EXHIBIT 10.6
SEVERANCE AGREEMENT
THIS AGREEMENT is made on the 17th day of August, 1993, by and between
Penncore Financial Services Corporation, a Pennsylvania corporation and
Pennsylvania bank holding company, with offices at Xx. 000 xxx Xxxxxxx Xxxx, Xxx
000, Xxxxxxx, XX, 00000 (the "Company"), Commonwealth State Bank, a Pennsylvania
Bank with offices at Xx. 000 xxx Xxxxxxx Xxxx, Xxx 000, Xxxxxxx, XX, 00000 (the
"Bank") and Xxxxxx X. Xxxx, an adult individual who resides at 0-00 Xxxxxxx
Xxxxx, Xxxxxxx, XX 00000, (the "Executive").
WHEREAS, Executive is the Vice President and CFO of the Bank, the principal
subsidiary of the Company, and also the Vice President and CFO of the Company.
Executive is an integral part of the management team of the Bank and Company;
and
WHEREAS, as a result of changes in federal and state banking laws, there
has been a dramatic increase in the number of mergers and other acquisitions of
Pennsylvania bank and bank holding companies. While the Bank and Company remain
committed to the policy of remaining an independent bank and holding company,
they recognize that they might nevertheless be acquired as a result of an
unsolicited takeover attempt or in a negotiated transaction. Executive will play
a critical role in any such acquisition, as it falls principally upon him and
the other members of Management to vigorously and aggressively represent and
protect the interests of the shareholders of the Bank and Company; and
WHEREAS, the Bank and Company believe that Executive should not be forced
to sacrifice his future financial security in order to fulfill his
responsibilities to the shareholders. The Board of Directors of the Bank and
Company have carefully considered this problem and have determined that it
should be addressed. Specifically,
the Board of Directors has concluded that basic financial protection should be
provided to Executive in the form of certain limited severance benefits payable
in the event that he is discharged or resigns following, and for reasons
relating to a change in control of the Bank or Company; and
WHEREAS, the purpose of this Agreement is to define these severance
benefits and to specify the conditions under which they are to be paid. This
Agreement is not intended to affect the terms of Executive's employment at will
in the absence of a change in control of the Bank or Company. Accordingly,
although this Agreement will take effect upon execution as a binding legal
obligation of the Bank and Company, it will become operative only upon a change
in control of the Bank or Company as that concept is defined below.
WITNESSETH:
NOW, THEREFORE, in consideration of Executive's continuing service to the
Bank and Company and of the mutual covenants and undertakings hereinafter set
forth, and intending to be legally bound, the parties hereby agree as follows:
1. Undertaking of the Company
The Bank and Company shall provide to Executive the severance benefits
specified in Paragraph 5 below in the event that at any time following a change
in control of the Bank or Company:
(a) Executive is discharged by the Bank or Company, other than for
Cause pursuant to Paragraph 3 below; or
(b) Executive resigns from the Bank and Company for Good Reason
pursuant to Paragraph 4 below.
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2. Change in Control
(a) For purposes of this Agreement, a Change in Control of the Bank or
Company shall mean a change in control of the kind that would be
required to be reported in response to Item 1 of Form 8-K promulgated
by the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, and as in effect on the date hereof.
(b) Without Limitation of the foregoing, a Change in Control of the
Bank or Company shall be deemed to have occurred upon the occurrence
of any of the following events:
(1) Any person or group of persons acting in concert, shall have
acquired, directly or indirectly, beneficial ownership (as
defined in Rule 13d-3(a) of the SEC) of forty (40%) percent
or more of the outstanding shares of the voting stock of the
Bank or Company;
(2) The composition of the Board of Directors of the Bank or
Company shall have changed such that during any period of
two consecutive years during the terms of this Agreement,
the persons who at the beginning of such period were members
of the Board of Directors cease for any reason to constitute
a majority of the Board of Directors, unless the nomination
or election of each director who was not a director at the
beginning of such period was approved in advance by
directors representing not less that two-thirds of the
directors then in office who were directors at the beginning
of the period; or
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(3) The Bank or Company shall be merged or consolidated with or
its assets purchased by another corporation and as a result
of such merger, consolidation or sale of assets, less than a
majority of the outstanding voting stock of the surviving,
resulting or purchasing corporation is owned, immediately
after the transaction, by the holders of the voting stock of
the Bank or Company outstanding immediately before the
transaction.
3. Discharge for Cause
(a) The Bank or Company may at any time following a Change in
Control discharge Executive for Cause, in which event
Executive shall not be entitled to receive the severance
benefits specified in Paragraph 5 below.
(b) For purposes of this Agreement, the Bank and Company shall
have Cause to discharge Executive only under the following
circumstances:
(i) Executive shall have committed an act of dishonesty
constituting a felony and resulting or intending to result
directly or indirectly in gain or personal enrichment at the
expense of the Bank or Company; or
(ii) Executive shall have deliberately and intentionally
refused (for reasons other than incapacity due to accident
or physical or mental illness) to perform his duties to the
Bank or Company for a period of 30 consecutive days
following the receipt by him of written notice from the Bank
or Company setting forth in detail the facts upon
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which the Bank or Company relies in concluding that
Executive has deliberately and intentionally refused to
perform such duties.
4. Resignation for Good Reason
(a) Executive may at any time following a Change in Control
resign from the Bank and Company for Good Reason, in which
event Executive shall be entitled to receive the severance
benefits specified in Paragraph 6 below.
