SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for Quarterly period ended
September 30, 1999.
( ) 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 October 31, 1999
COMMON STOCK ($1.00 Par Value) 10,429,953
(Title of Class) (Outstanding Shares)
MAIN STREET BANCORP, INC.
FORM 10-Q
For the Quarter Ended September 30, 1999
Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1999 and December 31,1998 4
Consolidated Statements of Income for
Three and Nine Month Periods ended
September 30, 1999 and 1998 5
Consolidated Statement of Stockholders'
Equity for the Nine Month Period
Ended September 30, 1999 6
Consolidated Statements of Cash Flows for
the Nine Month Periods Ended September 30,
1999 and 1998 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24
PART II OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security
Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 27
Main Street Bancorp, Inc. (the Company) may from time to
time make written or oral "forward-looking statements,"
including statements contained in the Company's filings with the
Securities and Exchange Commission (including this Quarterly
Report on Form 10-Q and the exhibits hereto and thereto), in its
reports to stockholders and in other communications by the
Company, which are made in good faith by the Company pursuant to
the "safe harbor" provisions of the private Securities
Litigation Reform Act of 1995.
These forward-looking statements include statements with
respect to the Company's beliefs, plans, objectives, goals,
expectations, anticipations, estimates and intentions, that are
subject to significant risks and uncertainties, and are subject
to change based on various factors (some of which are beyond the
Company's control). The words "may," "could," "should,"
"would," "believe," "anticipate," "estimate," "expect,"
"intend," "plan" and similar expressions are intended to
identify forward-looking statements. The following factors,
among others, could cause the Company's financial performance to
differ materially from the plans, objectives, expectations,
estimates and intentions expressed in such forward-looking
statements: the strength of the United States economy in
general and the strength of the local economies in which the
Company conducts operations; the effects of, and changes in,
trade, monetary and fiscal policies and laws, including interest
rate policies of the Board of Governors of the Federal Reserve
System; inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new
products and services of the Company and the perceived overall
value of these products and services by users, including the
features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute
competitors' products and services for the Company's products
and services; the success of the Company in gaining regulatory
approval of its products and services, when required; the impact
of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in
consumer spending and saving habits; and the success of the
Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important
factors is not exclusive. The Company does not undertake to
update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the
Company.
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1999 1998
(In thousands, except share data)
<S> <C> <C>
Cash and due from banks $ 45,371 $ 28,710
Interest-bearing deposits with banks 1,153 336
Federal funds sold 470 470
Securities available for sale 381,187 534,526
Securities held to maturity, fair value September 30,
1999 $252,416; December 31, 1998 $25 267,216 25
Loans receivable, net of allowance for loan losses
September 30, 1999 $6,931; December 31, 1998 $7,222 623,153 533,395
Mortgages held for sale 4,937 5,069
Due from mortgage investors 3,504 14,567
Bank premises and equipment, net 34,116 25,717
Prepaid expenses and other assets 42,329 15,726
TOTAL ASSETS $1,403,436 $1,158,541
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $116,702 $102,432
Demand, interest bearing 144,865 68,116
Savings 328,303 326,749
Time deposits 428,500 321,253
TOTAL DEPOSITS 1,018,370 818,550
Accrued interest payable and other liabilities 28,178 24,007
Other borrowed funds 188,984 86,072
Long-term debt 85,000 135,000
TOTAL LIABILITIES 1,320,532 1,063,629
Stockholders' equity:
Common stock, par value $1.00 per share;
authorized 50,000,000 shares; issued and outstanding
September 30, 1999 10,429,953 shares; December 31,
1998 10,388,443 shares 10,430 10,388
Surplus 64,390 64,134
Retained earnings 20,006 19,227
Accumulated other comprehensive income (11,922) 1,163
