EXHIBIT 10.5
EMPLOYMENT AGREEMENT
PRIME BANCORP, INC.
AND
XXXXXXX X. XXXXXXX
THIS AGREEMENT, made as of June 12, 1996 is by and among PRIME BANCORP,
INC., a Delaware Corporation ("Holding Company"), PRIME BANK, a savings bank, a
Pennsylvania stock saving bank, with its main office located at 6425 Rising Sun
Avenue, Philadelphia, Philadelphia County, Commonwealth of Pennsylvania ("Prime
Bank") and XXXXXXX X. XXXXXXX ("Executive"). As used in this agreement the term
"Company" shall refer both individually and collectively to Prime Bank and the
Holding Company.
Background
A. Company and Executive wish to enter into an employment agreement
pursuant to which Company wishes to secure the services of Executive as
Executive Vice President for a period of not less than three (3) years.
B. Executive is willing to enter into this Employment Agreement (this
"Agreement") for such period upon the terms and conditions herein set forth.
C. The Company's Board of Directors has approved this Agreement.
NOW THEREFORE, in consideration of the mutual promises and agreement set
forth herein, the parties agree as follows:
1. Employment.
1.1 Company shall employ Executive, and Executive shall serve, as
President of First Sterling Bank and/or Executive Vice President of Company
during the "Term" defined in Section 2 of this Agreement. Executive agrees to
serve, as requested, as a member of a committee or committees of the Board of
Directors.
1.2 If at any time during the Term the Board of Directors shall fail
to reelect Executive as Executive Vice President of Company or shall remove him
from such office without
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cause, or if at any time during the Term Executive shall fail to be vested by
Employer with the powers and authority above, Executive shall have the right, by
written notice to Company satisfying the requirements of Section 6.7(c), to
terminate his services hereunder, and Executive shall have no further obligation
under this Agreement. Termination of Executive's services under this Section 1
shall be treated as a termination of employment by Company other than for cause
and shall be governed by the provisions of Section 6.7(e) of this Agreement.
2. Term of Employment. The initial term of employment hereunder shall be
for a period of three years commencing on January 1, 1997 and ending on December
31, 1999. This Agreement shall be extended automatically for one additional year
on each anniversary of the date of commencement of the Term, unless either
Company or Executive gives contrary written notice to the other not less than 30
days nor more than 90 days in advance of any anniversary date on which this
Agreement would otherwise be extended. References in this Agreement to the
"Term" shall refer both to such initial term and such successive terms. The Term
of this Agreement may be changed by mutual written consent of Company and
Executive.
3. Compensation. Company shall pay or cause to be paid to Executive
during the term of employment a base salary of not less than Two Hundred
Thousand Dollars ($200,000) per annum, payable in biweekly installments during
each year of the Term. It is understood that Company may, in the discretion of
its Board of Directors, increase such base salary in light of Executive's job
duties and performance and such other factors as adjustment in cost of living.
Executive shall be entitled to a non-discretionary bonus-incentive of $50,000
for the fiscal year 1997, which shall be payable on or before December 31, 1997.
In addition, Executive shall be entitled to participate in an executive
compensation plan based on performance standards determined by the Board of
Directors
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or a Committee thereof.
4. Employee Benefit Plans; Fringe Benefits.
4.1 (a) Executive shall be entitled to participate in the Company's
Incentive Stock Option Plan (the "Plan") and on the effective Date of the
Agreement Executive shall be granted the following options to purchase
authorized but unissued common stock under the Plan, exercisable on the dates so
indicated so long as the Agreement remains in effect:
Option Expiration
No. of Shares Exercise Price Date
------------- -------------- -----------------
16,500 shares exercisable
on or after effective date
of this Employment Agreement * April 1, 2000
8,250 shares exercisable
on or after January 15, 1998 * April 1, 2000
8,250 shares exercisable
on or after January 15, 1999 * April 1, 2000
* The purchase price at which the options granted hereunder may be exercised
shall be the closing price of the Company's common stock as reported on the
NASDAQ National Market System on the date of the consummation of the Merger
Agreement between the Company and First Sterling Bancorp.
Executive shall be entitled from time to time, to such additional option
grants as may be determined by the Board of Directors of the Company or the
appropriate authorized Committee of the Board.
(b) In the event that the Executive terminates his employment for
"good reason," as defined in Section 6.7(a) of this Agreement, or in the event
Executive is terminated by Company for other than cause, or in the event of any
"change in control" of the Company, as defined in Section 6.7(b) of this
Agreement, whether or not Executive terminates his employment, Executive shall
be entitled to exercise his option to purchase all unexercised option shares,
whether or not accrued, during a period of 90 days following such termination of
employment or event of "change of control".
