EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement is effective as of June 1, 2006, between Xxxxxx Financial
Corporation, a Pennsylvania corporation ("XXXXXX"), and E. Xxxxxx Xxxxxx, an
adult individual (the "EXECUTIVE").
BACKGROUND
Executive is currently employed as the Senior Executive Vice
President/Chairman and CEO of Xxxxxx Bank. Xxxxxx and Executive have previously
entered into a Severance Agreement, dated October 17, 2000 and amended July 23,
2002 ("ORIGINAL AGREEMENT"), which provides for certain payments to Executive
upon the occurrence of an employment termination in connection with a change in
control of Fulton. Fulton now desires to enter into a comprehensive Employment
Agreement with the Executive ("AGREEMENT"), replacing the Original Agreement and
addressing more broadly the terms and conditions of Executive's employment,
including but not limited to the consequences of an employment termination in
connection with a change in control. The Executive desires to continue in the
employment of Fulton, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1 Employment: Continuation of Employment. Fulton hereby continues the
employment of the Executive, and Executive hereby agrees to continue Executive's
employment by Fulton, for the period and upon the terms and conditions
hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve hereunder initially as Senior Vice
President/Chairman and CEO of Xxxxxx Bank, and thereafter during the term
of this Agreement in such other or additional positions as may be assigned
by the Board of Directors of Fulton (the "BOARD") or by the Chief Executive
Officer of Fulton acting on behalf of the Board. Executive shall perform
such duties and shall have such authority consistent with Executive's
position as may from time to time reasonably be specified by the Board or
by the Chief Executive Officer of Fulton acting on behalf of the Board.
Executive shall report directly to Chief Executive Officer of Fulton and
shall perform Executive's duties for Fulton principally at Xxxxxx'x
headquarters in Lancaster, Pennsylvania, or at such other locations
determined by the Board or by the Chief Executive Officer of Fulton acting
on behalf of the Board, except for periodic travel that may be necessary or
appropriate in connection with the performance of Executive's duties
hereunder. The terms and conditions of this Agreement have been reviewed
and approved by the Board's Executive Compensation Committee, and such
Committee shall review the Agreement on
a three year cycle, or more frequently, to assess its continuing
appropriateness in light of Xxxxxx'x then-current needs.
(b) Executive shall devote Executive's full working time, energy,
skill and best efforts to the performance of Executive's duties hereunder,
in a manner that will faithfully and diligently further the business and
interests of Fulton, and shall not be employed by or participate or engage
in or be a part of in any manner the management or operation of any
business enterprise other than Fulton without the prior written consent of
the Board or the Chief Executive Officer of Fulton acting on behalf of the
Board, which consent may be granted or withheld in Xxxxxx'x sole
discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1 Term. The term of the Executive's employment under this Agreement (the
EMPLOYMENT PERIOD") shall commence on the effective date of the Agreement first
entered above (the "EFFECTIVE DATE") and shall continue until the earliest of
(a) the voluntary termination of Executive's employment by the Executive other
than for Good Reason (as defined in Section 4.2), (b) the termination of the
Executive's employment by the Executive for Good Reason, (c) the termination of
the Executive's employment by Fulton for any reason other than Cause (as defined
in Section 4.3), (d) the termination of the Executive's employment by Fulton for
Cause, (e) termination of the Executive's employment with Fulton due to the
Disability (as defined in Section 4.4), (f) the termination of Executive's
employment with Fulton due to his retirement upon attaining age 65, or (g) the
death of the Executive.
SECTION 3. COMPENSATION.
3.1 Basic Compensation. As compensation for Executive's services hereunder,
Fulton shall pay to Executive a salary at an initial annual rate equal to
$320,943, payable in periodic installments in accordance with Xxxxxx'x regular
payroll practices in effect from time to time. Executive's annual salary, as
determined in accordance with this Section 3.1, is hereinafter referred to as
Executive's "BASE SALARY." For years subsequent to the initial year of this
Agreement, Executive's Base Salary shall be set by Fulton at an amount no less
than the initial annual rate set herein. For each year in the Employment Period,
Executive shall be a participant in any bonus or incentive compensation program
for executives, including in particular any annual cash bonus plan and
equity-based long term incentive plan, that Xxxxxx may implement and administer
from time to time during the Employment Period, and the amount and form of such
bonus and incentive compensation shall be determined annually by Fulton
consistent with its Board's executive compensation practices. References herein
to the amount of the Executive's Base Salary or annual cash bonus or cash
incentive compensation shall be to the gross amount of such compensation
element, exclusive of any elective compensation deferral agreements entered into
by the Executive from time to time.
