SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for Quarterly period ended
June 30, 1998.
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _______ to ________.
No. 0-24145
(Commission File Number)
MAIN STREET BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2960905
(State of Incorporation) (IRS Employer ID Number)
601 PENN STREET, READING, PA 19601
(Address of Principal Executive Offices) (Zip Code)
(610) 685-1400
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to the filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Number of Shares Outstanding as of July 31, 1998
COMMON STOCK ($1.00 Par Value) 9,692,918
(Title of Class) (Outstanding Shares)
<PAGE>
MAIN STREET BANCORP, INC.
FORM 10-Q
For the Quarter Ended June 30, 1998
Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 1
Consolidated Statements of Income for
the Six and Three Month Periods ended
June 30, 1998 and 1997 2
Consolidated Statement of Stockholders'
Equity for the Six-Month Period
Ended June 30, 1998 3
Consolidated Statements of Cash Flows for
the Six-Month Periods Ended June 30, 1998
and 1997 4
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security
Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
<PAGE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
(Unaudited)
ASSETS: (In thousands, except per share data)
<S> <C> <C>
Cash and due from banks $ 23,370 $ 24,918
Interest-bearing deposits with banks 58 200
Federal funds sold 6,870 470
Securities available for sale 284,852 209,106
Securities held to maturity, fair value June 30,
1998 $1,274; December 31, 1997 $71,769 1,275 70,914
Loans receivable, net of allowance for loan losses
June 30, 1998 $5,905; December 31, 1997 $5,738 512,246 477,838
Due from mortgage investors 8,323 5,425
Bank premises and equipment, net 15,429 11,511
Accrued interest receivable 6,424 5,825
Prepaid expenses and other assets 5,510 7,656
TOTAL ASSETS $864,357 $813,863
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 84,711 $ 73,985
Demand, interest bearing 53,688 52,344
Savings 273,783 239,504
Time deposits 286,370 260,975
TOTAL DEPOSITS 698,552 626,808
Accrued interest payable and other liabilities 12,157 13,625
Other borrowed funds 10,006 30,260
Long-term debt 50,000 54,450
TOTAL LIABILITIES 770,715 725,143
Stockholders' equity:
Common stock, par value $1.00 per share;
authorized 50,000,000 shares; issued and
outstanding June 30, 1998 9,689,818 shares;
December 31, 1997 9,639,808 shares 9,690 9,640
Surplus 50,526 49,985
Retained earnings 29,492 26,721
Net unrealized appreciation on securities
available for sale, net of taxes 3,934 2,374
TOTAL STOCKHOLDERS' EQUITY 93,642 88,720
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $864,357 $813,863
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
PAGE 1
<PAGE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
(In thousands, except Per share data)
<S> <C> <C> <C> <C>
Interest income:
Loan receivable, including fees $11,178 $ 9,333 $21,760 $18,114
Interest and dividends on securities:
Taxable 3,362 2,998 6,951 5,529
Tax-exempt 969 694 1,765 1,401
Other 18 43 29 211
Total interest income 15,527 13,068 30,505 25,255
Interest expense:
Deposits 6,409 5,105 12,423 9,839
Other borrowed funds 367 498 849 840
Long-term debt 739 644 1,490 1,313
Total interest expense 7,515 6,247 14,762 11,992
Net interest income 8,012 6,821 15,743 13,263
Provision for loan losses 250 306 485 592
Net interest income after provision
for loan losses 7,762 6,515 15,258 12,671
Other income:
Income from fiduciary activities 207 184 431 477
Customer service fees 638 539 1,212 1,028
Mortgage banking activities 449 246 811 392
Net realized gains on sale of securities 468 8 2,150 136
Other 83 48 175 32
Total other income 1,845 1,025 4,779 2,065
Other expenses:
Salaries and wages 2,402 1,933 4,686 3,734
Employee benefits 620 503 1,166 937
Occupancy 561 361 981 731
Equipment depreciation and maintenance 383 329 723 653
Merger costs 1,963 -- 1,963 --
Other 1,820 1,642 3,472 3,414
Total other expenses 7,749 4,768 12,991 9,469
Income before income taxes 1,858 2,772 7,046 5,267
Federal income taxes 478 738 1,951 1,388
Net Income $ 1,380 $ 2,034 $ 5,095 $ 3,879
======= ======= ======== =======
Basic earnings per share $ 0.14 $ 0.26 $ 0.53 $ 0.50
======= ======= ======== =======
Diluted earnings per share $ 0.14 $ 0.26 $ 0.52 $ 0.49
======= ======= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements
PAGE 2
<PAGE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
For the Six months Ended June 30, 1998
<TABLE>
<CAPTION> Net Unrealized
Number Of Appreciation
Shares Of On Securities Compre-
Common Common Retained Available hensive
Stock Stock Surplus Earnings For Sale Total Income
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 9,639,808 $9,640 $49,985 $26,721 $2,374 $88,720
Net income -- -- -- 5,095 -- 5,095 $5,095
Pre-merger stock transactions
of pooled entities 31,043 31 433 -- -- 464 --
Issuance of common stock upon
exercise of stock options 18,967 19 107 -- -- 126 --
Tax benefit upon exercise of
stock options 1 1 --
Cash in lieu of fractional -- -- -- (20) -- (20) --
shares
Net change in unrealized
appreciation on securities
available for sale, net of -- -- -- -- 1,560 1,560 1,560
taxes
Comprehensive income $6,655
Cash dividends declared -- -- -- (2,304) -- (2,304)
Balance June 30, 1998 9,689,818 $9,690 $50,526 $29,492 $3,934 $93,642
========= ====== ======= ======= ====== =======
</TABLE>
See Notes to Consolidated Financial Statements
PAGE 3
<PAGE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1998 June 30, 1997
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,095 $ 3,879
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan and foreclosed real estate losses 490 661
Provision for depreciation and amortization 653 593
Loss on sale of equipment and foreclosed real estate 34 6
Net realized (gain) on sale of securities (2,149) (137)
Provision for deferred income taxes (119) (91)
Proceeds from sale of mortgage loans 61,775 20,087
Net (gain) loss on sale of mortgage loans (76) 10
Mortgage loans originated for sale (61,698) (20,090)
Net accretion (amortization) of security premiums and discounts 617 5
(Increase) decrease in:
Due from mortgage investors (2,898) (1,430)
Accrued interest receivable (599) (889)
Prepaid expenses and other assets 1,225 (223)
Increase in accrued interest payable and other liabilities 960 905
Net cash provided by operating activities 3,310 3,286
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 7,094 7,163
Proceeds from maturities of and principal repayments on securities
available for sale 25,851 11,072
Proceeds from maturities and calls of securities held to maturity 4,850 3,495
Purchases of securities available for sale (41,863) (60,443)
Purchases of securities held to maturity -- (4,994)
Decrease in interest-bearing deposits with banks 142 21,197
(Increase)/Decrease in federal funds sold (6,400) 1,040
Loans made to customers, net of principal collected (41,955) (43,985)
Proceeds from sale of third-party dealer loan portfolio 6,367 --
Proceeds from sales of foreclosed real estate 598 811
Proceeds from sales of bank premises and equipment 3 30
Purchases of premises and equipment (4,574) (2,076)
Net cash used in investing activities (49,887) (66,690)
</TABLE>
PAGE 4
<PAGE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits $ 46,349 $ 45,712
Net increase in time deposits 25,395 15,422
Proceeds from (repayment of) other borrowed funds (20,254) 13,315
Proceeds from long-term borrowings -- 30,000
Principal payments of long-term borrowings (4,450) (35,000)
Proceeds from exercise of stock options 126 --
Cash in lieu of fractional shares (20) --
Pre-merger stock transactions of pooled entity 464 (193)
Cash dividends paid (2,581) (1,414)
Net cash provided by financing activities 45,029 67,842
Increase (decrease) in cash and due from banks (1,548) 4,438
Cash and due from banks:
Beginning 24,918 18,428
Ending $ 23,370 $ 22,866
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 14,721 $ 11,895
========= ========
Income taxes $ 1,110 $ 1,425
========= ========
</TABLE>
See Notes To Consolidated Financial Statements
PAGE 5
<PAGE>
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The consolidated financial statements give retroactive effect to
the pooling of interests merger of BCB Financial Services
Corporation ("BCB") and Heritage Bancorp, Inc. ("Heritage") as
more fully described below. As a result, the consolidated
balance sheets as of June 30, 1998 and December 31, 1997, and the
related consolidated statements of income, stockholders' equity
and cash flows for each of the six and three months ended
June 30, 1998 and 1997, are presented as if the combining
companies had been consolidated for all periods presented. As
required by generally accepted accounting principles, the
consolidated financial statements will become the historical
consolidated financial statements upon issuance of the
consolidated financial statements for the period that includes
the date of the acquisition. The consolidated statements of
stockholders' equity reflect the accounts of Main Street Bancorp,
Inc. (the "Company") as if the common stock had been issued
during all periods presented.
On May 1, 1998, the Company was formed upon the completion of a
merger of equals between BCB and Heritage. The merger was
accounted for as a pooling of interests on the Company's books.
As a result of the merger, each of the 3,478,241 outstanding
shares of BCB common stock as of April 30, 1998 was converted
into 1.3335 shares of the Company's common stock and each of the
4,793,746 outstanding shares of Heritage common stock as of
April 30, 1998 was converted into 1.05 shares of the Company's
stock, with cash being paid for fractional share interests.
The unaudited consolidated financial statements include the
accounts of the Company and its wholly-owed subsidiaries, Berks
County Bank (Berks), Heritage National Bank (HNB), and Heritage
Holding Company (HHC). All significant intercompany accounts and
transactions have been eliminated.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
considered necessary for fair presentation have been included.
Operating results of the six-month period ended June 30, 1998 are
not necessarily indicative of the results that may be expected
for the year ended December 31, 1998.
<PAGE 6>
EARNINGS PER SHARE
The following table sets forth the computations of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six months Ended June 30,
1998 1997 1998 1997
<S> <C> <C>
Numerator, net income $1,380,000 $2,034,000 $5,095,000 $3,879,000
========== ========== ========== ==========
Denominator:
Denominator for basic earnings per share,
weighted average shares 9,681,393 7,778,504 9,663,701 7,780,885
Effect of dilutive securities, stock option 154,473 85,414 148,750 83,482
Denominator for diluted earnings per
share, weighted average shares
and assumed conversions 9,835,866 7,863,918 9,812,451 7,864,367
========== ========== ========== ==========
Basic earnings per common share $0.14 $0.26 $0.53 $0.50
========== ========== ========== ==========
Diluted earnings per common share $0.14 $0.26 $0.52 $0.49
========== ========== ========== ==========
</TABLE>
OTHER EXPENSES
The following represents the most significant categories of other
expenses for the six months ended June 30:
1998 1997
(In thousands)
Advertising $ 568 $ 534
Data processing and MAC fees 553 468
F.D.I.C. insurance premiums 90 78
Office supplies and expenses 585 572
Professional fees 401 485
Taxes, other than income 322 273
Foreclosed real estate 66 78
All other expenses 887 926
$ 3,472 $ 3,414
======= =======
COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income," in June 1997. The
Company adopted the provisions of the new standard in the first
quarter of 1998.
The only comprehensive income item that the Company presently has
is unrealized appreciation (depreciation) on securities available
for sale. The federal income taxes allocated to the unrealized
gains (losses) are as follows: <PAGE 7>
<TABLE>
<CAPTION>
For The Six Months Ended
June 30,
1998 1997
(In thousands)
<S> <C> <C>
Unrealized holding gains (losses) arising during the period:
Before tax amount $2,586 $ 42
Tax (expense) benefit (879) (14)
Net of tax amount 1,707 28
Less reclassification adjustment for gains (losses) included in net income:
Before tax amount 222 136
Tax (expense) benefit (75) (46)
Net of tax amount 147 90
Net unrealized gains (losses):
Before tax amount 2,364 (94)
Tax (expense) benefit (804) 32
Net of tax amount $1,560 $ (62)
====== ======
</TABLE>
ACCOUNTING POLICIES
In June 1998, the Financial Accounting Standards Board
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which becomes effective for the Company
January 1, 2000. Management expects this Statement will have no
impact on the Company, as presently no derivative instruments are
held.
SECURITIES
The Company transferred securities with an amortized cost of
$72.6 million from held to maturity to available for sale on
May 31, 1998 in order to provide flexibility for management to
implement new investment strategies. The transfer resulted in a
$840,000 adjustment to fair value on the securities previously
classified as held to maturity with a corresponding adjustment to
equity of $554,000 for unrealized gains, net of taxes. All
securities at June 30, 1998 were classified as available for sale
except for those securities that will call or mature within the
next six months.
PAGE 8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis is intended to assist
in understanding and evaluating the major changes in the
financial condition and earnings performance of Main Street
Bancorp, Inc. (the "Company") with a primary focus on an analysis
of operating results.
FINANCIAL CONDITION HIGHLIGHTS
The assets increased to $864.4 million at June 30, 1998,
compared to $813.9 million at December 31, 1997, an increase of
$50.5 million, or 6.20%. This increase was primarily reflected
in loans and deposits.
Federal funds sold increased $6.4 million, to $6.9 million
at June 30, 1998 from $0.5 million at December 31, 1997. This
resulted from the investment of the proceeds from the sale of the
third party dealer loan portfolio of Heritage National Bank
("HNB") in June of 1998.
Securities increased $6.1 million, or 2.18%, to
$286.1 million at June 30, 1998 when compared to $280.0 million
at December 31, 1997. The increase is due to the purchase of
$41.9 million in securities, offset by the securities sales and
maturities of $37.8 million.
The Company transferred securities with an amortized cost of
$72.6 million from held to maturity to available for sale on
May 31, 1998 in order to provide flexibility for management to
implement new investment strategies. The transfer resulted in a
$840,000 adjustment to fair value on the securities previously
classified as held to maturity with a corresponding adjustment to
equity of $554,000 for unrealized gains, net of taxes. All
securities at June 30, 1998 were classified as available for sale
except for those securities that will call or mature within the
next six months.
Loans receivable, net of allowance for loan losses of
$5.9 million at June 30, 1998 and $5.7 million at December 31,
1997, increased to $512.2 million at June 30, 1998 from
$477.8 million at December 31, 1997. The increase of
$34.4 million, or 7.20%, was primarily from an increase in
commercial loans which was due to favorable market conditions.
Amounts due from mortgage investors increased to
$8.3 million at June 30, 1998 from $5.4 million at December 31,
1997. These amounts represent loans originated by Berks County
Bank ("Berks") for other mortgage investors/lenders under
standing commitments. These loans are temporarily funded for
investors for periods ranging from three to twenty-one days.
<PAGE 9>
Bank premises and equipment, net of accumulated
depreciation, increased from $11.5 million at December 31, 1997
to $15.4 million at June 30, 1998. This increase was mostly
attributable to the purchase of the Berks County Bank Building
during February of 1998. The Berks County Bank Building houses
the corporate offices of the Company.
Total deposits, the primary source of funds, increased
$71.8 million to $698.6 million at June 30, 1998 compared to
$626.8 million at December 31, 1997, an increase of 11.46%. The
increase in deposits was primarily in savings and time deposits.
Savings deposits increased from $239.5 million at December 31,
1997 to $273.8 million at June 30, 1998, an increase of
$34.3 million, or 14.32%. This was due to the offering of an
above market rate of 4.20% APY (annual percentage yield) on money
market deposits to customers of Berks. Total time deposits
increased $25.4 million, or 9.73%, to $286.4 million at June 30,
1998 from $261.0 million at December 31, 1997. As a percentage
of total deposits, time deposits decreased from 41.64% at
December 31, 1997 to 40.99% at June 30, 1998.
Other borrowed funds and long-term debt decreased
$24.7 million, or 29.17%, from $84.7 million at December 31, 1997
to $60.0 million at June 30, 1998. The decrease resulted because
deposit growth was sufficient to fund loan growth and security
purchases and the Company was able to paydown borrowings.
Stockholders' equity increased $4.9 million, or 5.52%, to
$93.6 million at June 30, 1998 from $88.7 million at December 31,
1997. The increase was primarily from the retention of earnings
for the first six months, net of cash dividends declared of
$2.3 million. Also, contributing to the increase in
stockholders' equity was the increase in the net unrealized
appreciation on securities available for sale of $1.5 million,
from $2.4 million at December 31, 1997 to $3.9 million at
June 30, 1998.
RESULTS OF OPERATIONS
Overview
Net income for the first six months of 1998 was $5.1 million
compared to $3.9 million for the first six months of 1997, an
increase of 30.77%. On a per share basis, basic earnings were
$0.53 and $0.50 for the first six months of 1998 and 1997,
respectively. Diluted earnings per share were $0.52 and $0.49
for the six months ended June 30, 1998 and 1997, respectively.
Earnings for the second quarter of 1998 was $1.4 million compared
to $2.0 million for the second quarter of 1997. Basic and
diluted earnings per share for the second quarter of 1998 was
$0.14 as compared to $0.26 for the second quarter of 1997. The
decrease in the second quarter of 1998 was due to the
$2.0 million ($1.4 million, net of tax) of one-time,
merger-related costs. However, these merger costs were offset by
<PAGE 10> securities gains realized in the first half of
$2.2 million ($1.4 million, net of tax).
Net Interest Income
Net interest income is the difference between interest
income on interest-earning assets and interest expense on
interest-bearing liabilities. Net interest income, on a
tax-equivalent basis, increased $2.7 million, or 19.42%, to
$16.6 million for the first six months of 1998 compared to
$13.9 million for the six months of 1997. For the second quarter
of 1998, net interest income, on a tax-equivalent basis,
increased $1.3 million, or 18.06%, to $8.5 million from
$7.2 million for the second quarter of 1997. The increase in net
interest income was primarily due to an increase in average
interest-earning assets of $144.9 million, or 22.4%, for the
first six months of 1998 compared to 1997 and an increase of
$137.2 million, or 20.56%, for the second quarter of 1998
compared to 1997. Average interest-bearing liabilities increased
$105.8 million and $100.6 million for the first six months and
second quarter of 1998 compared to 1997, respectively. This
resulted in an increase to the average rate paid on
interest-bearing liabilities to 4.50% for the first six months of
1998 compared to 4.35% for the first six months of 1997. For the
second quarter of 1998, the average rate paid on interest-bearing
liabilities was 4.48% compared to 4.34% for the second quarter of
1997. The increase was mostly due to the 4.20% APY paid on money
market deposits by Berks.
Net interest margin decreased 13 basis points from 4.34% for
the first six months of 1997 to 4.21% for the first six months of
1998, calculated on a tax-equivalent basis. Net interest margin
decreased 10 basis points from 4.32% in the second quarter of
1997 to 4.22% in the second quarter of 1998, calculated on a
tax-equivalent basis. Net interest margin primarily decreased
due to an increase in the average rate paid on interest-bearing
liabilities and to a decrease in the average yield on
interest-earning assets due to increased competition in lending
and lower interest rates on investments.
Provision For Loan Losses
The provision for loan losses is charged to operations to
bring the total allowance for loan losses to a level considered
appropriate by management. The level of the allowance for loan
losses is determined by management based upon its evaluation of
the known as well as inherent risks within the Berks' and HNB's
(collectively, the "Banks") loan portfolios. Management's
periodic evaluation is based upon an examination of the
portfolios, past loss experience, current economic conditions,
the results of the most recent regulatory examinations and other
relevant factors. The provision for loan losses was $485,000 for
the first six months of 1998 compared to $592,000 for the first
six months of 1997. For the second quarter of 1998, the
provision for loan losses was $250,000 compared to $306,000 for
<PAGE 11> the second quarter of 1997. The reason for the
decrease is due to the adequacy of the allowance for loan losses
as per recent management analysis. The allowance for loan losses
to nonperforming loans was 69.63% at June 30, 1998 compared to
85.08% at June 30, 1997.
Other Income
Other income increased $2.7 million, or 128.57%, to
$4.8 million for the first six months of 1998 compared to
$2.1 million for the first six months of 1997. For the second
quarter of 1998, other income increased $820,000, or 82.0%, to
$1.8 million from $1.0 million for the second quarter of 1997.
The increase in other income for the first six months and second
quarter of 1998 was mostly due to realized gains on sales of
securities and income from mortgage banking activities. For the
first six months of 1998, realized gains on sales of securities
increased $2.0 million to $2.1 million from $136,000 for the same
period a year earlier. For the second quarter of 1998, realized
gains on sales of securities increased $460,000 to $468,000 from
$8,000 reported in the second quarter of 1997. Management
elected to sell some of its available-for-sale equity securities
of Pennsylvania banks in order to provide additional capital that
could be leveraged for additional earnings in its subsidiary
banks.