4.2 During the Term, executive shall be entitled to participate in
stock options, stock appreciation, stock purchases, pension, thrift, medical
coverage, education or other retirement or
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employee benefits, including without limitation the Company's Employee
Retirement Savings Plan and Incentive Stock Option Plan, and any other plans
that Company may adopt for the benefit of its executive employees.
4.3 During the Term, Company shall reimburse Executive for reasonable
expenses incurred by him in the performance of his duties, the payment of
reasonable expenses for attending annual and periodic meetings of trade
association, and any other benefits which are commensurate with the duties and
responsibilities to be performed by Executive under this Agreement.
4.4 During the Term, the Company shall provide Executive with the use
of a new automobile, every two (2) years, which shall be generally in the range
of a $35,000 car.
4.5 During the Term, the Company shall pay Executive's club dues and
fees at Aronimink Country Club, or such other club as may be selected by
Executive.
4.6 During the Term, the Company shall maintain term life insurance on
Executive's life in an amount not less than one and one-half times his base
salary as provided in Section 3 hereof.
4.7 Executive shall be entitled to participate in any other fringe
benefits which may be or become applicable to Company's executive employees.
5. Vacations.
Executive shall be entitled to an annual paid vacation of four (4)
weeks per year or such longer period as the Board of Directors of Company may
approve. The timing of paid vacations shall be scheduled in a reasonable manner
by Executive. Executive shall not be entitled to receive any additional
compensation from
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Company on account of his failure to take a paid vacation. Executive shall also
not be entitled to accumulate unused paid vacation time from one calendar year
to the next, except with the approval of the Board of Directors of Company.
6. Termination of Employment.
6.1 Company shall have the right, at any time upon prior written
Notice of Termination satisfying the requirements of Section 6.7(c) hereunder,
to terminate Executive's employment hereunder, including termination for cause.
For the purpose of this Agreement, termination for "cause" shall mean
termination for personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, conviction of a felony, or willful
violation of any law, rule or regulation or final cease-and-desist order which
in the reasonable judgment of the Board of Directors of the Company will
probably cause substantial economic damages to the Company, willful or
intentional breach or neglect by Executive of his duties, or material breach of
any material provision of this Agreement. For purposes of this paragraph, no
act, or failure to act on Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that this action or omission was in the best interest of Company;
provided that any act or omission to act on Executive's behalf in reliance upon
an opinion of counsel to the Company or counsel to the Executive shall not be
deemed to be willful. The terms "incompetence" and "misconduct" shall be defined
with reference to standards generally prevailing in the banking industry. In
determining incompetence and misconduct, Company shall have the burden of proof
with regard to the acts or omission of Executive and the standards prevailing in
the banking industry.
6.2 In the event employment is terminated for cause pursuant to
Section 6.1 hereof, Executive shall have no right to
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compensation or other benefits for any period after such date of termination. If
Executive is terminated by Bank or Holding Company other than for cause pursuant
to Section 6.1 hereof, Employee's right to compensation and other benefits under
this Agreement shall be as set forth in Sections 6.7 hereof.
6.3 Executive shall have the right, upon prior written Notice of
Termination of not less than thirty (30) days satisfying the requirements of
Section 6.7(c) hereof, to terminate his employment hereunder, but in such event
Executive shall have no right after the date of termination to compensation or
other benefits as provided in this Agreement, unless such termination is for
"good reason", as defined pursuant to Section 6.7(a) hereof. If Executive
provides a Notice of Termination for "good reason", as defined pursuant to
Section 6.7(a) hereof, the date of termination shall be the date on which a
Notice of Termination is given.
6.4 If Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of Company's affairs pursuant to
notice served by any Regulatory Agency, Company's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, Company
shall: (i) pay Executive all the compensation withheld while contract
obligations were suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
6.5 If Executive is removed from office and/or permanently prohibited
from participating in the conduct of Company's affairs by an order issued by any
Regulatory Agency, all obligations of Company under this Agreement shall
terminate as of the effective date of the order, but rights of the Executive to
compensation earned as of the date of termination shall not be affected.
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6.6 All obligations under this Agreement are subject to termination by
any Regulatory Agency in accordance with any applicable provisions of law or
regulations granting such authority, but rights of the Executive to compensation
earned as of the date of termination shall not be affected.