3.2 Employee Benefits. In addition to the compensation provided for in
Section 3.1, Executive shall participate during the Employment Period in those
of Xxxxxx'x broad-based employee retirement plans, welfare benefit plans, and
other benefit programs for which Executive is eligible under the terms of the
plan or program, on the same terms and conditions that are applicable to
employees generally. Further, Executive shall be eligible during the
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Employment Period to participate in any Fulton executive-only retirement plan,
deferred compensation plan, welfare benefit plan, or other benefit programs, as
and to the extent any such benefit programs, plans or arrangements are or may
from time to time be in effect during the Employment Period.
3.3 Vacation and Leave. Executive shall be entitled to annual paid
vacation, leave of absence and leave for illness or temporary disability in
conformity with Xxxxxx'x regular policies and practices, and any leave on
account of illness or temporary disability shall not constitute a breach by the
Executive of Executive's agreements hereunder.
3.4 Other Executive Benefits. Executive shall also receive such other
general executives perquisites as approved from time to time by the Chief
Executive Officer of Fulton such as company paid club memberships and
employer-provided automobiles.
3.5 Expense Reimbursement. During the term of Executive's employment,
Fulton shall reimburse Executive for all reasonable expenses incurred by
Executive in connection with the performance of Executive's duties hereunder in
accordance with its regular reimbursement policies as in effect from time to
time and upon receipt of itemized vouchers therefor and such other supporting
information as Xxxxxx may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1 Voluntary Termination or Age 65 Retirement. In the event Executive's
employment is voluntarily terminated by the Executive other than for Good Reason
(as defined in Section 4.2) or terminates due to Executive's retirement upon
attaining age 65, Fulton shall be obligated to pay Executive's Base Salary
through the effective date of Executive's termination, together with applicable
expense reimbursements and all accrued and unpaid benefits and vested benefits
in accordance with the applicable employee benefit plans. Upon making the
payments described in this Section 4.1, Fulton shall have no further
compensation obligation to Executive hereunder.
4.2 Termination for Good Reason; Termination Without Cause.
(a) In the event:
(i) Executive's employment is terminated during the term hereof
by Executive for "Good Reason" (as defined herein); or
(ii) Executive's employment is terminated during the term hereof
by Fulton for any reason other than "Cause" (as defined herein);
then Fulton shall continue to pay Executive all of the consideration provided
for in the following sentence for twelve (12) months following such termination.
For purposes of the foregoing, the consideration payable under this Section 4.2
shall include the Base Salary (as in effect immediately prior to the
termination) and may include an additional cash bonus amount determined in the
sole and absolute discretion of Fulton, which discretion shall be exercised by
the Executive Compensation Committee of the Board (or its successor) and
approved by the Board (all exclusive of any election to defer receipt of
compensation the Executive may have made). During such twelve (12) month period,
the Executive shall also continue to be eligible to participate in the
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employee benefit plans referred to in Section 3.2 to the extent Executive
remains eligible under the applicable employee benefit plans and to the extent
Executive's eligibility is not contrary to, or does not negate, the tax favored
status of the plans or of the benefits payable under the plan. If Executive is
unable to continue to participate in any employee benefit plan or program
provided for under this Agreement, Executive shall be compensated in respect of
such inability to participate through payment by Fulton to Executive, on an
annual basis in advance, of an amount equal to the annual cost that would have
been incurred by Fulton if the Executive were able to participate in such plan
or program plus an amount which, when added to the Xxxxxx annual cost, would be
sufficient after Federal, state and local income and payroll taxes (based on the
tax returns filed by the Executive most recently prior to the date of
termination) to enable the Executive to net an amount equal to the Xxxxxx annual
cost.
(b) As used herein, the Executive shall have "GOOD REASON" if:
(i) There has occurred a material breach of Xxxxxx'x material
obligations under this Agreement, and Fulton has not remedied such
breach after notice and a reasonable opportunity to cure;
(ii) Fulton, without Executive's prior written consent, changes
or attempts to change in any significant respect the authority,
duties, compensation, benefits or other terms or conditions of
Executive's employment in a manner that is adverse to the Executive;
or
(iii) Fulton requires Executive to be based at a location outside
a thirty-five (35) mile radius of the location where Executive
previously was based, except for reasonably required travel on
Xxxxxx'x business.