Income from mortgage banking activities increased $419,000,
or 106.89%, to $811,000 during the first six months of 1998
compared to $392,000 for the first six months of 1997. For the
second quarter of 1998, income from mortgage banking activities
increased $203,000, or 82.52%, to $449,000 from $246,000 in the
second quarter of 1997. Mortgage banking income represents
income generated from the mortgages temporarily funded for
mortgage investors. The increase was due primarily to an
increase in new home construction and refinancing, attributable
to the low interest rate environment.
Other Expenses
Total other expenses increased $3.5 million, or 36.84%, to
$13.0 million for the first six months of 1998 compared to
$9.5 million for the first six months of 1997. Total other
expenses also increased during the second quarter of 1998 to
$7.7 million from $4.8 million for the second quarter of 1997, an
increase of $2.9 million, or 60.42%.
Salaries, wages and employee benefits increased
$1.2 million, or 25.53%, and $586,000, or 24.06% for the six and
three months ended June 30, 1998, compared to the respective
periods in 1997. Salaries, wages and employee benefits increased
due to the growth of the Company and also due to the accrual of
the 3% salary match for all eligible employees under the new
money purchase plan as approved under the consolidation agreement
pursuant to which BCB and Heritage were consolidated to form the
Company. <PAGE 12>
Occupancy expense increased $250,000, or 34.20%, to $981,000
for the first six months of 1998 compared to $731,000 for the
first six months of 1997. For the second quarter of 1998,
occupancy expense was $561,000 compared to $361,000 for the
second quarter of 1997, an increase of $200,000, or 55.40%. These
increases reflect one-time expenses related to occupying the new
corporate headquarters at the Berks County Bank Building and also
includes obligations to pay the remaining lease payments for the
prior headquarters.
Other operating expenses, including merger costs, increased
$2.0 million, or 58.8%, to $5.4 million for the first six months
of 1998, compared to $3.4 million for the first six months of
1997. For the second quarter of 1998, other operating expenses
increased by $2.2 million, or 137.50%, to $3.8 million from
$1.6 million a year earlier. The large increase in other
expenses was mostly due to the one-time merger related costs of
$2.0 for the three and six months ended June 30, 1998. Other
slight increases or decreases occurred in advertising, data
processing and MAC fees, professional fees and corporate taxes.
Advertising increased $34,000 to $568,000 for the first six
months of 1998 compared to $534,000 for the first six months of
1997 and decreased $27,000 during the second quarter, from
$323,000 in 1997 to $296,000 in 1998. The decrease from last
year was due to the opening and promotion of the Muhlenberg and
Shillington offices during the second quarter of 1997. Data
processing and MAC fees increased $85,000, or 18.16%, from
$468,000 in the first six months of 1997 to $553,000 in the first
six months of 1998. For the second quarter, data processing and
MAC fees increased $37,000 to $289,000 from $252,000 a year
earlier. The increase was a result of increased volume in credit
card processing/ATM processing. Professional fees decreased
$84,000, or 17.32%, and increased $33,000, or 19.19%, for the six
and three months ended June 30, 1998, respectively, compared to
the same periods in 1997. The increased legal fees for the
quarter was mostly due to legal fees incurred on loan workouts.
Corporate taxes increased $49,000, or 17.95%, to $322,000 for the
first six months of 1998 compared to $273,000 for the same period
in 1997. For the second quarter of 1998, corporate taxes
increased $43,000, or 32.58%, to $175,000 compared to $132,000
for the second quarter of 1997. The increase was due to
increased Pennsylvania shares tax due to Berks being downstreamed
$15.0 million of capital in 1997 as a result of a secondary stock
offering.
Federal Income Taxes
The provision for federal income taxes was $2.0 million for
the first six months of 1998 compared to $1.4 million for the
first six months of 1997. The provision for income taxes was
$478,000 for the second quarter of 1998 compared to $738,000 for
the second quarter of 1997. The effective tax rate for the first
six months of 1998 was 27.69% versus 26.35% for the first six
months of 1997.
<PAGE 13>
Asset Quality
Non-performing assets as a percentage of total assets
increased from .78% at December 31, 1997 to 1.04% at June 30,
1998. Non-performing assets increased from $6.3 million at
December 31, 1997 to $9.0 million at June 30, 1998. The ratio of
the allowance for loan losses to non-performing assets was 90.44%
at December 31, 1997 compared to 65.58% at June 30, 1998.
Non-performing assets are comprised of non-accrual loans,
accruing loans that are 90 days or more past due, foreclosed real
estate and restructured loans.
As financial institutions which assume lending and credit
risks as a principal element of their business, the Banks
anticipate that credit loss will be experienced in the normal
course of business. Accordingly, management of the Banks makes a
quarterly determination as to an appropriate provision from
earnings necessary to maintain an allowance for loan losses that
is adequate for potential yet undetermined losses. The amount
charged against earnings is based upon several factors including
at a minimum, each of the following:
- a continuing review of delinquent, classified and non-
accrual loans, large loans, and overall portfolio
quality. This continuous review assesses the risk
characteristics of both individual loans and the total
loan portfolio;
- analytical review of loan charge-off experience,
delinquency rates and other relevant historical and
peer statistical rations;
- management's judgment with respect to local and general
economic conditions and their impact on the existing
loan portfolio;
- regular examinations and reviews of the loan portfolio
by the bank regulators.
When it is determined that the prospect for recovery of the
principal of a loan has significantly diminished, that portion of
the loan is immediately charged against the allowance account.
Subsequent recoveries, if any, are credited to the allowance
account. In addition, non-accrual and large delinquent loans are
reviewed monthly to determine potential losses.
Management believes the allowance for loan losses was
adequate to cover risks inherent in its loan portfolio at
June 30, 1998. However, there can be no assurance that the
Company will not have to increase its provision for loan losses
in the future as a result of changes in economic conditions or
for other reasons. Any such increase could adversely affect the
Company's results of operations.
<PAGE 14>
Capital
The Company's Tier 1 capital to risk-weighted assets ratio
at June 30, 1998 was 16.59% compared to 17.56% at December 31,
1997. These ratios far exceeded the Tier 1 regulatory capital
requirement of 4.00%. The Company's total capital to
risk-weighted assets ratio at June 30, 1998 was 17.68% compared
to 18.72% at December 31, 1997. These ratios exceeded the total
risk-based capital regulatory requirement of 8.00%. At June 30,
1998, the Company's leverage ratio was 10.55% versus 10.93% at
December 31, 1997. The Company is categorized as "well
capitalized" under applicable Federal regulations.
Liquidity
Financial institutions must maintain liquidity to meet
day-to-day requirements of depositors and borrowers, take
advantage of market opportunities, and provide a cushion against
unforeseen needs. Liquidity needs can be met by either reducing
assets or increasing liabilities. Sources of asset liquidity are
provided by securities, cash and amounts due from banks,
interest-bearing deposits with banks, and Federal funds sold.
These liquid assets totaled $315.1 million at June 30, 1998
compared to $234.7 million at December 31, 1997. Maturing and
repaying loans are another source of asset liquidity. At
June 30, 1998, the Company estimated that an additional
$213.2 million of loans will mature or reprice in the next
six-month period ended December 31, 1998.
Liability liquidity can be met by attracting deposits with
competitive rates, buying Federal funds or utilizing the
facilities of the Federal Reserve System or the FHLB System. The
Banks utilize a variety of these methods of liability liquidity.
At June 30, 1998, the Banks had approximately $223.9 million in
unused lines of credit available to it under informal
arrangements with correspondent banks compared to $225.7 million
at December 31, 1997. These lines of credit enable the Banks to
purchase funds for short-term needs at current market rates.
Year 2000 Computer Issues
Management has initiated a company-wide program to prepare
Main Street's, Berks' and Heritage's computer systems and
applications for the year 2000.
The "year 2000" challenge is pervasive and complex as
virtually every computer operation will be affected in some way
by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive
information when the year changes to 2000.
The Company is utilizing both internal and external
resources to identify, correct or reprogram, and test the systems
for the year 2000 compliance. <PAGE 15>
The Company plans to have all reprogramming efforts
completed by December 31, 1998, allowing adequate time for
testing.
The Company expects to incur internal staff costs and other
expenses related to hardware and software enhancements necessary
to prepare the systems for the year 2000. Management expects
these "year 2000" maintenance or modification costs to be less
than $100,000.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk
This section contains certain forward-looking statements
which may involve significant risks and uncertainties. Although
management believes that the expectations reflected in the
forward-looking statements are reasonable, actual results may
differ materially from the tables and discussion included in this
section.
Market Risk
Market risk is the risk of loss arising from adverse changes
in the fair value of financial instruments due to changes in
interest rates, exchange rates, and equity prices. The Company's
market risk is composed primarily of interest rate risk. The
Company's Asset/Liability Committee (ALCO) is responsible for
reviewing the interest rate sensitivity position of the Company
and establishing policies to monitor and limit exposure to
interest rate risk. The operations of the Company do not subject
it to foreign currency exchange or commodity price risk. Also,
the Company and the Banks do not utilize interest rate swaps,
caps, or other hedging transactions.
Interest Rate Sensitivity
Interest rate sensitivity is a function of repricing
characteristics of the Company's assets and liabilities. Each
asset and liability reprices either at maturity or during the
life of the instrument. Interest rate sensitivity is measured as
the difference between the volume of assets and liabilities that
are subject to repricing at a future period of time. These
differences are known as interest sensitivity gaps.
The principal objectives of asset/liability management are
to manage the sensitivity of the net interest margin to potential
movements in interest rates and to enhance profitability through
returns from managed levels of interest rate risk. The Company
actively manages the interest rate sensitivity of its assets and
liabilities. Several techniques are used for measuring interest
rate sensitivity. The traditional maturity "gap" analysis which
reflects the volume difference between interest rate sensitive
assets and liabilities during a given time period, is reviewed
regularly by management. A positive gap occurs when the amount
<PAGE 16> of interest sensitive assets exceeds interest sensitive
liabilities. This position would contribute positively to net
income in a rising interest rate environment. Conversely, if the
balance sheet has more liabilities repricing than assets, the
balance sheet is liability sensitive or negatively gapped.
Management continues to monitor sensitivity in order to avoid
overexposure to changing interest rates.
Limitations of gap analysis in the following gap schedule
include: 1) assets and liabilities which contractually reprice
within the same period may not, in fact, reprice at the same time
or to the same extent; 2) changes in market interest rates do
not affect all assets and liabilities to the same extent or at
the same time; 3) interest rate gaps reflect the Company's
position on a single date (June 30, 1998 in the case of the
following table) while the Company continually adjusts its
interest sensitivity throughout the year; and 4) the actual
performance of assets and liabilities may differ with varying
interest rate scenarios compared to their original contractual
terms (i.e., the repayment of mortgage loans increases as
interest rates fall).
Another way management reviews its interest sensitivity
position is through "simulation." In simulation, the Company
projects future net interest streams in light of the current gap
position. Various interest rate scenarios are used to measure
levels of interest income associated with potential changes in
our operating environment. Management cannot predict the
direction of interest rates or how the mix of assets and
liabilities will change. The use of this information will help
formulate strategies to minimize the unfavorable effect on net
interest income caused by interest rate changes.
<TABLE>
<CAPTION>
Gap Analysis
Six to
Three Three to Twelve One to Five Over Five
Months Six Months Months Years Years Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans $191,143 $ 22,019 $ 37,555 $ 172,777 $ 94,657 $518,151
Securities 21,492 8,508 16,107 27,483 209,374 282,964
Interest-bearing deposits and
federal funds sold 58 -- -- -- -- 58
Total interest earning assets $212,693 $ 30,527 $ 53,662 $ 200,260 $304,031 $801,173
Interest bearing liabilities:
Interest bearing demand deposits $ 0 $ 0 $ 0 $ 26,844 $ 26,844 $ 53,688
Savings deposits 83,585 0 0 0 190,198 273,783
Time deposits 51,036 41,948 57,124 135,198 1,064 286,370
Short-term borrowings 9,006 1,000 0 0 0 10,006
Long-term borrowings 50,000 0 0 0 0 50,000
Total interest bearing
liabilities $ 193,627 $ 42,948 $ 57,124 $ 162,042 $218,106 $673,847
========= ========= ========= ========= ======== ========
Interest sensitivity gap $ 19,066 $ (12,421) $ (3,462) $ 38,218 $ 85,925 $127,326
Cumulative sensitivity gap $ 19,066 $ 6,645 $ 3,183 $ 41,401 $127,326 $127,326
========= ========= ========= ========= ======== ========
<PAGE 17>
</TABLE>
As of June 30, 1998 the gap analysis would indicate that net
income would not be significantly influenced by small
fluctuations in interest rates, either up or down. Conversely,
the rate sensitivity of these liabilities will increase in a
rising rate environment due to market competition until rates
return to pre-1992 levels (approximately 5% for savings and
demand deposits). In addition, $40,000,000 in long-term
borrowings which have a fixed rate, contain a conversion option
that allows the Federal Home Loan Bank (FHLB) to convert these
borrowings to a floating rate instrument on a quarterly basis and
a put option that allows the Banks to prepay the borrowings in
the event that the FHLB exercises its option. For purposes of
the GAP table above, these borrowings were included in the
"3 Month" category because they could reprice quarterly. Changes
in interest rates will determine whether or not the fixed rates
are converted to variable rates and will also impact the interest
rate risk of the Company.
Interest Rate Sensitivity - Cash Flow Analysis
The Interest Rate Sensitivity Table below illustrates the
cash flows expected from earning assets for each of the next five
years. Cash flows from loans are based on contractual payments
and actual cash flows will most likely vary based on the
fluctuation of interest rates. Generally, loans will prepay
faster in a decreasing rate environment. This will result in
lower interest income since there is more cash flows to reinvest
at lower interest rates. Cash flows from bullet securities,
which include U.S. Treasury securities, obligations of states and
political subdivisions, and other securities are based on the
earlier of the contractual maturity or the call date if the
security is likely to be called with little or no change in
interest rates from June 30, 1998. Equity securities are
excluded from this table since the income derived from these
investments is not directly tied to interest rates. Cash flows
from mortgage-backed securities are based on consensus prepayment
speeds under an unchanged rate environment over the next five
years. Similar to loans, prepayments on mortgage-backed
securities tend to increase as interest rates fall and slow as
rates rise.
Also included on the table is the contractual maturities of
all interest bearing liabilities. Interest bearing demand and
savings deposits are included as maturing in 1999. These
customers have no obligation to keep their money with the Company
for any period of time. In order to determine the effect of
market interest rates on these products, the Company uses a
simulation model. While the entire balance of these products is
affected immediately when there is an interest rate change, the
interest rate change is generally not equal to the change in Fed
funds or the prime rate. The Company has noted that competitive
pressures drive this rate more than small changes in market
<PAGE 18> rates. Time deposits are presented by contractual
maturity. Short-term borrowings consist of repurchase agreements
and overnight borrowings from the FHLB. Generally, the funds
mature within 1 business day. Long-term borrowings are presented
by contractual maturity.
<TABLE>
<CAPTION>
Interest rate sensitivity - Cash Flow Analysis
Cash Flows for the Year Ended December 31,
1999 2000 2001 2002 2003 Thereafter Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Rate Sensitive Assets:
Fixed interest rate loans $ 60,560 $40,958 $46,883 $27,388 $23,681 $ 83,879 $283,349
Average interest rate 8.30% 8.58% 8.25% 8.48% 8.33% 7.91% 8.24%
Variable interest rate loans $79,785 $12,966 $11,810 $9,497 $8,881 $111,863 $234,802
Average interest rate 9.21% 8.89% 8.96% 8.83% 8.80% 8.12% 8.57%
Fixed interest rate securities $62,538 $30,742 $36,562 $41,004 $11,582 $39,372 $221,800
Average interest rate 7.19% 6.87% 6.96% 7.29% 7.07% 6.72% 7.04%
Variable interest rate securities $11,620 $7,622 $5,961 $4,532 $3,469 $12,654 $45,858
Average interest rate 6.92% 6.92% 6.92% 6.92% 6.92% 6.92% 6.92%
Other interest bearing assets $6.928 0 0 0 0 0 $6,928
Average interest rate 5.37% 0 0 0 0 0 5.37%
Rate Sensitive Liabilities:
Non-interest bearing demand $84,711 0 0 0 0 0 $84,711
Average interest rate 0 0 0 0 0 0 0
Savings and interest bearing
demand $273,783 0 0 0 0 0 $273,783
Average interest rate 4.05% 0 0 0 0 0 4.05%
Time-deposits $137,958 $81,748 $29,867 $8,280 $23,146 $5,371 $286,370
Average interest rate 5.13% 5.89% 5.92% 6.13% 6.12% 6.11% 5.54%
Fixed interest rate borrowings $10,006 0 0 0 0 0 $10,006
Average interest rate 5.22% 0 0 0 0 0 5.22%
Variable interest rate
borrowings 0 $5,000 0 $35,000 $10,000 0 $50,000
Average interest rate 0 5.87% 0 5.70% 5.60% 0 5.70%
</TABLE>
Note: Cash flow information for loans does not include the
allowance for loans losses.
The fair value of the financial instruments was calculated
at December 31, 1997. There has been no material changes in the
difference between the carrying amount and the fair values since
December 31, 1997.
PAGE 19
<PAGE>
PART II
Item 1. Legal Proceedings - None
Item 2. Change in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
On April 29, 1998, special meetings of shareholders were
held by BCB and Heritage to approve the consolidation into the
Company. Notice of the meetings was mailed to all shareholders
on or about March 20, 1998.
The meetings were held to approve and adopt the Agreement
and Plan of Consolidation, dated as of November 18, 1997, by and
between BCB and Heritage pursuant to which BCB and Heritage
consolidated into the Company.
The consolidation received the requisite number of shares
for approval by both BCB and Heritage shareholders. The number
of cast for, against and withheld were as follows:
BCB shareholders:
For Against Withheld
2,780,516 11,546 13,723
Heritage shareholders:
For Against Withheld
3,600,561 435,749 35,294
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of Main Street Bancorp, Inc.,
incorporated herein by reference to Exhibit 3.1 of the
Registration Statement No. 333-44697 on Form S-4 of the
registrant.
3.2 Bylaws of Main Street Bancorp, Inc., incorporated
herein by reference to Exhibit 3.2 of the Registration
Statement No. 333-44697 on Form S-4 of the registrant.
10.1 Executive Employment Agreement, dated May 1, 1998,
among Main Street Bancorp, Inc., Berks County Bank and
Nelson R. Oswald. <PAGE 20>
10.2 Executive Employment Agreement, dated May 1, 1998,
among Main Street Bancorp, Inc., Heritage National Bank
and Allen E. Kiefer.
10.3 Executive Employment Agreement, dated May 1, 1998,
among Main Street Bancorp, Inc., Heritage National Bank
and Richard A. Ketner.
10.4 Change of control agreement, dated May 1, 1998, among
Main Street Bancorp, Inc., Berks County Bank and
Steven A. Ehrlich.
10.5 Change of control agreement, dated May 1, 1998, among
Main Street Bancorp, Inc., Berks County Bank and
Norman E. Heilenman.
27. Financial Data Schedule.
(b) Reports on Form 8-K
On May 15, 1998, the Company filed a Current Report on
Form 8-K, dated May 15, 1998, to report the completion of the
consolidation of BCB and Heritage. No financial statements were
filed with the Current Report.
On June 11, 1998, the Company filed a Current Report on
Form 8-K, dated June 11, 1998, to report the results of
operations of the Company for the first five months of 1998. No
financial statements were filed with the current report.
On June 25, 1998, the Company filed an Amended Current
Report on Form 8-K/A to file the audited financial statements of
the Company for the years ended December 31, 1997, 1996 and 1995.
On June 26, 1998, the Company filed an Amended Current
Report on Form 8-K/A to file corrected audited financial
statements of the Company for the years ended December 31, 1997,
1996 and 1995.
PAGE 21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
MAIN STREET BANCORP, INC.
(Registrant)
August 13, 1998 By/s/ Nelson R. Oswald
Nelson R. Oswald,
Chairman and CEO
(Principal Executive Officer)
By/s/ Donna L. Rickert
Donna L. Rickert
Senior Vice President
and Controller
(Principal Accounting Officer)
PAGE 22
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1 Articles of Incorporation of Main Street Bancorp, Inc.,
incorporated herein by reference to Exhibit 3.1 of the
Registration Statement No. 333-44697 on Form S-4 of the
registrant.
3.2 Bylaws of Main Street Bancorp, Inc., incorporated herein by
reference to Exhibit 3.2 of the Registration Statement
No. 333-44697 on Form S-4 of the registrant.
10.1 Executive Employment Agreement, dated May 1, 1998, among
Main Street Bancorp, Inc., Berks County Bank and Nelson R.