TOTAL STOCKHOLDERS' EQUITY 82,904 94,912
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,403,436 $1,158,541
========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, 1999 September 30, 1998 September 30,1999 September 30, 1998
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loan receivable, including fees $12,600 $11,381 $35,984 $33,141
Interest and dividends on securities:
Taxable 5,518 3,572 16,106 10,523
Tax-exempt 3,646 1,345 10,466 3,110
Other 31 238 49 267
Total interest income 21,795 16,536 62,605 47,041
Interest expense:
Deposits 8,846 7,199 24,655 19,622
Other borrowed funds 2,689 363 6,817 1,212
Long-term debt 1,039 718 4,014 2,208
Total interest expense 12,574 8,280 35,486 23,042
Net interest income 9,221 8,256 27,119 23,999
Provision for loan losses 200 1,725 800 2,210
Net interest income after provision
for loan losses 9,021 6,531 26,319 21,789
Other income:
Income from fiduciary activities 291 195 816 626
Customer service fees 951 671 2,408 1,883
Mortgage banking activities 330 545 1,029 1,356
Net realized gains (losses) on sale of
securities (35) 1,723 (113) 3,873
Other 225 23 510 198
Total other income 1,762 3,157 4,650 7,936
Other expenses:
Salaries and wages 3,686 2,504 10,056 7,190
Employee benefits 915 666 2,462 1,832
Severance payments 1,727 -- 2,058 --
Occupancy 1,151 604 2,892 1,585
Equipment depreciation and maintenance 648 390 1,748 1,113
Merger expenses -- -- -- 1,963
Other 2,994 1,822 8,373 5,294
Total other expenses 11,121 5,986 27,589 18,977
Income before income taxes (338) 3,702 3,380 10,748
Federal income taxes (benefit) (1,108) 574 (1,773) 2,525
Net Income $ 770 $ 3,128 $ 5,153 $ 8,223
============================ ==========================
Basic earnings per share $0.07 $0.30 $0.49 $0.79
============================ ==========================
Diluted earnings per share $0.07 $0.30 $0.49 $0.78
========================== =========================
See Notes to Consolidated Financial Statements
</TABLE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Number Of Accumulated
Shares Other
Common Common Retained Comprehensive
Stock Stock Surplus Earnings Income Total
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 10,388,443 $10,388 $64,134 $19,227 $ 1,163 $94,912
Comprehensive income
Net income 5,153 5,153
Change in net unrealized
gains (losses) on securities
available for sale (13,085) (13,085)
Total comprehensive income (7,932)
Issuance of common stock upon
exercise of stock options 41,510 42 256 298
Cash dividends declared -- -- -- (4,374) -- (4,374)
Balance September 30, 1999 10,429,953 $10,430 $64,390 $20,006 ($11,922) $82,904
==================================================================
See Notes to Consolidated Financial Statements
</TABLE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1999 September 30,1998
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,153 $ 8,223
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan and foreclosed real estate losses 833 2,235
Provision for depreciation and amortization 1,799 1,030
(Gain) Loss on sale of equipment and foreclosed real estate (84) 45
Net realized (gain) loss on sale of securities 113 (3,872)
Provision for deferred income taxes ( 2 ,962) (246)
Proceeds from sale of mortgage loans 72,126 80,438
Net (gain) loss on sale of mortgage loans 223 (129)
Mortgage loans originated for sale (72,217) (80,361)
Net (amortization) of security premiums and discounts 270 902
(Increase) decrease in:
Due from mortgage investors 11,063 (4,770)
Accrued interest receivable and other assets (16,393) (10,394)
Increase in accrued interest payable and other liabilities 2,620 2,293
Net cash provided by operating activities 2,544 (4,606)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 56,667 27,860
Proceeds from maturities of and principal repayments on securities
available for sale 28,903 61,213
Proceeds from maturities and calls of securities held to maturity 65 5,350
Purchases of securities available for sale (107,893) (275,165)
Purchases of securities held to maturity (110,446) --
(Increase) Decrease in interest-bearing deposits with banks (817) (78)
(Increase) Decrease in federal funds sold -- --
Loans made to customers, net of principal collected (91,563) (53,313)
Proceeds from sale of third-party dealer loan portfolio -- 6,367
Proceeds from sales of foreclosed real estate 784 865
Proceeds from sales of bank premises and equipment 9 2
Purchases of premises and equipment (10,248) __(6,356)
Net cash used in investing activities (234,539) (233,255)
</TABLE>