4.3 Termination for Cause. Executive's employment hereunder shall terminate
immediately upon notice of termination for "Cause" (as defined herein), in which
event Fulton shall not thereafter be obligated to make any further payments
hereunder other than amounts (including salary, expense reimbursement, etc.)
accrued under this Agreement as of the date of such termination in accordance
with generally accepted accounting principles. As used herein, "CAUSE" shall
mean the following:
(a) Executive shall have committed an act of dishonesty constituting a
felony and resulting or intending to result directly or indirectly in gain
or personal enrichment at the expense of Fulton;
(b) Executive's use of alcohol or other drugs which interferes with
the performance by the Executive of Executive's duties;
(c) Executive shall have deliberately and intentionally refused or
otherwise failed (for reasons other than incapacity due to accident or
physical or mental illness) to perform Executive's duties to Fulton, with
such refusal or failure continuing for a period of at least 30 consecutive
days following the receipt by Executive of written notice from Fulton
setting forth in detail the facts upon which Fulton relies in concluding
that Executive has deliberately and intentionally refused or failed to
perform such duties; or
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(d) Executive's conduct that brings public discredit on or injures the
reputation of Fulton, in Xxxxxx'x reasonable opinion.
4.4 Benefits Following Death or Disability.
(a) Following Executive's total disability ("DISABILITY", as defined
below) or death during the term of this Agreement, the employment of the
Executive will terminate automatically, in which event the Bank shall not
thereafter be obligated to make any further payments hereunder other than
amounts (including salary, expense reimbursement, etc.) accrued under this
Agreement as of the date of such termination in accordance with generally
accepted accounting principles or as otherwise specifically provided
herein. For purposes hereof, Disability shall mean shall mean that the
Executive, by reason of a medically determinable physical or medical
impairment that can be expected to result in death or expected to last for
a continuous period of at least twelve months, (i) is unable to engage in
any substantial gainful activity or (ii) has received income replacement
benefits for a period of at least three months under an accident or health
plan of Fulton.
(b)
(i) In the event of a termination of this Agreement as a result
of the Executive's death, the Executive's dependents, beneficiaries
and estate, as the case may be, will receive such survivor's income
and other benefits as they may be entitled under the terms of the
benefit programs, plans, and arrangements described in Section 3.2
which provide benefits upon the death of the Executive.
(ii) In the event of a termination of this Agreement as a result
of the Executive's Disability, (A) Fulton shall pay the Executive an
amount equal to at least six months' Base Salary at the rate and as
required by Section 3.1 and in effect immediately prior to the date of
Disability, (B) thereafter for as long as Executive continues to be
disabled Fulton shall continue to pay an amount equal to at least 60%
of Base Salary in effect immediately prior to the date of Disability
until the earlier of Executive's death or December 31 of the calendar
year in which Executive attains age 65; and (C), to the extent not
duplicative of the foregoing, Executive shall receive those benefits
customarily provided by Fulton to disabled former employees, which
benefits shall include, but shall not be limited to, life, medical,
health, accident insurance and a survivor's income benefit.
(iii) For the purposes of (i) and (ii) above, the Executive or
Executive's dependents shall pay the same percentage of the total cost
of coverage under the applicable employee benefit plans as Executive
was paying when Executive's employment terminated. The total cost of
the Executive's continued coverage shall be determined using the same
rates for health, life and/or disability coverage that apply from time
to time to similarly situated active employees.
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4.5 Death or Disability Following Termination of Employment. Executive's
disability or death following Executive's termination pursuant to Section 4.2
shall not affect Executive's right, or if applicable, the right of Executive's
beneficiaries, to receive the payments for the balance of the period described
in Section 4.2, nor will it affect the right of Executive or Executive's
beneficiaries to receive the balance of payments due under Sections 6 and 7
herein.
4.6 Beneficiary Designation. Executive may, at any time, by written notice
to Fulton, name one or more beneficiaries of any benefits which may become
payable by Fulton pursuant to this Agreement. If Executive fails to designate a
beneficiary any benefits to be paid pursuant to this Agreement shall be paid to
Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS.