Oswald.
10.2 Executive Employment Agreement, dated May 1, 1998, among
Main Street Bancorp, Inc., Heritage National Bank and
Allen E. Kiefer.
10.3 Executive Employment Agreement, dated May 1, 1998, among
Main Street Bancorp, Inc., Heritage National Bank and
Richard A. Ketner.
10.4 Change of control agreement, dated May 1, 1998, among Main
Street Bancorp, Inc., Berks County Bank and Steven A.
Ehrlich.
10.5 Change of control agreement, dated May 1, 1998, among Main
Street Bancorp, Inc., Berks County Bank and Norman E.
Heilenman.
27 Financial Data Schedule. <PAGE 23>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 1st day of May,
1998, between MAIN STREET BANCORP, INC., a Pennsylvania business
corporation ("Main"), BERKS COUNTY BANK, a Pennsylvania banking
corporation (the "Bank"), and NELSON R. OSWALD, an individual
(the "Executive").
W I T N E S S E T H:
WHEREAS, BCB Financial Services Corporation ("BCB"), the
Bank and the Executive entered into an agreement dated as of
January 1, 1995 (the "1995 Agreement"), regarding, among other
things, the employment of the Executive by BCB and the Bank; and
WHEREAS, BCB has, as of the date hereof, consolidated with
Heritage Bancorp, Inc. to form Main; and
WHEREAS, Main, the Bank and the Executive desire to enter
into a new Agreement regarding, among other things, the
employment of the Executive by Main and the Bank and,
concurrently therewith, to terminate the 1995 Agreement, all as
hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Employment. Main and the Bank each hereby employ the
Executive, and the Executive hereby accepts employment with Main
and the Bank, on the terms and conditions set forth in this
Agreement.
2. Duties of Employee. The Executive will perform and
discharge well and faithfully such duties as an executive officer
of Main and the Bank as may be assigned to him from time to time
by the respective Boards of Directors of Main and the Bank. The
Executive will be employed as Chairman and Chief Executive
Officer of Main and Chairman, Chief Executive Officer and
President of the Bank, and will hold such other titles as may be
given to him from time to time by the respective Boards of
Directors of Main and of the Bank, and as specified in Section
30. The Executive will devote his full time, attention and
energies to the business of Main and the Bank and will not,
during the Employment Period (as defined in Section 3), be
employed or involved in any other business activity, whether or
not such activity is pursued for gain, profit or other pecuniary
advantage; provided, however, that this section will not be
construed as preventing the Executive from (a) passively
investing his personal assets, (b) acting as a member of the
Board of Directors of Main, the Bank or any other corporation not
in competition with either, or as a member of the Board of
Trustees of any other organization, or (c) being involved in any
community, civic or similar activity.
<PAGE 1>
3. Term of Employment. The Executive's employment under
this Agreement will be for a period (the "Employment Period")
commencing upon the date of this Agreement and ending at the end
of the term of this Agreement pursuant to Section 19, unless the
Executive's employment is sooner terminated in accordance with
Section 5 or one of the following provisions:
(a) Termination for Cause. The Executive's employment
under this Agreement may be terminated at any time during
the Employment Period for "Cause" (as herein defined), by
action of the Boards of Directors of Main or of the Bank,
upon giving notice of such termination to the Executive at
least 15 days prior to the date upon which such termination
is to take effect. As used in this Agreement, "Cause" means
any of the following events:
(i) the Executive is convicted of or enters a
plea of guilty or nolo contendere to a felony, a crime
of falsehood, or a crime involving fraud or moral
turpitude, or the actual incarceration of the Executive
for a period of 45 consecutive days;
(ii) the Executive willfully and repeatedly fails
to follow the lawful instructions of the Board of
Directors of Main or of the Board of Directors of the
Bank after the Executive's receipt of written notice of
such instructions, other than a failure resulting from
the Executive's incapacity because of physical or
mental illness;
(iii) a government regulatory agency recommends
or orders in writing that the Bank terminate the
employment of the Executive with the Bank or relieve
him of his duties as such relate to the Bank; or
(iv) the Executive violates the covenant not to
compete contained in Section 8 or the confidentiality
provisions of Section 9.
Notwithstanding the foregoing, the recommendation or order
of a government regulatory agency referred to in Section
3(a)(iii) will not constitute "Cause" giving Main the right
to terminate this Agreement as it relates to Main unless:
(i) such recommendation or order results from an
assessment against the Executive of a final
unappealable civil monetary penalty ("tier 3") under
Section 8(i)(2)(C) of the Federal Deposit Insurance
Act;
(ii) such penalty is based on a knowing or
reckless (A) violation of law or regulation, (B) unsafe
or unsound practice, or (C) breach of fiduciary duty;
<PAGE 2>
(iii) in the case of each of (A), (B) and (C)
above, is either intentionally concealed by the
Executive from the Board (and is not actually known by
the Board), or committed by the Executive after
repeated warnings by the Board or the governmental
regulatory agency; and
(iv) in the case of each of (A), (B) and (C)
above, results in a substantial loss to Bank.
In addition, the Executive's employment under this Agreement
will not be deemed to have been terminated for "Cause" under
Sections 3(a)(i) or (ii) if such termination took place
solely as a result of:
(i) questionable judgment on the part of the
Executive;
(ii) any act or omission believed by the
Executive, in good faith, to have been in, or not
opposed to, the best interests of Main or of the Bank;
or
(iii) any act or omission in respect of which a
determination could properly be made that the Executive
met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses
under the Articles of Incorporation or By-laws of Main
or the Bank or the directors' and officers' liability
insurance of Main or the Bank, in each case as in
effect at the time of such act or omission.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the effective
date of such termination.
(b) Termination Without Cause. The Executive's
employment under this Agreement may be terminated at any
time during the Employment Period without "Cause" (as
defined in Section 3(a)), by action of the Boards of
Directors of Main and of the Bank, upon giving notice of
such termination to the Executive at least 30 days prior to
the date upon which such termination is to take effect. If
the Executive's employment is terminated under the
provisions of this subsection, then the Executive will be
entitled to receive the compensation set forth in Section 6.
(c) Voluntary Termination, Retirement or Death. If
the Executive voluntarily terminates employment without Good
Reason (as defined in Section 5), retires or dies, the
Executive's employment under this Agreement will be deemed
terminated as of the date of the Executive's voluntary
termination, retirement or death, and all rights of the
Executive under Section 4 will cease as of the date of such
<PAGE 3> termination and any benefits payable to the
Executive will be determined in accordance with the
retirement and insurance programs of Main and of the Bank
then in effect.
(d) Disability. If the Executive is incapacitated by
accident, sickness, or otherwise so as to render the
Executive mentally or physically incapable of performing the
essential duties required of the Executive under Section 2,
notwithstanding reasonable accommodation, for a continuous
period of six months, then, upon the expiration of such
period or at any time thereafter, by action of the Boards of
Directors of Main and of the Bank, the Executive's
employment under this Agreement may be terminated
immediately upon giving the Executive notice to that effect.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the last business
day of the week in which such termination occurs, and the
Executive will thereafter be entitled to the benefits to
which he is entitled under any disability plan of Main or
the Bank in which he is then a participant (including the
minimum benefit described in Section 4(d)(iv)).
4. Employment Period Compensation and Related Matters.
(a) Salary. For services performed by the Executive
under this Agreement, Main and the Bank will pay the
Executive a salary, in the aggregate, during the Employment
Period, at the annualized rate of $269,000, payable at the
same times as salaries are payable to other executive
employees of Main or of the Bank. Main and/or the Bank may,
from time to time, increase (but not decrease) the
Executive's salary, and any and all such increases will be
deemed to constitute amendments to this subsection to
reflect the increased amounts, effective as of the dates
established for such increases by the Board of Directors of
Main or of the Bank in the resolutions authorizing such
increases.
(b) Bonus. For services performed by the Executive
under this Agreement, Main will pay the Executive a bonus,
annually during the Employment Period, in such amounts (if
any) and at such times as is provided in such incentive plan
for executive officers as may be approved by the Board of
Directors of Main and in effect from time to time. In
addition, Main may, from time to time, pay such other bonus
or bonuses to the Executive as Main, in its sole discretion,
deems appropriate. The payment of any such bonuses will not
reduce or otherwise affect any other obligation of Main
and/or the Bank to the Executive provided for in this
Agreement.
(c) Pension and Welfare Benefits. Main will provide
the Executive, during the Employment Period, with pension
<PAGE 4> and welfare benefits (within the meaning of Section
3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) in the aggregate not less favorable than
those received by other employees of Main.
(d) Fringe Benefits.
(i) In General. Except as otherwise provided in
this subsection, Main will provide the Executive,
during the Employment Period, with such fringe benefits
as may be provided generally from time to time for its
executive officers.
(ii) Supplemental Pension. The Executive will be
entitled to continued maintenance of the supplemental
pension benefit program in effect for him through BCB
immediately prior to the date of this Agreement, with
such nonsubstantive amendments thereto as may be
required to give effect to the above-reference
consolidation.
(iii) Life Insurance. In addition to the life
insurance coverage to which the Executive may be
entitled from time to time under Main's life insurance
plan, Main will provide him with supplemental life
insurance of not less than $300,000, if he initially
qualifies therefor on a standard underwriting basis.
The Executive will be the owner of the policy providing
such life insurance coverage.
(iv) Disability Insurance. In addition to the
disability coverage to which the Executive may be
entitled from time to time under Main's disability
insurance plan, Main will provide him with such
additional monthly disability insurance coverage (if
any) as may be necessary to ensure a minimum level of
coverage of the greater of (A) 50% of his monthly base
salary or (B) $6,000 per month, if he qualifies
therefor on a standard underwriting basis.
(v) Vacation. The Executive will be entitled to
not less than five weeks of vacation per calendar year,
plus one additional day for each five years of service
with Main and any predecessor of Main. The right to
carry over unused vacation days will be subject to the
executive personnel policies of Main from time to time
in effect.
(vi) Automobile. Main will provide the Executive
with the use of a purchased or leased automobile. The
make and model of such automobile will be reasonably
consistent with the Executive's position with Main.
Expenses of the use of such automobile will be borne as
provided from time to time in policies approved by
Main's Board of Directors. <PAGE 5>
(vii) Stock Awards. Main will annually award to
the Executive, no later than February 15, 2,000 shares
of its common stock. In addition, Main will award the
Executive 1,000 shares of its common stock on July 1,
1998. The number of shares to be awarded annually will
be subject to such equitable adjustment as may be
determined by Main's Board of Directors, in its
discretion, in order to take into account the effect of
stock dividends, stock splits, reorganizations and
similar transactions or events.
(viii) Stock Options. The Executive will be
entitled to such stock option grants as may be granted
from time to time by the Board of Directors of Main
and/or the Compensation Committee of such Board and as
are consistent with the Executive's responsibilities
and performance.
(e) Expense Reimbursement. The Executive will be
entitled to reimbursement of all expenses incurred by him in
the discharge of his duties hereunder, or otherwise in
furtherance of the business of Main and the Bank, provided
he renders an accounting of such expenses in such manner as
may be required from time to time for employees generally.
(f) Salary Deferral. The Executive may request that
the payment of any portion of his base salary and/or bonus
for any calendar year be deferred. Such request must be
made in writing to Main and the Bank before the beginning of
such calendar year and must include the period of deferral
requested by the Executive (the "Deferral Period"). If the
Boards of Directors of Main and of the Bank approve such
request, the Executive will be entitled to receive, at the
end of the Deferral Period, the deferred portion of his base
salary and/or bonus plus interest at a compounded rate of 6%
per annum. Any salary and/or bonus which is deferred as
described herein will be credited to an account on the books
of Main and of the Bank established in the name of the
Executive. However, this account will not be funded, and
neither Main nor the Bank will be deemed to be a trustee for
the Executive with respect to any deferred amount. The
liabilities of Main and the Bank to the Executive hereunder
are those of a debtor pursuant to such contractual
obligations as are created by this Agreement. No
liabilities of Main and the Bank which arise under this
subsection will be deemed to be secured by any pledge or
other encumbrance on any property of Main or of the Bank.
Main and the Bank will not be required to segregate any
funds representing such deferred amounts, and nothing herein
will be construed as providing for such segregation.
5. Resignation of the Executive for Good Reason.
(a) Events Giving Right to Terminate for Good Reason.
The Executive may resign for Good Reason (as herein defined)
<PAGE 6> at any time during the Employment Period, as
hereinafter set forth. As used in this Agreement, the term
"Good Reason" means any of the following:
(i) any reduction in title or a material adverse
change in the Executive's responsibilities or authority
which are inconsistent with, or the assignment to the
Executive of duties inconsistent with, the Executive's
status as Chairman and Chief Executive Officer of Main
and Chairman, Chief Executive Officer and President of
the Bank;
(ii) any reassignment of the Executive to a
principal office which is more than 50 miles from 601
Penn Street, Reading, Pennsylvania;
(iii) any removal of the Executive from office
except for any termination of the Executive's
employment under the provisions of Section 3(a) or (d);
(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;
(v) any failure by Main and/or the Bank to
provide the Executive with benefits at least as
favorable as those enjoyed by the Executive under any
of the pension or welfare plans (as such terms are
defined in ERISA Section 3) of Main in which the
Executive is participating on the date of this
Agreement, or the taking of any action that would
materially reduce any of such benefits, unless the
change is part of a change applicable in each case to
employees generally; and
(vi) any material breach of this Agreement by
Main or the Bank, coupled with the failure to cure the
same within 30 days after receipt of a written notice
of such breach from the Executive.
(b) Notice of Termination. At the option of the
Executive, exercisable by the Executive within 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 Main and the Bank and the provisions of Section 6 will
thereupon apply.
(c) Special Right of Termination. Notwithstanding
anything herein to the contrary, but subject to the
provisions of Section 3(a), within the later of (i) the
one-year period following the occurrence of a Change in
Control (as defined below), or (ii) the period ending
January 3, 2000, if a Change in Control occurs before such
date, the Executive may terminate his employment for any or
<PAGE 7> no reason by delivering a written notice, similar
to a Notice of Termination, to Main; and such termination
will be deemed for all purposes to constitute a resignation
for Good Reason. In such event, he will be entitled to the
payments and benefits described in Section 6.
(d) Change in Control Defined. For purposes of this
Agreement, the term "Change in Control" means any of the
following:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), other than
Main, a subsidiary of Main, an employee benefit plan of
Main or a subsidiary of Main (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of Main
representing more than 20% of the combined voting power
of Main's then outstanding securities;
(ii) the occurrence of, or execution of an
agreement providing for, a sale of all or substantially
all of the assets of Main or the Bank to an entity
which is not a direct or indirect subsidiary of Main;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger,
consolidation or similar transaction involving Main,
unless (A) the shareholders of Main immediately prior
to the consummation of any such transaction will
initially own securities representing a majority of the
voting power of the surviving or resulting corporation,
and (B) the directors of Main immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the surviving
or resulting corporation; and
(iv) any other event which is at any time
irrevocably designated as a "Change in Control" for
purposes of this Agreement by resolution adopted by a
majority of the then non-employee directors of Main.
6. Rights in Event of Certain Termination of Employment.
In the event that the Executive resigns from employment for Good
Reason, by delivery of a Notice of Termination or other permitted
notice to Main and the Bank, or the Executive's employment is
terminated by Main and/or the Bank without Cause, Executive will
be entitled to receive the amounts and benefits set forth in this
section.
(a) Basic Payments. The Executive will be paid an
amount equal to three times the sum of (i) the highest
annualized base salary paid to him during the year of
termination or the immediately preceding two calendar years,
<PAGE 8> and (ii) the highest bonus paid to him with respect
to one of the three calendar years immediately preceding the
year of termination. Such amount will be paid to the
Executive in 36 equal monthly installments (without
interest), beginning 30 days following the date of
termination of employment. Notwithstanding the preceding
provisions of this subsection to the contrary, in the event
this section becomes applicable following a Change in
Control, the Executive will, within 30 days after his
termination of employment, be paid a lump sum equal to the
present value of the amounts otherwise payable under this
subsection. For purposes of the preceding sentence, present
value will be determined by using the short-term applicable
federal rate under Section 1274 of the Internal Revenue Code
of 1986, as amended (the "Code"), in effect on the date of
termination of employment. For purposes of this subsection,
to the extent necessary, base salary and bonuses with any
predecessor of Main or an affiliate thereof shall be taken
into account.
(b) Supplemental Payment in Lieu of Certain Benefits.
In lieu of continued pension, welfare and other benefits, a
lump sum cash payment of $103,916 will be paid to the
Executive within 30 days following the date of termination
of employment.
(c) Excise Tax Matters in General. In the event that
the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable
to the Executive by Main and/or the Bank, are such that he
becomes subject to the excise tax provisions of Code Section
4999, Main and the Bank will pay him such additional amount
or amounts as will result in his retention (after the
payment of all federal, state and local excise, employment,
and income taxes on such payments and the value of such
benefits) of a net amount equal to the net amount he would
have retained had the initially calculated payments and
benefits been subject only to income and employment
taxation. For purposes of the preceding sentence, the
Executive will be deemed to be subject to the highest
marginal federal, state and local tax rates. All
calculations required to be made under this subsection will
be made by Main's independent certified public accountants,
subject to the right of Executive's representative to review
the same. All such amounts required to be paid will be paid
at the time any withholding may be required under applicable
law, and any additional amounts to which the Executive may
be entitled will be paid or reimbursed no later than 15 days
following confirmation of such amount by Main's accountants.
In the event any amounts paid hereunder are subsequently
determined to be in error because estimates were required or
otherwise, the parties agree to reimburse each other to
correct such error, as appropriate, and to pay interest
thereon at the applicable federal rate (as determined under
Code Section 1274A for the period of time such erroneous
<PAGE 9> amount remained outstanding and unreimbursed). The
parties recognize that the actual implementation of the
provisions of this subsection are complex and agree to deal
with each other in good faith to resolve any questions or
disagreements arising hereunder.
(d) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provisions of
Subsection (c), if (i) it is determined that the payments to
be provided to the Executive hereunder would subject him to
the excise tax provisions of Code Section 4999, but (ii) a
5% reduction in the present value (as determined pursuant to
the provisions of Code Section 280G) of such payments would
result in no such excise tax being owed, then such payments
will be reduced or eliminated by the smallest amount
necessary to avoid the imposition of such excise tax. The
Executive will be entitled, within a reasonable period of
time, to specify which payments will be reduced or
eliminated.
7. Expiration of Agreement. In the event this Agreement
expires by its terms in accordance with the provisions of Section
19(a) and the Executive's employment thereafter voluntarily or
involuntarily terminates prior to the attainment of age 65 and
other than for Cause, Main will pay or cause to be paid to him,
in one lump sum within 30 days following termination, an amount
equal to 1.5 times the sum of the amounts described in Clauses
(i) and (ii) of Section 6(a).
8. Covenant Not to Compete.
(a) The Executive hereby acknowledges and recognizes
the highly competitive nature of the business of Main and of
the Bank and accordingly agrees that, during and for the
applicable period set forth in Subsection (c), the Executive
will not:
(i) be engaged, directly or indirectly, either
for his own account or as agent, consultant, employee,
partner, officer, director, proprietor, investor
(except as an investor owning less than 5% of the stock
of a publicly owned company) or otherwise of, any
person, firm, corporation, or enterprise engaged, in
(A) the banking, thrift or credit union industry, or
(B) any other activity in which Main or any of its
subsidiaries is engaged during the Employment Period,
in either case (A) or (B) in any county in which, at
any time during the Employment Period or at the date of
termination of the Executive's employment, a branch,
office or other facility of Main or any of its
subsidiaries is located, or in any county contiguous to
such a county, including contiguous counties located
outside of the Commonwealth of Pennsylvania (the
"Non-Competition Area"); and
<PAGE 10>
(ii) provide financial or other assistance to any
person, firm, corporation, or enterprise engaged in (A)
the banking or financial services industry, or (B) any
other activity in which Main or any of its subsidiaries
is engaged during the Employment Period, in the
Non-Competition Area.
(b) It is expressly understood and agreed that,
although the Executive, Main and the Bank consider the
restrictions contained in Subsection (a) reasonable for the
purpose of preserving for Main and its subsidiaries their
goodwill and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that
the time or territory or any other restriction contained in
Subsection (a) is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of
Subsection (a) will not be rendered void but will be deemed
amended to apply as to such maximum time and territory and
to such other extent as such court may judicially determine
or indicate to be reasonable.
(c) The provisions of this section will be applicable
commencing on the date of this Agreement and ending as
follows:
(i) at the termination of the payments and
benefits provided under Section 6; provided, however,
that this clause will not apply in the event
Executive's termination of employment occurs following
a Change in Control;
(ii) one year following the termination of
Executive's employment, in the case of a voluntary
termination without Good Reason; or
(iii) in all other cases, the date of Executive's
termination of employment.
