EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 99.1
THIS
AGREEMENT executed this _16th
day of
December, 2005, is made as of the 20th day of April, 2004 (Effective Date),
between Citizens Financial Services, Inc. (the “Corporation”) and First Citizens
National Bank (the “Bank”) and Xxxxxxx X. Xxxxx (the “Executive”).
WHEREAS,
the Bank is a subsidiary of the Corporation; and
WHEREAS,
any reference to “Corporation” shall mean Corporation or Bank;
WHEREAS,
the Corporation and Bank desire to employ the Executive as President and Chief
Executive Officer under the terms and conditions set forth herein;
and
WHEREAS,
the Executive desires to serve the Corporation and Bank in an executive capacity
under the terms and conditions set forth in this Agreement;
WHEREAS,
the Corporation and the Bank were represented by Xxxxxxxx Xxxxxxxx, P.C. and
Executive was represented by Xxx Xxxxxxxxx, Esquire, of XxXxxxxx, Page,
Xxxxxxxxx & Hall, during the negotiation of this Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties agree as
follows:
1. TERM
OF EMPLOYMENT.
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(a) General.
The
Corporation and Bank hereby shall employ the Executive and the Executive hereby
accepts employment with the Corporation and Bank for a term of three (3) years
beginning on April 20, 2004, and ending three years later (the “Employment
Period”), subject, however, to prior termination of this Agreement as set forth
below. The
initial term of this Agreement shall commence on the Effective Date hereof
and
shall continue through April 20, 2007. This Agreement shall be renewed
automatically on June 1 of each year for successive terms of three years each,
unless either party notifies the other party at least 90 (ninety) days
prior
to
such date of such party's determination not to renew this Agreement
beyond
the then existing term. It is the intention of the parties that this Agreement
be "Evergreen" unless (i) either party gives written notice to the other
party of his or its intention not to renew this Agreement as provided above
or
(ii) this Agreement is terminated
pursuant to Section 12 hereof. Each reference herein to "the term of this
Agreement" shall include the initial term and any renewal term. Except in the
event Executive retires pursuant to the then current retirement policy, at
the
end of the term of the Agreement, Executive, if requested, shall submit his
resignation for any Board of Director or similar position he may hold at the
Bank, Corporation, or its subsidiaries or affiliates.
2. POSITION
AND DUTIES.
The
Executive shall serve as the President and Chief Executive Officer of the
Corporation and Bank, reporting only to the Board of Directors of the
Corporation and Bank and shall have supervision and control over, and
responsibility for, the general management and operation of the Corporation
and
Bank, and shall have such other powers and duties as may from time to time
be
prescribed by the Board of Directors of the Corporation and Bank
3. ENGAGEMENT
IN OTHER EMPLOYMENT.
The
Executive will devote his full attention, time and energies to the business
of
Corporation, Bank and any of their subsidiaries or affiliates. The Executive
shall neither engage in any business or commercial activities, duties or
pursuits which compete with the business or commercial activities of the
Corporation, Bank or any of their subsidiaries or affiliates, nor serve as
a
director or officer or in any other capacity in a company which competes with
the Corporation, Bank or any of their subsidiaries or affiliates. The Executive
may continue his activities as disclosed to the Corporation and Bank to date
in
Xxxxxxxx Real Estate Inc., subject to any future review for compliance with
any
regulatory requirements.
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4. COMPENSATION/ANNUAL
DIRECT SALARY.
As
compensation for services rendered the Corporation and Bank under this
Agreement, the Executive shall be entitled to receive from the Corporation
or
Bank an annual direct salary of One Hundred Fifty Thousand Dollars ($150,000)
per year (the “Annual Direct Salary” and as may be increased in the future),
payable in such intervals, consistent with the Bank’s payroll policy prorated
for any partial employment period. After the year 2004, the Annual Direct Salary
shall be reviewed annually no later than December 31 of the then calendar year
and shall be subject to such annual change, but not reduced below the Annual
Direct Salary in effect at the time of such review without the Executive’s
written consent, as may be set by the Board of Directors of the Corporation
and
Bank taking into account the position and duties of the Executive and the
performance of the Corporation and Bank under the Executive’s leadership.
5. FRINGE
BENEFITS, VACATION, EXPENSES, AND PERQUISITES.
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Employee
Benefit Plans.