5.1 Confidentiality. Executive acknowledges a duty of confidentiality owed
to Fulton and shall not, at any time during or after Executive's employment by
Fulton, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the Board or senior management of Fulton,
any trade secret, private or confidential information or knowledge of Fulton or
any of their affiliates obtained or acquired by Executive while so employed. All
computer software, business cards, customer lists, price lists, contract forms,
catalogs, books, records, files and know-how acquired while an employee of
Fulton are acknowledged to be the property of Fulton (or the applicable
affiliate) and shall not be duplicated, removed from Xxxxxx'x possession or made
use of other than in pursuit of Xxxxxx'x business and, upon termination of
employment for any reason, Executive shall deliver to Fulton, without further
demand, all copies thereof which are then in Executive's possession or under
Executive's control.
5.2 Non-Competition and Nonsolicitation. Executive shall not, during the
Employment Period and for a period of one (1) year thereafter, directly or
indirectly:
(a) be or become an officer, director or employee or agent of, or a
consultant to or give financial or other assistance to, any person or
entity considering engaging in commercial banking, or so engaged, anywhere
within the geographic market of Fulton;
(b) seek, in competition with the business of Fulton, to procure
orders from or do business with any customer of Xxxxxx;
(c) solicit or contact any person who is an employee of the Xxxxxx
with a view to the engagement or employment of such person by a third
party;
(d) seek to contract with or engage (in such a way as to adversely
affect or interfere with the business of Fulton) any person or entity who
has been contracted with or engaged to provide goods or services to Fulton;
or
(e) engage in or participate in any effort or act to induce any of the
customers, associates, consultants, or employees of Fulton to take any
action which might be disadvantageous to Fulton;
provided, however, (i) that nothing herein shall prohibit the Executive and
Executive's affiliates
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from owning, as passive investors, in the aggregate not more than 5% of the
outstanding publicly traded stock of any corporation so engaged and (ii) in the
event the Executive's employment is terminated by the Executive for Good Reason
or by Fulton other than for Cause, the covenants in this Section 5.2 shall not
apply.
For the purpose of Sections 5.1 and 5.2, Fulton shall be deemed to refer to
Fulton and all of its present or future affiliates.
5.3 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained
herein are fair and reasonable in light of the consideration paid
hereunder, and that damages alone shall not be an adequate remedy for any
breach by Executive of Executive's covenants which then apply and
accordingly expressly agrees that, in addition to any other remedies which
Xxxxxx may have, Fulton shall be entitled to injunctive relief in any court
of competent jurisdiction for any breach or threatened breach of any such
covenants by Executive. Nothing contained herein shall prevent or delay
Fulton from seeking, in any court of competent jurisdiction, specific
performance or other equitable remedies in the event of any breach or
intended breach by Executive of any of its obligations hereunder.
(b) In the event Executive breaches Executive's obligations under
Section 5.2, the period specified therein shall be tolled during the period
of any such breach and any litigation seeking remedies for such breach and
shall resume upon the conclusion or termination of any such breach and any
such litigation. The remedies set forth in this Section are cumulative and
in addition to any and all other remedies available to Fulton at law or in
equity.
SECTION 6. PAYMENTS FOR TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
6.1 Definitions.
(a) For purposes of this Agreement, a Change in Control of Fulton
shall mean a change in control of the kind that would be required to be
reported in response to Item 1 of Securities and Exchange Commission Form
8-K promulgated under the Securities Exchange Act of 1934 and as in effect
on the date hereof. Without limitation of the foregoing, a "Change in
Control," as used in this Agreement, shall be deemed to have occurred when:
(i) Any person or group of persons acting in concert, shall have
acquired, directly or indirectly, beneficial ownership of 20 percent
or more of the outstanding shares of the voting stock of Fulton; or
(ii) The composition of the Board of Fulton shall have changed
such that during any period of two consecutive years during the term
of this Agreement, the persons who at the beginning of such period
were members of the Board cease for any reason to constitute a
majority of the Board, unless the nomination or election of each
director who was not a director at the beginning of such period was
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approved in advance by directors representing not less than two-thirds
of the directors then in office who were directors at the beginning of
the period; or
(iii) Fulton shall be merged or consolidated with or its assets
purchased by another corporation and as a result of such merger,
consolidation or sale of assets, less than a majority of the
outstanding voting stock of the surviving, resulting or purchasing
corporation is owned, immediately after the transaction, by the
holders of the voting stock of the Company outstanding immediately
before the transaction.
