Ex-10(e)
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement"), made as of November 10,
2003, is by and among DNB FINANCIAL CORPORATION ("Holding Company"), 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
(Director Name), an individual residing at (Director Address) ("Director").
Background
A. Company and Director wish to enter into an agreement pursuant to which
Company wishes to secure the future services of each director and to induce the
directors to devote their time and attention to the interests and affairs of the
Corporation and the Bank under all circumstances, including without limitation
circumstances involving a possible change in control of the Corporation and
Bank.
B. Director is willing to enter into this 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, and shall, be maintained as part
of the official records of the Holding Company and the Bank.
D. This Agreement amends and restates the terms of a plan originally approved by
the Company on February 27, 2002, to eliminate retroactively the retirement
features originally approved by the Company on that date. Any previous agreement
signed by the parties incorporating a retirement feature is hereby rescinded
absolutely and retroactively and shall be of no force or effect.
NOW THEREFORE, in consideration of the mutual promises and agreements set forth
herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms when
capitalized shall have the following respective meanings:
"Aggregate Annual Cash Compensation" means the aggregate annual cash
compensation actually paid to Director for Director Services in a fiscal year
(including any compensation which, but for an election by the Director to defer
receipt, would have been paid to Director, and including any variable cash
compensation such as payments for attendance at individual meetings, but not
including the value of any stock option or other nonmonetary grants or any other
deferred compensation, and not including any payments to third parties for
benefits on behalf of Director).
"Aggregate Annual Compensation" means, for any fiscal year, the Aggregate Annual
Cash Compensation plus any noncash compensation, paid or credited to Director
during the fiscal year for Director Services, including without limitation the
value, on the later of the date of grant or vesting of any stock option or other
nonmonetary grants or any other deferred compensation granted during such fiscal
year, as well as the cash amount of any premiums paid by the Company for health
insurance, HMO or other similar medical benefits (but not any disability plans
or benefits) for the Director.
"Base Fiscal Year" means the last full fiscal year of the Company ending prior
to a Change in Control.
"Cause" when used in connection with a termination means and includes (i)
involuntary termination, prior to the expiration of a regular term of office, of
Director's status or services as a director in accordance with the provisions of
the Company's or Bank's articles or bylaws, or by court order or otherwise in
accordance with applicable law or regulations, or (ii) personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, conviction of a felony, or willful or intentional breach or neglect by
Director of his duties, or (iii) 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 (iv)
willful violation of any law, rule or regulation or final cease-and-desist order
or other regulatory agreement, which violation in the reasonable judgment of the
Board of Directors of the Company will probably cause substantial economic
damages to the Company. For purposes of this paragraph, no act, or failure to
act on Director'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 Director in reliance upon an approving opinion of counsel to
the Company or counsel to the Director 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 Director and the standards prevailing in the banking
industry.
"Change in Control" means and includes 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 of this Agreement), other than 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 after a Change in Control,
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 definition, 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
Triggering Event in question occurs.
"Director Services" means services as director for the Holding company, the Bank
and all of their subsidiaries (as opposed to services as employee)
"Good Reason" has the meaning assigned thereto in Section 3(c).
"Termination" means termination of Director's service as director for any of the
Holding Company, Bank or their subsidiaries, so that, immediately after such
termination, Director is not a voting director of Holding Company, Bank or any
of their subsidiaries. A "Termination" also occurs if Director's status is
changed, for any remaining director positions with the Company, the Bank and
their subsidiaries, to an emeritus, advisory or other nonvoting capacity. A
termination of Director's service as director with less than all of Bank,
Holding Company and their subsidiaries shall not be deemed a "Termination" for
purposes of this Agreement so long as Director remains a director of Holding
Company, Bank or any of their subsidiaries.
"Triggering Event" has the meaning assigned thereto in Section 3(c).
2. Service as a Director; Compensation; Other Agreements; Employee Directors.
(a) Director shall not be deemed to have received any vested rights to continued
service as a Director by virtue of this Agreement. This Agreement is not an
employment agreement, but shall only be interpreted as governing the making of
certain payments in recognition of past service as director (but not as
employee) which may be due to Director upon termination of Director's service as
director 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 service or
status of a Director in accordance with the articles of incorporation and bylaws
of the Company and applicable laws and regulations, subject nevertheless to the
terms of this Agreement.
(b) The compensation to be paid by Company to Director from time to time for
current services as Director, including any fringe benefits, shall not be
governed by this Agreement. This Agreement shall not be deemed to affect the
terms of any stock options or other agreements between the Company and Director.
If Director is also an employee of the Company, this Agreement is not intended
to address or affect Director's employment with the Company as an employee, or
the termination of such employment, or any matters relating to termination of
employment; likewise, termination of Director's employment with the Company for
any reason shall not give Director any claim for payments under this Agreement
except solely to the extent Director's service as a director of the Holding
Company or Bank shall be terminated in circumstances giving Director a right to
payment under the terms of this Agreement. This Agreement shall not be
considered, in any respect, a benefit or perquisite of any employment
relationship between Director and Company and is not given in consideration of
employment.
3. Termination of Director Status; Compensation.
(a) Termination at the Instance of Parties other than the Director.
(i) If Director's service as a director for the Holding Company, Bank or any of
their subsidiaries is terminated for Cause at any time before or after a Change
in Control, then Director shall have no right to any payments under this
Agreement due to such termination.
(ii) If Termination occurs within three (3) years after a Change in Control and
other than for Cause, then in such case Director's right to severance payments
under this Agreement shall be as set forth in subsection (g) of this Section.