The Executive shall be entitled to participate in or receive benefits
under all Bank employment benefit plans including, but not limited
to, the
management incentive plan, any pension plan, profit-sharing plan,
savings
plan, or life insurance plan (except in the event the Bank provides
life
insurance as set forth in Section 5(g), and the group disability
insurance
plan as made available by the Bank to its employees), subject to
and on a
basis consistent with terms, conditions and overall administration
of such
plans and arrangements, including without limitation the eligibility
requirements of such plans or arrangements. The Bank shall apply
for and
obtain an individual disability policy to be owned by the Executive
that
shall provide Executive with a seventy percent (70%) of Annual Direct
Salary benefit integrated with any social security benefits at standard
rates. The Bank shall pay Executive the amount of that premium for
the
individual policy with a standard waiver of premium clause plus such
additional amount (tax allowance) as may be necessary to compensate
the
Executive for the payment by Executive of the applicable federal,
state
and local income taxes on the receipt of individual disability insurance
premium. The Bank shall enroll Executive in the current group short-term
disability policy and pay the premiums for the group short-term disability
policy in the event Executive has less than 100 days of accrued vacation,
sick days and personal days. In the event Bank enrolls Executive
in the
current short term disability policy, Bank shall at the end of the
applicable term of the short-term disability policy, evaluate if
Executive
has less than the requisite 100 days, and renew said policy in such
event.
In computing such tax allowance for the individual long-term disability
policy, the payment to be made under this clause shall be multiplied
by
the “gross-up percentage” (“GUP”). The GUP shall be determined as
follows:
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GUP
=
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Tax
Rate
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1-
Tax Rate
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The
Tax
Rate for purposes of computing the GUP shall be the highest marginal federal,
state and local income employment-related tax rate applicable to the Executive
in the year in which the payment is made.
In
the
event that the Executive is not insured for the life insurance, long term
disability insurance and short term disability policy, if applicable,
contemplated by subsections (a) and (g) within ninety (90) days of the execution
of this Agreement, Executive may terminate this Agreement by giving written
notice within thirty (30) days at which time all provisions shall be null and
void ab
initio.
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(b)
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Vacation,
Holidays, Sick Days and Personal Days.
The Executive shall be entitled to twenty paid vacation days in each
calendar year. The Executive shall also be entitled to all paid holidays,
sick days and personal days given by the Corporation and/or the Bank
to
its employees. In addition, irrespective of any change in policy
by the
Corporation and/or the Bank, the Executive shall be entitled to carry
vacation days, sick days, and personal days over for an additional
one
full year.
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(c)
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Business
Expenses.
During the term of his employment hereunder, the Executive shall
be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by him, which are properly accounted for, in accordance
with the
policies and procedures established by the Board of Directors of
the
Corporation and/or the Bank for its senior executive
officers.
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(d)
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Automobile.
The Executive shall be provided with a company-owned or leased vehicle
which may include at Executive’s option a sport utility vehicle or truck
reasonably acceptable to Executive and Bank during the Employment
Period.
The vehicle will be replaced no less than every third year. The vehicle
is
to be used for Corporation or Bank business and/or business development,
and as properly documented as required by applicable Internal Revenue
guidelines by Executive for personal business.
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(e)
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Club
Memberships.
The Corporation shall provide payment of annual dues and monthly
business
development expenses for the Executive in connection with a club
membership in the market area. Any other contributions (assessments)
associated with the club membership are the sole responsibility of
the
Executive and are to be paid by the Executive.
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(f)
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Professional
Memberships and Continuing Education.
The Corporation and/or Bank shall pay all fees and expenses associated
with the Executive’s professional memberships and continuing education
related to the Executive’s status as a Public Accountant.
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(g) Life
Insurance.
The
Bank, after this Agreement is executed, shall apply to acquire a single premium
Bank-owned Life Insurance (“BOLI”) policy or an individual level term thirty
(30) year policy (“Term Life Insurance”) with a death benefit of up to
$1,000,000 at standard rates on Executive’s life under which the Bank shall be
the owner of the policy, but provide Executive through a Collateral Assignment
Agreement, a death benefit of three times Annual Salary but not to exceed
$1,000,000 in a total death benefit. The Bank may integrate this death benefit
with the existing group life insurance plan and provide the death benefit in
excess of that provided in the group life insurance plan through the Term Life
Insurance, existing BOLI or BOLI hereinafter acquired. The BOLI shall comply
with the requirements of OCC Bulletin 2004-56 or any subsequent regulatory
guidance. In the event any of the life insurance is not provided through single
premium BOLI, the Bank shall pay the annual premiums for the Term Life
Insurance, thereby maintaining the insurance coverage contemplated by this
subsection throughout the term of this Agreement.
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6.