MAIN STREET BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS Con't. (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1999 September 30, 1998
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits $ 92,573 $ 75,227
Net increase in time deposits 107,247 49,447
Proceeds from (repayment of) other borrowed funds 102,912 100,033
Proceeds from long term borrowings -- 25,000
Principal payments of long-term borrowings (50,000) (4,450)
Proceeds from exercise of stock options 298 (20)
Cash in lieu of fractional shares -- 464
Pre-merger stock transactions of pooled entity -- 201
Cash dividends paid (4,374) (3,941)
Net cash provided by financing activities 248,656 241,961
Increase (decrease) in cash and due from banks 16,661 4,100
Cash and due from banks:
Beginning 28,710 24,918
Ending $45,371 $29,018
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $33,574 $22,853
======== =======
Income taxes $ 1,360 $ 2,180
======== =======
See Notes To Consolidated Financial Statements
</TABLE>
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
On May 1, 1998, the Company was formed upon the completion of a
merger of equals between BCB Financial Services Corporation
("BCB") and Heritage Bancorp, Inc. ("Heritage"). The Company
issued approximately 9,680,000 shares of common stock to the
stockholders of BCB and Heritage. BCB stockholders received
1.3335 shares of the Company's common stock for each outstanding
share and Heritage stockholders received 1.05 shares of the
Company's common stock for each outstanding share. Cash was
paid for fractional share interests. The merger was accounted
for as a pooling of interests by the Company. Merger costs of
approximately $1,963,000, consisting primarily of professional
fees and related transaction costs, have been expensed in
connection with the merger.
The unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Main
Street Bank (the "Bank") and MBNK Investment Company. 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 for the
nine-month period ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1999.
EARNINGS PER SHARE
The following table sets forth the computations of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
<S> <C> <C> <C> <C>
Numerator, net income $ 770,000 $ 3,128,000 $ 5,153,000 $ 8,223,000
========================= ========================
Denominator:
Denominator for basic earnings per
share, weighted average shares 10,417,346 10,365,185 10,410,114 10,348,663
Effect of dilutive securities, stock options 69,221 133,034 60,233 150,379
Denominator for diluted earnings per
share, weighted average shares
and assumed conversions 10,486,567 10,498,219 10,470,347 10,499,042
========================= =======================
Basic earnings per common share $0.07 $0.30 $0.49 $0.79
========================= =======================
Diluted earnings per common share $0.07 $0.30 $0.49 $0.78
====================== =====================
</TABLE>
COMPREHENSIVE INCOME
The only comprehensive income item that the Company
presently has is unrealized gains (losses) on securities
available for sale. The unrealized gains (losses) on securities
available for sale are as follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
September September
30, 1999 30, 1998
<S> <C> <C>
Unrealized holding gains (losses) arising
during the period:
Before tax amount $(20,244) $ 6,245
Tax (expense) benefit 7,086 (2,123)
Net of tax amount (13,158) 4,122
Less reclassification adjustment for gains
(losses) included in net income:
Before tax amount (113) 780
Tax (expense) benefit 40 (265)
Net of tax amount (73) 515
Net unrealized gains (losses):
Before tax amount (20,131) 5,465
Tax (expense) benefit 7,046 (1,858)
Net of tax amount $(13,085) $ 3,607
====== =====
</TABLE>
OTHER EXPENSES
The following represents the most significant categories of
other expenses for the three and nine months ended September 30:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30
1999 1998 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Advertising $ 681 $ 276 $1,794 $ 844
Data processing and MAC fees 416 301 1,145 854
Office supplies and expenses 575 394 1,512 979
Professional fees 211 213 613 614
All other expenses 1,111 638 3,309 2,003
$2,994 $1,822 $8,373 $5,294
====== ====== ====== ======
</TABLE>
ACCOUNTING POLICIES
In June 1999, the Financial Accounting Standards Board
issued Statement No. 137, which delayed the implementation date
of Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which now becomes effective for the
Bank January 1, 2001. Management expects this Statement will
have no impact on the Bank, as presently no derivative
instruments are held.