9. Confidentiality.
(a) As used in this section, the term "Confidential
Information" means any and all information regarding the
organization, business or finances of Main or any of its
subsidiaries and affiliates, including, but not limited to,
any and all business plans and strategies, financial
information, proposals, reports, marketing plans and
information, cost information, customer information, claims
history and experience data, sales volume and other sales
statistics, personnel data, pricing information, concepts
and ideas, information respecting existing and proposed
investments and acquisitions, and information regarding
customers and suppliers, but the term "Confidential
Information" will not include information created by the
Executive or which prior to the Executive's receipt thereof
(i) was generally publicly available, or (ii) was in the
<PAGE 11> Executive's possession free of any restrictions on
its use or disclosure and from a source other than Main or
any of its subsidiaries or affiliates.
(b) The Executive acknowledges and agrees that his
employment by Main and the Bank will afford him an
opportunity to acquire Confidential Information and that the
misappropriation or disclosure of any Confidential
Information would cause irreparable harm to Main and its
subsidiaries and affiliates.
(c) During the Employment Period and for a period of
two years thereafter, the Executive will not use for the
benefit of anyone other than Main and its subsidiaries and
affiliates or disclose any of the Confidential Information
for any reason or purpose whatsoever except to authorized
representatives of such business entities or as directed or
authorized by Main.
(d) With respect to those items of Confidential
Information which constitute trade secrets under applicable
law, the Executive's obligations of confidentiality and
nondisclosure as set forth in this section will continue and
survive after the two-year period as provided in Subsection
(c) to the greatest extent permitted by applicable law.
(e) The Executive will not remove any records,
documents or any other tangible items (excluding the
Executive's personal property) from the premises of Main or
its subsidiaries or affiliates, in either original or
duplicate form, except as needed in the ordinary course of
performing services hereunder.
(f) Upon termination of this Agreement, the Executive
will immediately surrender to the owner thereof all
documents (other than documents created by him) in his
possession, custody or control embodying the Confidential
Information or any part thereof and will not thereafter
remove the same from the premises on which it is located.
10. Remedies. Executive acknowledges and agrees that the
remedy at law of Main and of the Bank for a breach or threatened
breach of any of the provisions of Section 8 or 9 would be
inadequate and, in recognition of this fact, in the event of a
breach or threatened breach by the Executive of any of the
provisions of Section 8 or 9, it is agreed that, in addition to
the remedy at law, Main and the Bank will be entitled to, without
posting any bond, and the Executive agrees not to oppose any
request of Main and the Bank for, equitable relief in the form of
specific performance, a temporary restraining order, a temporary
or permanent injunction, or any other equitable remedy which may
then be available. Nothing herein contained will be construed as
prohibiting Main and the Bank from pursuing any other remedies
available to them for such breach or threatened breach.
<PAGE 12>
11. Arbitration. Main, the Bank and Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time. Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association
("Association") in Philadelphia, Pennsylvania, in accordance with
the Individual Employment Dispute Resolution rules of the
Association. Main and the Bank, or Executive, may initiate an
arbitration proceeding at any time by giving notice to the others
in accordance with the rules of the Association. The Association
will designate a single arbitrator to conduct the proceeding, but
Main and the Bank, and the Executive, may, as a matter of right,
require the substitution of a different arbitrator chosen by the
Association. Each such right of substitution may be exercised
only once. The arbitrator will not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of
Pennsylvania but will be bound by the substantive law applicable
to this Agreement. The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of fact, will be
final and binding upon the parties and will be enforceable in
courts of proper jurisdiction. Following written notice of a
request for arbitration, Main and the Bank, and the Executive,
will be entitled to an injunction restraining all further
proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein.
12. Legal Expenses. Main and/or the Bank will pay to the
Executive all reasonable legal fees and expenses when incurred by
the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement, provided he brings the action
in good faith.
13. Indemnification. Main and the Bank will indemnify the
Executive, to the fullest extent permitted under Pennsylvania and
federal law, with respect to any threatened, pending or completed
legal or regulatory action, suit or proceeding brought against
him by reason of the fact that he is or was a director, officer,
employee or agent of Main or the Bank, or is or was serving at
the request of Main or the Bank as a director, officer, employee
or agent of another person or entity. To the fullest extent
permitted by Pennsylvania and federal law, Main and the Bank
will, in advance of final disposition, pay any and all expenses
incurred by the Executive in connection with any threatened,
pending or completed legal or regulatory action, suit or
proceeding with respect to which he may be entitled to
indemnification hereunder. Main and the Bank will use their best
efforts to obtain insurance coverage for the Executive under a
policy covering directors and officers thereof against
litigation, arbitrations and other legal and regulatory
proceedings; provided, however, that nothing herein is to be
construed as requiring such action if the Boards of Directors of
<PAGE 13> Main and the Bank determine that such insurance
coverage cannot be obtained at commercially reasonable rates.
14. Notices. Any notice required or permitted to be given
under this Agreement will, to be effective hereunder, be given to
both Main and the Bank, in the case of notices given by the
Executive, and will, to be effective hereunder, be given by both
Main and the Bank, in the case of notices given to the Executive.
Any such notice will be deemed properly given if in writing and
if mailed by registered or certified mail, postage prepaid with
return receipt requested, to the residence of the Executive, in
the case of notices to the Executive, and to the respective
principal offices of Main and of the Bank, in the case of notices
to Main and the Bank.
15. Waiver. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive,
an executive officer of Main, and an executive officer of the
Bank, each such officer specifically designated by the Boards of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time.
16. Assignment. This Agreement is not assignable by any
party hereto, except by Main and the Bank to any successor in
interest to the respective businesses of Main and the Bank.
17. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter of this
Agreement and, in accordance with the provisions of Section 27,
supersedes any prior agreement of the parties.
18. Successors; Binding Agreement.
(a) Main and the Bank will require any successor
(whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of
the business and/or assets of Main and/or the Bank to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that Main and the Bank
would be required to perform it if no such succession had
taken place. Failure by Main and the Bank to obtain such
assumption and agreement prior to the effectiveness of any
such succession will constitute a material breach of this
Agreement. As used in this Agreement, "Main" and the "Bank"
means Main and the Bank as hereinbefore defined and any
successor to the business and/or assets of Main and/or the
Bank as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE 14>
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs,
distributees, devisees, and legatees. If the Executive
should die while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
19. Termination.
(a) Unless the Executive's employment is terminated
pursuant to the provisions of Section 3 or Section 5, the
term of this Agreement will be for a period commencing on
the date of this Agreement and ending on December 31, 2001;
provided, however, that this Agreement will be automatically
renewed on January 1, 2000 for the three-year period
commencing on such date and ending on December 31, 2002,
unless either party gives written notice of nonrenewal to
the other party on or before November 1, 1999 (in which case
this Agreement will continue in effect through December 31,
2001); and provided further, that if this Agreement is
renewed on January 1, 2000, it will be automatically renewed
on January 1 of each subsequent year (the "Annual Renewal
Date") for a period ending three years from each Annual
Renewal Date unless either party gives written notice of
nonrenewal to the other party at least 60 days prior to an
Annual Renewal Date (in which case this Agreement will
continue in effect for a term ending two years from the
Annual Renewal Date immediately following such notice). For
purposes of the preceding sentence Main and the Bank will be
considered one party.
(b) Any termination of the Executive's employment
under this Agreement or of this Agreement will not affect
the benefit, noncompetition and confidential information
provisions of Section 6, 7, 8, 9 or 12, which will, if
relevant, survive any such termination and remain in full
force and effect in accordance with their respective terms.
(c) Except as provided in Section 27, nothing herein
will be construed as limiting, restricting or eliminating
any rights the Executive may have under any plan, contract
or arrangement to which he is a party or in which he is a
vested participant; provided, however, that any termination
payments required hereunder will be in lieu of any severance
benefits to which he may be entitled under a severance plan
or arrangement of Main and the Bank; and provided further,
that if the benefits under any such plan or arrangement may
not legally be eliminated, then the payments hereunder will
be correspondingly reduced in such equitable manner as the
Board of Directors of Main may determine.
<PAGE 15>
20. No Mitigation or Offset. The Executive will not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; nor will any
amounts or benefits payable or provided hereunder be reduced in
the event he does secure employment, except as otherwise provided
herein.
21. Validity. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, which
will remain in full force and effect. In addition, if a
government regulatory agency recommends or orders that the Bank
terminate the employment of the Executive with the Bank or
relieve him of his duties as such relate to the Bank, the
Agreement or such provision will nevertheless be and remain an
obligation of Main enforceable against it in accordance with its
terms, notwithstanding any such termination of the Executive's
employment with the Bank.
22. Applicable Law. Except to the extent preempted by
federal law, this Agreement will be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
23. Number. Words used herein in the singular will be
construed as being used in the plural, as the context requires,
and vice versa.
24. Headings. The headings of the sections and subsections
of this Agreement are for convenience only and will not control
or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
25. References to Entities. All references to Main will be
deemed to include references to the Bank, as appropriate in the
relevant context, and vice versa.
26. Guaranty. Main hereby irrevocably and unconditionally
guarantees to the Executive the full and timely performance by
the Bank of each and every obligation of the Bank contained in
this Agreement.
27. Effective Date; Termination of Prior Agreement. This
Agreement will become effective immediately upon the execution
and delivery of this Agreement by the parties hereto. Upon the
execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof, including without
limitation the 1995 Agreement, will be deemed automatically
terminated and be of no further force or effect.
28. Withholding For Taxes. All amounts and benefits paid
or provided hereunder will be subject to withholding for taxes as
required by law.
<PAGE 16>
29. Individual Agreement. This Agreement is an agreement
solely between and among the parties hereto. It is intended to
constitute a nonqualified unfunded arrangement for the benefit of
a key management employee and will be construed and interpreted
in a manner consistent with such intention.
30. Other Position. Upon execution of this Agreement, Main
will use its best efforts to cause the Board of Directors of
Heritage National Bank to elect Executive to the position of Vice
Chairman of such bank.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MAIN STREET BANCORP, INC.
By /s/ Allen E. Kiefer
BERKS COUNTY BANK
By /s/ Allen E. Kiefer
/s/ Nelson R. Oswald
<PAGE 17>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 1st day of May,
1998, between MAIN STREET BANCORP, INC., a Pennsylvania business
corporation ("Main"), HERITAGE NATIONAL BANK, a national banking
corporation (the "Bank"), and ALLEN E. KIEFER, an individual (the
"Executive").
W I T N E S S E T H:
WHEREAS, Heritage Bancorp, Inc. ("Heritage") and the
Executive are parties to (i) an employment agreement dated as of
September 13, 1994 (between the Executive and Miners National
Bancorp, Inc.), as amended as of September 15, 1997 (the "1994
Agreement"), and (ii) a change in control agreement dated as of
September 15, 1997, which agreement superseded a prior agreement
executed as of September 13, 1994 (the "Change in Control
Agreement"); and
WHEREAS, Heritage has, as of the date hereof, consolidated
with BCB Financial Services Corporation to form Main; and
WHEREAS, Main, the Bank and the Executive desire to enter
into a new Agreement regarding, among other things, the
employment of the Executive by Main and the Bank and,
concurrently therewith, to terminate the 1994 Agreement and the
Change in Control Agreement, all as hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Employment. Main and the Bank each hereby employ the
Executive, and the Executive hereby accepts employment with Main
and the Bank, on the terms and conditions set forth in this
Agreement.
2. Duties of Employee. The Executive will perform and
discharge well and faithfully such duties as an executive officer
of Main and the Bank as may be assigned to him from time to time
by the respective Boards of Directors of Main and the Bank. The
Executive will be employed as President and Chief Operating
Officer of Main and Chief Executive Officer and President of the
Bank, and will hold such other titles as may be given to him from
time to time by the respective Boards of Directors of Main and of
the Bank, and as specified in Section 30. The Executive will
devote his full time, attention and energies to the business of
Main and the Bank and will not, during the Employment Period (as
defined in Section 3), be employed or involved in any other
business activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; provided, however,
that this section will not be construed as preventing the
Executive from (a) passively investing his personal assets, (b)
acting as a member of the Board of Directors of Main, the Bank or
any other corporation not in competition with either, or as a
<PAGE 1> member of the Board of Trustees of any other
organization, or (c) being involved in any community, civic or
similar activity.
3. Term of Employment. The Executive's employment under
this Agreement will be for a period (the "Employment Period")
commencing upon the date of this Agreement and ending at the end
of the term of this Agreement pursuant to Section 19, unless the
Executive's employment is sooner terminated in accordance with
Section 5 or one of the following provisions:
(a) Termination for Cause. The Executive's employment
under this Agreement may be terminated at any time during
the Employment Period for "Cause" (as herein defined), by
action of the Boards of Directors of Main or of the Bank,
upon giving notice of such termination to the Executive at
least 15 days prior to the date upon which such termination
is to take effect. As used in this Agreement, "Cause" means
any of the following events:
(i) the Executive is convicted of or enters a
plea of guilty or nolo contendere to a felony, a crime
of falsehood, or a crime involving fraud or moral
turpitude, or the actual incarceration of the Executive
for a period of 45 consecutive days;
(ii) the Executive willfully and repeatedly fails
to follow the lawful instructions of the Board of
Directors of Main or of the Board of Directors of the
Bank after the Executive's receipt of written notice of
such instructions, other than a failure resulting from
the Executive's incapacity because of physical or
mental illness;
(iii) a government regulatory agency recommends
or orders in writing that the Bank terminate the
employment of the Executive with the Bank or relieve
him of his duties as such relate to the Bank; or
(iv) the Executive violates the covenant not to
compete contained in Section 8 or the confidentiality
provisions of Section 9.
Notwithstanding the foregoing, the recommendation or order
of a government regulatory agency referred to in Section
3(a)(iii) will not constitute "Cause" giving Main the right
to terminate this Agreement as it relates to Main unless:
(i) such recommendation or order results from an
assessment against the Executive of a final
unappealable civil monetary penalty ("tier 3") under
Section 8(i)(2)(C) of the Federal Deposit Insurance
Act;
<PAGE 2>
(ii) such penalty is based on a knowing or
reckless (A) violation of law or regulation, (B) unsafe
or unsound practice, or (C) breach of fiduciary duty;
(iii) in the case of each of (A), (B) and (C)
above, is either intentionally concealed by the
Executive from the Board (and is not actually known by
the Board), or committed by the Executive after
repeated warnings by the Board or the governmental
regulatory agency; and
(iv) in the case of each of (A), (B) and (C)
above, results in a substantial loss to Bank.
In addition, the Executive's employment under this Agreement
will not be deemed to have been terminated for "Cause" under
Sections 3(a)(i) or (ii) if such termination took place
solely as a result of:
(i) questionable judgment on the part of the
Executive;
(ii) any act or omission believed by the
Executive, in good faith, to have been in, or not
opposed to, the best interests of Main or of the Bank;
or
(iii) any act or omission in respect of which a
determination could properly be made that the Executive
met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses
under the Articles of Incorporation or By-laws of Main
or the Articles of Association or By-laws of the Bank
or the directors' and officers' liability insurance of
Main or the Bank, in each case as in effect at the time
of such act or omission.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the effective
date of such termination.
(b) Termination Without Cause. The Executive's
employment under this Agreement may be terminated at any
time during the Employment Period without "Cause" (as
defined in Section 3(a)), by action of the Boards of
Directors of Main and of the Bank, upon giving notice of
such termination to the Executive at least 30 days prior to
the date upon which such termination is to take effect. If
the Executive's employment is terminated under the
provisions of this subsection, then the Executive will be
entitled to receive the compensation set forth in Section 6.
(c) Voluntary Termination, Retirement or Death. If
the Executive voluntarily terminates employment without Good
<PAGE 3> Reason (as defined in Section 5), retires or dies,
the Executive's employment under this Agreement will be
deemed terminated as of the date of the Executive's
voluntary termination, retirement or death, and all rights
of the Executive under Section 4 will cease as of the date
of such termination and any benefits payable to the
Executive will be determined in accordance with the
retirement and insurance programs of Main and of the Bank
then in effect.
(d) Disability. If the Executive is incapacitated by
accident, sickness, or otherwise so as to render the
Executive mentally or physically incapable of performing the
essential duties required of the Executive under Section 2,
notwithstanding reasonable accommodation, for a continuous
period of six months, then, upon the expiration of such
period or at any time thereafter, by action of the Boards of
Directors of Main and of the Bank, the Executive's
employment under this Agreement may be terminated
immediately upon giving the Executive notice to that effect.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the last business
day of the week in which such termination occurs, and the
Executive will thereafter be entitled to the benefits to
which he is entitled under any disability plan of Main or
the Bank in which he is then a participant (including the
minimum benefit described in Section 4(d)(iv)).
4. Employment Period Compensation and Related Matters.
(a) Salary. For services performed by the Executive
under this Agreement, Main and the Bank will pay the
Executive a salary, in the aggregate, during the Employment
Period, at the annualized rate of $215,200, payable at the
same times as salaries are payable to other executive
employees of Main or of the Bank. Main and/or the Bank may,
from time to time, increase (but not decrease) the
Executive's salary, and any and all such increases will be
deemed to constitute amendments to this subsection to
reflect the increased amounts, effective as of the dates
established for such increases by the Board of Directors of
Main or of the Bank in the resolutions authorizing such
increases.
(b) Bonus. For services performed by the Executive
under this Agreement, Main will pay the Executive a bonus,
annually during the Employment Period, in such amounts (if
any) and at such times as is provided in such incentive plan
for executive officers as may be approved by the Board of
Directors of Main and in effect from time to time. In
addition, Main may, from time to time, pay such other bonus
or bonuses to the Executive as Main, in its sole discretion,
deems appropriate. The payment of any such bonuses will not
reduce or otherwise affect any other obligation of Main
<PAGE 4> and/or the Bank to the Executive provided for in
this Agreement.
(c) Pension and Welfare Benefits. Main will provide
the Executive, during the Employment Period, with pension
and welfare benefits (within the meaning of Section 3 of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in the aggregate not less favorable than those
received by other employees of Main.
(d) Fringe Benefits.
(i) In General. Except as otherwise provided in
this subsection, Main will provide the Executive,
during the Employment Period, with such fringe benefits
as may be provided generally from time to time for its
executive officers.
(ii) Supplemental Pension. The Executive will be
entitled to continued maintenance of the supplemental
pension benefit program in effect for him through
Heritage immediately prior to the date of this
Agreement, with such nonsubstantive amendments thereto
as may be required to give effect to the above-
referenced consolidation.
(iii) Life Insurance. In addition to the life
insurance coverage to which the Executive may be
entitled from time to time under Main's life insurance
plan, Main will provide him with supplemental life
insurance of not less than the greater of (A) 50% of
his annualized base salary or (B) $100,000, if he
initially qualifies therefor on a standard underwriting
basis. The Executive will be the owner of the policy
providing such life insurance coverage. Any required
increase in coverage by reason of an increase in base
salary shall be effected no later than 30 days after
such salary increase.
(iv) Disability Insurance. In addition to the
disability coverage to which the Executive may be
entitled from time to time under Main's disability
insurance plan, Main will provide him with such
additional monthly disability insurance coverage (if
any) as may be necessary to ensure a minimum level of
coverage of 50% of his monthly base salary, if he
qualifies therefor on a standard underwriting basis.
(v) Vacation. The Executive will be entitled to
not less than five weeks of vacation per calendar year,
plus one additional day for each five years of service
with Main and any predecessor of Main. The right to
carry over unused vacation days will be subject to the
executive personnel policies of Main from time to time
in effect. <PAGE 5>
(vi) Automobile. Main will provide the Executive
with the use of a purchased or leased automobile. The
make and model of such automobile will be reasonably
consistent with the Executive's position with Main.
Expenses of the use of such automobile will be borne as
provided from time to time in policies approved by
Main's Board of Directors.
(vii) Club Memberships. Main will pay
Executive's annual membership fees and periodic
assessments at the Schuylkill Country Club and the
Pottsville Club.
(viii) Stock Awards. Main will annually award to
the Executive, no later than February 15, 1,600 shares
of its common stock. The number of shares to be
awarded annually will be subject to such equitable
adjustment as may be determined by Main's Board of
Directors, in its discretion, in order to take into
account the effect of stock dividends, stock splits,
reorganizations and similar transactions or events.
(ix) Stock Options. The Executive will be
entitled to such stock option grants as may be granted
from time to time by the Board of Directors of Main
and/or the Compensation Committee of such Board and as
are consistent with the Executive's responsibilities
and performance.