INDEMNIFICATION.
The Corporation will indemnify the Executive as required under
Pennsylvania and federal law, with respect to any threatened, pending
or
completed legal or regulatory action, suit or proceeding brought
against
him by reason of the fact that he is or was a director, officer,
employee
or agent of the Corporation.
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7. LIABILITY
INSURANCE.
The
Bank and/or the Corporation shall use its best efforts to
obtain
insurance coverage for the Executive under an insurance policy covering officers
and directors of the Bank and Corporation against lawsuits, arbitrations or
other legal or regulatory proceedings; however, nothing herein shall be
construed to require the Bank and/or the Corporation to obtain such insurance,
if the Board of Directors of the Bank and/or the Corporation determine that
such
coverage cannot be obtained at a reasonable price.
8. RESIDENCE.
Irrespective of any existing or future policies of the Corporation or Bank,
Executive shall not be required to change his place of residence while employed
as President and Chief Executive officer of the Corporation and Bank.
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9. UNAUTHORIZED
DISCLOSURE.
During
the term of his employment hereunder, or at any later time, the Executive shall
not, without the written consent of the Board of Directors of the Corporation
or
Bank or a person authorized thereby, knowingly disclose to any person, other
than an employee of the Corporation or Bank or a person to whom disclosure
is
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties as an executive of the Corporation or Bank, any
confidential information, trade secrets, or know how, obtained by him while
in
the employ of the Corporation or Bank. Confidential information, trade secrets,
or know how includes:
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any
services, products, improvements, formulas, projects, proposals,
designs
or styles, processes, customers, (including, but not limited to,
customers
of Corporation, Bank or any of their affiliates or subsidiaries on
whom
the Executive called or with whom he became acquainted during the
term of
his employment),
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methods
of business or any business practices, research, product or business
plans, customer lists, markets, software, developments, inventions,
technology, drawings, engineering, marketing, distribution and sales
methods and systems, finances, sales and profit figures,
and
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other
business information of Corporation, Bank or any of their subsidiaries
or
affiliates, the disclosure of which could be or will be materially
damaging to the Corporation, Bank or any of their subsidiaries or
affiliates.
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Provided,
however, that confidential information, trade secrets or know how shall not
include:
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any
information known generally to the public (other than as a result
of
unauthorized disclosure by the Executive or any person with the
assistance, consent or direction of the Executive), or
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any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted
by
the Corporation or Bank or any information that must be disclosed
as
required by law.
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10.
RETURN
OF COMPANY PROPERTY AND DOCUMENTS.
The
Executive
agrees
that, at the time of termination of his employment, regardless of the reason
for
termination, he, as soon as practical, will deliver to Corporation or Bank,
any
and all company property, including, but not limited to, keys, security codes
or
passes, mobile telephones, pagers, computers, devices, confidential information
(as defined in this Agreement), records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, software
programs, equipment, other documents or property, or reproductions of any of
the
aforementioned items developed or obtained by the Executive during the course
of
his employment.
11. RESTRICTIVE
COVENANT.
(a) Non-competition
and Non-solicitation.
The
Executive hereby acknowledges and recognizes the highly competitive nature
of
the business of Corporation and Bank and accordingly agrees that, for the
applicable period and the applicable circumstances set forth in Section 11(c)
hereof, Executive shall not:
(i) be
engaged, directly or indirectly, either for his own account or as agent,
consultant, employee, partner, officer, director, proprietor, investor (except
as an investor owning less than 5% of the stock of a publicly owned company)
or
otherwise of any person, firm, corporation or enterprise engaged in (1) the
banking or financial services industry (including bank holding company), or
(2)
any other activity in which Corporation, Bank or any of their subsidiaries
or
affiliates are engaged during the Employment Period, in any county in which,
a
branch, or office of Corporation or any of its subsidiaries is located, or
within a fifty (50) mile radius of any branch, or office of Corporation or
any
of its subsidiaries, any of the foregoing which existed on the date of
termination of the Executive’s employment, which radius includes areas located
outside of the Commonwealth of Pennsylvania (the “Non-Competition Area”);
or
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(ii) provide
financial or other assistance to any person, firm, corporation, or enterprise
engaged in (1) the banking or financial services industry (including bank
holding company), or (2) any other activity in which Corporation, Bank or any
of
their subsidiaries or affiliates are engaged during the Employment Period in
the
Non-Competition Area; or
(iii) directly
or indirectly contact, solicit or induce any person, firm, corporation or other
entity who or which is a customer or referral source of Corporation, Bank or
any
of their subsidiaries or affiliates during the term of Executive’s employment or
at the date of termination of Executive’s employment, to become a client,
customer or referral service of any other person, firm, corporation or other
entity provided that such other person, firm, corporation or other entity
competes in any way with the Corporation, Bank or any of their subsidiaries
or
affiliates; or
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(iv)
directly or indirectly solicit, induce or encourage any
employee of
Corporation, Bank or any of their subsidiaries or affiliates, who
is
employed during the term of Executive’s employment or at the date of
termination of Executive’s employment, to leave the employ of Corporation,
Bank or any of their subsidiaries or affiliates or to seek, obtain
or
accept employment with any person or entity other than Corporation,
Bank
or any of their subsidiaries or affiliates, provided, however,
the
furnishing of a written reference, requested by an employee, shall
not
itself be a violation of this restrictive covenant.