6.7(a) Executive may terminate his employment hereunder for "good
reason". For purposes of this Agreement, "good reason" shall mean (A) a failure
by Company to comply with any material provision of this Agreement, which
failure has not been cured within ten (10) days after a notice of such
noncompliance has been given by Executive to Company; (B) subsequent to a
"change in control" of Company (as defined in Section 6.7(b) of this Agreement)
and without Executive's express written consent, any of the following shall
occur; (i) the assignment to Executive of any duties substantially inconsistent
with Executive's positions, duties, responsibilities, titles or offices as in
effect immediately prior to a change in control of Company, (ii) any removal of
Executive from, or any failure to re-elect Executive to, any of such positions,
except in connection with a termination of employment for cause, disability,
death, retirement or pursuant to Sections 6.1 or 6.5 hereof, (iii) a reduction
by Company in Executive's annual salary as in effect immediately prior to a
change in control or as the same may be increased from time to time, or the
failure to grant increases in the Executive's base salary on a basis at least
substantially comparable to those granted to other senior executives of the
Company, or (iv) the failure of Company to continue in effect any bonus, benefit
or compensation plan, life insurance plan, health and accident plan or
disability plan in which Executive is participating at the time of a change in
control of Company, or the taking of any action by Company which would adversely
affect Executive's benefits under any of such plans; or (C) any purported
termination of Executive's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of paragraph 6.7(c) hereof
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(and for purposes of this Agreement no such purported termination shall be
effective).
(b) for purposes of this Agreement, a "change in control" of Company
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), provided that, without
limitation, such a change in control shall be deemed to have occurred if (A) any
"persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act
in effect on the date first written above), other than Company or any "person"
who on the date hereof is a director or officer of Company, is or becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act), directly
or indirectly, of securities of Company representing 25% or more of the combined
voting power of Company's then outstanding securities, or (B) during any period
of two consecutive years during the term of this Agreement, individuals who at
the beginning of such period constitute the Board of Directors 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.
(c) Any termination of Executive's employment by Company or by
Executive shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a dated notice which shall (A) indicate the specific termination provision
this Agreement relied upon; (B) 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; (C) specify a date of termination,
which shall be not less than thirty (30) nor more than ninety (90) days after
such Notice of
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Termination is given, except in the case of Company's termination of executive's
employment for cause pursuant to Section 6.1 hereof, in which case the Notice of
Termination may specify a date of termination as of the date such Notice of
Termination is given; and (D) be given in the manner specified in Section 12
hereof.
(d) If Executive shall terminate his Employment for good reason
pursuant to subpart (B) of Section 6.7(a) hereof, then in lieu of any further
salary payments to Executive for periods subsequent to the date of termination,
Company shall pay as severance to Executive an amount equal to (A) the average
aggregate annual compensation paid to the Executive and includible in the
Executive's gross income for federal income tax purposes during the three
calendar years preceding the taxable year in which the date of termination
occurs (or such lesser amount of time if the Executive has not been employed by
Company for three years at the time of termination) by Company and any of its
subsidiaries subject to United States income tax, multiplied by (B) 2.00, such
payment to be made in a lump sum on or before the fifth day following the date
of termination; provided, however, that if the lump sum severance payment under
this Section 6.7(d), either along or together with other payments which the
Executive has the right to receive from the Company, would constitute a
"parachute payment" (as defined in Section 280G of the Internal Revenue Code of
1986, as amended [the "Code]), such lump sum severance payment shall be reduced
to the largest amount as will result in no portion of the lump sum severance
payment under this Section 6.7(d) being subject to the excise tax imposed by
Section 4999 of the Code. The determination of any reduction in the lump sum
severance payment under this Section 6.7(d) pursuant to the foregoing provision
shall be made by independent counsel to Company in consultation with the
independent certified public accountants of Company.
(e) If Executive shall terminate his employment for good reason as
defined in subpart (A) or (C) of Section 6.7(a) hereof or
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if Executive is terminated by Company for other than cause pursuant to Section
6.1 hereof, then in lieu of any further salary payments to Executive for periods
subsequent to the date of termination, Company shall pay as severance to
Executive an amount equal to the product of (A) Executive's total annual
compensation paid pursuant to Section 3 hereof, in effect as of the date of
termination (but not less than the total annual compensation paid pursuant to
Section 3 for the year prior to the year of termination) multiplied by (B) the
greater of the number of years (including partial years) remaining in the term
of employment hereunder or the number 1.50, such payment to be made in
substantially equal biweekly installments on the normal pay date commencing with
month in which the date of termination occurs and continuing for the number of
consecutive biweekly payment dates (including the first such date aforesaid)
equal to the product obtained by multiplying the number of years (including
partial years) applicable under (B) above by 26.
(f) Executive shall not be required to mitigate the amount of any
payment provided for in paragraph (d) or (e) of this Section 6.7 by seeking
other employment or otherwise. No amounts received by Executive in subsequent
employment shall reduce the amount of any payment provided for in paragraph (d)
or (e) of this Section 6.7.
6.8 If Company is in default, as defined to mean an adjudication or
other official determination of a court of competent jurisdiction or other
public authority pursuant to which a conservator, receiver or other legal
custodian is appointed for Company for the purpose of liquidation, all
obligations under this Agreement shall terminate as of the date of default, but
rights of the Executive to compensation earned as of the date of termination
shall not be affected.