(e) Expense Reimbursement. The Executive will be
entitled to reimbursement of all expenses incurred by him in
the discharge of his duties hereunder, or otherwise in
furtherance of the business of Main and the Bank, provided
he renders an accounting of such expenses in such manner as
may be required from time to time for employees generally.
(f) Salary Deferral. The Executive may request that
the payment of any portion of his base salary and/or bonus
for any calendar year be deferred. Such request must be
made in writing to Main and the Bank before the beginning of
such calendar year and must include the period of deferral
requested by the Executive (the "Deferral Period"). If the
Boards of Directors of Main and of the Bank approve such
request, the Executive will be entitled to receive, at the
end of the Deferral Period, the deferred portion of his base
salary and/or bonus plus interest at a compounded rate of 6%
per annum. Any salary and/or bonus which is deferred as
described herein will be credited to an account on the books
of Main and of the Bank established in the name of the
Executive. However, this account will not be funded, and
neither Main nor the Bank will be deemed to be a trustee for
the Executive with respect to any deferred amount. The
liabilities of Main and the Bank to the Executive hereunder
are those of a debtor pursuant to such contractual
obligations as are created by this Agreement. No <PAGE 6>
liabilities of Main and the Bank which arise under this
subsection will be deemed to be secured by any pledge or
other encumbrance on any property of Main or of the Bank.
Main and the Bank will not be required to segregate any
funds representing such deferred amounts, and nothing herein
will be construed as providing for such segregation.
5. Resignation of the Executive for Good Reason.
(a) Events Giving Right to Terminate for Good Reason.
The Executive may resign for Good Reason (as herein defined)
at any time during the Employment Period, as hereinafter set
forth. As used in this Agreement, the term "Good Reason"
means any of the following:
(i) any reduction in title or a material adverse
change in the Executive's responsibilities or authority
which are inconsistent with, or the assignment to the
Executive of duties inconsistent with, the Executive's
status as President and Chief Operating Officer of Main
and Chief Executive Officer and President of the Bank;
(ii) any reassignment of the Executive to a
principal office which is more than 50 miles from 120
South Centre Street, Pottsville, Pennsylvania;
(iii) any removal of the Executive from office
except for any termination of the Executive's
employment under the provisions of Section 3(a) or (d);
(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;
(v) any failure by Main and/or the Bank to
provide the Executive with benefits at least as
favorable as those enjoyed by the Executive under any
of the pension or welfare plans (as such terms are
defined in ERISA Section 3) of Main in which the
Executive is participating on the date of this
Agreement, or the taking of any action that would
materially reduce any of such benefits, unless the
change is part of a change applicable in each case to
employees generally; and
(vi) any material breach of this Agreement by
Main or the Bank, coupled with the failure to cure the
same within 30 days after receipt of a written notice
of such breach from the Executive.
(b) Notice of Termination. At the option of the
Executive, exercisable by the Executive within 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
<PAGE 7> to Main and the Bank and the provisions of Section
6 will thereupon apply.
(c) Special Rights of Termination. Notwithstanding
anything herein to the contrary, but subject to the
provisions of Section 3(a), within the later of (i) the
one-year period following the occurrence of a Change in
Control (as defined below), or (ii) the period ending
January 3, 2000, whether or not a Change in Control occurs
before such date, the Executive may terminate his employment
for any or no reason by delivering a written notice, similar
to a Notice of Termination, to Main; and such termination
will be deemed for all purposes to constitute a resignation
for Good Reason. In such event, he will be entitled to the
payments and benefits described in Section 6 generally,
subject to the limitation set forth in Section 6(e).
(d) Change in Control Defined. For purposes of this
Agreement, the term "Change in Control" means any of the
following:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), other than
Main, a subsidiary of Main, an employee benefit plan of
Main or a subsidiary of Main (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of Main
representing more than 20% of the combined voting power
of Main's then outstanding securities;
(ii) the occurrence of, or execution of an
agreement providing for, a sale of all or substantially
all of the assets of Main or the Bank to an entity
which is not a direct or indirect subsidiary of Main;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger,
consolidation or similar transaction involving Main,
unless (A) the shareholders of Main immediately prior
to the consummation of any such transaction will
initially own securities representing a majority of the
voting power of the surviving or resulting corporation,
and (B) the directors of Main immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the surviving
or resulting corporation; and
(iv) any other event which is at any time
irrevocably designated as a "Change in Control" for
purposes of this Agreement by resolution adopted by a
majority of the then non-employee directors of Main.
<PAGE 8>
6. Rights in Event of Certain Termination of Employment.
In the event that the Executive resigns from employment for Good
Reason, by delivery of a Notice of Termination or other permitted
notice to Main and the Bank, or the Executive's employment is
terminated by Main and/or the Bank without Cause, Executive will
be entitled to receive the amounts and benefits set forth in this
section.
(a) Basic Payments. The Executive will be paid an
amount equal to three times the sum of (i) the highest
annualized base salary paid to him during the year of
termination or the immediately preceding two calendar years,
and (ii) the highest bonus paid to him with respect to one
of the three calendar years immediately preceding the year
of termination. Such amount will be paid to the Executive
in 36 equal monthly installments (without interest),
beginning 30 days following the date of termination of
employment. Notwithstanding the preceding provisions of
this subsection to the contrary, in the event this section
becomes applicable following a Change in Control, the
Executive will, within 30 days after his termination of
employment, be paid a lump sum equal to the present value of
the amounts otherwise payable under this subsection. For
purposes of the preceding sentence, present value will be
determined by using the short-term applicable federal rate
under Section 1274 of the Internal Revenue Code of 1986, as
amended (the "Code"), in effect on the date of termination
of employment. For purposes of this subsection, to the
extent necessary, base salary and bonuses with any
predecessor of Main or an affiliate thereof shall be taken
into account.
(b) Supplemental Payment in Lieu of Certain Benefits.
In lieu of continued pension, welfare and other benefits, a
lump sum cash payment of $105,417 will be paid to the
Executive within 30 days following the date of termination
of employment.
(c) Excise Tax Matters in General. In the event that
the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable
to the Executive by Main and/or the Bank, are such that he
becomes subject to the excise tax provisions of Code Section
4999, Main and the Bank will pay him such additional amount
or amounts as will result in his retention (after the
payment of all federal, state and local excise, employment,
and income taxes on such payments and the value of such
benefits) of a net amount equal to the net amount he would
have retained had the initially calculated payments and
benefits been subject only to income and employment
taxation. For purposes of the preceding sentence, the
Executive will be deemed to be subject to the highest
marginal federal, state and local tax rates. All
calculations required to be made under this subsection will
be made by Main's independent certified public accountants,
<PAGE 9> subject to the right of Executive's representative
to review the same. All such amounts required to be paid
will be paid at the time any withholding may be required
under applicable law, and any additional amounts to which
the Executive may be entitled will be paid or reimbursed no
later than 15 days following confirmation of such amount by
Main's accountants. In the event any amounts paid hereunder
are subsequently determined to be in error because estimates
were required or otherwise, the parties agree to reimburse
each other to correct such error, as appropriate, and to pay
interest thereon at the applicable federal rate (as
determined under Code Section 1274A for the period of time
such erroneous amount remained outstanding and
unreimbursed). The parties recognize that the actual
implementation of the provisions of this subsection are
complex and agree to deal with each other in good faith to
resolve any questions or disagreements arising hereunder.
(d) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provisions of
Subsection (c), if (i) it is determined that the payments to
be provided to the Executive hereunder would subject him to
the excise tax provisions of Code Section 4999, but (ii) a
5% reduction in the present value (as determined pursuant to
the provisions of Code Section 280G) of such payments would
result in no such excise tax being owed, then such payments
will be reduced or eliminated by the smallest amount
necessary to avoid the imposition of such excise tax. The
Executive will be entitled, within a reasonable period of
time, to specify which payments will be reduced or
eliminated.
(e) Special Limitation on Certain Payments and
Benefits. Notwithstanding any provision of this section to
the contrary, in the event the Executive terminates his
employment under Clause (ii) of Section 5(c) and no Change
in Control has then occurred, the termination payments and
benefits to which he is entitled hereunder will not exceed
the payments and benefits he would have been entitled to
under the Change in Control Agreement had it not been
terminated in connection with the execution of this
Agreement.
7. Expiration of Agreement. In the event this Agreement
expires by its terms in accordance with the provisions of Section
19(a) and the Executive's employment thereafter voluntarily or
involuntarily terminates prior to attainment of age 65 and other
than for Cause, Main will pay or cause to be paid to him, in one
lump sum within 30 days following termination, an amount equal to
1.5 times the sum of the amounts described in Clauses (i) and
(ii) of Section 6(a).
8. Covenant Not to Compete.
<PAGE 10>
(a) The Executive hereby acknowledges and recognizes
the highly competitive nature of the business of Main and of
the Bank and accordingly agrees that, during and for the
applicable period set forth in Subsection (c), the Executive
will not:
(i) be engaged, directly or indirectly, either
for his own account or as agent, consultant, employee,
partner, officer, director, proprietor, investor
(except as an investor owning less than 5% of the stock
of a publicly owned company) or otherwise of, any
person, firm, corporation, or enterprise engaged, in
(A) the banking, thrift or credit union industry, or
(B) any other activity in which Main or any of its
subsidiaries is engaged during the Employment Period,
in either case (A) or (B) in any county in which, at
any time during the Employment Period or at the date of
termination of the Executive's employment, a branch,
office or other facility of Main or any of its
subsidiaries is located, or in any county contiguous to
such a county, including contiguous counties located
outside of the Commonwealth of Pennsylvania (the
"Non-Competition Area"); and
(ii) provide financial or other assistance to any
person, firm, corporation, or enterprise engaged in (A)
the banking or financial services industry, or (B) any
other activity in which Main or any of its subsidiaries
is engaged during the Employment Period, in the
Non-Competition Area.
(b) It is expressly understood and agreed that,
although the Executive, Main and the Bank consider the
restrictions contained in Subsection (a) reasonable for the
purpose of preserving for Main and its subsidiaries their
goodwill and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that
the time or territory or any other restriction contained in
Subsection (a) is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of
Subsection (a) will not be rendered void but will be deemed
amended to apply as to such maximum time and territory and
to such other extent as such court may judicially determine
or indicate to be reasonable.
(c) The provisions of this section will be applicable
commencing on the date of this Agreement and ending as
follows:
(i) at the termination of the payments and
benefits provided under Section 6; provided, however,
that this clause will not apply in the event
Executive's termination of employment occurs following
a Change in Control or pursuant to Clause (ii) of
Section 5(c); <PAGE 11>
(ii) one year following the termination of
Executive's employment, in the case of a voluntary
termination without Good Reason; or
(iii) in all other cases, the date of Executive's
termination of employment.
9. Confidentiality.
(a) As used in this section, the term "Confidential
Information" means any and all information regarding the
organization, business or finances of Main or any of its
subsidiaries and affiliates, including, but not limited to,
any and all business plans and strategies, financial
information, proposals, reports, marketing plans and
information, cost information, customer information, claims
history and experience data, sales volume and other sales
statistics, personnel data, pricing information, concepts
and ideas, information respecting existing and proposed
investments and acquisitions, and information regarding
customers and suppliers, but the term "Confidential
Information" will not include information created by the
Executive or which prior to the Executive's receipt thereof
(i) was generally publicly available, or (ii) was in the
Executive's possession free of any restrictions on its use
or disclosure and from a source other than Main or any of
its subsidiaries or affiliates.
(b) The Executive acknowledges and agrees that his
employment by Main and the Bank will afford him an
opportunity to acquire Confidential Information and that the
misappropriation or disclosure of any Confidential
Information would cause irreparable harm to Main and its
subsidiaries and affiliates.
(c) During the Employment Period and for a period of
two years thereafter, the Executive will not use for the
benefit of anyone other than Main and its subsidiaries and
affiliates or disclose any of the Confidential Information
for any reason or purpose whatsoever except to authorized
representatives of such business entities or as directed or
authorized by Main.
(d) With respect to those items of Confidential
Information which constitute trade secrets under applicable
law, the Executive's obligations of confidentiality and
nondisclosure as set forth in this section will continue and
survive after the two-year period as provided in Subsection
(c) to the greatest extent permitted by applicable law.
(e) The Executive will not remove any records,
documents or any other tangible items (excluding the
Executive's personal property) from the premises of Main or
its subsidiaries or affiliates, in either original or
<PAGE 12> duplicate form, except as needed in the ordinary
course of performing services hereunder.
(f) Upon termination of this Agreement, the Executive
will immediately surrender to the owner thereof all
documents (other than documents created by him) in his
possession, custody or control embodying the Confidential
Information or any part thereof and will not thereafter
remove the same from the premises on which it is located.
10. Remedies. Executive acknowledges and agrees that the
remedy at law of Main and of the Bank for a breach or threatened
breach of any of the provisions of Section 8 or 9 would be
inadequate and, in recognition of this fact, in the event of a
breach or threatened breach by the Executive of any of the
provisions of Section 8 or 9, it is agreed that, in addition to
the remedy at law, Main and the Bank will be entitled to, without
posting any bond, and the Executive agrees not to oppose any
request of Main and the Bank for, equitable relief in the form of
specific performance, a temporary restraining order, a temporary
or permanent injunction, or any other equitable remedy which may
then be available. Nothing herein contained will be construed as
prohibiting Main and the Bank from pursuing any other remedies
available to them for such breach or threatened breach.
11. Arbitration. Main, the Bank and Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time. Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association
("Association") in Philadelphia, Pennsylvania, in accordance with
the Individual Employment Dispute Resolution rules of the
Association. Main and the Bank, or Executive, may initiate an
arbitration proceeding at any time by giving notice to the others
in accordance with the rules of the Association. The Association
will designate a single arbitrator to conduct the proceeding, but
Main and the Bank, and the Executive, may, as a matter of right,
require the substitution of a different arbitrator chosen by the
Association. Each such right of substitution may be exercised
only once. The arbitrator will not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of
Pennsylvania but will be bound by the substantive law applicable
to this Agreement. The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of fact, will be
final and binding upon the parties and will be enforceable in
courts of proper jurisdiction. Following written notice of a
request for arbitration, Main and the Bank, and the Executive,
will be entitled to an injunction restraining all further
proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein.
<PAGE 13>
12. Legal Expenses. Main and/or the Bank will pay to the
Executive all reasonable legal fees and expenses when incurred by
the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement, provided he brings the action
in good faith.
13. Indemnification. Main and the Bank will indemnify the
Executive, to the fullest extent permitted under Pennsylvania and
federal law, with respect to any threatened, pending or completed
legal or regulatory action, suit or proceeding brought against
him by reason of the fact that he is or was a director, officer,
employee or agent of Main or the Bank, or is or was serving at
the request of Main or the Bank as a director, officer, employee
or agent of another person or entity. To the fullest extent
permitted by Pennsylvania and federal law, Main and the Bank
will, in advance of final disposition, pay any and all expenses
incurred by the Executive in connection with any threatened,
pending or completed legal or regulatory action, suit or
proceeding with respect to which he may be entitled to
indemnification hereunder. Main and the Bank will use their best
efforts to obtain insurance coverage for the Executive under a
policy covering directors and officers thereof against
litigation, arbitrations and other legal and regulatory
proceedings; provided, however, that nothing herein is to be
construed as requiring such action if the Boards of Directors of
Main and the Bank determine that such insurance coverage cannot
be obtained at commercially reasonable rates.
14. Notices. Any notice required or permitted to be given
under this Agreement will, to be effective hereunder, be given to
both Main and the Bank, in the case of notices given by the
Executive, and will, to be effective hereunder, be given by both
Main and the Bank, in the case of notices given to the Executive.
Any such notice will be deemed properly given if in writing and
if mailed by registered or certified mail, postage prepaid with
return receipt requested, to the residence of the Executive, in
the case of notices to the Executive, and to the respective
principal offices of Main and of the Bank, in the case of notices
to Main and the Bank.
15. Waiver. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive,
an executive officer of Main, and an executive officer of the
Bank, each such officer specifically designated by the Boards of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time.
16. Assignment. This Agreement is not assignable by any
party hereto, except by Main and the Bank to any successor in
interest to the respective businesses of Main and the Bank.
<PAGE 14>
17. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter of this
Agreement and, in accordance with the provisions of Section 27,
supersedes any prior agreement of the parties.
18. Successors; Binding Agreement.
(a) Main and the Bank will require any successor
(whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of
the business and/or assets of Main and/or the Bank to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that Main and the Bank
would be required to perform it if no such succession had
taken place. Failure by Main and the Bank to obtain such
assumption and agreement prior to the effectiveness of any
such succession will constitute a material breach of this
Agreement. As used in this Agreement, "Main" and the "Bank"
means Main and the Bank as hereinbefore defined and any
successor to the business and/or assets of Main and/or the
Bank as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs,
distributees, devisees, and legatees. If the Executive
should die while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
19. Termination.
(a) Unless the Executive's employment is terminated
pursuant to the provisions of Section 3 or Section 5, the
term of this Agreement will be for a period commencing on
the date of this Agreement and ending on December 31, 2000;
provided, however, that this Agreement will be automatically
renewed on January 1, 2000 for the two-year period
commencing on such date and ending on December 31, 2001,
unless either party gives written notice of nonrenewal to
the other party on or before November 1, 1999 (in which case
this Agreement will continue in effect through December 31,
2000); and provided further, that if this Agreement is
renewed on January 1, 2000, it will be automatically renewed
on January 1 of each subsequent year (the "Annual Renewal
Date") for a period ending two years from each Annual
Renewal Date unless either party gives written notice of
nonrenewal to the other party at least 60 days prior to an
<PAGE 15> Annual Renewal Date (in which case this Agreement
will continue in effect for a term ending one year from the
Annual Renewal Date immediately following such notice). For
purposes of the preceding sentence, Main and the Bank will
be considered one party.
(b) Any termination of the Executive's employment
under this Agreement or of this Agreement will not affect
the benefit, noncompetition and confidential information
provisions of Section 6, 7, 8, 9 or 12, which will, if
relevant, survive any such termination and remain in full
force and effect in accordance with their respective terms.
(c) Except as provided in Section 27, nothing herein
will be construed as limiting, restricting or eliminating
any rights the Executive may have under any plan, contract
or arrangement to which he is a party or in which he is a
vested participant; provided, however, that any termination
payments required hereunder will be in lieu of any severance
benefits to which he may be entitled under a severance plan
or arrangement of Main and the Bank; and provided further,
that if the benefits under any such plan or arrangement may
not legally be eliminated, then the payments hereunder will
be correspondingly reduced in such equitable manner as the
Board of Directors of Main may determine.
20. No Mitigation or Offset. The Executive will not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; nor will any
amounts or benefits payable or provided hereunder be reduced in
the event he does secure employment, except as otherwise provided
herein.
21. Validity. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, which
will remain in full force and effect. In addition, if a
government regulatory agency recommends or orders that the Bank
terminate the employment of the Executive with the Bank or
relieve him of his duties as such relate to the Bank, the
Agreement or such provision will nevertheless be and remain an
obligation of Main enforceable against it in accordance with its
terms, notwithstanding any such termination of the Executive's
employment with the Bank.
22. Applicable Law. Except to the extent preempted by
federal law, this Agreement will be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
23. Number. Words used herein in the singular will be
construed as being used in the plural, as the context requires,
and vice versa.
<PAGE 16>
24. Headings. The headings of the sections and subsections
of this Agreement are for convenience only and will not control
or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
25. References to Entities. All references to Main will be
deemed to include references to the Bank, as appropriate in the
relevant context, and vice versa.
26. Guaranty. Main hereby irrevocably and unconditionally
guarantees to the Executive the full and timely performance by
the Bank of each and every obligation of the Bank contained in
this Agreement.
27. Effective Date; Termination of Prior Agreement. This
Agreement will become effective immediately upon the execution
and delivery of this Agreement by the parties hereto. Upon the
execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof, including without
limitation the 1994 Agreement and the Change in Control
Agreement, will be deemed automatically terminated and be of no
further force or effect.
28. Withholding For Taxes. All amounts and benefits paid
or provided hereunder will be subject to withholding for taxes as
required by law.
29. Individual Agreement. This Agreement is an agreement
solely between and among the parties hereto. It is intended to
constitute a nonqualified unfunded arrangement for the benefit of
a key management employee and will be construed and interpreted
in a manner consistent with such intention.
30. Other Position. Upon execution of this Agreement, Main
will use its best efforts to cause the Board of Directors of
Berks County Bank to elect Executive to the position of Vice
Chairman of such bank.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MAIN STREET BANCORP, INC.
