AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT FOR WILLIAM S. LATOFF
Exhibit
10e
AMENDED
AND RESTATED CHANGE OF CONTROL AGREEMENT
FOR
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THIS
AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (this “Agreement”), made as of
December 20, 2006, is by and among DNB FINANCIAL CORPORATION (“Holding
Company”), DNB FIRST, NATIONAL ASSOCIATION (formerly known as Downingtown
National Bank), a national banking association with principal offices at ▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“Bank”) (Holding Company and Bank are
sometimes referred to individually and collectively herein as the “Company”) and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual (“Executive”).
Background
A.
On
December 17, 2004 Company and Executive entered into an agreement pursuant
to
which Company wishes to secure the future services of Executive by providing
Executive the severance payments provided in this Agreement as additional
incentive to induce Executive to devote Executive’s time and attention to the
interests and affairs of the Company (the “Agreement”).
B.
Company and Executive wish to amend and restate the Agreement upon the terms
and
conditions herein set forth.
C.
The
Boards of Directors of the Holding Company and the Bank have each approved
this
Agreement and it is intended to be maintained as part of the official records
of
the Holding Company and the Bank.
NOW
THEREFORE, in consideration of the mutual promises and agreements set forth
herein, and intending to be legally bound hereby, the parties agree to amend
the
Agreement so that it shall provide in full as follows (as so amended and
restated, hereafter the “Agreement”):
1.
Employment.
Except
strictly to such extent (if any) as may be provided in another agreement between
Holding Company or Bank and Executive, Executive shall remain an employee at
will of the Company hereafter. This Agreement is not an employment agreement,
but shall only be interpreted as governing the payment of severance, which
may
be due to Executive upon termination of Executive’s employment with Company
under the specific circumstances described in this Agreement. No provision
of
this Agreement shall be interpreted to derogate from the power of the Company
or
its Board of Directors to terminate the employment of the Executive, subject
nevertheless to the terms of this Agreement.
2.
Compensation.
The
compensation to be paid by Company to Executive from time to time, including
any
fringe benefits or other employee benefits, shall not be governed by this
Agreement. This Agreement shall not be deemed to affect the terms of any stock
options, employee benefits or other agreements between the Company and
Executive.
3.
Severance
Payments upon Termination of Employment After a “Change in
Control”.
This
Agreement does not govern any termination of Executive’s employment with Company
which occurs prior to a “change in control” as defined in subsection (e) of this
Section. No inference shall be drawn from any provision of this Section
concerning the rights and obligations of the parties in connection with a
termination of Executive’s employment prior to such a “change in control”.
(a)
Termination
by Company for Cause or Not for Cause. If
Executive’s employment is terminated by Company for “cause” (as defined in
subsection (c) of this Section) at any time, or with or without “cause” prior to
a “change in control”, Executive shall have no right to any severance or other
payments under this Agreement due to such termination. If Executive is
terminated by Company or Holding Company after a “change in control” (as defined
in subsection (e) of this Section) other than for “cause”, Executive’s right to
severance payments under this Agreement shall be as set forth in subsection
(f)
of this Section. A termination by Company of Executive’s employment with Bank
only or Holding Company only shall be deemed a termination for purposes of
this
Agreement, and Executive’s right to severance payments (if any) hereunder, shall
be determined as if such termination were a termination from employment with
Company entirely.
(b)
Termination
by Executive for Good Reason or Not for Good Reason. If
Executive terminates Executive’s employment with Holding Company and Bank prior
to a change in control, or without “good reason” (as defined in subsection (d)
of this Section) at any time, Executive shall have no right to any severance
or
other payments under this Agreement due to such termination. If Executive
terminates Executive’s employment with Holding Company and Bank for “good
reason” after a “change in control” (as defined in subsection (e) of this
Section), Executive’s right to severance payments under this Agreement shall be
as set forth in subsection (f) of this Section.
(c)
Definition
of “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, suspension or removal from
office or prohibition from participation in the conduct of Holding Company’s or
Bank’s affairs pursuant to a notice or other action by any Regulatory Agency, 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 without 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 by Executive in reliance upon an
approving 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.
