FIRST FEDERAL BANK
CHANGE IN CONTROL AGREEMENT
This AGREEMENT is made effective as of November 25, 2003, by and between
First Federal Bank (the "Bank"), a federally chartered savings institution, with
its principal administrative office at 00 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, XX 00000,
Xxx X. Xxxxxx ("Executive"), and Northeast Pennsylvania Financial Corp. (the
"Holding Company"), a corporation organized under the laws of the State of
Delaware which is the holding company of the Bank.
WHEREAS, the Bank recognizes the substantial contribution Executive has
made to the Bank and wishes to protect Executive's position therewith for the
period provided in this Agreement; and
WHEREAS, Executive has agreed to serve in the employ of the Bank.
NOW, THEREFORE, in consideration of the contribution and
responsibilities of Executive, and upon the other terms and conditions
hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT.
The term of the First Federal Bank Change in Control Agreement (the
"Agreement") shall be deemed to have commenced as of the date first above
written and shall continue indefinitely until a majority of the Board of
Directors of the Bank ("Board") elects to discontinue the Agreement. However,
the Board will review Executive's performance annually and the results thereof
shall be included in the minutes of the Board's meeting.
2. CHANGE IN CONTROL.
(a) If a Change in Control (as defined herein) has occurred or the
Board has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in Section 3 upon his subsequent termination
of employment at any time during the term of this Agreement due to (i)
Executive's dismissal, or (ii) Executive's voluntary resignation following any
demotion, loss of title, office or significant authority or responsibility,
reduction in the annual compensation or material reduction in benefits or
relocation of his principal place of employment by more than 25 miles from its
location immediately prior to the Change in Control, unless such termination is
because of his death or termination for Cause.
(b) For purposes of this Plan, a "Change in Control" of the Bank or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1 of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); or (ii) results in a Change in
Control of the Bank or the Holding Company within the meaning of the Home
Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance Act, or the
Rules and Regulations promulgated by the Office of Thrift Supervision ("OTS")
(or its predecessor agency), as in effect
on the date hereof (provided, that in applying the definition of change in
control as set forth under the Rules and Regulations of the OTS, the Board shall
substitute its judgment for that of the OTS); or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (A) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Bank or the Holding
Company representing 25% or more of the Bank's or the Holding Company's
outstanding voting securities or right to acquire such securities except for any
voting securities of the Bank purchased by the Holding Company in connection
with the conversion of the Bank to the stock form and any voting securities
purchased by any employee benefit plan of the Bank or the Holding Company, or
(B) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as though
he were a member of the Incumbent Board, or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Holding Company or similar transaction occurs in which the Bank or
Holding Company is not the resulting entity; provided, however, that such an
event listed above will be deemed to have occurred or to have been effectuated
upon the receipt of all required regulatory approvals not including the lapse of
any statutory periods.
(c) Executive shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of Executive's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. Notwithstanding the foregoing, Executive shall not
be deemed to have been Terminated for Cause unless and until there shall have
been delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Bank at a meeting of the Board called and held for
that purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive's conduct justified a finding of
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after the Date of Termination for Cause. During the period beginning
on the date of the Notice of Termination for Cause pursuant to Section 4 hereof
through the Date of Termination for Cause, stock options and related limited
rights granted to Executive under any stock option plan shall not be exercisable
nor shall any unvested awards granted to Executive under any stock benefit plan
of the Bank, the Company or any subsidiary or affiliate thereof, vest. At the
Date of Termination for Cause, such stock options and related limited rights and
any such unvested awards shall become null and void and shall not be exercisable
by or delivered to Executive at any time subsequent to such Termination for
Cause.
2
3. TERMINATION BENEFITS.
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by termination of the Executive's employment
due to: (1) Executive's dismissal or (2) Executive's voluntary termination
pursuant to Section 2(a), unless such termination is due to Termination for
Cause, the Bank and the Holding Company shall pay Executive, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, a sum equal to one (1) year of Executive's average annual
compensation for the three most recent taxable years that Executive has been
employed by the Bank or such lesser number of years in the event that Executive
shall have been employed by the Bank for less than three years. Such average
annual compensation shall include Base Salary, commissions, bonuses,
contributions on Executive's behalf to any pension and/or profit sharing plan,
severance payments, retirement payments, directors or committee fees, fringe
benefits paid or to be paid to the Executive in any such year and payment of any
expense items without accountability or business purpose or that do not meet the
Internal Revenue Service requirements for deductibility by the Bank; provided
however, that any payment under this provision and subsection 3(b) below shall
not exceed one (1) year of the Executive's average annual compensation. At the
election of Executive, which election is to be made prior to a Change in
Control, such payment shall be made in a lump sum. In the event that no election
is made, payment to Executive will be made on a monthly basis in approximately
equal installments during the remaining term of this Agreement.
