CHANGE OF CONTROL AND SEVERANCE AGREEMENT
Exhibit 99.1
CHANGE OF CONTROL AND SEVERANCE AGREEMENT
THIS AGREEMENT is made as of the 21st day of March, 2006, between Fidelity D& D Bancorp, Inc. (“Corporation”), The Fidelity Deposit and Discount Bank (“Bank”), and Xxxxxx X. Xxxxxxxxxxx (“Executive”), an individual residing in Moscow, Pennsylvania (collectively the “Parties” and, individually, sometimes a “Party”).
WHEREAS, the Corporation is a bank holding company;
WHEREAS, the Bank is a subsidiary of the Corporation;
(a) Executive’s conviction of or plea of guilty or nolo contendere to a felony, a crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive for a period of twenty (20) consecutive days or more;
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(b) Executive’s failure to follow the good faith lawful instructions of the Board of Directors of Corporation or Bank with respect to its operations, after written notice from Corporation or Bank and a failure to cure such violation within thirty (30) days of receipt of said written notice;
(c) Executive’s willful failure to substantially perform Executive’s duties to Corporation or Bank, other than a failure resulting from Executive’s incapacity because of physical or mental illness, after written notice from Corporation or Bank and a failure to cure such violation within thirty (30) days of said written notice;
(d) dishonesty or gross negligence of the Executive in the performance of his duties;
(e) Executive’s removal or prohibition from being an institutional-affiliated party by a final order of an appropriate federal banking agency pursuant to Section 8(e) or 8(g) of the Federal Deposit Insurance Act or by the Pennsylvania Department of Banking pursuant to state law;
(f) conduct by the Executive which brings public discredit to Corporation or Bank which results or may be reasonably expected to result in material financial or other harm to the Corporation or Bank;
(g) Executive’s breach of fiduciary duty involving personal profit;
(h) unlawful harassment by the Executive against employees, customers, business associates, contractors, or vendors of Corporation or Bank which results or may be reasonably expected to result in material liability to Corporation or Bank;
(i) the willful violation by the Executive of the provisions of Sections 8, 9, 10, or 11 hereof, after notice from the Corporation or Bank and a failure to cure such violation within thirty (30) days of said notice;
(j) the violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority;
(k) theft or abuse by Executive of the Corporation’s or Bank’s property or the property of Corporation’s or Bank’s customers, employees, contractors, vendors, or business associates;
(l) any act of fraud, misappropriation or personal dishonesty;
(m) insubordination; or
(n) the existence of any material conflict between the interests of the Corporation or Bank and the Executive that is not disclosed in writing by the Executive to the Corporation and Bank and approved in writing by the Board of Directors of Corporation and Bank.
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(a) (i) a merger, consolidation or division involving Corporation or Bank, (ii) a sale, exchange, transfer or other disposition of substantially all of the assets of Corporation or Bank, or (iii) a purchase by Corporation or Bank of substantially all of the assets of another entity, unless a majority of the members of the Board of Directors of the legal entity resulting from or existing after any such transaction and of the Board of Directors of such entity’s parent corporation, if any, are former members of the Board of Directors of Corporation or Bank; or
(b) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than Corporation or Bank or any “person” who on the date hereof is a director or officer of Corporation or Bank, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of stock of Corporation or Bank representing fifty percent (50%) or more of the total fair market value or combined voting power of Corporation’s or Bank’s then outstanding stock; or
(c) during any period of one (1) year during the term of Executive’s employment under this Agreement, individuals who at the beginning of such period constitute the Board of Directors of Corporation and Bank cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period.
(a) the first date on which a single person and/or entity, or group of affiliated persons and/or entities, acquire beneficial ownership of fifty percent (50%) or more of the Corporation’s voting stock or the total fair market value of the Corporation’s stock, or
(b) the date of the closing of an Agreement, transferring all or substantially all of the Bank’s or Corporation’s assets, or
(c) the date on which a merger, consolidation or business combination is consummated, as applicable, or
(d) the date on which individuals who formerly constituted a majority of the Board of Directors of the Bank and Corporation under Section 3(c) hereof and the replacement directors otherwise approved under Section 3(c) cease to be a majority within a one year period.
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5. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE OF CONTROL.
If a Change in Control (as defined in Section 3 of this Agreement) shall occur and thereafter, there shall be:
(a) any involuntary termination of Executive’s employment (other than for a disability wherein Executive is unable to perform all of his essential job functions taking into account any reasonable accommodations);
(b) any reduction in Executive’s title, responsibilities, including reporting responsibilities, or authority, including such title, responsibilities or authority as such may be increased from time to time during the term of this Agreement;
(c) the assignment to Executive of duties inconsistent with Executive’s office on the Date of Change in Control or as the same may be increased from time to time after the Change in Control;
(d) any reassignment of Executive to a location greater than twenty-five (25) miles from the location of Executive’s office on the date of the Change in Control;
(e) any reduction in Executive’s Annual Base Salary in effect on the Date of the Change in Control or as the same may be increased from time to time after the Change in Control;
(f) any failure to provide Executive with benefits at least as favorable as those enjoyed by Executive under any of Corporation’s or Bank’s retirement or pension, life insurance, medical, health and accident, disability or other employee plans in which Executive participated at the time of the Change in Control, or the taking of any action that would materially reduce any of such benefits in effect at the time of the Change in Control; then, at the option of Executive, exercisable by Executive within180 days of a Change in Control, Executive may resign from employment with Corporation and Bank (or, if involuntarily terminated, give notice of intention to collect benefits under this Agreement) by delivering a notice in writing (the “Notice of Termination”) to Corporation and Bank and the provisions of Section 6 of this Agreement shall apply.