SECURITIES
The Company transferred securities with an amortized cost
of $125.8 million from available for sale to held to maturity
during the second quarter of 1999. The securities transferred
were municipal securities and US Agency securities. The primary
reason for the transfer of the securities was due to tax
planning strategies. In connection with this strategy,
management re-evaluated its intention with respect to its
available for sale portfolio and has concluded that the
securities will be held to maturity. The Company transferred
these securities at amortized cost rather than fair value, due
to the immateriality of the difference between the two on the
date of transfer, and the fact that there would be no impact on
earnings or earnings per share as a result of the transfer.
NEW BRANCH OPENINGS
As of September 30, 1999, the Company has opened 17 of the
23 branches announced last year. The remaining six branches
will open in the next six months.
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
Total assets increased to $1.40 billion at September 30,
1999, compared to $1.16 billion at December 31, 1998, an
increase of $240.0 million, or 20.7%. This increase was
primarily reflected in securities, loans, bank premises and
equipment and other assets.
Securities increased $113.8 million, or 21.3%, to $648.4
million at September 30, 1999 compared to $534.6 million at
December 31, 1998. The increase is due to the purchase of
$218.3 million in securities, offset by the securities sales and
maturities of $85.6 million. The Company elected to increase
its securities portfolio as part of a program to leverage the
balance sheet and increase earnings, thereby offsetting a
portion of the increased operating expenses that resulted from
the Company's branch expansion program. The securities
purchases were initially funded with short-term Federal Home
Loan Bank advances. Over time, the Company plans to replace
most of these short-term borrowings with lower-cost deposits
expected to be gathered from the branch expansion plans. The
strategic plan also includes replacing securities with higher
yielding loans as additional volume is generated from the
Company's new markets. The Company's goal is to execute this
plan and increase the initial spread of 2% on borrowings and
securities into a 4% spread on deposits and loans. Nearly the
entire bond securities portfolio is rated AAA by either Standard
& Poor or Moodys. There were no derivatives held at September
30, 1999 and no investments in hedge funds. Securities held at
September 30, 1999 were primarily government agencies,
municipalities, or bank stocks.
The Company transferred securities with an amortized cost
of $125.8 million from available for sale to held to maturity
during the second quarter of 1999. The securities transferred
were municipal securities and US Agency securities. The primary
reason for the transfer of the securities was due to tax
planning strategies. In connection with this strategy,
management re-evaluated its intention with respect to its
available for sale portfolio and has concluded that the
securities will be held to maturity. The Company transferred
these securities at amortized cost rather than fair value due to
the immateriality of the difference between the two on the date
of transfer, and the fact that there would be no impact on
earnings or earnings per share as a result of the transfer.
Loans receivable, net of allowance for loan losses of $6.9
million at September 30, 1999 and $7.2 million at December 31,
1998, increased to $623.2 million at September 30, 1999 from
$533.4 million at December 31, 1998. The increase of $89.8
million, or 16.8%, was primarily due to an increase in
commercial loans. During the first nine months of 1999, the
Company provided for $0.8 million in loan losses. See
"Provision for Loan Losses" for a further discussion of the
provision.
Amounts due from mortgage investors decreased from $14.6
million at December 31, 1998 to $3.5 million at September 30,
1999. These amounts represent loans originated by the Bank for
other mortgage investors/lenders under standing commitments.
These loans are temporarily funded for investors for periods
ranging from three to twenty-one days.
Bank premises and equipment, net of accumulated
depreciation, increased from $25.7 million at December 31, 1998
to $34.1 million at September 30, 1999. This increase was
attributable to the leasehold improvements and purchase of
various furniture, fixtures and equipment for the twenty-three
branch expansion program.
Prepaid expenses and other assets increased by 169.4%, or
$26.6 million, to $42.3 million at September 30, 1999 from $15.7
million at December 31, 1998. The increase was due to the
recording of a $11.6 million receivable for securities that were
sold at September 30 but had not settled and also due to the
recording of a $6.4 million deferred tax asset relating to the
accounting requirements of FASB 115.