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(d)
Definition
of “Good Reason”. For
purposes of this Agreement, Executive shall have “good reason” for terminating
his employment with Holding Company and Bank if Executive terminates such
employment within two (2) years after the occurrence of any one or more of
the
following events (a “Triggering Event”) without Executive’s express written
consent, but only if the Triggering Event occurs within two (2) years after
a
“change in control” (as defined in subsection (e) of this Section) of Bank or
Holding Company: (i) the assignment to Executive of any duties inconsistent
with
Executive’s positions, duties, responsibilities, titles or offices with Bank or
Holding Company as in effect immediately prior to a change in control of Bank
or
Holding 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
or
suspension of employment for cause, disability, death or retirement, (iii)
a
reduction by Holding Company or Bank in Executive’s base annual salary, bonus
and/or benefits as in effect immediately prior to a change in control or as
the
same may be increased from time to time thereafter, or the failure to grant
periodic increases in the Executive’s base annual salary on a basis at least
substantially comparable to the lowest periodic increase granted to other
officers of the Company having the title of executive vice president or above,
or (iv) any purported termination of Executive’s employment with Bank or Holding
Company when “cause” (as defined in this Agreement) for such termination does
not exist, or (v) a relocation of Executive’s workplace outside of ▇▇▇▇▇▇▇
County.
(e)
Definition
of “Change in Control”. For
purposes of this Agreement, a “change in control” of Company or Bank shall mean
any one or more of the following:
(1)
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”)(or any successor provision) as it may
be amended from time to time;
(2)
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 Bank or any
“person” who on the date hereof is a director of officer of Company or Bank, is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Company or Bank representing
25%
or more of the combined voting power of Company’s or Bank’s then outstanding
securities; or
(3)
during any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of Company 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.
(4)
the
signing of a letter of intent or a formal acquisition or merger agreement
between the Holding Company or Bank, of the one part, and a third party which
contemplates a transaction which would result in a “change of control” under
paragraphs (1), (2) or (3) of this subsection (f), but, as to any Triggering
Event, only if such letter of intent or agreement, or the transaction
contemplated thereby, has not been canceled or terminated at the time the
occurrence of the Triggering Event in question.
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(f)
Severance.
If
Executive is entitled to severance payments under subsection (a) or (b) of
this
Section, and if Executive shall have signed a release or releases as more fully
described in Section 4 of this Agreement, Company shall pay as severance to
Executive the following:
(I)
Base
Severance. A
basic
severance payment (“Base Severance”) in an amount equal to: (X) the sum (herein
called “Total Annual Cash Compensation”) of two elements: (I) the aggregate
amount of (i) salary, (ii) the Company’s cash contribution toward the cost of
medical, life, disability and health insurance benefits, and (iii) employer
contributions (whether or not matching) under the Company’s qualified defined
contribution retirement plans, that was payable to or for the benefit of
Executive at any time during the most recent full fiscal year of the Company
ended prior to the time the Executive becomes entitled to severance payments
under this Section (the “Base Element”), plus (II) the average of the aggregate
annual cash bonuses that have been earned by the Executive for performance
by
the Executive during each of the three (3) most recent fiscal years of the
Company ended prior to the time the Executive becomes entitled to severance
payments under this Section, but any bonus shall only be included in the
foregoing average to the extent it has been finally approved and fixed as to
amount at the time the Executive becomes entitled to severance payments under
this Section (the “Bonus Element”); multiplied by (Y) 2.99. Such payment shall
be made in a lump sum within one (1) calendar week following the date of
termination, or, if later, at the earliest time permitted under Section 409A
of
the Internal Revenue Code of 1986, as amended (the “Code”), subject to
withholding by the Company as required by applicable law and regulations.
For
purposes of calculating the Base Severance under this Agreement, the following
shall apply:
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(A)
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Subject
to paragraph (C) below, “Total Annual Cash Compensation” shall not include
compensation that may have accrued but did not become payable at
any time
or during any period of reference.
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(B)
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Subject
to paragraph (C) below, “Total Annual Cash Compensation” shall not include
compensation that was paid in the form of Company stock or other
noncash
form.