(b) Termination at the Instance of the Director.
(i) If a Termination occurs voluntarily by the Director at his or her own
instance, either prior to a Change in Control for any reason, or within three
(3) years after a Change in Control without Good Reason, or more than three (3)
years after a Change in Control, Director shall have no right to any payments
under this Agreement due to such Termination.
(ii) If a Termination occurs for Good Reason within three (3) years after a
Change in Control, Director's right to severance payments under this Agreement
shall be as set forth in subsection (g) of this Section.
(c) "Good Reason." For purposes of this Agreement, Director shall have "Good
Reason" for causing a Termination if the Termination occurs within one (1) year
after any of the following events described in (i), (ii) or (iii) of this
subsection (a "Triggering Event") shall have occurred without Director's
consent:
(i) a reduction (for reasons other than the actions of the Director) in the
Aggregate Annual Compensation paid to Director for Director Services during any
fiscal year of the Company, as compared to the greater of (I) the Aggregate
Annual Compensation paid to Director for all Director Services during the Base
Fiscal Year, or (II) the Aggregate Annual Compensation paid to Director for all
Director Services during any fiscal year of the Company after the Base Fiscal
Year; or
(ii) the Company's failure to give Director increases in Aggregate Annual
Compensation for Director Services at least equal to any increases given to
other directors of the Holding Company, the Bank or any of their
subsidiaries in their compensation for comparable services as director;
(iii) the imposition by the Company of changes in duties or schedule or
location of attendance at board or committee meetings that, singly or in
the aggregate, impose additional unreimbursed expense, or other
unreasonable burdens, on the Director in attending or participating in
board or committee meetings or otherwise fulfilling his or her
responsibilities.
(d) Severance. If Director is entitled to severance payments under
subsection (a) or (b) of this Section, and if Director shall have signed a
release or releases as more fully described in Section 4 of this Agreement,
Company shall pay as severance to Director the following:
(I) Base Severance. An amount equal to the product obtained by multiplying
(A) 2.99 times (B) either:
(i) if a change of control has occurred prior to the date of Termination,
the greater of (I) the Aggregate Annual Cash Compensation paid to Director
for Director Services during the Base Fiscal Year, or (II) the Aggregate
Annual Cash Compensation paid to Director for Director Services during any
fiscal year of the Company after the Base Fiscal Year, or
(ii) if a change of control has not occurred prior to the date of
Termination, the Aggregate Annual Cash Compensation paid to Director during
the last full fiscal year of the Company prior to the date of Termination.
Such amount shall be payable in equal installments over a period of three
(3) years following the date of Termination, subject to withholding of any
taxes by the Company as required by applicable law and regulations. Unless
the Company shall have elected to pay in more frequent installments, such
installments shall be monthly.
(II) Medical/Health Benefits. If the Company paid for Director's health
insurance, HMO or other similar medical provider benefits (excluding any
disability plans or benefits) immediately prior to the date of Termination,
the Company shall continue to pay for or reimburse Director's payments such
benefits for a period of one (1) year after the date of Termination but in
an aggregate amount not exceeding the Company's payments therefor in the
year preceding the date of Termination.
(III) Reduction to Avoid Excise Tax. Notwithstanding any provision of this
Agreement or any other agreement of the parties, if the severance payment
or payments under this Agreement, either alone or together with other
payments which the Director has the right 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") or any successor
provision, such severance payment or payments shall be reduced to the
largest amount as will result in no portion of the severance payment under
this Agreement being subject to the excise tax imposed by Section 4999 of
the Code.
(e) Any termination of Director's service as a director of Holding Company,
Bank or any of their subsidiaries, whether by Company or by Director, 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 or applicable; (B) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Director's service under the provision so indicated; (C) specify the
effective date of termination.
(f) 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 Director to
compensation earned as of the date of termination shall not be affected.
(g) Director 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 Director from any source,
except to the extent that a determination is made that Director's receipt
of any such compensation or other payments from another source constitute a
breach of Director's obligations to the Company.
4. Execution of Release Required. Director agrees that, as a precondition
to receiving the payments provided for in this Agreement, Director 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 Director may then have against Holding Company or Bank,
including without limitation any claims related to termination of service,
discrimination, harrassment, 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 Director 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 Director. All amounts
payable by Company hereunder shall be paid without notice or demand.
6. Continuing Obligations. Director 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. 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 Director, provided, however, that
Director 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. Director's Acknowledgment of Terms. Director acknowledges that he or
she has read this Agreement fully and carefully, understands its terms and
that it has been entered into by Director voluntarily. Director
acknowledges that any payments to be made hereunder will constitute
additional compensation to Director and may be subject to taxation or
withholding. Director further acknowledges that Director has had sufficient
opportunity to consider this Agreement and discuss it with Director's own
advisors, including Director's attorney and accountants. Director has been
informed that Director has the right to consider this Agreement for a
period of at least twenty one (21) days prior to entering into it. Director
acknowledges that Director has taken sufficient time to consider this
Agreement before signing it. Director also acknowledges that Director 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.
IN WITNESS WHEREOF, the parties hereto have caused the due execution of
this Agreement as of the date first set forth above.
Holding Company: Bank:
DNB FINANCIAL CORPORATION DOWNINGTOWN NATIONAL BANK
By: ___________________________ By: ______________________
Title: Title:
Witness: Director:
______________________________ (Director/S/)
Print Name: Print Name: