) the fair market value of a share of stock of the same class as
the
stock subject to the option or appreciation right, determined as of the date
on
which her employment terminates, over (II) the exercise price per share for
such
option or appreciation right, as specified in or under the relevant plan or
program; multiplied by
(B) the
number of shares with respect to which options or appreciation rights are being
surrendered.
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The
Employer and the Executive agree that the Employer may condition the payments
and benefits (if any) due under Sections 9(b)(iii), (iv), (v), (vi), (vii)
and
(viii) on the receipt of the Executive's resignation from any and all positions
which she holds as an officer, director or committee member with respect to
the
Employer or any of its subsidiaries or affiliates.
(c) In
the
event the Executive’s employment is terminated by voluntary resignation
(including voluntary retirement) subsequent to the Executive reaching age 64
but
before the end of the Employment Period other than pursuant to Section 9(a)
and
such termination occurs either before a Change in Control as defined in Section
11(a) or more than two years after a Change in Control, the Employer shall
pay
and provide to the Executive (or, in the event of her subsequent death, to
her
estate):
(i) her
earned but unpaid Base Salary as of the date of the termination of her
employment, such payment to be made at the time and in the manner prescribed
by
law applicable to the payment of wages but in no event later than 30 days after
termination of employment;
(ii) the
benefits, if any, to which she is entitled under the employee benefit plans
and
programs and compensation plans and programs maintained for the benefit of
the
Company's and the Bank’s officers and employees through the date of the
termination of her employment;
(iii) in
eighteen (18) equal monthly installments beginning with the first business
day
of the month following the Executive’s termination of employment an aggregate
amount equal to 1.125 times her Base Salary as in effect immediately prior
to
her termination; and
(iv) continued
group health and dental insurance benefits at the same level as in effect as
of
the date of termination of employment for a period of eighteen (18) months
beginning on the date her employment terminates.
SECTION
10. TERMINATION
WITHOUT ADDITIONAL EMPLOYER LIABILITY.
(a) In
the
event that the Executive's employment with the Employer shall terminate during
the Employment Period on account of:
(i) the
discharge of the Executive for "cause," which, for purposes of this Agreement,
shall mean a discharge because either the Company Board or the Bank Board
determines that the Executive has: (A) willfully failed to perform her
assigned duties under this Agreement, other than any failure resulting from
the
Executive’s incapacity due to physical or mental injury or illness; (B)
committed an act involving moral turpitude in the course of her employment
with
the Employer and its subsidiaries; (C) engaged in willful misconduct; (D)
breached her fiduciary duties for personal profit; (E) 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 her performance of services for the Company or the Bank, as
determined by the Company Board or the Bank Board; or (F) 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 Company Board or the
Bank
Board gives written notice to the Executive of the material
breach;
7
(ii) the
Executive's voluntary resignation from employment (including voluntary
retirement) with the Company and the Bank for reasons other than those specified
in Section 9(a)(i) and other than pursuant to the provisions of Section 9(c);
or
(iii) the
death
of the Executive while employed by the Employer, or the termination of the
Executive's employment because of "Disability" as defined in Section 10(c)
below;
then
in
any of the foregoing events, the Employer shall have no further obligations
under this Agreement, other than (A) the payment to the Executive of her earned
but unpaid Base Salary as of the date of the termination of her employment,
(B)
the payment to the Executive of the benefits to which she is entitled under
all
applicable employee benefit plans and programs and compensation plans and
programs, and (C) the provision of such other benefits, if any, to which she
is
entitled as a former employee under the Company's or the Bank’s employee benefit
plans and programs and compensation plans and programs.
(b) For
purposes of this Section 10, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Employer. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly
adopted by the Company Board, the Bank Board or based upon the written advice
of
counsel for the Employer shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Employer. The cessation of employment of the Executive shall not be deemed
to be
for "cause" within the meaning of Section 10(a)(i) unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by
the
affirmative vote of three-fourths of the members of the Company Board or the
Bank Board at a meeting of such Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before such Board), finding
that, in the good faith opinion of such Board, the Executive is guilty of the
conduct described in Section 10(a)(i) above, and specifying the particulars
thereof in detail.
(c) “Disability”
shall be deemed to have occurred after the Executive has been absent from her
duties hereunder on a full-time basis for six consecutive months due to any
physical or mental injury or disease that prevents the Executive from engaging
in substantially all of her duties. The existence of such physical or mental
injury or disease shall be determined by either (i) a physician selected by
the
Employer, with the physician to certify the existence or absence of such injury
or disease to the Employer and the Executive or (ii) if disability insurance
coverage exists in which the Executive participates, the insurance company
pursuant to which the Executive is provided long-term disability insurance.
For
purposes of this section, the Executive shall be deemed to have been absent
from
her duties hereunder on a full-time basis for six consecutive months if she
has
not, within any six-month period, attended to her duties on a full-time basis
for 15 consecutive business days within such six-month period.
(d) During
any period in which the Executive is absent due to physical or mental injury
or
disease, the Employer may, without breaching this Agreement, appoint another
person or persons to act as Senior Executive Vice President and interim Chief
Risk Officer pending the Executive’s return to her duties on a full-time basis
hereunder or her termination as a result of such Disability. Prior to the
Executive’s employment being terminated due to Disability under Section 10(e)
hereof, the Executive shall continue to receive her full Base Salary, bonuses
and other benefits to which she is entitled under this Agreement, including
continued participation in all employee benefit plans and
programs.
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(e) The
Employer may provide notice to the Executive in writing that they intend to
terminate the Executive’s employment under this Agreement, with the termination
date to be on or after the date that the Executive has been absent from her
duties hereunder on a full-time basis for six consecutive months due to any
physical or mental injury or disease. At the time her employment hereunder
is
terminated due to Disability, (i) the Executive shall not be entitled to any
payments or benefits pursuant to Sections 4 and 5 hereof for periods subsequent
to such date of termination, and (ii) the Executive shall become entitled to
receive the Disability payments that may be available under any applicable
long-term disability plan or other benefit plan.
SECTION
11. PAYMENTS
UPON A CHANGE IN CONTROL.
(a) The
term
“Change in Control” means the occurrence of any of the following:
(1) any
person or “group” of persons (as provided under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), and any Internal Revenue Service
(the “IRS”) guidance and regulations issued under Section 409A of the Code)
acquires ownership of stock of the Company or the Bank that, together with
stock
held by such person or group, constitutes more than 50% of the total fair market
value or total voting power of the outstanding stock of the Company or the
Bank,
provided that the stock of the Company or the Bank remains outstanding after
such acquisition and provided further that if the person or group of persons
is
already deemed to own more than 50% of the total fair market value or total
voting power, then the acquisition of additional stock by such person or group
of persons shall not constitute an additional Change of Control;
(2) any
person or “group” of persons (as provided under Section 409A of the Code and any
IRS guidance and regulations issued under Section 409A of the Code) acquires
(or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or group of persons) ownership of stock of the
Company or the Bank possessing 35% or more of the total voting power of the
stock of the Company or the Bank, provided that if a person or group of persons
that is deemed to have effective control of the Company or the Bank pursuant
to
this clause acquires additional stock of the Company or the Bank, such
additional acquisition shall not constitute an additional Change of
Control;
(3) a
majority of the members of the Board of Directors of the Company is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the Board of Directors of the Company prior to the
date of the appointment or election, provided that if a person or group of
persons that is deemed to have effective control of the Company or the Bank
pursuant to this clause acquires stock of the Company or the Bank that would
trigger either clauses (1) or (2) above, such acquisition of stock shall not
constitute an additional Change of Control; and
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(4) any
person or “group” of persons (as provided under Section 409A of the Code and any
IRS guidance and regulations issued under Section 409A of the Code) acquires
(or
has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or group of persons) assets from the Company or
the
Bank that have a total gross fair market value equal to 40% or more of the
total
gross fair market value of all of the assets of the Company or the Bank, as
the
case may be, immediately prior to such acquisition or acquisitions. For purposes
of this provision, “gross fair market value” means the value of the assets of
the Company or the Bank, as the case may be, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such
assets. A transfer of assets by the Company or the Bank to related persons,
shareholders or entities shall not be treated as a Change of Control to the
extent that such transfers are excluded from the definition of a change in
control under Section 409A of the Code and the regulations issued
thereunder.
(b) For
purposes of determining whether a Change in Control has occurred, persons will
not be considered to be acting as a group solely because they purchase or own
stock of the Company at the same time.