Total deposits, the primary source of funds, increased
$199.4 million to $1.018 billion at September 30, 1999 compared
to $818.6 million at December 31, 1998, an increase of 24.4%.
The increase in deposits was primarily in interest-bearing
checking and time deposits. Interest-bearing checking increased
from $68.1 million at December 31, 1998 to $144.9 million at
September 30, 1999, an increase of $76.8 million, or 112.8%.
The increase was due to the reclassification of the municipal
money management account from savings to interest-bearing
checking. At September 30, 1999, the Company had $66.1 million
in municipal money management accounts. Total time deposits
increased $107.2 million, or 33.4%, to $428.5 million at
September 30, 1999 from $321.3 million at December 31, 1998.
The increase in time deposits was due to a CD (certificate of
deposit) promotion the Bank initiated to increase liquidity in
advance of year 2000 (Y2K) uncertainties, provide long term
funding for loan and security purchases, and to attract new
customers to the Company's new branches. In order to receive
the bonus CD rate, customers were required to also open a lower-
cost checking and savings account.
As of September 30, 1999, the Company has opened 17 of the
23 branches in connection with the branch expansion announced
last year. These branches have been open an average of 4 months
and have gathered $70.3 million in deposits. The mix of these
deposits is 42% in checking and savings and 58% in certificates
of deposits.
Other liabilities increased $4.2 million, or 17.5%, to
$28.2 million at September 30, 1999 from $24.0 million at
December 31, 1998. The slight increase was due to the recording
of a $17.6 million payable at September 30, 1999 for securities
that were traded but not settled. At December 31, 1998, the
Company recorded $16.1 million in securities that were traded
but had not settled.
Other borrowed funds and long-term debt increased $52.9
million, or 23.9%, from $221.1 million at December 31, 1998 to
$274.0 million at September 30, 1999. The increase in other
borrowed funds and long-term debt was primarily used to fund
security purchases. As mentioned above, the Company elected to
purchase securities ahead of the in-flow of deposits and loans
expected to occur in 2000 and beyond from the addition of 23 new
branches in order to offset expected start-up costs in 1999 and
2000 associated with these branch openings.
Stockholders' equity decreased $12.0 million, or 12.6%,
from $94.9 million at December 31, 1998 to $82.9 million at
September 30, 1999. The decrease was primarily due to the
change in net appreciation (depreciation) on securities
available for sale, as required by FASB 115. At December 31,
1998, the Company had $1.2 million in appreciation, and at
September 30, 1999, the Company had $11.9 million in
depreciation, on securities available for sale. This decrease
occurred because of the general increase in interest rates
during that period. Should interest rates increase in the
future, stockholders' equity could further decrease due to
further depreciation of the securities available for sale.
Should interest rates decline in future periods, stockholders'
equity could increase as a result of appreciation on securities
available for sale. FASB 115 requires companies to report the
securities classified as "available-for-sale" at fair value,
with unrealized gains and losses, net of deferred income taxes,
reported as a separate component of stockholders' equity. FASB
115 only addresses one component of the balance sheet,
securities, and does not take into account fair value
adjustments for the remaining items of the balance sheet. FASB
107 addresses the full balance sheet market value issue but does
not require a separate adjustment to stockholders' equity. In
addition, the Company does not include the FASB 115 adjustment
to stockholders' equity when calculating regulatory capital
ratios. Thus, the $11.9 million reduction to equity for
securities depreciation at September 30, 1999, had no impact on
the Company's regulatory capital adequacy ratios.
RESULTS OF OPERATIONS
Overview
Net income for the third quarter of 1999 was $770,000
compared to $3.1 million for the third quarter of 1998. On a
per share basis, basic and diluted earnings were $0.07 and $0.30
for the third quarter of 1999 and 1998, respectively. Earnings
for the first nine months of 1999 were $5.2 million compared to
$8.2 million a year earlier. Basic earnings per share was $0.49
and $0.79 for the first nine months of 1999 and 1998,
respectively. Diluted earnings per share was $0.49 and 0.78 for
the first nine months of 1999 and 1998, respectively. During
the third quarter of 1999, the Company incurred a one-time,
pretax charge of $1.7 million for change in control and
severance payments to Allen E. Kiefer, who resigned as President
of the Company on August 4, 1999. See "Other Expenses" for
further explanation.
