AMENDMENT TO EMPLOYMENT AGREEMENT FOR XXXXX X. XXXXXX
DATED APRIL 12, 2001
This Amendment to the Employment Agreement for Xxxxx X. Xxxxxx dated April
12, 2001, between Xxxxx X. Xxxxxx and East Penn Bank ("the Parties") is made
this 21st day of July, 2006.
WHEREAS, the Parties entered into an Employment Agreement dated April 12,
2001;
WHEREAS, the Parties desire to make certain modifications to the Agreement
to ensure its continuing compliance with all applicable provisions of the tax
laws, including Internal Revenue Code Section 409A.
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
and intending to be legally bound hereby, the Parties agree, effective the date
hereof, as follows:
1. Section 4(c) shall be amended to read as follows:
Notwithstanding the provisions of Section 4(a) of this Agreement, the term
of this Agreement shall end upon Executive's voluntary termination of
employment (other than in accordance with Section 6 of this Agreement) for
Good Reason. The term "Good Reason" shall mean (i) the assignment of
duties and responsibilities inconsistent with Executive's status as
President and Chief Executive Officer of Bank, (ii) a reassignment which
requires Executive to move his principal residence more than twenty (20)
miles from the Bank's principal executive office immediately prior to this
Agreement, (iii) any removal of the Executive from office or any adverse
change in the terms and conditions of the Executive's employment, except
for any termination of the Executive's employment under the provisions of
Section 4(b) hereof, (iv) any reduction in the Executive's Annual Base
Salary as in effect on the date hereof or as the same may be increased
from time to time, except such reductions that are the result of a
national financial depression or national or bank emergency when such
reduction has been implemented by the Board of Directors for Bank's senior
management, (v) any failure of Bank to provide the Executive with benefits
at least as favorable as those enjoyed by the Executive during the
Employment Period under any of the pension, life insurance, medical,
health and accident disability or other employee plans of Bank, or the
taking of any action that would materially reduce any of such benefits
unless such reduction is part of a reduction applicable to all employees
or limited by severe health reasons which precludes obtaining such
insurance coverage at commercially reasonable rates, or (vi) a final
adjudication, by a court of competent jurisdiction or a regulatory body
governing Bank, that Bank's Board of Directors violated law, rule,
regulation governing banks or bank officers, or any final cease and desist
order issued by a bank regulatory authority
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when Bank's Board of Directors instructed or directed Executive to take
certain action or engage in certain activity. If such termination occurs
for Good Reason, then Bank shall pay Executive an amount equal to and no
greater than 2.99 times the Executive's Agreed Compensation as defined in
Section 4(e), payable in thirty-six (36) equal monthly installments and
subject to federal, state, and local tax withholdings. In addition, for a
period of three (3) years from the date of termination of employment, or
until Executive secures substantially similar benefits through other
employment, whichever shall first occur, Executive shall receive a
continuation of all life, disability, medical insurance and other normal
health and welfare benefits in effect with respect to Executive during the
two (2) years prior to his termination of employment, or, if Bank cannot
provide such benefits because Executive is no longer an employee, a dollar
amount equal to the cost to Executive of obtaining such benefits (or
substantially similar benefits). Additionally, if permitted under the
terms of the plan, Executive shall receive the additional retirement
benefits to which he would have been entitled had his employment continued
through the then remaining term of the Agreement. In the event that the
payments described herein, when added to all other amounts or benefits
provided to or on behalf of Executive in connection with his termination
of employment, would result in the imposition of an excess tax under Code
Section 4999, Bank shall pay to Executive an additional cash payment
("Gross-up Payment") in an amount such that the after-tax proceeds of such
Gross-up Payment (including any income tax or Excise Tax on such Gross-up
Payment) will be equal to the amount of the Excise Tax.
At the option of Executive, exercisable by the Executive within ninety
(90) days after the occurrence of the event constituting "Good Reason,"
the Executive may resign from employment under this Agreement by a notice
in writing (the "Notice of Termination") delivered to Bank and the
provisions of this Section 4(c) shall thereupon apply.
Notwithstanding any other provision, in the event that Executive is
determined to be a specified employee ("key employee") as that term is
defined in Section 409A of the Code, no payment that is determined to be
deferred compensation subject to Section 409A of the Code shall be made
until one day following six months from the date of separation of service
as that term is defined in Section 409A of the Code.
2. Section 4(d) shall be amended to read as follows:
Notwithstanding the provisions of Section 4(a) of this Agreement, the term
of this Agreement shall end upon Executive's Disability and Executive's
rights under this Agreement shall cease as of the date of such
termination; provided, however, that Executive shall nevertheless be
entitled to receive any benefits that may be available under any
disability plan of Bank, until the earliest of (i) Executive's return to
employment, (ii) his attainment of age 65, or (iii) his death. In
addition, Executive shall receive for such period, a continuation of all
life, disability, medical insurance and other normal health and welfare
benefits in effect or, if Bank cannot provide such benefits because
Executive is no longer an employee, a dollar amount equal to the cost to
Executive of obtaining such benefits (or substantially similar benefits).
For purposes of this Agreement, the Executive shall have a Disability if,
the Executive is unable to
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engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less
than 12 months. The Executive will be deemed disabled if the Social
Security Administration has determined that he is disabled or if a carrier
of any group disability insurance policy provided by the Bank or made
available by the Bank to its employees and covering the Executive
determines that he is disabled as long as the policy's definition of
disability complies with the definition of disability under IRC Section
409A.
