CHANGE OF CONTROL, NON-COMPETE AND
NON-DISCLOSURE AGREEMENT
THIS CHANGE OF CONTROL, NON-COMPETE AND NON-DISCLOSURE AGREEMENT (the
"Agreement") is made as of this 25th day of April, 2005, by and between FIRST
NATIONAL BANK OF XXXXXXX COUNTY, a wholly-owned subsidiary of First Xxxxxxx
County Corporation and a national banking association with its principal offices
located at 0 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx (hereinafter
individually referred to as the "Bank") and Xxxxx X. Xxxxxx-Xxxxxxx of 00
Xxxxxxxx Xxxxxxx, Xxxxxxxxxxxxx, XX 00000 (hereinafter referred to as
"Executive").
BACKGROUND
WHEREAS, the Bank desires to employ Executive as Executive Vice President
of Marketing ("Officer") and to offer Executive certain benefits in connection
with such employment;
WHEREAS, Executive is desirous of securing such employment and such
benefits set forth herein; and
WHEREAS, in consideration of the receipt of such benefits, Executive is
willing to be bound by certain non-compete and non-disclosure obligations as set
forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter set forth, the parties, intending to be legally bound
hereby agree as follows:
1) TERM OF AGREEMENT.
This Agreement is effective as of the latest to occur of the following
dates: (a) the date this Agreement is executed and delivered by both Executive
and the Bank, (b) the date on which Executive's employment as Officer commences,
or (c) the date set forth above. This Agreement will continue in effect as long
as Executive is actively employed by the Bank, unless Executive and the Bank
agree in writing to termination of this Agreement.
2) TERMINATION COMPENSATION.
If Executive's employment with the Bank is terminated without "Cause" (as
defined in Section 6) at any time within two years following a "Change of
Control" (as defined in Section 4), Executive will receive the "Termination
Benefits" (as defined in Section 3). Executive will also receive the Termination
Benefits if Executive terminates his or her
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employment for "Good Reason" (as defined in Section 5) at any time within two
years following a Change of Control.
Executive is not entitled to receive the Termination Benefits if
Executive's employment is terminated by Executive or the Bank for any or no
reason before a Change of Control occurs or more than two years after a Change
of Control has occurred.
In order to receive the Termination Benefits, Executive must execute any
release of claims that Executive may have pursuant to this Agreement (but not
any other claims) that may be requested by the Bank.
The Termination Benefits will be paid to Executive under the terms and
conditions hereof, without regard to whether Executive looks for or obtains
alternative employment following Executive's termination of employment with the
Bank.
3) TERMINATION BENEFITS DEFINED.
For purposes of this Agreement, the term "Termination Benefits" will mean
and include the following:
a) For a period of one year from Executive's termination (the "Benefit
Period"), payment of Executive's base salary on the same basis that
Executive was paid immediately prior to Executive's termination;
Payment of any bonus Executive would otherwise be eligible to receive
for the year in which Executive's termination occurs and for that
portion of the following year which is included in the Benefit Period,
such bonus to be calculated and paid as provided below; and
b) Continuation during the Benefit Period of all fringe benefits that
Executive was receiving immediately prior to Executive's termination,
including, without limitation, life, disability, accident and group
health insurance benefits coverage for Executive and Executive's
immediate family ("Fringe Benefits"), such Fringe Benefits to be
provided on substantially the same terms and conditions as they were
provided immediately prior to Executive's termination.
c) The bonus component of Executive's Termination Benefits will equal the
sum of (i) the bonus to which Executive would have been entitled for
the year during which Executive's termination occurs (calculated after
annualizing the Bank's consolidated financial results through the date
of termination if such bonus is based upon a percentage of profits)
(the "Annual Amount"), and (ii) an amount equal to the product of (x)
the Annual Amount times (y) a fraction the numerator of which is the
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number of days in the year following termination which is included in
the Benefit Period and the denominator of which is 365 (the "Prorated
Amount"). Both the Annual Amount and the Prorated Amount will be paid
to Executive not later than March 31st of the year following
Executive's termination.