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(C)
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Notwithstanding
paragraphs (A) and (B) above, “Total Annual Cash Compensation” shall
include compensation that otherwise would have been payable in cash
at any
time or during any period of reference, but was not paid in cash
because
of an election by the Executive to defer all or part of it or to
take it
in the form of Company stock or other noncash form.
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(D)
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If
the Executive shall not have been employed by the Company for three
(3)
full fiscal years prior to the time the Executive becomes entitled
to
severance payments under this Section, the average used for determining
the Bonus Element shall be determined based on the number of full
and
partial fiscal years of the Company in which the Executive was so
employed
and that have ended prior to the time the Executive becomes entitled
to
severance payments under this
Section.
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(E)
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If
any cash bonuses that were payable in a partial fiscal year of employment
are included in calculating the average used for determining the
Bonus
Element, the assumed amount of cash bonuses to be used for that partial
fiscal year in calculating the average shall be determined by dividing
the
actual cash bonuses payable for the partial fiscal year by the actual
number of calendar days of employment in the partial fiscal year,
and
multiplying the result by 365.
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(F)
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For
purposes of determining the Bonus Element, any signing bonus or other
compensation that was payable as an incentive to Executive’s employment
with the Company shall not be
considered.
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(G)
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If
the Executive shall not have been employed with the Company for a
full
fiscal year of the Company prior to the time that the Executive becomes
entitled to severance payments under this Section, the “Base Element” for
purposes of this Agreement shall be determined by dividing the amount
of
the Base Element as it would have been determined under clause (X)(I)
of
this paragraph by the actual number of calendar days of employment
in the
partial fiscal year, and multiplying the result by
365.
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(II)
Medical/Health
Benefits. For
a
period of eighteen (18) months from the date of termination of the Executive’s
employment with the Company, the Company shall continue to pay for Executive’s
health insurance, HMO or other similar medical provider benefits (excluding
any
disability plans or benefits) on the same terms and conditions available to
other employees from time to time. Thereafter, if the Executive chooses to
continue such medical/health benefits as provided under the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”), Executive must do so at Executive’s own
expense. If, at any time after the termination of Executive’s employment with
the Company, Executive becomes covered for medical/health benefits on any terms
with a new employer, the Company shall thereafter have no obligation to pay
for
any benefits or coverage and the Company’s COBRA obligations shall terminate to
the extent permitted by COBRA. Executive agrees to immediately notify Company,
in writing, upon Executive’s acceptance of new employment which provides
medical/health benefits for which Executive is eligible.
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(III)
Section
280G Gross-Up. If,
as a
result of payments provided for under or pursuant to this Agreement, together
with all other payments in the nature of compensation provided to or for the
benefit of the Executive under any other plans or agreements in connection
with
a Change in Control, the Executive becomes subject to excise taxes under Section
4999 of the Code, then, in addition to any other benefits provided under or
pursuant to this Agreement or otherwise, the Company shall pay to the Executive
at the time any such payments are made under or pursuant to this or other plans
or agreements, an amount equal to the amount of such excise taxes (the
“Parachute Tax Reimbursement”). In addition, the Company shall “gross up” such
Parachute Tax Reimbursement by paying to the Executive at the same time an
additional amount equal to the aggregate amount of any additional taxes (whether
income taxes, excise taxes, special taxes, employment taxes or otherwise, and
whether Federal, state or local) that are or will be payable by the Executive
as
a result of the Parachute Tax Reimbursement being paid or payable to the
Executive and as a result of such additional amounts paid or payable to the
Executive pursuant to this sentence, such that after payment of such additional
taxes the Executive shall have been paid on a net, after-tax basis an amount
equal to the Parachute Tax Reimbursement. The amount of the gross-up described
in the immediately preceding sentence shall be computed on the assumption that
the Executive shall be subject to each applicable tax at the highest marginal
rate of such tax.
The
amount of any Parachute Tax Reimbursement and any gross-up shall be determined
by a registered public accounting firm selected by the Compensation Committee
of
the Board of Directors of the Company, whose determination, absent manifest
error, shall be treated as conclusive and binding absent a binding determination
by a governmental authority that a greater or lesser amount of taxes is payable
by the Executive.