By /s/ Nelson R. Oswald
HERITAGE NATIONAL BANK
By /s/ Nelson R. Oswald
/s/ Allen E. Kiefer
<PAGE 17>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 1st day of May,
1998, between MAIN STREET BANCORP, INC., a Pennsylvania business
corporation ("Main"), HERITAGE NATIONAL BANK, a national banking
corporation (the "Bank"), and RICHARD A. KETNER, an individual
(the "Executive").
W I T N E S S E T H:
WHEREAS, Heritage Bancorp, Inc. ("Heritage") and the
Executive are parties to (i) an employment agreement dated as of
September 13, 1994 (between the Executive and Miners National
Bancorp, Inc.), as amended as of September 15, 1997 (the "1994
Agreement"), and (ii) a change in control agreement dated as of
September 15, 1997, which agreement superseded a prior agreement
executed as of September 13, 1994 (the "Change in Control
Agreement"); and
WHEREAS, Heritage has, as of the date hereof, consolidated
with BCB Financial Services Corporation to form Main; and
WHEREAS, Main, the Bank and the Executive desire to enter
into a new Agreement regarding, among other things, the
employment of the Executive by Main and the Bank and,
concurrently therewith, to terminate the 1994 Agreement and the
Change in Control Agreement, all as hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Employment. Main and the Bank each hereby employ the
Executive, and the Executive hereby accepts employment with Main
and the Bank, on the terms and conditions set forth in this
Agreement.
2. Duties of Employee. The Executive will perform and
discharge well and faithfully such duties as an executive officer
of Main and the Bank as may be assigned to him from time to time
by the respective Boards of Directors of Main and the Bank. The
Executive will be employed as Executive Vice President and Chief
Administrative Officer of Main and Executive Vice President of
the Bank, and will hold such other titles as may be given to him
from time to time by the respective Boards of Directors of Main
and of the Bank, and as specified in Section 30. The Executive
will devote his full time, attention and energies to the business
of Main and the Bank and will not, during the Employment Period
(as defined in Section 3), be employed or involved in any other
business activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; provided, however,
that this section will not be construed as preventing the
Executive from (a) passively investing his personal assets, (b)
acting as a member of the Board of Directors of Main, the Bank or
any other corporation not in competition with either, or as a
<PAGE 1> member of the Board of Trustees of any other
organization, or (c) being involved in any community, civic or
similar activity.
3. Term of Employment. The Executive's employment under
this Agreement will be for a period (the "Employment Period")
commencing upon the date of this Agreement and ending at the end
of the term of this Agreement pursuant to Section 19, unless the
Executive's employment is sooner terminated in accordance with
Section 5 or one of the following provisions:
(a) Termination for Cause. The Executive's employment
under this Agreement may be terminated at any time during
the Employment Period for "Cause" (as herein defined), by
action of the Boards of Directors of Main or of the Bank,
upon giving notice of such termination to the Executive at
least 15 days prior to the date upon which such termination
is to take effect. As used in this Agreement, "Cause" means
any of the following events:
(i) the Executive is convicted of or enters a
plea of guilty or nolo contendere to a felony, a crime
of falsehood, or a crime involving fraud or moral
turpitude, or the actual incarceration of the Executive
for a period of 45 consecutive days;
(ii) the Executive willfully and repeatedly fails
to follow the lawful instructions of the Board of
Directors of Main or of the Board of Directors of the
Bank after the Executive's receipt of written notice of
such instructions, other than a failure resulting from
the Executive's incapacity because of physical or
mental illness;
(iii) a government regulatory agency recommends
or orders in writing that the Bank terminate the
employment of the Executive with the Bank or relieve
him of his duties as such relate to the Bank; or
(iv) the Executive violates the covenant not to
compete contained in Section 8 or the confidentiality
provisions of Section 9.
Notwithstanding the foregoing, the recommendation or order
of a government regulatory agency referred to in Section
3(a)(iii) will not constitute "Cause" giving Main the right
to terminate this Agreement as it relates to Main unless:
(i) such recommendation or order results from an
assessment against the Executive of a final
unappealable civil monetary penalty ("tier 3") under
Section 8(i)(2)(C) of the Federal Deposit Insurance
Act;
<PAGE 2>
(ii) such penalty is based on a knowing or
reckless (A) violation of law or regulation, (B) unsafe
or unsound practice, or (C) breach of fiduciary duty;
(iii) in the case of each of (A), (B) and (C)
above, is either intentionally concealed by the
Executive from the Board (and is not actually known by
the Board), or committed by the Executive after
repeated warnings by the Board or the governmental
regulatory agency; and
(iv) in the case of each of (A), (B) and (C)
above, results in a substantial loss to Bank.
In addition, the Executive's employment under this Agreement
will not be deemed to have been terminated for "Cause" under
Sections 3(a)(i) or (ii) if such termination took place
solely as a result of:
(i) questionable judgment on the part of the
Executive;
(ii) any act or omission believed by the
Executive, in good faith, to have been in, or not
opposed to, the best interests of Main or of the Bank;
or
(iii) any act or omission in respect of which a
determination could properly be made that the Executive
met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses
under the Articles of Incorporation or By-laws of Main
or the Articles of Association or By-laws of the Bank
or the directors' and officers' liability insurance of
Main or the Bank, in each case as in effect at the time
of such act or omission.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the effective
date of such termination.
(b) Termination Without Cause. The Executive's
employment under this Agreement may be terminated at any
time during the Employment Period without "Cause" (as
defined in Section 3(a)), by action of the Boards of
Directors of Main and of the Bank, upon giving notice of
such termination to the Executive at least 30 days prior to
the date upon which such termination is to take effect. If
the Executive's employment is terminated under the
provisions of this subsection, then the Executive will be
entitled to receive the compensation set forth in Section 6.
(c) Voluntary Termination, Retirement or Death. If
the Executive voluntarily terminates employment without Good
<PAGE 3> Reason (as defined in Section 5), retires or dies,
the Executive's employment under this Agreement will be
deemed terminated as of the date of the Executive's
retirement or death, and all rights of the Executive under
Section 4 will cease as of the date of such termination and
any benefits payable to the Executive will be determined in
accordance with the retirement and insurance programs of
Main and of the Bank then in effect.
(d) Disability. If the Executive is incapacitated by
accident, sickness, or otherwise so as to render the
Executive mentally or physically incapable of performing the
essential duties required of the Executive under Section 2,
notwithstanding reasonable accommodation, for a continuous
period of six months, then, upon the expiration of such
period or at any time thereafter, by action of the Boards of
Directors of Main and of the Bank, the Executive's
employment under this Agreement may be terminated
immediately upon giving the Executive notice to that effect.
If the Executive's employment is terminated under the
provisions of this subsection, then all rights of the
Executive under Section 4 will cease as of the last business
day of the week in which such termination occurs, and the
Executive will thereafter be entitled to the benefits to
which he is entitled under any disability plan of Main or
the Bank in which he is then a participant (including the
minimum benefit described in Section 4(d)(iv)).
4. Employment Period Compensation and Related Matters.
(a) Salary. For services performed by the Executive
under this Agreement, Main and the Bank will pay the
Executive a salary, in the aggregate, during the Employment
Period, at the annualized rate of $161,400, payable at the
same times as salaries are payable to other executive
employees of Main or of the Bank. Main and/or the Bank may,
from time to time, increase (but not decrease) the
Executive's salary, and any and all such increases will be
deemed to constitute amendments to this subsection to
reflect the increased amounts, effective as of the dates
established for such increases by the Board of Directors of
Main or of the Bank in the resolutions authorizing such
increases.
(b) Bonus. For services performed by the Executive
under this Agreement, Main will pay the Executive a bonus,
annually during the Employment Period, in such amounts (if
any) and at such times as is provided in such incentive plan
for executive officers as may be approved by the Board of
Directors of Main and in effect from time to time. In
addition, Main may, from time to time, pay such other bonus
or bonuses to the Executive as Main, in its sole discretion,
deems appropriate. The payment of any such bonuses will not
reduce or otherwise affect any other obligation of Main
<PAGE 4> and/or the Bank to the Executive provided for in
this Agreement.
(c) Pension and Welfare Benefits. Main will provide
the Executive, during the Employment Period, with pension
and welfare benefits (within the meaning of Section 3 of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in the aggregate not less favorable than those
received by other employees of Main.
(d) Fringe Benefits.
(i) In General. Except as otherwise provided in
this subsection, Main will provide the Executive,
during the Employment Period, with such fringe benefits
as may be provided from time to time for its executive
officers.
(ii) Supplemental Pension. Main will, no later
than February 15, 1999, establish or cause to be
established for the benefit of the Executive a
supplemental pension benefit program presently intended
to be similar, except as to targeted benefit level, as
is maintained for its present Chief Executive Officer.
(iii) Life Insurance. In addition to the life
insurance coverage to which the Executive may be
entitled from time to time under Main's life insurance
plan, Main will provide him with supplemental life
insurance of not less than the greater of (A) 50% of
his annualized base salary or (B) $100,000, if he
initially qualifies therefor on a standard underwriting
basis. The Executive will be the owner of the policy
providing such life insurance coverage. Any required
increase in coverage by reason of an increase in base
salary shall be effected no later than 30 days after
such salary increase.
(iv) Disability Insurance. In addition to the
disability coverage to which the Executive may be
entitled from time to time under Main's disability
insurance plan, Main will provide him with such
additional monthly disability insurance coverage (if
any) as may be necessary to ensure a minimum level of
coverage of 50% of his monthly base salary, if he
qualifies therefor on a standard underwriting basis.
(v) Vacation. The Executive will be entitled to
not less than four weeks of vacation per calendar year,
plus one additional day for each five years of service
with Main and any predecessor of Main. The right to
carry over unused vacation days will be subject to the
executive personnel policies of Main from time to time
in effect.
<PAGE 5>
(vi) Automobile. Main will provide the Executive
with the use of a purchased or leased automobile. The
make and model of such automobile will be reasonably
consistent with the Executive's position with Main.
Expenses of the use of such automobile will be borne as
provided from time to time in policies approved by
Main's Board of Directors.
(vii) Club Memberships. Main will pay
Executive's annual membership fees and periodic
assessments at one club of Executive's selection which
is reasonably acceptable to Main.
(viii) Stock Awards. Main will annually award to
the Executive, no later than February 15, 1,200 shares
of its common stock. The number of shares to be
awarded annually will be subject to such equitable
adjustment as may be determined by Main's Board of
Directors, in its discretion, in order to take into
account the effect of stock dividends, stock splits,
reorganizations and similar transactions or events.
(ix) Stock Options. The Executive will be
entitled to such stock option grants as may be granted
from time to time by the Board of Directors of Main
and/or the Compensation Committee of such Board and as
are consistent with the Executive's responsibilities
and performance.
(e) Expense Reimbursement. The Executive will be
entitled to reimbursement of all expenses incurred by him in
the discharge of his duties hereunder, or otherwise in
furtherance of the business of Main and the Bank, provided
he renders an accounting of such expenses in such manner as
may be required from time to time for employees generally.
(f) Salary Deferral. The Executive may request that
the payment of any portion of his base salary and/or bonus
for any year be deferred. Such request must be made in
writing to Main and the Bank before the beginning of such
calendar year and must include the period of deferral
requested by the Executive (the "Deferral Period"). If the
Boards of Directors of Main and of the Bank approve such
request, the Executive will be entitled to receive, at the
end of the Deferral Period, the deferred portion of his base
salary and/or bonus plus interest at a compounded rate of 6%
per annum. Any salary and/or bonus which is deferred as
described herein will be credited to an account on the books
of Main and of the Bank established in the name of the
Executive. However, this account will not be funded, and
neither Main nor the Bank will be deemed to be a trustee for
the Executive with respect to any deferred amount. The
liabilities of Main and the Bank to the Executive hereunder
are those of a debtor pursuant to such contractual
obligations as are created by this Agreement. No <PAGE 6>
liabilities of Main and the Bank which arise under this
subsection will be deemed to be secured by any pledge or
other encumbrance on any property of Main or of the Bank.
Main and the Bank will not be required to segregate any
funds representing such deferred amounts, and nothing herein
will be construed as providing for such segregation.
5. Resignation of the Executive for Good Reason.
(a) Events Giving Right to Terminate for Good Reason.
The Executive may resign for Good Reason (as herein defined)
at any time during the Employment Period, as hereinafter set
forth. As used in this Agreement, the term "Good Reason"
means any of the following:
(i) any reduction in title or a material adverse
change in the Executive's responsibilities or authority
which are inconsistent with, or the assignment to the
Executive of duties inconsistent with, the Executive's
status as Executive Vice President and Chief
Administrative Officer of Main and Executive Vice
President of the Bank;
(ii) any reassignment of the Executive to a
principal office which is more than 50 miles from 120
South Centre Street, Pottsville, Pennsylvania;
(iii) any removal of the Executive from office
except for any termination of the Executive's
employment under the provisions of Section 3(a) or (d);
(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;
(v) any failure by Main and/or the Bank to
provide the Executive with benefits at least as
favorable as those enjoyed by the Executive under any
of the pension or welfare plans (as such terms are
defined in ERISA Section 3) of Main in which the
Executive is participating on the date of this
Agreement, or the taking of any action that would
materially reduce any of such benefits, unless the
change is part of a change applicable in each case to
employees generally; and
(vi) any material breach of this Agreement by
Main or the Bank, coupled with the failure to cure the
same within 30 days after receipt of a written notice
of such breach from the Executive.
(b) Notice of Termination. At the option of the
Executive, exercisable by the Executive within 90 days after
the occurrence of the event constituting Good Reason, the
Executive may resign from employment under this Agreement by
<PAGE 7> a notice in writing (the "Notice of Termination")
delivered to Main and the Bank and the provisions of Section
6 will thereupon apply.
(c) Special Rights of Termination. Notwithstanding
anything herein to the contrary, but subject to the
provisions of Section 3(a), within the later of (i) the one-
year period following the occurrence of a Change in Control
(as defined below), or (ii) the period ending January 3,
2000, whether or not a Change in Control occurs before such
date, the Executive may terminate his employment for any or
no reason by delivering a written notice, similar to a
Notice of Termination, to Main; and such termination will be
deemed for all purposes to constitute a resignation for Good
Reason. In such event, he will be entitled to the payments
and benefits described in Section 6 generally, subject to
the limitation set forth in Section 6(e).
(d) Change in Control Defined. For purposes of this
Agreement, the term "Change in Control" means any of the
following:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), other than
Main, a subsidiary of Main, an employee benefit plan of
Main or a subsidiary of Main (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of Main
representing more than 20% of the combined voting power
of Main's then outstanding securities;
(ii) the occurrence of, or execution of an
agreement providing for, a sale of all or substantially
all of the assets of Main or the Bank to an entity
which is not a direct or indirect subsidiary of Main;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger,
consolidation or similar transaction involving Main,
unless (A) the shareholders of Main immediately prior
to the consummation of any such transaction will
initially own securities representing a majority of the
voting power of the surviving or resulting corporation,
and (B) the directors of Main immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the surviving
or resulting corporation; and
(iv) any other event which is at any time
irrevocably designated as a "Change in Control" for
purposes of this Agreement by resolution adopted by a
majority of the then non-employee directors of Main.
<PAGE 8>
6. Rights in Event of Certain Termination of Employment.
In the event that the Executive resigns from employment for Good
Reason, by delivery of a Notice of Termination or other permitted
notice to Main and the Bank, or the Executive's employment is
terminated by Main and/or the Bank without Cause, Executive will
be entitled to receive the amounts and benefits set forth in this
section.
(a) Basic Payments. The Executive will be paid an
amount equal to three times the sum of (i) the highest
annualized base salary paid to him during the year of
termination or the immediately preceding two calendar years,
and (ii) the highest bonus paid to him with respect to one
of the three calendar years immediately preceding the year
of termination. Such amount will be paid to the Executive
in 36 equal monthly installments (without interest),
beginning 30 days following the date of termination of
employment. Notwithstanding the preceding provisions of
this subsection to the contrary, in the event this section
becomes applicable following a Change in Control, the
Executive will, within 30 days after his termination of
employment, be paid a lump sum equal to the present value of
the amounts otherwise payable under this subsection. For
purposes of the preceding sentence, present value will be
determined by using the short-term applicable federal rate
under Section 1274 of the Internal Revenue Code of 1986, as
amended (the "Code"), in effect on the date of termination
of employment. For purposes of this subsection, to the
extent necessary, base salary and bonuses with any
predecessor of Main or an affiliate thereof shall be taken
into account.
(b) Supplemental Payment in Lieu of Certain Benefits.
In lieu of continued pension, welfare and other benefits, a
lump sum cash payment of $73,912 will be paid to the
Executive within 30 days following the date of termination
of employment.
(c) Excise Tax Matters in General. In the event that
the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable
to the Executive by Main and/or the Bank, are such that he
becomes subject to the excise tax provisions of Code Section
4999, Main and the Bank will pay him such additional amount
or amounts as will result in his retention (after the
payment of all federal, state and local excise, employment,
and income taxes on such payments and the value of such
benefits) of a net amount equal to the net amount he would
have retained had the initially calculated payments and
benefits been subject only to income and employment
taxation. For purposes of the preceding sentence, the
Executive will be deemed to be subject to the highest
marginal federal, state and local tax rates. All
calculations required to be made under this subsection will
be made by Main's independent certified public accountants,
<PAGE 9> subject to the right of Executive's representative
to review the same. All such amounts required to be paid
will be paid at the time any withholding may be required
under applicable law, and any additional amounts to which
the Executive may be entitled will be paid or reimbursed no
later than 15 days following confirmation of such amount by
Main's accountants. In the event any amounts paid hereunder
are subsequently determined to be in error because estimates
were required or otherwise, the parties agree to reimburse
each other to correct such error, as appropriate, and to pay
interest thereon at the applicable federal rate (as
determined under Code Section 1274A for the period of time
such erroneous amount remained outstanding and
unreimbursed). The parties recognize that the actual
implementation of the provisions of this subsection are
complex and agree to deal with each other in good faith to
resolve any questions or disagreements arising hereunder.
(d) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provisions of
Subsection (c), if (i) it is determined that the payments to
be provided to the Executive hereunder would subject him to
the excise tax provisions of Code Section 4999, but (ii) a
5% reduction in the present value (as determined pursuant to
the provisions of Code Section 280G) of such payments would
result in no such excise tax being owed, then such payments
will be reduced or eliminated by the smallest amount
necessary to avoid the imposition of such excise tax. The
Executive will be entitled, within a reasonable period of
time, to specify which payments will be reduced or
eliminated.
(e) Special Limitation on Certain Payments and
Benefits. Notwithstanding any provision of this section to
the contrary, in the event the Executive terminates his
employment under Clause (ii) of Section 5(c) and no Change
in Control has then occurred, the termination payments and
benefits to which he is entitled hereunder will not exceed
the payments and benefits he would have been entitled to
under the Change in Control Agreement had it not been
terminated in connection with the execution of this
Agreement.
7. Expiration of Agreement. In the event this Agreement
expires by its terms in accordance with the provisions of Section
19(a) and the Executive's employment thereafter voluntarily or
involuntarily terminates prior to attainment of age 65 and other
than for Cause, Main will pay or cause to be paid to him, in one
lump sum within 30 days following termination, an amount equal to
1.5 times the sum of the amounts described in Clauses (i) and
(ii) of Section 6(a).
8. Covenant Not to Compete.
<PAGE 10>
(a) The Executive hereby acknowledges and recognizes
the highly competitive nature of the business of Main and of
the Bank and accordingly agrees that, during and for the
applicable period set forth in Subsection (c), the Executive
will not:
(i) be engaged, directly or indirectly, either
for his own account or as agent, consultant, employee,
partner, officer, director, proprietor, investor
(except as an investor owning less than 5% of the stock
of a publicly owned company) or otherwise of, any
person, firm, corporation, or enterprise engaged, in
(A) the banking, thrift or credit union industry, or
(B) any other activity in which Main or any of its
subsidiaries is engaged during the Employment Period,
in either case (A) or (B) in any county in which, at
any time during the Employment Period or at the date of
termination of the Executive's employment, a branch,
office or other facility of Main or any of its
subsidiaries is located, or in any county contiguous to
such a county, including contiguous counties located
outside of the Commonwealth of Pennsylvania (the
"Non-Competition Area"); and
(ii) provide financial or other assistance to any
person, firm, corporation, or enterprise engaged in (A)
the banking or financial services industry, or (B) any
other activity in which Main or any of its subsidiaries
is engaged during the Employment Period, in the
Non-Competition Area.
(b) It is expressly understood and agreed that,
although the Executive, Main and the Bank consider the
restrictions contained in Subsection (a) reasonable for the
purpose of preserving for Main and its subsidiaries their
goodwill and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that
the time or territory or any other restriction contained in
Subsection (a) is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of
Subsection (a) will not be rendered void but will be deemed
amended to apply as to such maximum time and territory and
to such other extent as such court may judicially determine
or indicate to be reasonable.