(c) Upon
the
occurrence of a Change in Control prior to the expiration of the Employment
Period, the Executive shall be entitled to receive a severance benefit in an
amount as calculated hereunder. If the Executive is not terminated as of the
Change in Control, she shall receive a lump sum payment within 25 days after
the
effective time of such Change in Control in an amount equal to 1.0 times the
Executive’s Base Amount, as hereinafter defined, from the Employer. If the
Executive’s employment is terminated as of the Change of Control, she shall
receive a lump sum payment within 25 days after the effective time of such
Change in Control in an amount equal to 2.0 times the Executive’s Base Amount
from the Employer, minus $1.00. If the Executive’s employment is not terminated
as of the Change in Control but is terminated within one year thereafter by
either the Employer for other than cause or by the Executive upon the occurrence
of any of the events set forth in Section 9(a)(i), in addition to the payment
made at or within 25 days of the Change in Control, the Executive shall receive
a lump sum payment upon termination of employment from the Employer or its
predecessor in an amount equal to 1.0 times the Executive’s Base Amount as
calculated in connection with the Change in Control. If the Executive’s
employment is terminated more than one year but less than two years after the
Change in Control by either Employer other than for cause or by the Executive
upon the occurrence of any of the events set forth in Section 9(a)(i), in
addition to the payment made at or within 25 days of the Change in Control,
she
shall receive a lump sum payment upon termination from the Employer or its
predecessor in an amount equal to 1.0 times the Executive’s Base Amount as if
the Change in Control had occurred as of the date of termination; provided
however,
that for
purposes of calculating the Executive’s Base Amount for purposes of this
sentence, any income related to the initial severance payment paid to the
Executive at or within 25 days of the Change in Control pursuant to this Section
11(c) shall be excluded. For purposes hereof “Base Amount” shall be equal to the
Executive’s “base amount” (excluding any income resulting from the vesting of
restricted stock or the exercise of non-qualified options on or prior to the
Effective Date) as defined under Section 280G of the Code. The Executive shall
not be entitled to receive any payments or benefits under Section 9 of this
Agreement if she receives payments pursuant to this Section 11(b) unless her
employment is terminated more than two years after a Change in
Control.
10
SECTION
12. TAX
INDEMNIFICATION.
(a) If
the
payments and benefits pursuant to this Agreement, either alone or together
with
other payments and benefits which the Executive has the right to receive from
the Employer and their subsidiaries, would constitute a “parachute payment” as
defined in Section 280G(b)(2) of the Code (the “Initial Parachute Payment”),
then the Company shall pay to the Executive, at the time such payments or
benefits are paid and subject to applicable withholding requirements, a cash
amount equal to the sum of the following:
(i) twenty
(20) percent (or such other percentage equal to the tax rate imposed by Section
4999 of the Code) of the amount by which the Initial Parachute Payment exceeds
the Executive’s “base amount” from the Employer and their subsidiaries
(including their predecessors), as defined in Section 280G (b)(3) of the Code,
with the difference between the Initial Parachute Payment and the Executive’s
base amount being hereinafter referred to as the “Initial Excess Parachute
Payment”; and
(ii) such
additional amount (tax allowance) as may be necessary to compensate the
Executive for the payment by the Executive of state and federal income and
excise taxes on the payment provided under clause (i) above and on any payments
under this clause (ii). In computing such tax allowance, the payment to be
made
under clause (i) above shall be multiplied by the “gross up percentage” (“GUP”).
The GUP shall be determined as follows:
|
Tax
Rate
|
|||
|
GUP
=
|
|||
|
1
Tax Rate
|
The
Tax
Rate for purposes of computing the GUP shall be the highest marginal federal
and
state income and employment-related tax rate (including Social Security and
Medicare taxes), including any applicable excise tax rate, applicable to the
Executive in the year in which the payment under clause (i) above is made,
and
shall also reflect the phase-out of deductions and the ability to deduct certain
of such taxes.
(b) Notwithstanding
the foregoing, if it shall subsequently be determined in a final judicial
determination or a final administrative settlement to which the Executive is
a
party that the actual excess parachute payment as defined in Section 280G(b)(1)
of the Code (before giving effect to the payments under Sections 12(a)(i) and
(ii) above) is different from the Initial Excess Parachute Payment (such
different amount being hereafter referred to as the “Determinative Excess
Parachute Payment”), then the Company’s independent tax counsel or accountants
shall determine the amount (the “Adjustment Amount”) which either the Executive
must pay to the Company or the Company must pay to the Executive in order to
put
the Executive (or the Company, as the case may be) in the same position the
Executive (or the Company, as the case may be) would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, the independent tax counsel
or
accountants shall take into account any and all taxes (including any penalties
and interest) paid by or for the Executive or refunded to the Executive or
for
the Executive’s benefit. As soon as practicable after the Adjustment Amount has
been so determined, the Company shall pay the Adjustment Amount to the Executive
or the Executive shall repay the Adjustment Amount to the Company, as the case
may be.