If
the
Parachute Tax Reimbursement and a gross-up are provided for the Executive
pursuant to one or more other plans or agreements in addition to this Agreement,
they shall be provided only once.
(g)
Any
termination of Executive’s employment by Company or by Executive shall be
communicated by a dated, written notice, signed by the party giving the notice,
which shall (A) indicate the specific termination provision in 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 the effective date of termination.
(h)
All
obligations under this Agreement are subject to termination by any bank
regulatory agency having jurisdiction over Holding Company or Bank (“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.
(i)
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise. The severance
payments provided for in this Agreement shall not be reduced by any compensation
or other payments received by Executive after the date of termination of
Executive’s employment from any source.
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4.
Execution
of Release Required.
Executive agrees that, as a precondition to receiving the payments provided
for
in this Agreement, Executive shall have executed and delivered to Holding
Company and Bank a release or releases, in form satisfactory to Holding Company
and Bank, releasing all claims which Executive may then have against Holding
Company or Bank, including without limitation any claims related to employment,
termination of employment, discrimination, harassment, compensation or benefits,
but excluding any claims for payments due or to become due under this Agreement.
5.
Payment
Obligations Absolute.
Provided that the preconditions for payment set forth in this Agreement are
fully satisfied, Company’s obligation to pay Executive the severance payments
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.
6.
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.
7.
Amendments.
No
amendments to this Agreement shall be binding unless in a writing, signed by
both parties, which states expressly that it amends this Agreement.
8.
Notices.
Notices
under this Agreement shall be deemed sufficient and effective if (i) in writing
and (ii) either (A) when delivered in person or by facsimile, telecopier,
telegraph or other electronic means capable of being embodied in written form
or
(B) forty-eight (48) hours after deposit thereof in the U.S. mails by certified
or registered mail, return receipt requested, postage prepaid, addressed to
each
party at such party’s address first set forth above and, in the case of Company,
to the attention of the Chairman of the Board, or to such other notice address
as the party to be notified may have designated by written notice to the sending
party.
9.
Prior
Agreements.
There
are no other agreements between Company and Executive regarding Executive’s
employment. This Agreement is the entire agreement of the parties with respect
to its subject matter and supersedes any and all prior or contemporaneous
discussions, representations, understandings or agreements regarding its subject
matter.
10.
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, provided, however, that Executive shall not assign or anticipate
any
of his rights hereunder, whether by operation of law or otherwise. For purposes
of this Agreement, “Company” shall also refer to any successor to Holding
Company or Bank, whether such succession occurs by merger, consolidation,
purchase and assumption, sale of assets or otherwise.
11.
Executive’s
Acknowledgment of Terms.
Executive acknowledges that he has read this Agreement fully and carefully,
understands its terms and that it has been entered into by Executive
voluntarily. Executive acknowledges that any payments to be made hereunder
will
constitute additional compensation to Executive. Executive further acknowledges
that Executive has had sufficient opportunity to consider this Agreement and
discuss it with Executive’s own advisors, including Executive’s attorney and
accountants. Executive has been informed that Executive has the right to
consider this Agreement for a period of at least twenty one (21) days prior
to
entering into it. Executive acknowledges that Executive has taken sufficient
time to consider this Agreement before signing it. Executive also acknowledges
that Executive has the right to revoke this Agreement for a period of seven
(7)
days following this Agreement’s execution by giving written notice of revocation
to Company.
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IN
WITNESS WHEREOF, the parties hereto have caused the due execution of this
Agreement as of the date first set forth above.
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Attest:
_______________________________
Print
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
EVP and CFO
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Holding
Company:
DNB
FINANCIAL CORPORATION
By:
__________________________
Print
Name:: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:
President and COO
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Attest:
_______________________________
Print
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
EVP and CFO
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Bank:
DNB
FIRST, NATIONAL ASSOCIATION
By:
___________________________
Print
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:
President and COO
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Witness:
_______________________________
Print
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Executive:
______________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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