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(b) Amendment
of Restrictive Covenant.
It is
expressly understood and agreed that, although Executive, Corporation and Bank
consider the restrictions contained in Section 11(a) reasonable for the purpose
of preserving for Corporation, Bank and any of their subsidiaries or affiliates,
their good will and other proprietary rights, if a final judicial determination
is made by a court having jurisdiction that the time or territory or any other
restriction contained in Section 11(a) is an unreasonable or otherwise
unenforceable restriction against the Executive, the provisions of Section
11(a)
shall not be rendered void, but shall be deemed amended to apply as to such
maximum time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable.
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(c) Period
of Restrictive Covenant.
The
provisions of this Section 11 shall be applicable, commencing on the Effective
Date of this Agreement and ending:
(i) one
(1)
year after the effective date of termination of employment by Corporation and/or
Bank with Cause.
(ii)
two
(2)
years after the effective date of termination of employment by Corporation
and/or Bank without Cause, or resignation by Executive with or without Good
Reason; and
(iii) two
(2)
years if Executive’s employment terminates following a Change of Control during
the first year of employment and the payments in Section 14(c) hereof are
triggered, and
(iv) thirty
(30) months if Executive’s employment terminates following a Change of Control
during the second year of employment and the payments in Section 14(c) hereof
are triggered, and
(v) three
(3)
years if Executive’s employment terminates following a Change of Control after
the second year of employment and the payments in Section 14(c) hereof are
triggered, provided however in all events that the Restrictive Covenant shall
continue,
(vi) during
such period of time that the executive receives any disability payment pursuant
to any disability benefit or policy provided or funded by the Corporation or
the
Bank whether pursuant to this agreement or a plan or arrangement provided to
other Corporation or Bank employees.
(d) Exception
to Non-competition.
In the
event that Executive’s employment is terminated by Corporation and/or Bank for
Cause, or by Executive without Good Reason, the Executive may during the
applicable period of Restrictive Covenant engage in the practice of Public
Accounting. However, the Executive shall comply and shall be subject to Section
11(a)(ii), (iii) and (iv) with regard to services other than accounting services
offered by any entity in which he is a partner, shareholder, owner, officer,
or
employee.
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(e) Breach
of Restrictive Covenant.
It is
expressly understood and agreed that if the Executive violates or breaches
any
provisions of this Section 11, then the provisions of this Section 11 shall
apply to the Executive for an additional one (1) year following the date of
such
violation or breach.
(f) Enforcement
of Restrictive Covenant and Unauthorized Disclosure.
Executive acknowledges that his breach of any of the restrictions set forth
in
this Agreement in Sections 9, 10 and 11 will result in irreparable injury which
is not compensable in damages or other legal remedies, and Bank and Corporation
may seek to obtain injunctive relief against the breach, or threatened breach
of
this Agreement, and/or specific performance and damages, as well as other legal
and equitable remedies including attorney’s fees which may be available and to
which Bank and Corporation may be entitled. The right to equitable relief shall
include, without limitation, the right to both preliminary and permanent
injunctions against any breach or threatened breach and specific performance
for
the provisions of this Agreement, and in such case, the Employee shall raise
no
objection, and hereby waives any objection, to the form of relief prayed for
in
any such proceeding. Employer shall not be required to post a bond or similar
assurance should Employer bring any action for equitable relief in order to
enforce this Agreement.
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TERMINATION.
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(a) Death.
Notwithstanding any other provisions of this Agreement, this Agreement shall
terminate automatically upon the Executive’s death and the Executive’s rights
under this Agreement shall cease as of the date of such termination.
(b) Disability.