Net Interest Income
Net interest income is the difference between interest
income on interest-earning assets and interest expense on
interest-bearing liabilities. For the third quarter of 1999,
net interest income, calculated on a tax-equivalent basis,
increased $1.6 million, or 17.8%, to $10.6 million from $9.0
million in the third quarter of 1998. For the first nine months
of 1999, net interest income, calculated on a tax-equivalent
basis, was $31.2 million compared to $25.5 million for the first
nine months of 1998, an increase of $5.7 million, or 22.4%.
The increase in net interest income was primarily due to an
increase in average interest-earning assets. For year-to-date,
average interest-earning assets increased $384.3 million, or
47.1%, from $815.7 at September 30, 1998 to $1.20 billion at
September 30, 1999. For the third quarter, average interest-
assets increased $379.8 million, or 44.2%, from $860.2 million
at September 30, 1998 to $1.20 billion at September 30, 1999.
The increase in average assets consisted mostly of securities,
which increased $319.0 million, or 107.2 %, from $297.5 million
at September 30, 1998 to $616.5 million at September 30, 1999.
The majority of these securities purchases were funded with FHLB
borrowings at an approximate interest rate spread of 2.0%. As
mentioned earlier, the Company plans to eventually replace these
borrowings with deposits that will be gathered from the new
branch openings taking place in 1999.
Average interest-bearing liabilities increased $399.3
million to $1.13 billion for the third quarter of 1999 compared
to $730.7 million for the third quarter of 1998 and increased
$385.2 million to $1.07 billion for the year-to-date September,
1999 compared to $684.8 million for the year-to-date September,
1998. For the third quarter of 1999, the average rate paid on
interest-bearing liabilities was 4.43% compared to 4.50% for the
third quarter of 1998. For the year-to-date September, 1999,
the average rate paid on interest-bearing liabilities was 4.42%
compared to 4.50% for the year-to-date September, 1998. The
decrease came from the lower rates paid on other borrowed funds,
long-term debt, and money market savings accounts.
Net interest income calculated on a tax equivalent basis
remained flat for the three months ended September 30, 1999
compared to the three months ended June 30, 1999. This was up
$700,000 from the $9.9 million earned in the first quarter of
1999. The primary reason net interest income did not increase
in the third quarter versus the second quarter of 1999 was the
funding of the acquisition of noninterest-earning assets related
to the branch openings with interest bearing deposits and
borrowings. The bulk of the new branches were opened in late
second quarter of 1999. Each branch required vault cash
inventories and premises and equipment expenditures. Cash, due
from banks, and premises and equipment increased $14.5 million
from $ 65.0 million at June 30, 1999 to $79.5 million at
September 30, 1999. Another reason net interest margin remained
flat in the third quarter of 1999 versus the second quarter of
1999 was the increase in interest expense related to a
certificate of deposit promotion for the new branches. The
Company raised nearly $100 million of 6.00% certificates of
deposit with terms ranging between one and two years. These
deposits initially replaced lower cost overnight FHLB deposits
with some disintermediation in lower cost savings account. As
part of this promotion each customer was required to open a low
cost checking and savings account in order to obtain the high
rate certificate of deposit.
When the Company initiated its plan to open 23 new branches
in 1999, it anticipated it would be funding certain non-earning
assets with interest-bearing liabilities as the branches opened.
The Company also anticipated that it would be offering deposit
"specials" with aggressive interest rates in order to help
attract customers to new branches in new markets. These
transactions naturally affect net interest margin negatively and
were expected to occur around the time of the opening of the
majority of the 23 new branches in 1999. This is one of many of
the forecasted cost components of the branch expansion program
that has contributed to the decline in earnings from 1998 to
1999.