Notwithstanding the foregoing, if Executive terminates his or her
employment for Good Reason, Executive's Termination Benefits will be based upon
the greater of (i) Executive's salary, bonus and benefits immediately prior to
Executive's termination or (ii) Executive's salary, bonus and benefits
immediately prior to the Change of Control which gives rise to Executive's right
to receive Termination Benefits under this Agreement. The Bank does not intend
to provide duplicative Fringe Benefits. Consequently, Fringe Benefits otherwise
receivable pursuant to this Section will be reduced or eliminated if and to the
extent that Executive receives comparable Fringe Benefits from any other source
(for example, another employer); provided, however, that Executive will have no
obligation to seek, solicit or accept employment from another employer in order
to receive such benefits.
4) CHANGE OF CONTROL DEFINED.
For purposes of this Agreement, a "Change of Control" will be deemed to
have occurred upon the earliest to occur of the following events:
a) the date the shareholders of the Bank (or the Board of Directors, if
shareholder action is not required) approve a plan or other arrangement
pursuant to which the Bank will be dissolved or liquidated;
b) the date the shareholders of the Bank (or the Board of Directors, if
shareholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets of
the Bank;
c) the date the shareholders of the Bank (or the Board of Directors, if
shareholder action is not required) and the shareholders of the other
constituent corporation (or its board of directors if shareholder
action is not required) have approved a definitive agreement to merge
or consolidate the Bank with or into such other corporation, other
than, in either case, a merger or consolidation of the Bank in which
holders of shares of the common stock of the Bank (the "Common Stock")
immediately prior to the merger or consolidation will hold at least a
majority of the ownership of common stock of the surviving corporation
(and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the
surviving corporation, a majority of the voting power of the surviving
corporation's voting securities) immediately after the merger or
consolidation, which common stock (and, if applicable, voting
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securities) is to be held in the same proportion as such holders'
ownership of Common Stock immediately before the merger or
consolidation;
d) the date any entity, person or group, (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act")), other than the Bank or any of
its subsidiaries or any employee benefit plan (or related trust)
sponsored or maintained by the Bank or any of its subsidiaries, shall
have become the beneficial owner of, or shall have obtained voting
control over, more than fifty percent (50%) of the outstanding shares
of the Common Stock; or
e) the first day after the date this Plan is adopted when directors are
elected so that a majority of the Board of Directors shall have been
members of the Board of Directors for less than twenty-four (24)
months, unless the nomination for election of each new director who was
not a director at the beginning of such twenty-four (24) month period
was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period.
Notwithstanding any provision herein to the contrary, the filing of a
proceeding for the reorganization of the Bank under Chapter 11 of the Federal
Bankruptcy Code or any successor or other statute of similar import will not be
deemed to be a Change of Control for purpose of this Agreement.
5) GOOD REASON DEFINED.
For purposes of this Agreement, the term "Good Reason" will mean and
include the following situations:
a) any material adverse change in Executive's status, responsibilities or
Fringe Benefits;
b) any failure to nominate or elect Executive as Executive Vice President
of Marketing;
c) causing or requiring Executive to report to anyone other than the
President;
d) assignment to Executive of duties materially inconsistent with
Executive's position as Executive Vice President of Marketing;
e) any reduction of Executive's annual base salary or annual bonus (or, if
applicable, a change in the formula for determining Executive's annual
bonus which would have the effect of reducing by more than 10%
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Executive's annual bonus as it would otherwise have been calculated
immediately prior to the Change of Control that gives rise to
Executive's right to receive Termination Benefits as provided in this
Agreement) or other reduction in compensation or benefits, or
f) requiring Executive to be principally based at any office or location
more than 50 miles from the current offices of the Bank in West
Chester, Pennsylvania.
6) CAUSE DEFINED.
For purposes of this Agreement, the term "Cause" will mean and include the
following situations:
a) Executive's conviction by a court of competent jurisdiction of any
criminal offense involving dishonesty or breach of trust or any felony
or crime involving moral turpitude; b) Executive's failure to perform
the duties reasonably assigned to Executive by the Board of Directors
of the Bank fail without reasonable cause or excuse, which failure or
breach continues for more than ten days after written notice thereof is
given to Executive.