Notwithstanding any other provisions of this Agreement, if, as a result of
physical or mental injury or impairment, Executive is unable to perform all
of
the essential job functions of his position on a full time basis, with or
without a reasonable accommodation, and without posing a direct threat to
himself and others, for a period in excess of one (1) month, not to exceed
six
(6) months, all obligations of Bank and Corporation to pay Executive an Annual
Direct Salary as set forth in Section 4 of this Agreement are suspended
provided, however, in the event Executive does not have sufficient time off
or
sick leave to cover this period, and the short-term disability policy coverage
described in Section 5(a) was not acquired or maintained, the Bank shall pay
the
same benefits as provided in the short-term group policy. Any paid time off,
sick leave, or short term disability pay Executive may be entitled to receive,
pursuant to an established disability plan or program of the Bank and/or
Corporation shall be considered part of the compensation Executive shall receive
while disabled and shall not be in addition to the compensation received by
Executive under this provision of the Agreement. Executive agrees that should
he
remain unable to perform all of the essential functions of his position on
a
full time basis, with or without a reasonable accommodation and without posing
a
direct threat to himself or others, after six (6) months, the Bank and/or
Corporation will suffer an undue hardship by continuing Executive in his
position. Upon this event, all compensation and employment obligations of the
Bank and Corporation under this Agreement shall cease (with the exception of
Executive’s rights under the individual long-term disability policy described in
paragraph 5(a)) and this Agreement shall terminate. In such event, the time
period for the Restrictive Covenant set forth in Section 11(c)(vi) shall
control.
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(c) Cause.
Notwithstanding any other provisions of this Agreement, the Bank and/or
Corporation may terminate the Executive’s employment hereunder for “Cause.” As
used in this Agreement, the Bank and/or Corporation shall have “Cause” to
terminate the Executive’s employment hereunder upon: (i) the willful failure by
the Executive to substantially perform his duties hereunder (other than a
failure resulting from the Executive’s incapacity because of physical or mental
illness, as provided in Section 12(b) hereof), after notice from the Corporation
or Bank and a failure to cure such violation within thirty (30) days of said
notice; (ii) the willful engaging by the Executive in misconduct injurious
to
the Corporation or Bank; (iii) the willful violation by the Executive of the
provisions of Sections 3, 8, 9 or 11 hereof, after notice from the Corporation
or Bank and a failure to cure such violation within thirty (30) days of said
notice; (iv) the dishonesty or gross negligence of the Executive in the
performance of his duties; (v) the breach of Executive’s fiduciary duty
involving personal profit; (vi) the material 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; (vii) conduct on the part of Executive
which brings public discredit to the Corporation or Bank; (viii) unlawful
discrimination by the Executive, including harassment against Corporation or
Bank’s employees, customers, business associates, contractors, or visitors; (ix)
theft or abuse by Executive of the Corporation or Bank’s property or the
property of Corporation or Bank’s customers, employees, contractors, vendors, or
business associates; (x) failure of the Executive to follow the good faith
lawful instructions of the Board of Directors of Corporation or Bank with
respect to its operations, after notice from the Corporation or Bank and a
failure to cure such violation within thirty (30) days of said notice; (xi)
the
direction or recommendation of a state or federal bank regulatory authority
to
remove the Executive’s position with Corporation and/or Bank as identified
herein; (xii) any final removal or prohibition order to which the Executive
is
subject, by a federal banking agency pursuant to Sections 8(e) and 8(g) of
the
Federal Deposit Insurance Act; (xiii) the Executive’s conviction of or plea of
guilty or nolo
contendere
to a
felony, crime of falsehood or a crime involving moral turpitude, or the actual
incarceration of Executive; (xiv) any act of fraud, misappropriation or personal
dishonesty; (xv) insubordination; (xvi) misrepresentation of a material fact,
or
omission of information necessary to make the information supplied not
materially misleading, in an application or other information provided by the
Executive to the Corporation or any representative of the Corporation in
connection with the Executive’s employment with Corporation; (xvii) the
existence of any material conflict between the interests of Corporation and
the
Executive that is not disclosed in writing by the Executive to the Corporation
and approved in writing by the Board of Directors of Corporation; or (xviii)
the
Executive takes action that is clearly contrary to the best interest of the
Corporation.
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(d) Termination (d)
Termination by
Executive.