(c) The provisions of this section will be applicable
commencing on the date of this Agreement and ending as
follows:
(i) at the termination of the payments and
benefits provided under Section 6; provided, however,
that this clause will not apply in the event
Executive's termination of employment occurs following
a Change in Control or pursuant to Clause (ii) of
Section 5(c); <PAGE 11>
(ii) one year following the termination of
Executive's employment, in the case of a voluntary
termination without Good Reason; or
(iii) in all other cases, the date of Executive's
termination of employment.
9. Confidentiality.
(a) As used in this section, the term "Confidential
Information" means any and all information regarding the
organization, business or finances of Main or any of its
subsidiaries and affiliates, including, but not limited to,
any and all business plans and strategies, financial
information, proposals, reports, marketing plans and
information, cost information, customer information, claims
history and experience data, sales volume and other sales
statistics, personnel data, pricing information, concepts
and ideas, information respecting existing and proposed
investments and acquisitions, and information regarding
customers and suppliers, but the term "Confidential
Information" will not include information created by the
Executive or which prior to the Executive's receipt thereof
(i) was generally publicly available, or (ii) was in the
Executive's possession free of any restrictions on its use
or disclosure and from a source other than Main or any of
its subsidiaries or affiliates.
(b) The Executive acknowledges and agrees that his
employment by Main and the Bank will afford him an
opportunity to acquire Confidential Information and that the
misappropriation or disclosure of any Confidential
Information would cause irreparable harm to Main and its
subsidiaries and affiliates.
(c) During the Employment Period and for a period of
two years thereafter, the Executive will not use for the
benefit of anyone other than Main and its subsidiaries and
affiliates or disclose any of the Confidential Information
for any reason or purpose whatsoever except to authorized
representatives of such business entities or as directed or
authorized by Main.
(d) With respect to those items of Confidential
Information which constitute trade secrets under applicable
law, the Executive's obligations of confidentiality and
nondisclosure as set forth in this section will continue and
survive after the two-year period as provided in Subsection
(c) to the greatest extent permitted by applicable law.
(e) The Executive will not remove any records,
documents or any other tangible items (excluding the
Executive's personal property) from the premises of Main or
its subsidiaries or affiliates, in either original or
<PAGE 12> duplicate form, except as needed in the ordinary
course of performing services hereunder.
(f) Upon termination of this Agreement, the Executive
will immediately surrender to the owner thereof all
documents (other than documents created by him) in his
possession, custody or control embodying the Confidential
Information or any part thereof and will not thereafter
remove the same from the premises on which it is located.
10. Remedies. Executive acknowledges and agrees that the
remedy at law of Main and of the Bank for a breach or threatened
breach of any of the provisions of Section 8 or 9 would be
inadequate and, in recognition of this fact, in the event of a
breach or threatened breach by the Executive of any of the
provisions of Section 8 or 9, it is agreed that, in addition to
the remedy at law, Main and the Bank will be entitled to, without
posting any bond, and the Executive agrees not to oppose any
request of Main and the Bank for, equitable relief in the form of
specific performance, a temporary restraining order, a temporary
or permanent injunction, or any other equitable remedy which may
then be available. Nothing herein contained will be construed as
prohibiting Main and the Bank from pursuing any other remedies
available to them for such breach or threatened breach.
11. Arbitration. Main, the Bank and Executive recognize
that in the event a dispute should arise between them concerning
the interpretation or implementation of this Agreement, lengthy
and expensive litigation will not afford a practical resolution
of the issues within a reasonable period of time. Consequently,
each party agrees that all disputes, disagreements and questions
of interpretation concerning this Agreement are to be submitted
for resolution to the American Arbitration Association
("Association") in Philadelphia, Pennsylvania, in accordance with
the Individual Employment Dispute Resolution rules of the
Association. Main and the Bank, or Executive, may initiate an
arbitration proceeding at any time by giving notice to the others
in accordance with the rules of the Association. The Association
will designate a single arbitrator to conduct the proceeding, but
Main and the Bank, and the Executive, may, as a matter of right,
require the substitution of a different arbitrator chosen by the
Association. Each such right of substitution may be exercised
only once. The arbitrator will not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of
Pennsylvania but will be bound by the substantive law applicable
to this Agreement. The decision of the arbitrator, absent fraud,
duress, incompetence or gross and obvious error of fact, will be
final and binding upon the parties and will be enforceable in
courts of proper jurisdiction. Following written notice of a
request for arbitration, Main and the Bank, and the Executive,
will be entitled to an injunction restraining all further
proceedings in any pending or subsequently filed litigation
concerning this Agreement, except as otherwise provided herein.
<PAGE 13>
12. Legal Expenses. Main and/or the Bank will pay to the
Executive all reasonable legal fees and expenses when incurred by
the Executive in seeking to obtain or enforce any right or
benefit provided by this Agreement, provided he brings the action
in good faith.
13. Indemnification. Main and the Bank will indemnify the
Executive, to the fullest extent permitted under Pennsylvania and
federal law, with respect to any threatened, pending or completed
legal or regulatory action, suit or proceeding brought against
him by reason of the fact that he is or was a director, officer,
employee or agent of Main or the Bank, or is or was serving at
the request of Main or the Bank as a director, officer, employee
or agent of another person or entity. To the fullest extent
permitted by Pennsylvania and federal law, Main and the Bank
will, in advance of final disposition, pay any and all expenses
incurred by the Executive in connection with any threatened,
pending or completed legal or regulatory action, suit or
proceeding with respect to which he may be entitled to
indemnification hereunder. Main and the Bank will use their best
efforts to obtain insurance coverage for the Executive under a
policy covering directors and officers thereof against
litigation, arbitrations and other legal and regulatory
proceedings; provided, however, that nothing herein is to be
construed as requiring such action if the Boards of Directors of
Main and the Bank determine that such insurance coverage cannot
be obtained at commercially reasonable rates.
14. Notices. Any notice required or permitted to be given
under this Agreement will, to be effective hereunder, be given to
both Main and the Bank, in the case of notices given by the
Executive, and will, to be effective hereunder, be given by both
Main and the Bank, in the case of notices given to the Executive.
Any such notice will be deemed properly given if in writing and
if mailed by registered or certified mail, postage prepaid with
return receipt requested, to the residence of the Executive, in
the case of notices to the Executive, and to the respective
principal offices of Main and of the Bank, in the case of notices
to Main and the Bank.
15. Waiver. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing and signed by the Executive,
an executive officer of Main, and an executive officer of the
Bank, each such officer specifically designated by the Boards of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time.
16. Assignment. This Agreement is not assignable by any
party hereto, except by Main and the Bank to any successor in
interest to the respective businesses of Main and the Bank.
<PAGE 14>
17. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter of this
Agreement and, in accordance with the provisions of Section 27,
supersedes any prior agreement of the parties.
18. Successors; Binding Agreement.
(a) Main and the Bank will require any successor
(whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of
the business and/or assets of Main and/or the Bank to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that Main and the Bank
would be required to perform it if no such succession had
taken place. Failure by Main and the Bank to obtain such
assumption and agreement prior to the effectiveness of any
such succession will constitute a material breach of this
Agreement. As used in this Agreement, "Main" and the "Bank"
means Main and the Bank as hereinbefore defined and any
successor to the business and/or assets of Main and/or the
Bank as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs,
distributees, devisees, and legatees. If the Executive
should die while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
19. Termination.
(a) Unless the Executive's employment is terminated
pursuant to the provisions of Section 3 or Section 5, the
term of this Agreement will be for a period commencing on
the date of this Agreement and ending on December 31, 2000;
provided, however, that this Agreement will be automatically
renewed on January 1, 2000 for the two-year period
commencing on such date and ending on December 31, 2001,
unless either party gives written notice of nonrenewal to
the other party on or before November 1, 1999 (in which case
this Agreement will continue in effect through December 31,
2000); and provided further, that if this Agreement is
renewed on January 1, 2000, it will be automatically renewed
on January 1 of each subsequent year (the "Annual Renewal
Date") for a period ending two years from each Annual
Renewal Date unless either party gives written notice of
nonrenewal to the other party at least 60 days prior to an
<PAGE 15> Annual Renewal Date (in which case this Agreement
will continue in effect for a term ending one year from the
Annual Renewal Date immediately following such notice). For
purposes of the preceding sentence, Main and the Bank will
be considered one party.
(b) Any termination of the Executive's employment
under this Agreement or of this Agreement will not affect
the benefit, noncompetition and confidential information
provisions of Section 6, 7, 8, 9 or 12, which will, if
relevant, survive any such termination and remain in full
force and effect in accordance with their respective terms.
(c) Except as provided in Section 27, nothing herein
will be construed as limiting, restricting or eliminating
any rights the Executive may have under any plan, contract
or arrangement to which he is a party or in which he is a
vested participant; provided, however, that any termination
payments required hereunder will be in lieu of any severance
benefits to which he may be entitled under a severance plan
or arrangement of Main and the Bank; and provided further,
that if the benefits under any such plan or arrangement may
not legally be eliminated, then the payments hereunder will
be correspondingly reduced in such equitable manner as the
Board of Directors of Main may determine.
20. No Mitigation or Offset. The Executive will not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; nor will any
amounts or benefits payable or provided hereunder be reduced in
the event he does secure employment, except as otherwise provided
herein.
21. Validity. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, which
will remain in full force and effect. In addition, if a
government regulatory agency recommends or orders that the Bank
terminate the employment of the Executive with the Bank or
relieve him of his duties as such relate to the Bank, the
Agreement or such provision will nevertheless be and remain an
obligation of Main enforceable against it in accordance with its
terms, notwithstanding any such termination of the Executive's
employment with the Bank.
22. Applicable Law. Except to the extent preempted by
federal law, this Agreement will be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
23. Number. Words used herein in the singular will be
construed as being used in the plural, as the context requires,
and vice versa.
<PAGE 16>
24. Headings. The headings of the sections and subsections
of this Agreement are for convenience only and will not control
or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
25. References to Entities. All references to Main will be
deemed to include references to the Bank, as appropriate in the
relevant context, and vice versa.
26. Guaranty. Main hereby irrevocably and unconditionally
guarantees to the Executive the full and timely performance by
the Bank of each and every obligation of the Bank contained in
this Agreement.
27. Effective Date; Termination of Prior Agreement. This
Agreement will become effective immediately upon the execution
and delivery of this Agreement by the parties hereto. Upon the
execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof, including without
limitation the 1994 Agreement and the Change in Control
Agreement, will be deemed automatically terminated and be of no
further force or effect.
28. Withholding For Taxes. All amounts and benefits paid
or provided hereunder will be subject to withholding for taxes as
required by law.
29. Individual Agreement. This Agreement is an agreement
solely between and among the parties hereto. It is intended to
constitute a nonqualified unfunded arrangement for the benefit of
a key management employee and will be construed and interpreted
in a manner consistent with such intention.
30. Other Position. Upon execution of this Agreement, Main
will use its best efforts to cause the Board of Directors of
Berks County Bank to elect Executive to the position of Executive
Vice President of such bank.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MAIN STREET BANCORP, INC.
By/s/ Nelson R. Oswald
(SEAL)
HERITAGE NATIONAL BANK
By/s/ Allen E. Kiefer
(SEAL)
/s/ Richard A. Ketner (SEAL)
Richard A. Ketner <PAGE 17>
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 1st day of May,
1998, between MAIN STREET BANCORP, INC., a Pennsylvania business
corporation ("Main"), BERKS COUNTY BANK, a Pennsylvania banking
corporation (the "Bank"), and STEVEN A. EHRLICH, an individual
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive will initially be serving as a Senior
Vice President of Main and the Bank following the consolidation
of BCB Financial Services Corporation and Heritage Bancorp, Inc.
to form Main; and
WHEREAS, Main and the Bank consider the continued services
of the Executive to be in the best interest of Main, the Bank and
the shareholders of Main; and
WHEREAS, Main and the Bank desire to induce the Executive to
remain in the employ of his then employer (whether it be Main or
any other company affiliated with Main (the "Employer")) on an
impartial and objective basis in the event of a transaction
pursuant to which a Change in Control (as defined in
Section 2(c)) of Main occurs.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Term of Agreement.
(a) In General. Except as otherwise provided herein,
the term of this Agreement will be for a period commencing
on the date of this Agreement and ending on December 31,
2000; provided, however, that this Agreement will
automatically be renewed on January 1, 2000 for the two-year
period commencing on such date and ending on December 31,
2001, unless either the Executive or his Employer gives
written notice of nonrenewal to the other on or before
November 1, 1999 (in which case this Agreement will continue
in effect through December 31, 2000); and provided further,
that if this Agreement is renewed on January 1, 2000, it
will automatically be renewed on January 1 of each
subsequent year (the "Annual Renewal Date") for a period
ending two years from each Annual Renewal Date unless either
the Executive or his Employer gives written notice to the
other at least 60 days prior to an Annual Renewal Date (in
which case this Agreement will continue in effect for a term
ending one year from the Annual Renewal Date immediately
following such notice).
(b) Termination for Cause. Notwithstanding the
provisions of Section 1(a), this Agreement will terminate
automatically upon termination of the Executive's employment
<PAGE 1> by his Employer for Cause. As used in this
Agreement, the term "Cause" means:
(i) prior to a Change in Control, termination for
any reason; and
(ii) concurrent with or following a Change in
Control, termination following (A) the Executive's
conviction or plea of guilty or nolo contendere to a
felony, a crime of falsehood, or a crime involving
fraud or moral turpitude, or the actual incarceration
of the Executive for a period of 45 consecutive days,
(B) the Executive's willful and repeated failure to
follow the lawful instructions of his Employer after
receipt of written notice of such instructions from an
appropriate corporate official, other than a failure
resulting from the Executive's incapacity because of
physical or mental illness, or (C) a government
regulatory agency recommends or orders in writing that
the employment of the Executive be so terminated.
If the Executive's employment is terminated for Cause, his
rights under this Agreement will cease as of the effective
date of such termination.
(c) Voluntary Termination, Retirement, or Death.
Notwithstanding the provisions of Section 1(a), this
Agreement will terminate automatically upon the voluntary
termination of the Executive's employment (other than in
accordance with Section 2), his retirement or his death. In
any such event, the Executive's rights under this Agreement
will cease as of the effective date of such termination;
provided, however, that if the Executive dies after a Notice
of Termination (as defined in Section 2(b)) is delivered by
him in accordance with such section, the payments described
in Section 3 will nonetheless be made to the person or
persons determined pursuant to Section 9(b).
(d) Disability. Notwithstanding the provisions of
Section 1(a), this Agreement will terminate automatically
upon the termination of the Executive's employment by reason
of his Disability. In such event, the Executive's rights
under this Agreement will cease as of the effective date of
such termination; provided, however, that if the Executive
becomes disabled after a Notice of Termination is delivered
by him in accordance with Section 2(b), he will nonetheless
be entitled to receive the payments described in Section 3.
As used in this Agreement, the term "Disability" means
incapacitation, by accident, sickness or otherwise, such
that the Executive is rendered unable to perform the
essential duties required of him by his then position with
the Employer, notwithstanding reasonable accommodation, for
a period of six consecutive months.
2. Termination Following a Change in Control. <PAGE 2>
(a) Events Giving Right To Terminate For Good Reason.
If a Change in Control occurs and, concurrently therewith or
thereafter during the term of this Agreement, an event
constituting Good Reason also occurs with respect to the
Executive, he may terminate his employment in accordance
with the provisions of Section 2(b) and, thereupon, will
become entitled to the payments described in Section 3. As
used in this Agreement, the term "Good Reason" means any of
the following events:
(i) the involuntary termination of the Executive,
other than an involuntary termination permitted in
Sections 1(b) and (d);
(ii) a reduction in the Executive's title,
responsibility (including reporting responsibility) or
authority as in effect immediately prior to the Change
in Control; provided, however, that the assignment of
the Executive to a position with a reasonably similar
title, responsibility and authority will not constitute
an event of Good Reason if the Executive's actual or
targeted compensation in such new position is not less
than the Executive's actual and targeted compensation
immediately prior to the Change in Control;
(iii) the assignment to the Executive of duties
inconsistent with his position immediately prior to the
Change in Control, except for an assignment of duties
consistent with a position permitted in Clause (ii);
(iv) reassignment of the Executive to a principal
office which is more than 50 miles from 601 Penn
Street, Reading, Pennsylvania;
(v) a reduction in the Executive's annual base
salary in effect immediately prior to the Change in
Control;
(vi) the failure to provide the Executive with
welfare, pension, incentive compensation, fringe and
other benefits to which he was entitled immediately
prior to the Change in Control, unless such failure
occurs by reason of a reduction or change in such
benefits for employees generally or similarly situated
executive employees of the corporation which is the
acquiring, resulting or successor corporation in the
Change in Control (or an affiliate thereof); or
(vii) any material breach of this Agreement by
the corporation that may be the Executive's Employer at
the relevant time, coupled with the failure to cure the
same within 30 days after receipt of written notice of
such breach from the Executive.
<PAGE 3>
(b) Notice of Termination. Upon the occurrence of a
Change in Control and an event of Good Reason, the Executive
may, within 90 days of the occurrence of any such event,
resign from employment by a notice in writing ("Notice of
Termination") delivered to Main, whereupon he will become
entitled to the payments described in Section 3. In the
case of a termination described in Clause (i) of Section
2(a), the Executive will confirm his involuntary
termination, in writing, within 90 days of the date of such
termination, and such confirmation will be deemed a Notice
of Termination.
(c) Change in Control Defined. As used in this
Agreement, the term "Change in Control" means any of the
following:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), other than
Main, a subsidiary of Main, an employee benefit plan of
Main or a subsidiary of Main (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of Main
representing more than 20% of the combined voting power
of Main's then outstanding securities;
(ii) the occurrence of, or execution of an
agreement providing for, a sale of all or substantially
all of the assets of Main or the Bank to an entity
which is not a direct or indirect subsidiary of Main;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger,
consolidation or similar transaction involving Main,
unless (A) the shareholders of Main immediately prior
to the consummation of any such transaction will
initially own securities representing a majority of the
voting power of the surviving or resulting corporation,
and (B) the directors of Main immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the surviving
or resulting corporation; and
(iv) any other event which is at any time
irrevocably designated as a "Change in Control" for
purposes of this Agreement by resolution adopted by a
majority of the then non-employee directors of Main.
3. Rights in the Event of Certain Terminations Following
Change in Control. In the event the Executive validly and timely
delivers a Notice of Termination to Main, he will be entitled to
receive the following payments and benefits:
<PAGE 4>
(a) Basic Payments. The Executive will be paid an
amount equal to two times the sum of (i) the highest
annualized base salary paid to him during the year of
termination or the immediately preceding two calendar years,
and (ii) the highest bonus paid to him with respect to one
of the two calendar years immediately preceding the year of
termination. Such amount will be paid to the Executive in
24 equal monthly installments (without interest), beginning
30 days following the date of termination of employment.
For purposes of this subsection, to the extent necessary,
base salary and bonuses with any predecessor of Main or an
affiliate thereof shall be taken into account.
(b) Supplemental Payment in Lieu of Certain Benefits.
In lieu of continued pension, welfare and other benefits, a
lump sum cash payment of $26,499 will be paid to the
Executive within 30 days following the date of termination
of employment.
(c) Excise Tax Matters in General. In the event that
the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable
to the Executive by Main and/or any affiliated company, are
such that he becomes subject to the excise tax provisions of
Section 4999 of the Internal Revenue Code of 1996, as
amended (the "Code"), Main will pay him (or cause him to be
paid) such additional amount or amounts as will result in
his retention (after the payment of all federal, state and
local excise, employment, and income taxes on such payments
and the value of such benefits) of a net amount equal to the
net amount he would have retained had the initially
calculated payments and benefits been subject only to income
and employment taxation. For purposes of the preceding
sentence, the Executive will be deemed to be subject to the
highest marginal federal, state and local tax rates. All
calculations required to be made under this subsection will
be made by Main's independent certified public accountants,
subject to the right of Executive's representative to review
the same. All such amounts required to be paid will be paid
at the time any withholding may be required under applicable
law, and any additional amounts to which the Executive may
be entitled will be paid or reimbursed no later than 15 days
following confirmation of such amount by Main's accountants.
In the event any amounts paid hereunder are subsequently
determined to be in error because estimates were required or
otherwise, the parties agree to reimburse each other to
correct such error, as appropriate, and to pay interest
thereon at the applicable federal rate (as determined under
Code Section 1274A for the period of time such erroneous
amount remained outstanding and unreimbursed). The parties
recognize that the actual implementation of the provisions
of this subsection are complex and agree to deal with each
other in good faith to resolve any questions or
disagreements arising hereunder.