11
(c) In
each
calendar year that the Executive receives payments of benefits that constitute
a
parachute payment, the Executive shall report on her state and federal income
tax returns such information as is consistent with the determination made by
the
independent tax counsel or accountants of the Company as described above. The
Company shall indemnify and hold the Executive harmless from any and all losses,
costs and expenses (including without limitation, reasonable attorneys’ fees,
interest, fines and penalties) which the Executive incurs as a result of so
reporting such information. The Executive shall promptly notify the Company
in
writing whenever the Executive receives notice of the institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Section 12 is being reviewed or is in dispute. The Company shall assume
control at its expense over all legal and accounting matters pertaining to
such
federal tax treatment (except to the extent necessary or appropriate for the
Executive to resolve any such proceeding with respect to any matter unrelated
to
amounts paid or payable pursuant to this Section 12) and the Executive shall
cooperate fully with the Company in any such proceeding. The Executive shall
not
enter into any compromise or settlement or otherwise prejudice any rights the
Company may have in connection therewith without the prior consent of the
Company.
(d) The
Executive hereby agrees with the Employer and any successor thereto to in good
faith consider and take steps commonly used to minimize or eliminate any tax
liability or costs that would otherwise be created by the tax indemnification
provisions set forth in Section 12 of this Agreement if requested to do so
by
the Employer or any successor thereto; provided,
however,
that the
foregoing language shall neither require the Executive to take or not take
any
specific action in furtherance thereof nor contravene, limit or remove any
right
or privilege provided to the Executive under this Agreement.
SECTION
13. SOURCE
OF
PAYMENTS; NO DUPLICATION OF PAYMENTS.
All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Company or the Bank. Payments pursuant to this
Agreement shall be allocated between the Company and the Bank in proportion
to
the level of activity and the time expended on such activities by the Executive
as determined by the Company and the Bank on a quarterly basis, unless the
applicable provision of this Agreement specifies that the payment shall be
made
by either the Company or the Bank. In no event shall the Executive receive
duplicate payments or benefits from the Company and the Bank.
SECTION
14. COVENANT
NOT TO COMPETE.
In
the
event the Executive’s employment with the Employer is terminated for any reason
prior to the expiration of the Employment Period other than a termination of
employment occurring within 30 days of a Change in Control, the Executive hereby
covenants and agrees that for a period of eighteen months following the date
of
her termination of employment with the Employer (or, if less, for the Remaining
Employment Period), she shall not, without the written consent of the Employer,
become an officer, employee, consultant, director or trustee of any savings
bank, savings and loan association, savings and loan holding company, bank
or
bank holding company, or any direct or indirect subsidiary or affiliate of
any
such entity, that entails working within any county in which the Company or
the
Bank maintains an office as of the date of termination of the Executive’s
employment.
12
SECTION
15. CONFIDENTIALITY.
Unless
she obtains the prior written consent of the Employer, the Executive shall
at
all times keep confidential and shall refrain from using for the benefit of
herself, or any person or entity other than the Employer or its subsidiaries,
any material document or information obtained from the Employer or its
subsidiaries, in the course of her employment with any of them concerning their
properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources
or
has otherwise been made available to the public through no fault of her own)
until the same ceases to be material (or becomes so ascertainable or available);
provided,
however,
that
nothing in this Section 15 shall prevent the Executive, with or without the
Employer's consent, from participating in or disclosing documents or information
in connection with any judicial or administrative investigation, inquiry or
proceeding or the Company’s public reporting requirements to the extent that
such participation or disclosure is required under applicable law.