If, at the time of termination of Executive’s employment, a “Change in Control” (as defined in Section 3 of this Agreement) has also occurred, Corporation and Bank shall pay Executive a lump sum amount within thirty (30) days of Executive’s termination, which shall be paid in the aggregate amount equal to and no greater than 1.0 times the Executive’s Annual Base Salary, minus applicable taxes and withholdings. In addition, for a period of one (1) year from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to
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Executive during the two (2) years prior to his termination of employment, or, if Corporation and Bank cannot provide such benefits because Executive is no longer an employee, a dollar amount equal to the cost to Executive of obtaining such benefits (or substantially similar benefits) not to exceed 125% of the cost to the Corporation of obtaining such benefits (or similar benefits). However, in the event the payment described herein, when added to all other amounts or benefits provided to or on behalf of the Executive in connection with his termination of employment, would result in the imposition of an excise tax under Internal Revenue Code of 1986, as amended (the “Code”), Section 4999, such payments shall be retroactively (if necessary) reduced to the extent necessary to avoid such excise tax imposition. Upon written notice to Executive, together with calculations of Corporation’s independent auditors, Executive shall remit to Corporation the amount of the reduction, plus such interest, as may be necessary to avoid the imposition of such excise tax. Notwithstanding the foregoing or any other provision of this contract to the contrary, if any portion of the amount herein payable to the Executive is determined to be non-deductible pursuant to the regulations promulgated under Section 280G of the Code, the Corporation shall be required only to pay to Executive the amount determined to be deductible under Section 280G.
Notwithstanding the foregoing, in the event that Executive is determined to be a specified employee, as defined in Section 409A of the Code, no payment that is determined to be deferred compensation subject to Section 409A of the Code shall be made until one day following six months from the date of separation of service, as defined in Section 409A of the Code.
Notwithstanding the foregoing, in the event that Executive is determined to be a specified employee, as defined in Section 409A of the Code, no payment that is determined to be deferred compensation subject to Section 409A of the Code shall be made until one day following six months from the date of separation of service, as defined in Section 409A of the Code.
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(a) Executive hereby acknowledges and recognizes the highly competitive nature of the business of Corporation and Bank and accordingly agrees that, for a period of six months after the termination of employment with the Corporation or the Bank Executive shall not:
(i) directly or indirectly solicit persons or entities who were customers or referral sources of Corporation, Bank or their subsidiaries within sixth (6) months of Executive’s termination of employment, to become a customer or referral source of a person or entity other than Corporation, Bank or their subsidiaries;
(ii) directly or indirectly solicit employees of Corporation, Bank or their subsidiaries who were employed within one year of Executive’s termination of employment to work for anyone other than Corporation, Bank or their subsidiaries.
(b) It is expressly understood and agreed that, although Executive and Corporation and Bank consider the restrictions contained in Section 8(a) hereof reasonable for the purpose of preserving for Corporation and Bank and their subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or any restriction contained in Section 8(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 8(a) hereof shall not be rendered void but shall be deemed amended to apply as to such conditions to such other extent as such court may judicially determine or indicate to be reasonable.
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18. ARBITRATION. Corporation, Bank and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Consequently, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement (except for any enforcement sought with respect to Sections 8, 9, 10, or 11 which may be litigated in court, including an action for injunction or other relief) are to be submitted for resolution, in Lackawanna County, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment Disputes or other applicable rules then in effect (“Rules”). Corporation, Bank or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. Corporation and Bank and Executive may, as a matter of right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a request for arbitration, Corporation, Bank and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein or any enforcement sought with respect to Sections 8, 9, 10, or 11 of this Agreement, including an action for injunction or other relief.
20. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the domestic, internal laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws principles. The provisions of this Agreement shall be construed consistent with Section 409A of the Internal Revenue Code, the applicable Treasury Regulations and other official guidance promulgated thereunder so as not to give rise to any violation of such section.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
ATTEST: |
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Fidelity D& D Bancorp, Inc. |
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/s/ Xxxx X. Xxxxxxx |
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By |
/s/ Xxxxxx X. Xxxxxxx |
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, Secretary |
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The Fidelity Deposit and Discount Bank |
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/s/ Xxxx X. Xxxxxxx |
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By |
/s/ Xxxxxx X. Xxxxxxx |
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, Secretary |
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WITNESS: |
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Executive |
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/s/ Xxxxx X. Xxxx |
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/s/ Xxxxxx X. Xxxxxxxxxxx |
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Xxxxxx X. Xxxxxxxxxxx |
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