The
Executive may terminate his employment hereunder if (i) as a result of physical
or mental injury or impairment, Executive is unable to perform all of the
essential job functions of his position on a full time basis, with or without
a
reasonable accommodation, and without posing a direct threat to himself and
others, or (ii) for Good Reason. The term “Good Reason” shall mean (1) any
assignment to the Executive, without his consent, of any duties other than
those
contemplated by, or any limitation of the powers of the Executive not
contemplated by Section 2 hereof; or (2) any removal of the Executive from
any
of the positions indicated in Section 2 hereof, except as a result of his
regulatory removal and/or in connection with termination of the Executive’s
employment for Cause; or (3) failure of the Bank to comply with Sections 2
or 4
hereof, provided such alleged breach is not a result of his regulatory removal
and/or in connection with termination of the Executive’s employment For Cause,
all after notice from the Executive to the Corporation and Bank that such action
or limitation of the Bank or Corporation constitutes Good Reason and the failure
to cure such situation within thirty (30) days of said notice, or if said
situation cannot be cured within thirty (30) days, within a reasonable time
thereafter if a diligent effort is being made by the Corporation and/or the
Bank
to cure such situation.
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13. PAYMENTS
UPON TERMINATION ABSENT A CHANGE IN CONTROL.
(a) If
the
Executive’s employment is terminated by the Executive because of his health as
described in Section 12 (d)(i) hereof, or if the Executive’s employment is
terminated by the Bank or Corporation because of Executive’s disability or for
Cause (as defined herein), the Corporation shall pay the Executive his full
Annual Direct Salary through the date of termination at the rate in effect
at
the time of termination and the Corporation and Bank shall have no further
obligation to the Executive under this Agreement.
(b) If
the
Executive’s employment is terminated by the Corporation or Bank other than
pursuant to Sections 12(a) (Death); 12(b) (Disability); or 12(c) (Cause) hereof,
then the Corporation shall promptly pay the Executive a lump sum amount equal
to
and no greater than two (2) times the Executive’s Annual Direct Salary as
defined in Section 4, 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 health
care, life and disability insurance in effect with respect to Executive during
the one (1) year prior to his termination of employment. If Corporation cannot
provide such benefits under the terms of the plans or contracts, Corporation
shall pay to Executive, a dollar amount equal to the cost to the Executive
of
obtaining such benefits (or substantially similar benefits), not to exceed
125%
of the cost to the Corporation of obtaining such benefits (or substantially
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 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 Internal Revenue Code of
1986,
as amended (the “Code”), the Corporation shall be required only to pay to
Executive the amount determined to be deductible under Section
280G.
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(c) If
the
Executive shall terminate his employment for Good Reason, pursuant to Section
12(d)(ii)(1), (2), or (3), then the Corporation shall promptly pay the Executive
a lump sum amount equal to and no greater than two (2) times the Executive’s
Annual Direct Salary as defined in Section 4, 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 health care, life and disability insurance in effect
with respect to Executive during the one (1) year prior to his termination
of
employment. If Corporation cannot provide such benefits under the terms of
the
plans or contracts, Corporation shall pay to Executive, a dollar amount equal
to
the cost to the Executive of obtaining such benefits (or substantially similar
benefits), not to exceed 125% of the cost to the Corporation of obtaining such
benefits (or substantially 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 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 Internal Revenue Code
of
1986, as amended (the “Code”), the Corporation shall be required only to pay to
Executive the amount determined to be deductible under Section 280G.
16
(d) Notwithstanding
any other provision in this section, in the event that Executive is determined
to be a key employee as that term is defined by Section 409A of the IRC no
payment shall be made until one day following six months from the date of
separation from service as that term is defined by Section 409A of the
IRC.
14. PAYMENTS
UPON TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) If
a
Change in Control (as defined herein) shall occur and if, between the Date
of
the Change in Control (as defined herein) and one (1) year after the Date of
Change in Control (as defined herein), there shall be:
(i) any
involunt (i)
any involuntary
termination of Executive’s employment (other than for the reasons set forth in
Sections 12(a), (b) or (c) of this Agreement); or
(ii) any
failure by the acquiring person or entity to offer employment to Executive
as of
the Date of Change in Control (as defined herein), in a position having
equivalent responsibilities, title, authority, except reporting authority,
compensation and benefits as Executive received immediately prior to the Change
in Control (as defined herein); or
17
(iii) any
reduction in Executive’s title, responsibilities, except 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; or
(iv) the
assignment to Executive of duties inconsistent with Executive’s office on the
date of the Change in Control or as the same may be increased from time to
time
after the Change in Control; or
(v) any
reassignment of Executive to a location greater than fifty (50) miles from
the
location of Executive’s office on the date of the Change in Control;
or
(vi) any
reduction in Executive’s Annual Direct 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; or
(vii) any
failure to provide Executive with benefits at least as favorable as those
enjoyed by Executive under any of Corporation or Bank’s retirement or pension,
life insurance, medical, health and accident, disability or other employee
benefit 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 within sixty (60) days of the occurrence
of
any of the foregoing events, 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
14 (c) of this Agreement shall apply.