SECTION
16. SOLICITATION.
The
Executive hereby covenants and agrees that, for a period of eighteen months
following her termination of employment with the Employer for any reason, she
shall not, without the written consent of the Employer, either directly or
indirectly:
(a) solicit,
offer employment to, or take any other action intended, or that a reasonable
person acting in like circumstances would expect, to have the effect of causing
any officer or employee of the Employer or any of its subsidiaries or affiliates
to terminate her or her employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to, any
savings bank, savings and loan association, bank, bank holding company, savings
and loan holding company, or other institution engaged in the business of
accepting deposits, making loans or doing business within the counties specified
in Section 14;
(b) provide
any information, advice or recommendation with respect to any such officer
or
employee to any savings bank, savings and loan association, bank, bank holding
company, savings and loan holding company, or other institution engaged in
the
business of accepting deposits, making loans or doing business within the
counties specified in Section 14, that is intended, or that a reasonable person
acting in like circumstances would expect, to have the effect of causing any
officer or employee of the Employer or any of its subsidiaries or affiliates
to
terminate her employment and accept employment or become affiliated with, or
provide services for compensation in any capacity whatsoever to, any savings
bank, savings and loan association, bank, bank holding company, savings and
loan
holding company, or other institution engaged in the business of accepting
deposits, making loans or doing business within the counties specified in
Section 14; or
(c) solicit,
provide any information, advice or recommendation or take any other action
intended, or that a reasonable person acting in like circumstances would expect,
to have the effect of causing any customer of the Company or the Bank to
terminate an existing business or commercial relationship with the Company
or
the Bank.
13
SECTION
17. NO
EFFECT
ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The
termination of the Executive's employment during the Employment Period or
thereafter, whether by the Employer or by the Executive, shall have no effect
on
the vested rights of the Executive under the Company's or the Bank’s qualified
or non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans, or other
employee benefit plans or programs, or compensation plans or programs in which
the Executive was a participant.
SECTION
18. SUCCESSORS
AND ASSIGNS.
(a) This
Agreement is personal to each of the parties hereto, and no party may assign
or
delegate any of its rights or obligations hereunder without first obtaining
the
written consent of the other parties; provided, however, that the Employer
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 Employer, by an assumption agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would
be
required to perform it if no such succession or assignment had taken place.
Failure of the Employer 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 Executive to compensation from the Employer
in
the same amount and on the same terms as the compensation pursuant to Sections
9
and 11 hereof. For purposes of implementing the provisions of this Section
18(a), the date which any such succession becomes effective shall be deemed
the
date of termination of the Executive’s employment.
(b) This
Agreement and all rights of the Executive hereunder shall inure to the benefit
of and be enforceable by the Executive’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees.
SECTION
19. NOTICES.
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:
If
to the
Executive:
Xxxxxx
X.
Xxxxxx
At
the
address last appearing
on
the
personnel records of
the
Executive
14
If
to the
Employer:
KNBT
Bancorp, Inc.
Keystone
Nazareth Bank & Trust Company
Xxxxx
000
xxx Xxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxxx 00000
(or
the
address of the Company’s or the Bank’s principal executive office, if
different)
Attention:
Chairman of the Board
with
a
copy, in the case of a notice to the Employer, to:
Elias,
Matz, Xxxxxxx & Xxxxxxx L.L.P.
000
00xx
Xxxxxx,
X.X.
Xxxxxxxxxx,
X.X. 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx
Xxxx Xxxxx, Esq.
SECTION
20. INDEMNIFICATION
FOR ATTORNEYS' FEES.
(a) The
Employer shall indemnify, hold harmless and defend the Executive against
reasonable costs, including legal fees and expenses, incurred by her in
connection with or arising out of any action, suit or proceeding in which she
may be involved, as a result of her efforts, in good faith, to defend or enforce
the terms of this Agreement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Employer's obligations hereunder shall be conclusive evidence of the Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
(b) The
Employer's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which
the Employer may have against the Executive or others. Unless it is determined
that a claim made by the Executive was either frivolous or made in bad faith,
the Employer agrees to pay as incurred, to the full extent permitted by law,
all
legal fees and expenses which the Executive may reasonably incur as a result
of
or in connection with her consultation with legal counsel or arising out of
any
action, suit, proceeding or contest (regardless of the outcome thereof) by
the
Employer, the Executive or others regarding the validity or enforceability
of,
or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive
about
the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable federal rate provided for
in
Section 7872(f)(2)(A) of the Code. This Section 20(b) shall apply whether such
consultation, action, suit, proceeding or contest arises before, on, after
or as
a result of a Change in Control.
SECTION
21. SEVERABILITY.
A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision hereof.
15
SECTION
22. 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.
SECTION
23. COUNTERPARTS.
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.