(b) For purposes of Section 6.1(a)(i) above, a person shall be deemed
to be the beneficial owner of any shares which the person or any of the
person's affiliates or associates (i) owns, directly or indirectly, (ii)
has the right to acquire, or (iii) has the right to vote or direct the
voting thereof pursuant to any agreement, arrangement or understanding.
(c) A "Change in Control Period" shall mean the period commencing 90
days before a Change in Control and ending two (2) years after such Change
in Control.
6.2 Amount of Payments. Except as provided in Section 6.2(d) and in lieu of
amounts payable under Section 4, Fulton will pay the Executive the amounts
specified in the circumstances below.
(a) If, during the Change in Control Period, the Executive is
terminated by Fulton in the circumstances described Section 4.2(a)(ii), or
the Executive resigns for Good Reason as described in Section 4.2(a)(i),
Fulton will pay, or cause to be paid, to the Executive:
(i) an amount equal to two (2) times the sum of (A) the Base
Salary immediately before the Change in Control and (B) the highest
annual cash bonus or other incentive compensation awarded to the
Executive over the past three years in which cash bonus or other
incentive compensation was awarded (all exclusive of any election to
defer receipt of compensation the Executive may have made); and
(ii) an amount equal to that portion, if any, of Xxxxxx'x
contribution to the Executive's 401(k), profit sharing, deferred
compensation or other similar individual account plan which is not
vested as of the date of termination of Executive's employment (the
"DATE OF TERMINATION") (the "UNVESTED COMPANY CONTRIBUTION"), plus an
amount which, when added to the Unvested Company Contribution, would
be sufficient after Federal, state and local income taxes (based on
the tax returns filed by the Executive most recently prior to the Date
of Termination) to enable the Executive to net an amount equal to the
Unvested Company Contribution; and
(iii) Fulton shall pay the Executive up to $10,000 for executive
outplacement services utilized by the Executive upon the receipt by
Fulton of written receipts or other appropriate documentation; and
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(iv) Except for the payment provided in (iii) above, such
payments shall be made in one lump sum within 15 business days after
the Executive's termination or resignation.
(b) Except as provided in Section 6(d), if the Executive is terminated
as described in Section 6.2(a), the Executive shall continue to receive all
employee benefits available to Executive pursuant to Section 3.2 of this
Agreement that Executive was receiving immediately before such termination,
as provided in Section 4.2(a), and also the benefits available to Executive
immediately before such termination pursuant to Section 3.4. The Executive
shall continue to receive all such benefits for a period of two (2) years
after the date of a termination described in Section 6.2(a). The Executive
shall pay the same percentage of the total cost of coverage under the
applicable employee benefit plans as Executive was paying when Executive's
employment terminated. The total cost of the Executive's continued coverage
shall be determined using the same rates for health, life and/or disability
coverage that apply from time to time to similarly situated active
employees. In addition, Fulton shall pay to the Executive in a single lump
sum as soon as practicable after Executive's termination described in
Section 6.2(a) an aggregate amount equal to two (2) additional years of
Fulton retirement plan contributions under each tax qualified or
nonqualified defined contribution type of retirement plan in which the
Executive was a participant immediately prior to Executive's termination or
resignation and equal to the actuarial present value of two (2) additional
years of benefit accruals under each tax qualified or nonqualified defined
benefit type of retirement plan in which the Executive was a participant
immediately prior to Executive's termination or resignation, calculated in
each case as if the Executive had continued as a plan participant for the
number of additional years indicated above, Executive's annual compensation
for plan purposes in the most recently completed plan year of each plan
continued unchanged through these additional years, and the retirement
plans continued to operate unchanged through the additional years. The
actuarial equivalence factors and assumptions generally in use under any
defined benefit plan shall be applied in determining lump sum present
values of any defined benefit plan additional accruals payable hereunder.
(c) Upon the occurrence of a Change of Control, the vesting and
exercise rights of all stock options, shares of restricted stock, and other
equity-based compensation units held by the Executive pursuant to any stock
option plan, stock option agreement, restricted stock agreement, or other
long term incentive plan shall be governed by the terms of such plan or
agreement, but in the event the plan or agreement is silent on the subject
of change in control, all such options, shares, and units shall immediately
become vested and exercisable as to all or any part of the shares and
rights covered thereby.
(d) The Executive is to receive no payments under Section 6.2(a) and
no benefits under 6.2(b) if the Executive is terminated by Fulton during a
Change in Control Period upon the death or Disability of the Executive or
for Cause. In an instance of death or Disability of the Executive, however,
the Executive and Executive's dependents, beneficiaries and estate shall
receive any benefits payable to them under Section 4.4.