(b) Upon the occurrence of a Change in Control of the Bank or the
Holding Company followed at any time during the term of this Agreement by
Executive's voluntary or involuntary termination of employment, other than for
Termination for Cause, the Bank shall cause to be continued life, medical and
disability coverage substantially identical to the coverage maintained by the
Bank or Holding Company for Executive prior to his severance, except to the
extent such coverage may be changed in its application to all Bank or Holding
Company employees on a nondiscriminatory basis. Such coverage and payments shall
cease upon the expiration of twenty-four (24) full calendar months from the Date
of Termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in
no event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the Code or any successor
thereto, and in order to avoid such a result Termination Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to one year of Executive's
"base amount," as determined in accordance with said Section 280G. The
allocation of the reduction required hereby among the Termination Benefits
provided by the preceding paragraphs of this Section 3 shall be determined by
Executive.
3
4. NOTICE OF TERMINATION.
(a) Any purported termination by the Bank or by Executive in
connection with a Change in Control shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the
Notice of Termination (which, in the instance of Termination for Cause, shall
not be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in
Control, in the event the Executive is terminated for reasons other than
Termination for Cause, the Bank will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to his annual salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the earlier of: (1)
the resolution of the dispute in accordance with this Agreement or (2) the
expiration of the remaining term of this Agreement as determined as of the Date
of Termination.
5. SOURCE OF PAYMENTS.
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
Further, the Holding Company guarantees such payment and provision of all
amounts and benefits due hereunder to Executive and, if such amounts and
benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Holding Company.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Bank and Executive, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
4
Nothing in this Agreement shall confer upon Executive the right to
continue in the employ of Bank or shall impose on the Bank any obligation to
employ or retain Executive in its employ for any period.
7. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit
of, Executive, the Bank and their respective successors, heirs and assigns.
8. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
9. REQUIRED REGULATORY PROVISIONS.
(a) The board of directors may terminate Executive's employment at
any time, but any termination by the board of directors, other than Termination
for Cause, shall not prejudice Executive's right to compensation or other
benefits under this Agreement. Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause as
defined in Section 2(c) hereinabove.
(b) If Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. Section 1818(e)(3) or (g)(1)), the Bank's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay Executive all or part of the compensation withheld
while their contract obligations were suspended and (ii) reinstate (in whole or
in part) any of the obligations which were suspended.
(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal
5
Deposit Insurance Act (12 U.S.C. Section 1818(c)(4) or (g)(1)), all obligations
of the Bank under this contract shall terminate as of the effective date of the
order, but vested rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, all obligations of the Bank under this contract
shall terminate as of the date of default, but this paragraph shall not affect
any vested rights of the contracting parties.
(e) All obligations under this contract shall be terminated, except
to the extent determined that continuation of the contract is necessary for the
continued operation of the institution: (i) by the Director of the Office of
Thrift Supervision (or his or her designee) at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Director of the Office of Thrift
Supervision (or his or her designee) at the time the Director (or his or her
designee) approves a supervisory merger to resolve problems related to operation
of the Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any rules and regulations promulgated thereunder.
10. REINSTATEMENT OF BENEFITS UNDER SECTION 9(b).
In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice described in
Section 9(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Bank will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Bank's receipt of a dismissal of charges in the Notice.
11. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
12. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement. In addition, references to the
masculine shall apply equally to the feminine.
6
13. GOVERNING LAW.
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Pennsylvania but only to
the extent not preempted by Federal law.
14. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Bank's main office, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement, other
than in the case of a Termination for Cause.
15. PAYMENT OF COSTS AND LEGAL FEES.
All reasonable costs and legal fees paid or incurred by Executive
pursuant to any dispute or question of interpretation relating to this Agreement
shall be paid or reimbursed by the Bank (which payments are guaranteed by the
Holding Company pursuant to Section 5 hereof) if Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.
16. INDEMNIFICATION.
(a) The Bank shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, and shall indemnify Executive (and
his heirs, executors and administrators) to the fullest extent permitted under
Pennsylvania law against all expenses and liabilities reasonably incurred by him
in connection with or arising out of any action, suit or proceeding in which he
may be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements.
17. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
7
SIGNATURES
IN WITNESS WHEREOF, First Federal Bank and Northeast Pennsylvania
Financial Corp. have caused this Agreement to be executed by their duly
authorized officers, and Executive has signed this Agreement, on the 25th day of
November, 2003.
ATTEST: FIRST FEDERAL BANK
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- --------------------------------------
Xxxxx Xxxxxxxx Xxxxxx X. Xxxxx
Secretary President and Chief Executive Officer
For the Entire Board of Directors
SEAL
ATTEST: NORTHEAST PENNSYLVANIA FINANCIAL CORP.
(Guarantor)
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------- --------------------------------------
Xxxxx Xxxxxxxx Xxxxxx X. Xxxxx
Secretary President and Chief Executive Officer
For the Entire Board of Directors
SEAL
WITNESS:
/s/ Xxxxx X. Xxxxx /s/ Xxx X. Xxxxxx
---------------------------- --------------------------------------
Executive
8