7) CEILING ON BENEFITS.
Under the "golden parachute" rules in the Internal Revenue Code (the
"Code") Executive will be subject to a 20% excise tax (over and above regular
income tax) on any "excess parachute payment" that Executive receives following
a Change in Control, and the Bank will not be permitted to deduct any such
excess parachute payment. Very generally, compensation paid to Executive that is
contingent upon a Change in Control will be considered a "parachute payment" if
the present value of such consideration equals or exceeds three times
Executive's average annual compensation from the Bank for the five years prior
to the Change in Control. If payments are considered "parachute payments," then
all such payments to Executive in excess of Executive's base annual compensation
will be considered "excess parachute payments" and will be subject to the 20%
excise tax imposed under Section 4999 of the Code.
For example, if Executive's base annual compensation was $100,000,
Executive could receive $299,000 following a Change in Control without payment
of any excise tax. If Executive received $301,000 in connection with a Change in
Control, however, the entire $301,000 would be considered a parachute payment
and $201,000 of this amount would be considered an excess parachute payment
subject to excise tax.
In order to avoid this excise tax and the related adverse tax consequences
for the Bank, by signing this Agreement, Executive agrees that the Termination
Benefits payable to Executive under this Agreement will in no event exceed the
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maximum amount that can be paid to Executive without causing any portion of the
amounts paid or payable to Executive by the Bank following a Change in Control,
whether under this Agreement or otherwise, to be considered an "excess parachute
payment" within the meaning of Section 280G(b) of the Code.
If the Bank believes that these rules will result in a reduction of the
payments to which Executive is entitled under this Agreement, it will so notify
Executive within 60 days following delivery of the "Notice of Termination"
described in Section 8. If Executive wishes to have such determination reviewed,
Executive may, within 30 days of the date Executive is notified of a reduction
of payments, ask that the Bank retain, at its expense, legal counsel, certified
public accountants, and/or a firm of recognized executive compensation
consultants (an "Outside Expert") to provide an opinion concerning whether, and
to what extent, Executive's Termination Benefits must be reduced so that no
amount payable to Executive by the Bank (whether under this Agreement or
otherwise) will be considered an excess parachute payment.
The Outside Expert will be as mutually agreed by Executive and the Bank,
provided that if we are not able to reach a mutual agreement, the Bank will
select an Outside Expert, Executive will select an Outside Expert, and the two
Outside Experts will select a third Outside Expert to provide the opinion
required under this Section. The determination of the Outside Expert will be
final and binding, subject to any contrary determination made by the Internal
Revenue Service. If the Bank believes that Executive's Termination Benefits will
exceed the limitation contained in this Section, it will nonetheless make
payments to Executive, at the times stated above, in the maximum amount that it
believes may be paid without exceeding such limitation. The balance, if any,
will then be paid after the opinion of the Outside Expert has been received.
If the amount paid to Executive by the Bank following a Change in Control
is ultimately determined, pursuant to the opinion of the Outside Expert or by
the Internal Revenue Service, to have exceeded the limitation contained in this
Section, the excess will be treated as a loan to Executive by the Bank and will
be repayable on the 90th day following demand by the Bank, together with
interest at the "applicable federal rate" provided in Section 1274(d) of the
Code.
In the event that the provisions of Sections 280G and 4999 of the Code are
repealed without successor provisions, this Section will be of no further force
or effect.
8) TERMINATION NOTICE AND PROCEDURE.
Any termination by the Bank or Executive of Executive's employment during
the two years immediately following a Change of Control will be communicated by
written Notice of Termination to Executive if such Notice of Termination is
delivered by the Bank and to the Bank if such Notice of Termination is delivered
by Executive, all in accordance with the following procedures:
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The Notice of Termination will indicate the specific termination provision
in this Agreement relied upon, if applicable, and will set forth in reasonable
detail the facts and circumstances alleged to provide a basis for such
termination.