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(e) References in this Section 6.2 and in Section 7 to "Fulton" shall
include the successors of Fulton and the Bank, as applicable.
SECTION 7. MISCELLANEOUS.
7.1 Invalidity. If any provision hereof is determined to be invalid or
unenforceable by a court of competent jurisdiction, Executive shall negotiate in
good faith to provide Fulton with protection as nearly equivalent to that found
to be invalid or unenforceable and if any such provision shall be so determined
to be invalid or unenforceable by reason of the duration or geographical scope
of the covenants contained therein, such duration or geographical scope, or
both, shall be considered to be reduced to a duration or geographical scope to
the extent necessary to cure such invalidity.
7.2 Assignment: Benefit. This Agreement shall not be assignable by
Executive, and shall be assignable by Fulton only to any affiliate or to any
person or entity which may become a successor in interest (by purchase of assets
or stock, or by merger, or otherwise) to Fulton in the business or a portion of
the business presently operated by it. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the benefit of,
and be binding upon, the parties hereto and each of their respective permitted
successors, assigns, heirs, executors and administrators, including the
restrictive covenants of this Agreement.
7.3 Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by any party hereto to the
other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to Fulton:
Xxxxxx Financial Corporation
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
(b) If to Executive:
E. Xxxxxx Xxxxxx
0 Xxxxxxxxx Xxx
Xxxxxx, XX 00000
7.4 Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. The Original
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Agreement, if any, shall be terminated, with no further rights or obligations
thereunder due to or from either party, as of the effective date hereof. Any
amendment, modification, or waiver of this Agreement shall not be effective
unless in writing and agreed and executed by Xxxxxx and the Executive. Neither
the failure nor any delay on the part of any party to exercise any right,
remedy, power or privilege shall preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to any
occurrence and such failure or delay to exercise any right shall be construed as
a waiver of any right, remedy, power, or privilege with respect to any other
occurrence.
7.5 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable), without
giving effect to otherwise applicable principles of conflicts of law.
7.6 Headings; Counterparts. The headings of sections and subsections in
this Agreement are for convenience only and shall not affect its interpretation.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which, when taken together, shall be
deemed to constitute but one and the same Agreement.
7.7 Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
7.8 Certain Additional Payments.
(a) Gross-Up Payment Amount. Notwithstanding anything in this
Agreement to the contrary, in the event it shall be determined that any
payment or distribution by Xxxxxx (or its successor) to or for the benefit
of the Executive, whether paid, payable, distributed or distributable
pursuant to this Agreement or otherwise (a "PAYMENT") would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986
(the "CODE") (or any successor provision) or any interest or penalties with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are collectively referred to in this Agreement as
the "EXCISE TAX"), then the Executive shall be entitled to receive an
additional payment (a "GROSS-UP PAYMENT") in an amount such that after the
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Determinations. Subject to the provisions of Section 7.8(c), all
determinations required to be made under this Section 7.8, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by an accounting firm of national standing
reasonably selected by Xxxxxx (the "ACCOUNTING FIRM"), which shall provide
detailed supporting calculations to both Xxxxxx and the Executive within 15
business days of the receipt of written notice from the Executive that
there has been a Payment, or such earlier time as is requested by Xxxxxx.
Any Gross-Up
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Payment, as determined pursuant to this Section 7.8, shall be paid by
Xxxxxx to the Executive within five days of the receipt of the Accounting
Firm's determination. All fees and expenses of the Accounting Firm shall be
borne solely by Xxxxxx. Any determination by the Accounting Firm shall be
binding upon Xxxxxx and the Executive. As a result of the possible
uncertainty in application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments will not have been made by Xxxxxx that should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that Xxxxxx exhausts its remedies pursuant to
Section 7.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by Xxxxxx to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify Xxxxxx in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by Xxxxxx of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise Xxxxxx of
the nature of such claim and the date on which such claim is to be paid.