(b) During
the period of time between the execution of an agreement to effect a Change
in
Control (as defined herein) and the Date of the Change in Control (as defined
herein), Executive’s employment may only be terminated for Cause (as defined
herein). If, during that period of time, Executive’s employment is terminated
for Cause (as defined herein), then all rights of Executive under this Agreement
shall cease as of the effective date of such termination. If, during that period
of time, Executive’s employment is terminated other than for Cause (as defined
herein), then Executive may give notice of intention to collect benefits under
this Agreement by delivering a notice in writing (“Notice of Termination”) to
Corporation and Bank and the provisions of Section 14(c) of this Agreement
shall
apply.
18
(c) In
the
event that Executive delivers a Notice of Termination (as defined in Section
14(a) of this Agreement) to Corporation and Bank, following the Change in
Control, Executive shall be entitled to receive the compensation and benefits
set forth below:
(i)
For
less
than twelve (12) months of continuous service Corporation or Bank shall promptly
pay Executive a lump sum amount equal to and no greater than two (2) times
the
Executive’s Annual Direct Salary as defined in Section 4, minus applicable taxes
and withholdings.
(ii)
For
more
than twelve (12) months of continuous service Corporation or Bank shall promptly
pay Executive a lump sum amount equal to two and one-half (2.5) times the
Executive’s then current Annual Direct Salary as defined in Section
4.
(iii) For
more
than twenty-four (24) months of continuous service Corporation or Bank shall
promptly pay Executive a lump sum amount equal to two and ninety-nine hundredths
(2.99) times the Executive’s then current Annual Direct Salary as defined in
Section 4.
19
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 health care, life and disability insurance in effect with
respect to Executive during the one (1) year prior to his termination of
employment. If Corporation cannot provide such benefits under the terms of
the
plans or contracts, Corporation shall pay to Executive, a dollar amount equal
to
the cost to the Executive of obtaining such benefits (or substantially similar
benefits), not to exceed 125% of the cost to the Corporation of obtaining such
benefits (or substantially 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 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 Internal Revenue Code
of
1986, as amended (the “Code”), the Corporation shall be required only to pay to
Executive the amount determined to be deductible under Section
280G.
15. DEFINITION
OF CHANGE IN CONTROL.
For
purposes of this Agreement, the term “Change in Control” shall mean: A change in
control (other than one occurring by reason of an acquisition of the Corporation
or Bank by Executive) of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A and any successor rule
or regulation promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”) if Corporation or Bank were subject to the Exchange Act
reporting requirements; provided that, without limiting the foregoing, such
a
change in control shall be deemed to have occurred if the Board of Directors
certifies that one of the following has occurred:
20
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(a)
any “person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than the Corporation or Bank or any “person” who
on the date hereof is a director or officer of the Corporation
or Bank is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
or
Bank representing fifty percent (50%) or more of the combined voting
power
of the Corporation’s or Bank’s then outstanding securities, or
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(b)
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 the Corporation or 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;
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(c) a
merger,
consolidatio (c)
a merger,
consolidtion or business combination with the Corporation and/or Bank
occurs.
(d) Notwithstanding
any other provision in this section, in the event that Executive is determined
to be a key employee as that term is defined by Section 409A of the IRC no
payment shall be made until one day following six months from the date of
separation from service as that term is defined by Section 409A of the
IRC.
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16.
|
DEFINITION
OF DATE OF CHANGE IN CONTROL.
For purposes of this Agreement, the Date of Change in Control shall
mean:
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(a) the
first
date on which a single person and/or entity, or group of affiliated persons
and/or entities, acquire the beneficial ownership of fifty percent (50%) or
more
of the Corporation’s voting securities, or more than fifty percent (50%) of the
total fair market value of the Corporation, or
21
(b) the
date
of the closing of an Agreement, transferring all or substantially all of the
Bank 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 or Corporation under Section 15(b) hereof and the
replacement Director’s otherwise approved under Section 15(b), ceased to be a
majority within a one year period.
17. DAMAGES
FOR BREACH OF CONTRACT.
In the
event of a breach of this
Agreement
by either the Corporation, Bank or the Executive resulting in damages to another
party to this Agreement, that party may recover from the party breaching the
Agreement, only those damages as set forth herein. In no event shall any party
be entitled to the recovery of attorney’s fees or costs except as provided in
Sections 11(f) and 18.