The Company believes that the certificate of deposit
promotion has been successful in attracting customers who may
not have opened accounts as quickly as they have. Each customer
has opened checking and savings accounts and the Company is
optimistic that the checking and savings account balances in
these new accounts will increase in the near future as customers
clear outstanding checks in other bank accounts and use our
branches more and more, thereby mitigating the initial negative
impact on third quarter 1999's net interest margin.
The Company believes that as the lower-cost checking and
savings account balances grow in the new branches, net interest
income should continue to increase as it had prior to the third
quarter 1999 as these funds are deployed into higher yielding
loans and securities. The Company also believes that as the
cash inventories and premises and equipment investments in these
new branches are leveraged into growth in deposits and loans,
the negative impact on net interest margin from these non
interest-earning assets will be more than offset by the positive
effect on net interest margin from new deposits and loans.
Net interest margin is the difference between interest
earned and interest paid, divided by average total interest-
earning assets. Net interest margin decreased 73 basis points
from 4.13% in the third quarter of 1998 to 3.40% in the third
quarter of 1999, calculated on a tax-equivalent basis. Net
interest margin decreased 71 basis points from 4.19% for the
year-to-date September, 1998 to 3.48% for the year-to-date
September, 1999. Net interest margin decreased primarily
because the Company conducted a leveraging strategy whereby it
increased securities nearly $300.0 million at yields
approximately 2.0% above the interest rate paid on funding
liabilities. Approximately $200.0 million of funding
liabilities were borrowings and $100.0 million were new
deposits. Because the spread on this incremental balance sheet
expansion was nearly 200 basis points below the Company's net
interest margin at the start of the leveraging strategy(during
the fourth quarter 1998), the Company's net interest margin has
declined. However, the net interest income generated by this
balance sheet expansion has been used to offset nearly $6.0
million of operating costs associated with opening 23 new
branches, thereby mitigating the Company's earnings dilution
from this expansion strategy. As borrowings are replaced with
lower cost deposits, and as securities are replaced with higher
yielding loans, the Company expects the initial 2.0% spread on
this leveraging program to widen and eventually reverse the
recent decline in net interest margin.
In September, 1999, the Company announced it had filed with
the SEC a registration statement pursuant to which it would
issue junior subordinated debentures to a Delaware business
trust that would then sell to the public preferred securities
representing an undivided beneficial interest in the trust. The
Company expects to raise up to $40.0 million before the end of
the year 1999. The Company expects that the interest expense
paid on the junior subordinated debentures will exceed the yield
on assets these funds will initially purchase. This will
negatively impact fourth quarter net interest income and net
interest margin. However, these funds will substantially
increase tier one capital, thereby allowing the Company to grow
while maintaining strong capital ratios. As deposits and loans
are obtained from the growth this offering capitalizes, the net
interest income and margin from the loans and deposits should
exceed the negative effect on net interest income and margin
resulting from this offering.
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 Bank's loan
portfolio. Management's periodic evaluation is based upon an
examination of the portfolio, past loss experience, current
economic conditions, the results of the most recent regulatory
examinations and other relevant factors. The provision for loan
losses was $0.8 million for the first nine months of 1999
compared to $2.2 million for the first nine months of 1998. The
provision for loan losses was $0.2 million for the third quarter
of 1999 and $1.7 million for the third quarter of 1998. During
the third quarter of 1998, the Company elected to boost its
provision due to the uncertainty regarding economic conditions.
The allowance for loan losses to non-performing loans was 98.9%
at September 30, 1999, 14.1% better than the 86.7% level at
December 31, 1998. See further discussion under "Asset
Quality".