The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice
to Xxxxxx (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If Xxxxxx notifies the Executive
in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give Xxxxxx any information reasonably requested by Xxxxxx
relating to such claim,
(ii) take such action in connection with contesting such claim as
Xxxxxx shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by Xxxxxx and reasonable
acceptable to the Executive,
(iii) cooperate with Xxxxxx in good faith in order effectively to
contest such claim, and
(iv) permit Xxxxxx to participate in any proceedings relating to
such claim; provided, however, that Xxxxxx shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section, Xxxxxx shall control all proceedings taken in connection with
such contest and, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as Xxxxxx
shall
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determine; provided, however, that if Xxxxxx directs the Executive to
pay such claim and xxx for a refund, Xxxxxx shall, to the extent
permitted by applicable law, advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, Xxxxxx'x control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled in Executive's
sole discretion to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
7.9 Refunds. If, after receipt by the Executive of an amount advanced by
Xxxxxx pursuant to Section 7.8(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to Xxxxxx'x
complying with the requirements of such Section) promptly pay to Xxxxxx the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after receipt by the Executive of an amount
advanced by Xxxxxx pursuant to Section 7.8(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
Xxxxxx does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
7.10 Attorneys' Fees and Related Expenses. All attorneys' fees and related
expenses incurred by Executive in connection with or relating to enforcement by
Executive of Executive's rights under this Agreement shall be paid in full by
the Bank, provided Executive prevails in connection with enforcing Executive's
rights under this Agreement.
7.11 Mitigation. Executive shall not be required to mitigate the amount of
any payment or benefit provided for in Sections 4 or 6 hereto by seeking
employment or otherwise and the Bank shall not be entitled to setoff against the
amount of any payments made pursuant to Sections 4 or 6 hereto with respect to
any compensation earned by Executive arising from other employment.
7.12 Indemnification. Except to the extent inconsistent with Xxxxxx'x
certificate of incorporation or bylaws, Xxxxxx will indemnify the Executive and
hold Executive harmless to the fullest extent permitted by law with respect to
Executive's service as an officer and employee of Xxxxxx and its subsidiaries,
which indemnification shall be provided following termination of employment for
so long as the Executive may have liability with respect to Executive's service
as an officer or employee of Xxxxxx and its subsidiaries. The Executive will be
covered by a directors' and officers' insurance policy with respect to
Executive's acts as an officer to the same extent as all other Bank officers
under such policies.
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7.13 409A Safe Harbor. Notwithstanding anything in this Agreement to the
contrary, in no event shall Xxxxxx be obligated to commence payment or
distribution to the Executive of any amount that constitutes nonqualified
deferred compensation within the meaning of Internal Revenue Code section 409A
("CODE SECTION 409A") earlier than the earliest permissible date under Code
section 409A that such amount could be paid without additional taxes or interest
being imposed under Code section 409A. The Companies and the Executive agree
that they will execute any and all amendments to this Agreement as they mutually
agree in good faith may be necessary to ensure compliance with the distribution
provisions of Code section 409A and to cause any and all amounts due under this
Agreement, the payment or distribution of which is delayed pursuant to Code
section 409A, to be paid or distributed in a single sum payment at the earliest
permissible date under Code section 409A.
7.14 Funding of Grantor Trust Upon Change in Control. Xxxxxx shall
establish and maintain with an unaffiliated trustee an irrevocable grantor trust
(the "TRUST"), the assets of which shall at all times be subject to the claims
of Xxxxxx'x creditors in the event of Xxxxxx'x insolvency. Upon the occurrence
of a Change in Control, Xxxxxx shall deposit with the trustee of the Trust, to
be credited to an account established under the Trust in the name of and for the
benefit of the Executive, assets sufficient in value to satisfy fully the
obligations of Xxxxxx to the Executive under this Agreement that would arise in
the event that subsequent to the Change in Control, and during the period the
Executive continues to be covered by the severance benefit protections of this
Agreement, the Executive is terminated by Xxxxxx without Cause or the Executive
terminates his own employment for Good Reason. The contingent obligations to be
funded under the Trust shall include in particular those specified in Section 6
and Section 7.8 hereof. In the event the Executive's entitlement to benefits
under the Agreement expires or the amounts funded are in excess of the amount
needed to fully satisfy the claims under the Agreement of the Executive, any
excess amounts in the Executive's account under the Trust shall revert to
Xxxxxx.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
XXXXXX FINANCIAL CORPORATION
By: /s/ R. Xxxxx Xxxxx, Jr. /s/ E. Xxxxxx Xxxxxx
--------------------------------- ----------------------------------------
Name: R. Xxxxx Xxxxx Jr. EXECUTIVE
Title: Chairman, President and
Chief Executive Officer
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