Any Notice of Termination by the Bank will be in writing signed by the
Chairman of the Board of the Bank.
If the Bank furnishes Executive with a Notice of Termination or if
Executive furnishes the Bank with a Notice of Termination, and no good faith
dispute exists regarding such termination, then the date of Executive's
termination will be the date such Notice of Termination is deemed given pursuant
to Section 11 of this Agreement.
If the Bank in good faith furnishes Executive with a Notice of Termination
for Cause and Executive in good faith notifies the Bank that a dispute exists
concerning such termination within the 15-day period following Executive's
receipt of such notice, Executive may elect to continue Executive's employment
during such dispute. If it is thereafter determined that (i) Cause did exist,
the date of Executive's termination will be the earlier of (A) the date on which
the dispute is finally determined or (B) the date of Executive's death or
permanent disability; or (ii) Cause did not exist, Executive's employment will
continue as if the Bank had not delivered its Notice of Termination and there
will be no termination arising out of such notice.
If Executive in good faith furnishes a Notice of Termination for Good
Reason and the Bank notifies Executive that a dispute exists concerning the
termination within the 15-day period following the Bank's receipt of such
notice, Executive may elect to continue Executive's employment during such
dispute. If it is thereafter determined that (i) Good Reason did exist,
Executive's date of termination will be the earlier of (A) the date on which the
dispute is finally determined or (B) the date of Executive's death or permanent
disability; or (ii) Good Reason did not exist, Executive's employment will
continue after such determination as if Executive had not delivered the Notice
of Termination asserting Good Reason. If Good Reason is determined to exist,
Executive's salary, bonus and Fringe Benefits prior to such determination will
be no less than Executive's salary, bonus and benefits immediately prior to the
Change of Control which gives rise to Executive's right to receive Termination
Benefits as provided in this Agreement.
If Executive does not elect to continue employment pending resolution of a
dispute regarding a Notice of Termination, and it is finally determined that the
reason for termination set forth in such Notice of Termination did not exist, if
such notice was delivered by Executive, Executive will be deemed to have
voluntarily terminated Executive's employment other than for Good Reason and if
delivered by the Bank, the Bank will be deemed to have terminated Executive
without Cause.
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9) DEFERRAL OF PAYMENTS.
To the extent that any payment under this Agreement, when combined with all
other payments received during the year that are subject to the limitations on
deductibility under Section 162(m) of the Code, exceeds the limitations on
deductibility under Section 162(m) of the Code, such payment will, in the
discretion of the Bank, be deferred to the next succeeding calendar year. Such
deferred amounts will be paid no later than the 60th day after the end of such
next succeeding calendar year, provided that such payment, when combined with
any other payments subject to the Section 162(m) limitations received during the
year, does not exceed the limitations on deductibility under Section 162(m) of
the Code.
10) COMPETITION.
During the Term of this Agreement and for a period of one (1) year
following termination thereof, for any reason whatsoever, Executive shall not,
directly or indirectly: (a) be employed by any other bank or similar financial
institution doing business in Xxxxxxx County, Pennsylvania; (b) on behalf of a
competing bank or similar financial institution, solicit, engage in, or accept
business or perform any services for any organization or individual that at any
time during the one (1) year ending with Executive's termination was a Bank
client, customer or affiliate, or a source of business with which or who
Executive dealt or had any contact during the term of Executive's employment
with the Bank; (c) solicit any employee of the Bank for the purpose of inducing
such employee to resign from the Bank; nor (d) induce or assist others in
engaging in the activities described in subparagraphs (a) through (c) above.
Notwithstanding the foregoing if Executive's employment is terminated due to a
Change of Control, the provisions of clause (a) of the prior sentence shall be
null and void and Executive shall be entitled to be employed by any bank or
financial institution doing business in Xxxxxxx County, Pennsylvania or in any
other location.
11) DISCLOSURE OF CONFIDENTIAL INFORMATION.