SECTION
24. GOVERNING
LAW.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the Commonwealth of Pennsylvania applicable to contracts entered into
and to be performed entirely within the Commonwealth of Pennsylvania, except
to
the extent that federal law controls.
SECTION
25. HEADINGS
AND CONSTRUCTION.
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.
SECTION
26. ENTIRE
AGREEMENT; MODIFICATIONS.
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. No
modifications of this Agreement shall be valid unless made in writing and signed
by the parties hereto; provided, however, that if the Employer determines,
after
a review of the final regulations issued under Section 409A of the Code and
all
applicable IRS guidance, that this Agreement should be further amended to avoid
triggering the tax and interest penalties imposed by Section 409A of the Code,
the Employer may amend this Agreement to the extent necessary to avoid
triggering the tax and interest penalties imposed by Section 409A of the
Code.
SECTION
27. REQUIRED
REGULATORY PROVISIONS.
Notwithstanding
anything herein contained to the contrary, any payments to the Executive by
the
Employer, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated
thereunder in 12 C.F.R. Part 359.
16
SECTION
28. DISPUTE RESOLUTION.
(a) In
the
event of any dispute, claim, question or disagreement arising out of or relating
to this Agreement or the breach hereof, the parties hereto shall use their
best
efforts to settle such dispute, claim, question or disagreement. To this effect,
they shall consult and negotiate with each other, in good faith, and,
recognizing their mutual interests, attempt to reach a just and equitable
solution satisfactory to both parties.
(b) If
they
do not reach such a solution within a period of thirty (30) days, then the
parties agree first to endeavor in good faith to amicably settle their dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association (the “AAA”), before resorting to arbitration.
(c) Thereafter,
any unresolved controversy or claim arising out of or relating to this Agreement
or the breach thereof, upon notice by any party to the other, shall be submitted
to and finally settled by arbitration in accordance with the Commercial
Arbitration Rules (the “Rules”) of the AAA in effect at the time demand for
arbitration is made by any such party. The parties shall mutually agree upon
a
single arbitrator within thirty (30) days of such demand. In the event that
the
parties are unable to so agree within such thirty (30) day period, then within
the following thirty (30) day period, one arbitrator shall be named by each
party. A third arbitrator shall be named by the two arbitrators so chosen within
ten (10) days after the appointment of the first two arbitrators. In the event
that the third arbitrator is not agreed upon, he or she shall be named by the
AAA. Arbitration shall occur in Bethlehem, Pennsylvania or such other location
as may be mutually agreed to by the parties.
(d) The
award
made by all or a majority of the panel of arbitrators shall be final and
binding, and judgment may be entered based upon such award in any court of
law
having competent jurisdiction. The award is subject to confirmation,
modification, correction or vacation only as explicitly provided in Title 9
of
the United States Code. The prevailing party shall be entitled to receive any
award of pre- and post-award interest as well as attorney’s fees incurred in
connection with the arbitration and any judicial proceedings related thereto.
The parties acknowledge that this Agreement evidences a transaction involving
interstate commerce. The United States Arbitration Act and the Rules shall
govern the interpretation, enforcement, and proceedings pursuant to this
Section. Any provisional remedy which would be available from a court of law
shall be available from the arbitrators to the parties to this Agreement pending
arbitration. Either party may make an application to the arbitrators seeking
injunctive relief to maintain the status quo, or may seek from a court of
competent jurisdiction any interim or provisional relief that may be necessary
to protect the rights and property of that party, until such times as the
arbitration award is rendered or the controversy otherwise
resolved.
17
IN
WITNESS WHEREOF, the Employer has caused this Agreement to be executed and
the
Executive has hereunto set her hand, all as of the day and year first above
written.
THIS
AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE
PARTIES.
|
Xxxxxx
X. Xxxxxx, Executive
|
||||
|
ATTEST:
|
KEYSTONE
NAZARETH BANK
|
|||
|
&
TRUST COMPANY
|
||||
|
BY:
|
BY:
|
|||
|
Name:
|
Xxxxxxx
X. Xxxxxx
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Corporate
Secretary
|
Title:
|
Chairman
of the Board
|
|
|
[Seal]
|
||||
|
ATTEST:
|
KNBT
BANCORP, INC.
|
|||
|
BY:
|
BY:
|
|||
|
Name:
|
Xxxxxxx
X. Xxxxxx
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Corporate
Secretary
|
Title:
|
Chairman
of the Board
|
|