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,
with
the exception of the Unauthorized Disclosure Provisions of Section 9, and the
Restrictive Covenant provisions in Section 11 which the Corporation or Bank
may
seek to enforce in any court of competent jurisdiction, each party agrees that
all disputes, disagreements and questions of interpretation concerning this
Agreement are to be submitted for resolution, in Williamsport, 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, Bank and Executive may, as a matter
or
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 arbitration
proceeding and all filings, testimony, documents, and information, relating
to
or presented during the evaluation proceeding, shall be disclosed exclusively
for the purpose of facilitating the arbitration process and for no other purpose
and shall be deemed to be information subject to the confidentiality provisions
of 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. The Arbitrator or the Court, (which ever is
applicable) may award the prevailing party in a dispute reasonable counsel
fees
not to exceed $25,000.
22
19. NOTICE.
For the
purposes of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to
have
been
duly given when hand-delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If
to the Executive: Xxxxxxx
X. Xxxxx
00
Xxxxxx X
Xxxx
Xxxxxxx,
XX
00000
with
a copy
to: Xxx
Xxxxxxxxx, Esquire
XxXxxxxx,
Page,
Xxxxxxxxx & Xxxx
000
Xxxxxx
Xxxxxx
P.
O. Xxx
0
Xxxxxxxxxxxx,
XX
00000
23
If
to the
Bank: R.
Xxxxxx
Xxxxxxxx, Chairman
00
Xxxxx Xxxx
Xxxxxx
Xxxxxxxxx,
XX
00000
with
a copy
to: Xxxx
X.
Xxxxx, Esquire
Xxxxxxxx
Xxxxxxxx,
P.C.
P.
O. Xxx
00
Xxxxxxxxxx,
XX
00000
If
to the
Corporation: R.
Xxxxxx
Xxxxxxxx, Chairman
00
Xxxxx Xxxx
Xxxxxx
Xxxxxxxxx,
XX
00000
with
a copy
to: Xxxx
X.
Xxxxx, Esquire
Xxxxxxxx
Xxxxxxxx,
P.C.
P.
O. Xxx
00
Xxxxxxxxxx,
XX
00000
or
to
such other address as any party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
20. SUCCESSORS.
This
Agreement shall inure to the benefit of and be binding upon the Executive,
his
personal representatives, heirs or assigns and to the Bank and/or the
Corporation and any of their successors or assigns.
21. SEVERABILITY.
If any
provision of this Agreement is declared unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
22. AMENDMENT.
This
Agreement may be amended or canceled only by mutual agreement
of the parties in writing.
24
23. PAYMENT
OF MONEY DUE DECEASED EXECUTIVE.
In the
event of Executive’s
death, any monies that may be due him from the Corporation or Bank under this
Agreement as of the date of death, shall be paid to the person designated by
him
in writing for this purpose, or in the absence of any such designation, to
his
estate.
24. LAW
GOVERNING.
This
Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania provided that this Agreement
shall also be interpreted as is minimally required to qualify any payment as
not
triggering any penalty on the Executive, the Corporation or the Bank pursuant
to
Section 409A of the IRC.
25. EN 25.
ENTIRE
AGREEMENT. This Agreement supersedes any and all agreements, either oral or
in writing, between the parties with respect to the employment of the Executive
by the Corporation and Bank, and this Agreement contains all the covenants
and
agreements between the parties with respect to the subject matter of this
Agreement.
IN
WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have
caused this Agreement to be duly executed in their respective names and, in
the
case of the Corporation and Bank, by its authorized representatives the day
and
year above mentioned.
| ATTEST: |
FIRST
CITIZENS NATIONAL BANK
|
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| /s/ R. Xxxxxx Xxxxxxxx | |||
|
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| R.
Xxxxxx
Xxxxxxxx Chairman of the Board |
| ATTEST: |
CITIZENS
FINANCIAL SERVICES, INC.
|
||
| /s/ R. Xxxxxx Xxxxxxxx | |||
|
|
|
||
|
R.
Xxxxxx Xxxxxxxx
Chairman of the
Board
|
ATTEST:
|
WITNESS:
|
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| /s/ Xxxx Xxx Xxxx | /s/ Xxxxxxx X. Xxxxx | ||
|
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|
||
| Xxxx Xxx Xxxx | Xxxxxxx
X.
Xxxxx "Executive" |
FIRST
CITIZE
25