During the period during which Executive is employed by the Bank and
following the voluntary or involuntary termination of Executive's employment
with the Bank for any reason whatsoever, Executive shall not use for any
non-Bank purpose or disclose to any person or entity any confidential
information acquired during the course of employment with the Bank. Executive
shall not, directly or indirectly, copy, take, or remove from the Bank's
premises, any of the Bank's books, records, customer lists, or any other
documents or materials. The term "confidential information" as used in this
Agreement includes, but is not limited to, records, lists, and knowledge of the
Bank's customers, suppliers, methods of operation, processes, trade secrets,
methods of determination of prices and rates, financial condition, as the same
may exist from time to time.
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12) SUCCESSORS.
The Bank will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Bank or any of its subsidiaries to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession had
taken place. Failure of the Bank to obtain such assumption and agreement prior
to the effectiveness of any such succession will be a breach of this Agreement
and will entitle Executive to compensation in the same amount and on the same
terms to which Executive would be entitled hereunder if Executive terminates his
or her employment for Good Reason following a Change of Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective will be deemed the date of Executive's termination. As used in
this agreement "the Bank" will mean "the Bank" as hereinbefore defined and any
successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
13) BINDING AGREEMENT.
This Agreement will inure to the benefit of and be enforceable by Executive
and Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amount would still be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to Executive's
estate.
14) NOTICES.
For purposes of this Agreement, notices and all other communications
provided for in this Agreement will be in writing and will be deemed to have
been duly given when personally delivered or mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed to
Executive at the last address Executive has filed in writing with the Bank or,
in the case of the Bank, at its main office, attention of the Chairman of the
Board of Directors, or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notice of change of
address will be effective only upon receipt.
15) MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
Executive and the Chairman of the Board of the Bank. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
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party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement will be governed by the laws of the State of Pennsylvania without
regard to its conflicts of law principles. All references to sections of the
Exchange Act or the Code will be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder will be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Bank that arise prior to the expiration of this Agreement
will survive the expiration of the term of this Agreement.
16) VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any other provision
of this Agreement, which will remain in full force and effect.
17) COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which will
be deemed to be an original but all of which together will constitute one and
the same instrument.
18) EXPENSES AND INTEREST.
If a good faith dispute arises with respect to the enforcement of
Executive's rights under this Agreement or if any arbitration or legal
proceeding will be brought in good faith to enforce or interpret any provision
contained herein, or to recover damages for breach hereof, and Executive is the
prevailing party, Executive will recover from the Bank any reasonable attorneys'
fees and necessary costs and disbursements incurred as a result of such dispute
or legal proceeding, and prejudgment interest on any money judgment obtained by
Executive calculated at the rate of interest announced by Chase Manhattan Bank,
New York from time to time as its prime rate from the date that payments to
Executive should have been made under this Agreement. It is expressly provided
that the Bank will in no event recover from Executive any attorneys' fees,
costs, disbursements or interest as a result of any dispute or legal proceeding
involving the Bank and Executive.
19) PAYMENT OBLIGATIONS ABSOLUTE.
The Bank's obligation to pay Executive the Termination Benefits in
accordance with the provisions herein will be absolute and unconditional and
will not be affected by any circumstances; provided, however, that the Bank may
apply amounts payable under this Agreement to any debts owed to the Bank by
Executive on the date of Executive's termination. All amounts payable by the
Bank in accordance with this Agreement will be paid without notice or demand. If
the Bank has paid Executive more than the amount to which Executive is entitled
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under this Agreement, the Bank will have the right to recover all or any part of
such overpayment from Executive or from whomsoever has received such amount.
20) ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between Executive and the
Bank concerning the subject matter discussed in this Agreement and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations, or warranties, whether written or oral, by any officer,
employee or representative of the Bank. Any prior agreements or understandings
with respect to the subject matter set forth in this Agreement are hereby
terminated and canceled.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
FIRST NATIONAL BANK OF XXXXXXX COUNTY
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx
Executive Vice President Human Resources
/s/ Xxxxx X. Xxxxxx-Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxx-Xxxxxxx
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