6.9 As used in this Section 6, "Regulatory Agency" means
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a governmental agency having regulatory or supervisory jurisdiction over
Company.
7. Death and Disability.
7.1 Upon the death of Executive during the term hereof, all
compensation payments hereunder shall continue for a period of six (6) weeks
after the end of the week in which Executive's death shall occur, at which point
such payments shall cease and Company shall have no further obligations or
liabilities hereunder to Executive's estate or legal representative or
otherwise, except that Company shall pay to Executive's estate or legal
representation, based upon the portion of the calendar year that Executive was
employed by Company prior to his death, the prorated portion of Incentive
Compensation Executive would have earned if he had remained in the employ of
Company for the full calendar year (payable at such time that Executive would
have received such Incentive Compensation).
7.2 If Executive becomes unable to perform his duties hereunder due to
partial or total disability or incapacity resulting from a mental or physical
illness, injury or any similar cause, Company will continue the payment of
Executive's compensation at his then current rate for a period of six (6) weeks
following the date Executive is first unable to perform his duties due to such
disability or incapacity. Thereafter, Company shall have no obligation for the
Base Salary or other compensation payments to Executive during the continuance
of such disability or incapacity, except that Company shall pay to Executive,
based upon the portion of the calendar year that Executive was able to perform
his duties prior to the disability, the pro rata portion of Incentive
Compensation that Executive would have earned if he had remained in the employ
of Company for the full calendar year (payable at such time that Executive would
have received such Incentive Compensation). In the event of any dispute between
the Executive and the Company as to the Executive's entitlement to the
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continuation of compensation pursuant to this Section, the matter shall be
resolved by a majority vote of a panel of physicians, one of whom shall be
selected by the Executive, one of whom shall be selected by the Company, and one
of whom shall be selected by the other two physicians. The physicians' fees and
any other costs associated with the resolution of said dispute shall be borne by
the Company.
8. Payment Obligations Absolute.
Company's obligation to pay Executive the compensation and other
benefits provided herein shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off
counter claim, recoupment, defense or other right which Company may have against
Executive. All amounts payable by Company hereunder shall be paid without notice
or demand.
9. Continuing Obligations.
Executive shall retain in confidence any confidential information
known to him concerning Company and its business so long as such information is
not publicly disclosed.
10. Reimbursement of Legal Fees.
The Company shall pay all reasonable costs, including attorneys' fees
incurred by Executive (a) in seeking to obtain any amount or benefit granted
pursuant to this Agreement which the Executive in good faith shall believe the
Company has not paid or provided, or shall not be intending to pay or provide
when due, or (b) in seeking to enforce any obligation which the Executive in
good faith shall believe the Company has to the Executive under the Agreement,
or (c) in interpreting or negotiating the terms of this Agreement. Such
reasonable cost and fees shall be paid by the Company whether or not the
Executive shall have commenced litigation or any other similar proceedings.
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11. Amendments.
No amendments to this Agreement shall be binding unless in writing and
signed by both parties.
12. Notices.
All notices under this Agreement shall be in writing and shall be
deemed effective (i) when delivered in person or by facsimile, telecopier,
telegraph or other electronic means capable of being embodied in written form
(in Company's case, to its Secretary) or (ii) forty-eight (48) hours after
deposit thereof in the U. S. mails by certified or registered mail, return
receipt requested, postage prepaid, addressed, in the case of Executive, to his
last known address as carried on the personnel records of Company and, in the
case of Company, to the corporate headquarters, attention of the Secretary, or
to such other address as the party to be notified may specify by notice to the
other party.
13. Entire Agreement.
This is the entire agreement of the parties with respect to its
subject matter. There are no other oral understandings or agreements between the
parties with respect to the subject matter of this Agreement.
14. Assigns and Successors.
The rights and obligations of Company under this Agreement shall inure
to the benefit of and shall be binding upon the successors and assigns of
Company and Executive.
15. Construction.
This Agreement shall be construed under the laws of the Commonwealth
of Pennsylvania, as they may be preempted by federal laws and regulations.
Section headings are for convenience only and shall not be considered a part of
the terms and provisions of the Agreement.
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16. Conditional Upon Merger.
The parties hereto, Holding Company, Prime Bank and Executive
acknowledge and agree that the above agreement has been executed and delivered
subject to the consummation of an Agreement of Merger by and between Holding
Company and First Sterling Bancorp and shall become effective only upon
consummation of such merger. If such merger is not consummated, this agreement
shall be null and void and of no effect.
IN WITNESS WHEREOF, the parties hereto have caused the due execution
of this Agreement as of the date first set forth above.
Attest: PRIME BANCORP, INC.
By:
------------------------- -------------------------
President
Attest: PRIME BANK
By:
------------------------- -------------------------
Assistant Secretary President
------------------------- -------------------------
Witness Xxxxxxx X. Xxxxxxx