<PAGE 5>
(d) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provisions of
Subsection (c), if (i) it is determined that the payments to
be provided to the Executive hereunder would subject him to
the excise tax provisions of Code Section 4999, but (ii) a
5% reduction in the present value (as determined pursuant to
the provisions of Code Section 280G) of such payments would
result in no such excise tax being owed, then such payments
will be reduced or eliminated by the smallest amount
necessary to avoid the imposition of such excise tax. The
Executive will be entitled, within a reasonable period of
time, to specify which payments will be reduced or
eliminated.
4. Legal Expenses. Main will pay (or cause to be paid) to
the Executive all reasonable legal fees and expenses when
incurred by the Executive in seeking to obtain or enforce any
right or benefit provided by this Agreement, provided he brings
the action in good faith.
5. Notices. Any notice required or permitted to be given
under this Agreement will, to be effective hereunder, be given to
Main, in the case of notices given by the Executive, and will, to
be effective hereunder, be given by Main, in the case of notices
given to the Executive. Any such notice will be deemed properly
given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to the
residence of the Executive, in the case of notices to the
Executive, and to the principal office of Main, in the case of
notices to Main.
6. Waiver. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing and signed by the Executive and
an executive officer of Main specifically designated by the Board
of Directors of Main. No waiver by any party hereto at any time
of any breach by another party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party will be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time.
7. Assignment. This Agreement is not assignable by any
party hereto, except by Main and the Bank to any successor in
interest to the respective businesses of Main and the Bank.
8. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter of this
Agreement and, in accordance with the provisions of Section 18,
supersedes any prior agreement of the parties.
9. Successors; Binding Agreement.
(a) Main will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise)
<PAGE 6> to all or substantially all of the business and/or
assets of Main and/or the Bank to expressly assume and agree
to perform this Agreement (or cause it to be performed) in
the same manner and to the same extent that Main, the Bank
or any affiliated company of either would be required to
perform it if no such succession had taken place. Failure
by Main to obtain such assumption and agreement prior to the
effectiveness of any such succession will constitute a
material breach of this Agreement. As used in this
Agreement, "Main" and the "Bank" means Main and the Bank as
hereinbefore defined and any successor to the business
and/or assets of Main and/or the Bank as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs,
distributees, devisees, and legatees. If the Executive
should die while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
10. Continuation of Certain Provisions. Any termination of
the Executive's employment under this Agreement or of this
Agreement will not affect the benefit provisions of Section 3 or
4, which will, if relevant, survive any such termination and
remain in full force and effect in accordance with their
respective terms.
11. Other Rights. Except as provided in Section 18,
nothing herein will be construed as limiting, restricting or
eliminating any rights the Executive may have under any plan,
contract or arrangement to which he is a party or in which he is
a vested participant; provided, however, that any termination
payments required hereunder will be in lieu of any severance
benefits to which he may be entitled under a severance plan or
arrangement of Main, the Bank or any affiliated company of
either; and provided further, that if the benefits under any such
plan or arrangement may not legally be eliminated, then the
payments hereunder will be correspondingly reduced in such
equitable manner as the Board of Directors of Main may determine.
12. No Mitigation or Offset. The Executive will not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; nor will any
amounts or benefits payable or provided hereunder be reduced in
the event he does secure employment.
13. Validity. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
<PAGE 7> enforceability of any other provision of this Agreement,
which will remain in full force and effect. In addition, to the
extent relevant, if a government regulatory agency recommends or
orders that the Bank terminate the employment of the Executive
with the Bank or relieve him of his duties as such relate to the
Bank, the Agreement or such provision will nevertheless be and
remain an obligation of Main enforceable against it in accordance
with its terms, notwithstanding any such termination of the
Executive's employment with the Bank.
14. Applicable Law. Except to the extent preempted by
federal law, this Agreement will be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
15. Number. Words used herein in the singular will be
construed as being used in the plural, as the context requires,
and vice versa.
16. Headings. The headings of the sections and subsections
of this Agreement are for convenience only and will not control
or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
17. References to Entities. All references to Main will be
deemed to include references to the Bank, as appropriate in the
relevant context, and vice versa.
18. Effective Date; Termination of Prior Agreement. This
Agreement will become effective immediately upon the execution
and delivery of this Agreement by the parties hereto. Upon the
execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof will be deemed
automatically terminated and be of no further force or effect.
19. Withholding For Taxes. All amounts and benefits paid
or provided hereunder will be subject to withholding for taxes as
required by law.
20. Individual Agreement. This Agreement is an agreement
solely between and among the parties hereto. It is intended to
constitute a nonqualified unfunded arrangement for the benefit of
<PAGE 8> a key management employee and will be construed and
interpreted in a manner consistent with such intention.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MAIN STREET BANCORP, INC.
By/s/ Nelson R. Oswald
(SEAL)
BERKS COUNTY BANK
By/s/ Nelson R. Oswald
(SEAL)
/s/ Steven A. Ehrlich (SEAL)
Steven A. Ehrlich <PAGE 9>
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 1st day of May,
1998, between MAIN STREET BANCORP, INC., a Pennsylvania business
corporation ("Main"), BERKS COUNTY BANK, a Pennsylvania banking
corporation (the "Bank"), and NORMAN E. HEILENMAN, an individual
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive will initially be serving as a Senior
Vice President of Main and the Bank following the consolidation
of BCB Financial Services Corporation and Heritage Bancorp, Inc.
to form Main; and
WHEREAS, Main and the Bank consider the continued services
of the Executive to be in the best interest of Main, the Bank and
the shareholders of Main; and
WHEREAS, Main and the Bank desire to induce the Executive to
remain in the employ of his then employer (whether it be Main or
any other company affiliated with Main (the "Employer")) on an
impartial and objective basis in the event of a transaction
pursuant to which a Change in Control (as defined in
Section 2(c)) of Main occurs.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Term of Agreement.
(a) In General. Except as otherwise provided herein,
the term of this Agreement will be for a period commencing
on the date of this Agreement and ending on December 31,
2000; provided, however, that this Agreement will
automatically be renewed on January 1, 2000 for the two-year
period commencing on such date and ending on December 31,
2001, unless either the Executive or his Employer gives
written notice of nonrenewal to the other on or before
November 1, 1999 (in which case this Agreement will continue
in effect through December 31, 2000); and provided further,
that if this Agreement is renewed on January 1, 2000, it
will automatically be renewed on January 1 of each
subsequent year (the "Annual Renewal Date") for a period
ending two years from each Annual Renewal Date unless either
the Executive or his Employer gives written notice to the
other at least 60 days prior to an Annual Renewal Date (in
which case this Agreement will continue in effect for a term
ending one year from the Annual Renewal Date immediately
following such notice).
(b) Termination for Cause. Notwithstanding the
provisions of Section 1(a), this Agreement will terminate
automatically upon termination of the Executive's employment
<PAGE 1> by his Employer for Cause. As used in this
Agreement, the term "Cause" means:
(i) prior to a Change in Control, termination for
any reason; and
(ii) concurrent with or following a Change in
Control, termination following (A) the Executive's
conviction or plea of guilty or nolo contendere to a
felony, a crime of falsehood, or a crime involving
fraud or moral turpitude, or the actual incarceration
of the Executive for a period of 45 consecutive days,
(B) the Executive's willful and repeated failure to
follow the lawful instructions of his Employer after
receipt of written notice of such instructions from an
appropriate corporate official, other than a failure
resulting from the Executive's incapacity because of
physical or mental illness, or (C) a government
regulatory agency recommends or orders in writing that
the employment of the Executive be so terminated.
If the Executive's employment is terminated for Cause, his
rights under this Agreement will cease as of the effective
date of such termination.
(c) Voluntary Termination, Retirement, or Death.
Notwithstanding the provisions of Section 1(a), this
Agreement will terminate automatically upon the voluntary
termination of the Executive's employment (other than in
accordance with Section 2), his retirement or his death. In
any such event, the Executive's rights under this Agreement
will cease as of the effective date of such termination;
provided, however, that if the Executive dies after a Notice
of Termination (as defined in Section 2(b)) is delivered by
him in accordance with such section, the payments described
in Section 3 will nonetheless be made to the person or
persons determined pursuant to Section 9(b).
(d) Disability. Notwithstanding the provisions of
Section 1(a), this Agreement will terminate automatically
upon the termination of the Executive's employment by reason
of his Disability. In such event, the Executive's rights
under this Agreement will cease as of the effective date of
such termination; provided, however, that if the Executive
becomes disabled after a Notice of Termination is delivered
by him in accordance with Section 2(b), he will nonetheless
be entitled to receive the payments described in Section 3.
As used in this Agreement, the term "Disability" means
incapacitation, by accident, sickness or otherwise, such
that the Executive is rendered unable to perform the
essential duties required of him by his then position with
the Employer, notwithstanding reasonable accommodation, for
a period of six consecutive months.
2. Termination Following a Change in Control. <PAGE 2>
(a) Events Giving Right To Terminate For Good Reason.
If a Change in Control occurs and, concurrently therewith or
thereafter during the term of this Agreement, an event
constituting Good Reason also occurs with respect to the
Executive, he may terminate his employment in accordance
with the provisions of Section 2(b) and, thereupon, will
become entitled to the payments described in Section 3. As
used in this Agreement, the term "Good Reason" means any of
the following events:
(i) the involuntary termination of the Executive,
other than an involuntary termination permitted in
Sections 1(b) and (d);
(ii) a reduction in the Executive's title,
responsibility (including reporting responsibility) or
authority as in effect immediately prior to the Change
in Control; provided, however, that the assignment of
the Executive to a position with a reasonably similar
title, responsibility and authority will not constitute
an event of Good Reason if the Executive's actual or
targeted compensation in such new position is not less
than the Executive's actual and targeted compensation
immediately prior to the Change in Control;
(iii) the assignment to the Executive of duties
inconsistent with his position immediately prior to the
Change in Control, except for an assignment of duties
consistent with a position permitted in Clause (ii);
(iv) reassignment of the Executive to a principal
office which is more than 50 miles from 601 Penn
Street, Reading, Pennsylvania;
(v) a reduction in the Executive's annual base
salary in effect immediately prior to the Change in
Control;
(vi) the failure to provide the Executive with
welfare, pension, incentive compensation, fringe and
other benefits to which he was entitled immediately
prior to the Change in Control, unless such failure
occurs by reason of a reduction or change in such
benefits for employees generally or similarly situated
executive employees of the corporation which is the
acquiring, resulting or successor corporation in the
Change in Control (or an affiliate thereof); or
(vii) any material breach of this Agreement by
the corporation that may be the Executive's Employer at
the relevant time, coupled with the failure to cure the
same within 30 days after receipt of written notice of
such breach from the Executive.
<PAGE 3>
(b) Notice of Termination. Upon the occurrence of a
Change in Control and an event of Good Reason, the Executive
may, within 90 days of the occurrence of any such event,
resign from employment by a notice in writing ("Notice of
Termination") delivered to Main, whereupon he will become
entitled to the payments described in Section 3. In the
case of a termination described in Clause (i) of
Section 2(a), the Executive will confirm his involuntary
termination, in writing, within 90 days of the date of such
termination, and such confirmation will be deemed a Notice
of Termination.
(c) Change in Control Defined. As used in this
Agreement, the term "Change in Control" means any of the
following:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (the "Exchange Act")), other than
Main, a subsidiary of Main, an employee benefit plan of
Main or a subsidiary of Main (including a related
trust), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of Main
representing more than 20% of the combined voting power
of Main's then outstanding securities;
(ii) the occurrence of, or execution of an
agreement providing for, a sale of all or substantially
all of the assets of Main or the Bank to an entity
which is not a direct or indirect subsidiary of Main;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger,
consolidation or similar transaction involving Main,
unless (A) the shareholders of Main immediately prior
to the consummation of any such transaction will
initially own securities representing a majority of the
voting power of the surviving or resulting corporation,
and (B) the directors of Main immediately prior to the
consummation of such transaction will initially
represent a majority of the directors of the surviving
or resulting corporation; and
(iv) any other event which is at any time
irrevocably designated as a "Change in Control" for
purposes of this Agreement by resolution adopted by a
majority of the then non-employee directors of Main.
3. Rights in the Event of Certain Terminations Following
Change in Control. In the event the Executive validly and timely
delivers a Notice of Termination to Main, he will be entitled to
receive the following payments and benefits:
<PAGE 4>
(a) Basic Payments. The Executive will be paid an
amount equal to two times the sum of (i) the highest
annualized base salary paid to him during the year of
termination or the immediately preceding two calendar years,
and (ii) the highest bonus paid to him with respect to one
of the two calendar years immediately preceding the year of
termination. Such amount will be paid to the Executive in
24 equal monthly installments (without interest), beginning
30 days following the date of termination of employment.
For purposes of this subsection, to the extent necessary,
base salary and bonuses with any predecessor of Main or an
affiliate thereof shall be taken into account.
(b) Supplemental Payment in Lieu of Certain Benefits.
In lieu of continued pension, welfare and other benefits, a
lump sum cash payment of $24,023 will be paid to the
Executive within 30 days following the date of termination
of employment.
(c) Excise Tax Matters in General. In the event that
the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable
to the Executive by Main and/or any affiliated company, are
such that he becomes subject to the excise tax provisions of
Section 4999 of the Internal Revenue Code of 1996, as
amended (the "Code"), Main will pay him (or cause him to be
paid) such additional amount or amounts as will result in
his retention (after the payment of all federal, state and
local excise, employment, and income taxes on such payments
and the value of such benefits) of a net amount equal to the
net amount he would have retained had the initially
calculated payments and benefits been subject only to income
and employment taxation. For purposes of the preceding
sentence, the Executive will be deemed to be subject to the
highest marginal federal, state and local tax rates. All
calculations required to be made under this subsection will
be made by Main's independent certified public accountants,
subject to the right of Executive's representative to review
the same. All such amounts required to be paid will be paid
at the time any withholding may be required under applicable
law, and any additional amounts to which the Executive may
be entitled will be paid or reimbursed no later than 15 days
following confirmation of such amount by Main's accountants.
In the event any amounts paid hereunder are subsequently
determined to be in error because estimates were required or
otherwise, the parties agree to reimburse each other to
correct such error, as appropriate, and to pay interest
thereon at the applicable federal rate (as determined under
Code Section 1274A for the period of time such erroneous
amount remained outstanding and unreimbursed). The parties
recognize that the actual implementation of the provisions
of this subsection are complex and agree to deal with each
other in good faith to resolve any questions or
disagreements arising hereunder.
<PAGE 5>
(d) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provisions of
Subsection (c), if (i) it is determined that the payments to
be provided to the Executive hereunder would subject him to
the excise tax provisions of Code Section 4999, but (ii) a
5% reduction in the present value (as determined pursuant to
the provisions of Code Section 280G) of such payments would
result in no such excise tax being owed, then such payments
will be reduced or eliminated by the smallest amount
necessary to avoid the imposition of such excise tax. The
Executive will be entitled, within a reasonable period of
time, to specify which payments will be reduced or
eliminated.
4. Legal Expenses. Main will pay (or cause to be paid) to
the Executive all reasonable legal fees and expenses when
incurred by the Executive in seeking to obtain or enforce any
right or benefit provided by this Agreement, provided he brings
the action in good faith.
5. Notices. Any notice required or permitted to be given
under this Agreement will, to be effective hereunder, be given to
Main, in the case of notices given by the Executive, and will, to
be effective hereunder, be given by Main, in the case of notices
given to the Executive. Any such notice will be deemed properly
given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to the
residence of the Executive, in the case of notices to the
Executive, and to the principal office of Main, in the case of
notices to Main.
6. Waiver. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing and signed by the Executive and
an executive officer of Main specifically designated by the Board
of Directors of Main. No waiver by any party hereto at any time
of any breach by another party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party will be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time.
7. Assignment. This Agreement is not assignable by any
party hereto, except by Main and the Bank to any successor in
interest to the respective businesses of Main and the Bank.
8. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter of this
Agreement and, in accordance with the provisions of Section 18,
supersedes any prior agreement of the parties.
9. Successors; Binding Agreement.
(a) Main will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise)
<PAGE 6> to all or substantially all of the business and/or
assets of Main and/or the Bank to expressly assume and agree
to perform this Agreement (or cause it to be performed) in
the same manner and to the same extent that Main, the Bank
or any affiliated company of either would be required to
perform it if no such succession had taken place. Failure
by Main to obtain such assumption and agreement prior to the
effectiveness of any such succession will constitute a
material breach of this Agreement. As used in this
Agreement, "Main" and the "Bank" means Main and the Bank as
hereinbefore defined and any successor to the business
and/or assets of Main and/or the Bank as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs,
distributees, devisees, and legatees. If the Executive
should die while any amount is payable to the Executive
under this Agreement if the Executive had continued to live,
all such amounts, unless otherwise provided herein, will be
paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee, or, if
there is no such designee, to the Executive's estate.
10. Continuation of Certain Provisions. Any termination of
the Executive's employment under this Agreement or of this
Agreement will not affect the benefit provisions of Section 3 or
4, which will, if relevant, survive any such termination and
remain in full force and effect in accordance with their
respective terms.
11. Other Rights. Except as provided in Section 18,
nothing herein will be construed as limiting, restricting or
eliminating any rights the Executive may have under any plan,
contract or arrangement to which he is a party or in which he is
a vested participant; provided, however, that any termination
payments required hereunder will be in lieu of any severance
benefits to which he may be entitled under a severance plan or
arrangement of Main, the Bank or any affiliated company of
either; and provided further, that if the benefits under any such
plan or arrangement may not legally be eliminated, then the
payments hereunder will be correspondingly reduced in such
equitable manner as the Board of Directors of Main may determine.
12. No Mitigation or Offset. The Executive will not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; nor will any
amounts or benefits payable or provided hereunder be reduced in
the event he does secure employment.
13. Validity. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
<PAGE 7> enforceability of any other provision of this Agreement,
which will remain in full force and effect. In addition, to the
extent relevant, if a government regulatory agency recommends or
orders that the Bank terminate the employment of the Executive
with the Bank or relieve him of his duties as such relate to the
Bank, the Agreement or such provision will nevertheless be and
remain an obligation of Main enforceable against it in accordance
with its terms, notwithstanding any such termination of the
Executive's employment with the Bank.
14. Applicable Law. Except to the extent preempted by
federal law, this Agreement will be governed by and construed in
accordance with the domestic internal law of the Commonwealth of
Pennsylvania.
15. Number. Words used herein in the singular will be
construed as being used in the plural, as the context requires,
and vice versa.
16. Headings. The headings of the sections and subsections
of this Agreement are for convenience only and will not control
or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
17. References to Entities. All references to Main will be
deemed to include references to the Bank, as appropriate in the
relevant context, and vice versa.
18. Effective Date; Termination of Prior Agreement. This
Agreement will become effective immediately upon the execution
and delivery of this Agreement by the parties hereto. Upon the
execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof will be deemed
automatically terminated and be of no further force or effect.
19. Withholding For Taxes. All amounts and benefits paid
or provided hereunder will be subject to withholding for taxes as
required by law.
20. Individual Agreement. This Agreement is an agreement
solely between and among the parties hereto. It is intended to
constitute a nonqualified unfunded arrangement for the benefit of
<PAGE 8> a key management employee and will be construed and
interpreted in a manner consistent with such intention.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MAIN STREET BANCORP, INC.
By/s/ Nelson R. Oswald
(SEAL)
BERKS COUNTY BANK
By/s/ Nelson R. Oswald
(SEAL)
/s/ Norman E. Heilenman (SEAL)
Norman E. Heilenman <PAGE 9>
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 23,370
<INT-BEARING-DEPOSITS> 58
<FED-FUNDS-SOLD> 6,870
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 284,852
<INVESTMENTS-CARRYING> 1,275
<INVESTMENTS-MARKET> 1,274
<LOANS> 518,151
<ALLOWANCE> 5,905
<TOTAL-ASSETS> 864,357
<DEPOSITS> 698,552
<SHORT-TERM> 10,006
<LIABILITIES-OTHER> 12,157
<LONG-TERM> 50,000
0
0
<COMMON> 9,690
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<TOTAL-LIABILITIES-AND-EQUITY> 864,357
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<INTEREST-TOTAL> 30,505
<INTEREST-DEPOSIT> 12,423
<INTEREST-EXPENSE> 14,762
<INTEREST-INCOME-NET> 15,743
<LOAN-LOSSES> 485
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<INCOME-PRETAX> 7,046
<INCOME-PRE-EXTRAORDINARY> 5,095
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,095
<EPS-PRIMARY> 0.53
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<LOANS-NON> 7,213
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<LOANS-TROUBLED> 68
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<ALLOWANCE-OPEN> 5,738
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