(b) For purposes of this Agreement, Executive shall have Good
Reason to resign under the following circumstances:
(i) The Bank or Company, without Executive's prior
written consent, shall have changed or attempted
to change in any significant respect the
authority, duties, compensation, benefits or other
terms or conditions of Executive's employment; or
(ii) Executive shall have determined in good faith and
in his sole and absolute discretion that he is
unable to work harmoniously and effectively with
the new management of the Bank or Company or that
he is otherwise unable effectively to carry out
his duties and discharge his responsibilities to
the Bank or Company.
5. Severance Benefits
The severance benefits to be provided to Executive by the Bank and
Company under this Agreement are as follows:
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(a) The Bank and Company shall pay to Executive each month
during the Severance Benefit Period an amount equal to
one-twelfth of his base annual salary. Executive's base
annual salary shall be deemed to be that annual salary that
is being paid to Executive on January 1st of the year in
which the Change of Control shall occur. The payment to be
made in respect of each month shall be made on or before the
15th day of the next following month. It is understood that
the Bank and Company shall withhold from each monthly
payment such amounts as may be required under any applicable
federal, state or local law.
(b) The Bank and Company shall at its expense provide to
Executive throughout the Severance Benefit Period life,
medical, health, accident and disability insurance and a
survivor's income benefit in form, substance and amount
which is in each case substantially equivalent to that
provided to him before the commencement of the Severance
Benefit Period, whichever Executive shall in each case
select.
6. Severance Benefit Period
The Severance Benefit Period shall commence upon the effective date of
Executive's discharge (for reasons other than Cause) or resignation (for Good
Reason) and shall terminate upon the expiration of a period to be calculated by
providing the Executive with one (1) month of benefits for each and every full
or partial year of full time employment of the Executive with the Bank or
Company. Provided, however, that, in no event and under
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no circumstances shall the Severance Benefit Period exceed twelve (12) months in
duration or pay.
7. Mitigation and Setoff
(a) Executive shall not be required to mitigate the amount of
any payment or benefit provided for in Paragraph 5 above by
seeking employment or otherwise and the Bank or Company
shall not be entitled to setoff against the amount of any
payment or benefit provided for in Paragraph 5 above any
amounts earned by Executive in other employment during the
Severance Benefit Period.
(b) The Company hereby waives any and all rights to setoff in
respect to any claim, debt, obligation or other liability of
any kind whatsoever, against any payment or benefit provided
for in Paragraph 5 above.
8. Successors and Parties in Interest
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Bank or Company and their successors and
assigns, including, without limitation, any corporation
which acquires, directly or indirectly, by purchase, merger,
consolidation or otherwise, all or substantially all of the
business or assets of the Bank or Company. Without
limitation of the foregoing, the Bank and Company shall
require any such successor, by agreement in form and
substance satisfactory to Executive, expressly to assume and
agree to perform this Agreement in the same manner and to
the same extent that it is required to be performed by the
Bank or Company.
(b) This Agreement is binding upon and shall inure to the
benefit of Executive, his heirs and personal
representatives.
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9. Rights Under Other Plans
This Agreement is not intended to reduce, restrict or eliminate any
benefit to which Executive may otherwise be entitled at the time of his
discharge or resignation under any employee benefit plan of the Bank and Company
then in effect.
0X. Xxxxxxxxxxx
This Agreement may not be terminated except by mutual consent of the
parties, as evidenced by a written instrument duly executed by the Bank, Company
and by Executive.
11. Notices
All notices and other communications required to be given hereunder
shall be in writing and shall be deemed to have been given or made when hand
delivered or when mailed, certified mail, return receipt requested, to the Bank,
Company or to Executive, as the case may be, at their respective addresses set
forth above.
12. Severability
In the event that any provision of this Agreement shall be held to be
invalid or unenforceable by any court of competent jurisdiction, such provision
shall be deemed severable from the remainder of the Agreement and such holding
shall not invalidate or render unenforceable any other provision of this
Agreement.
13. Governing Law. Jurisdiction and Venue
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania. In the event that any party shall
institute any suit or other legal proceeding, whether in law or in
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equity, arising from or relating to this Agreement, the courts of the
Commonwealth of Pennsylvania shall have exclusive jurisdiction and venue shall
lie exclusively in the Court of Common Pleas of Bucks County.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties's
concerning the subject matter hereof and supersedes all prior written or oral
agreements or understandings between them. No terms or provision of this
Agreement may be changed, waived, amended or terminated, except by written
instrument duly executed by the Bank, Company and by Executive.
IN WITNESS WHEREOF, this Agreement is executed the day and year first
above written.
ATTEST: PENNCORE FINANCIAL SERVICES
CORPORATION
/s/ Xxxxxx X. Xxxx /s/ Xxxx X. Xxxxxxx, Xx.
---------------------------------- ----------------------------------
Xxxxxx X. Xxxx, Xxxx X. Xxxxxxx, Xx.
Vice President and Chairman of the Board
Assistant Secretary/Treasurer
ATTEST: COMMONWEALTH STATE BANK
/s/ Xxxxxx X. Xxxx /s/ Xxxx X. Xxxxxxx, Xx.
---------------------------------- ----------------------------------
Xxxxxx X. Xxxx, Xxxx X. Xxxxxxx, Xx.
Vice President and Chairman of the Board
Assistant Secretary/Treasurer
WITNESS:
/s/ Xxxx X. Xxxxxxx, Xx. /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx Executive
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