3. Section 6(b) shall be amended to read in its entirety as follows:
"Change in Control" means any of the following:
(a) (A) a merger, consolidation or division involving East Penn
Financial Corporation ("Corporation") or Bank, (B) a sale,
exchange, transfer or other disposition of substantially all
of the assets of the Corporation or Bank, or (C) a purchase by
the Corporation or Bank of substantially all of the assets of
another entity, unless after such merger, consolidation,
division, sale, exchange, transfer, purchase or disposition a
majority of the members of the Board of Directors of the legal
entity resulting from or existing after any such transaction
and of the Board of Directors of such entity's parent
corporation, if any, are former members of the Board of
Directors of Corporation; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")),
other than the Bank or any "person" who on the date hereof is
a director or officer of the Bank is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Bank representing thirty five percent (35%) or more of the
combined voting power of the Corporation's or Bank's then
outstanding securities; or
(c) during any period of one (1) year during the term of
Executive's employment under this Agreement, individuals who
at the beginning of such period constitute the Board of
Directors of 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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4. Section 7 shall be amended to read as follows:
For purposes of this Agreement, the Date of Change of Control shall mean:
(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
thirty five percent (35%) or more of the Bank's outstanding securities; or
(b) the date of the closing of a sale or the date of the transfer or
exchange of substantially all of the Corporation's or Bank's assets; or
(c) the date on which a merger, consolidation or division is consummated,
as applicable; or
(d) the ending date of a one (1) year period during which individuals who
formerly constituted a majority of the Board of Directors of the
Corporation or Bank ceased to be a majority thereof.
5. Section 8(a) shall be amended to include the following sentences:
In the event that the payments described herein, when added to all
other amounts or benefits provided to or on behalf of Executive in
connection with his termination of employment, would result in the
imposition of an excess tax under Code Section 4999, Bank shall pay to
Executive an additional cash payment ("Gross-up Payment") in an amount
such that the after-tax proceeds of such Gross-up Payment (including any
income tax or Excise Tax on such Gross-up Payment) will be equal to the
amount of the Excise Tax.
Notwithstanding any other provision, in the event that Executive is
determined to be a specified employee ("key employee") as that term is
defined in Section 409A of the Code, no payment that is determined to be
deferred compensation subject to Section 409A of the Code shall be made
until one day following six months from the date of separation of service
as that term is defined in Section 409A of the Code.
6. Section 9(a) shall be amended to read in entirety as follows:
In the event that Executive's employment is involuntarily terminated
by Bank without Cause and no Change in Control shall have occurred at the
date of such termination, Bank shall pay Executive an amount equal to and
no greater than 2.99 times the Executive's Agreed Compensation as defined
in subsection (e) of Section 4, payable in thirty-six (36) equal monthly
installments and subject to federal, state and local tax withholdings. In
addition, for a period of three (3) years from the date of termination of
employment, or until Executive secures substantially similar benefits
through other
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employment, whichever shall first occur, Executive shall receive a
continuation of all life, disability, medical insurance and other normal
health and welfare benefits in effect with respect to Executive during the
two (2) years prior to his termination of employment, or, if Bank cannot
provide such benefits because Executive is no longer an employee, a dollar
amount equal to the cost to Executive of obtaining such benefits (or
substantially similar benefits). In addition, if permitted pursuant to the
terms of the plan, Executive shall receive additional retirement benefits
to which he would have been entitled had his employment continued through
the then remaining term of the Agreement. In the event that the payments
described herein, when added to all other amounts or benefits provided to
or on behalf of Executive in connection with his termination of
employment, would result in the imposition of an excess tax under Code
Section 4999, Bank shall pay to Executive an additional cash payment
("Gross-up Payment") in an amount such that the after-tax proceeds of such
Gross-up Payment (including any income tax or Excise Tax on such Gross-up
Payment) will be equal to the amount of the Excise Tax.
Notwithstanding any other provision, in the event that Executive is
determined to be a specified employee ("key employee") as that term is
defined in Section 409A of the Code, no payment that is determined to be
deferred compensation subject to Section 409A of the Code shall be made
until one day following six months from the date of separation of service
as that term is defined in Section 409A of the Code.
7. The following sentence shall be added to Section 20:
This Agreement is intended to be in compliance with any applicable
provisions of IRC Section 409A and the Treasury Regulations promulgated
thereunder and shall be interpreted as is minimally required to qualify
any payment hereunder as not triggering any penalty on the Executive or
the Bank pursuant to Code Section 409A and the regulations promulgated
thereunder.
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8. All provisions of the Agreement not specifically modified by this
Amendment shall remain in force and continue in effect pursuant to their terms
as though this Amendment had never been executed.
IN WITNESS WHEREOF, the Parties, intending to be legally bound hereby,
have caused this Amendment to be duly executed in their respective names and, in
the case of the Company, by its authorized representative, on the day and year
first above written.
ATTEST: EAST PENN BANK
/s/ Xxxxxx Xxxxxxxxx By /s/ Forest X. Xxxxxxxx
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Forest X. Xxxxxxxx, Chairman of the Board
WITNESS: EXECUTIVE
/s/ Xxxxxx Xxxxxxxxx /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx ("Executive")
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