Other Income
Other income decreased $3.3 million, or 41.8%, from $7.9
million for the first nine months of 1998 to $4.6 million for
the first nine months of 1999. Other income decreased $1.4
million, or 43.8%, from $3.2 million in the third quarter of
1998 to $1.8 million in the third quarter of 1999. The decrease
in other income for the first nine months and third quarter of
1999 was mostly due to the difference in realized gains and
losses on sales of securities and realized losses on mortgages
held for sale, which are included in income from mortgage
banking activities. Excluding these securities and mortgage held
for sale gains and losses, other income increased $1.0 million,
or 25.0%, for the first nine months of 1999 compared to 1998 and
increased $0.4 million, or 28.6%, in the third quarter of 1999
compared to the same period in 1998. For the first nine months
of 1998, the Company realized gains on sales of securities of
$3.9 million compared to realized losses on sales of securities
of $113,000 for the first nine months of 1999. In the third
quarter of 1998, the Company had $1.7 million in realized gains
on sales of securities compared to a $35,000 realized loss in
the third quarter of 1999. The 1998 realized gains on securities
were the result of sales of its available-for-sale equity
securities of Pennsylvania banks in order to provide additional
revenue to help offset one-time expenses that occurred in 1998.
These one-time expenses included $2.0 million of merger related
costs, $1.7 million of loan loss provision, and approximately
$0.2 million of facilities expenses related to the acquisition
and relocation to the Company's new office at 601 Penn Street,
Reading, PA.
Income from mortgage banking activities decreased $0.3
million, or 23.1%, from $1.3 million during the first nine
months of 1998 to $1.0 million for the first nine months of 1999
and decreased $0.2 million from $0.5 million in the third
quarter of 1998 to $0.3 million in the third quarter of 1999.
The decrease was as a result of the accounting treatment for
mortgages held for sale. Generally accepted accounting
principles require companies to record mortgages held for sale
at the lower of cost or market. The resulting gains or losses
are primarily a function of interest rate movements. Because
interest rates have risen in 1999, which is a normal aspect of
the business cycle, the market value of mortgages held for sale
declined $223,000, or 4.52% of the $4.9 million in loans
classified held for sale. Income from mortgage banking
activities also decreased slightly due a slower volume of
refinancing business due to the rise in interest rates.
Customer service fees increased $0.5 million, or 27.9%, to
$2.4 million during the first nine months of 1999 compared to
$1.9 million for the first nine months of 1998. For the third
quarter of 1999, customer service fees increased $0.3 million,
or 42.9%, to $1.0 million compared to $0.7 million for the third
quarter of 1998. Customer service fees consist of charges for
overdrafts and NSF (non-sufficient funds), safe deposit rentals,
ATM and other services that are primarily deposit driven. The
reason for the increase was the increase in deposit accounts.
During 1999, the Company's opened 64,000 new deposit accounts,
an increase of 50% over the number at the end of 1998.
Other income increased $0.3 million, or 157.6%, to $0.5
million for the first nine months of 1999 compared to $0.2
million for the first nine months of 1998 and increased $202,000
to $225,000 for the third quarter of 1999 compared to $23,000
for the third quarter of 1998. Other income increased due to an
increase in outside rental income from the lease of space at the
Berks County Bank Building and to the reclassification of
certain fees on loans.
Other Expenses
Total other expenses increased $8.6 million, or 45.3%, to
$27.6 million for the first nine months of 1999 compared to
$19.0 million for the first nine months of 1998. Total other
expenses increased $5.1 million, or 85.0%, to $11.1 million in
the third quarter of 1999 compared to $6.0 million in the third
quarter of 1998.
Salaries, wages and employee benefits increased $3.5
million, or 38.9%, from $9.0 million for the nine months ended
September 30, 1998, to $12.5 million for the first nine months
of 1999. In the third quarter of 1999, salaries, wages and
employee benefits increased to $4.6 million from $3.2 million in
the third quarter of 1998, an increase of 43.8%. Salaries,
wages and employee benefits increased due to the opening and
hiring of staff at the seventeen new branch locations, fourteen
of which opened in the second quarter of 1999 and three of which
opened in the third quarter of 1999.
On August 4, 1999, Allen E. Kiefer resigned as President of
the Company. In connection with his resignation, the Company
incurred a one-time, pretax charge of $1.7 million in the third
quarter for change of control and severance payments the Company
was obligated to pay to Mr. Kiefer under agreements he entered
into with the former Heritage Bancorp, Inc. in 1997. The
Company also incurred a similar severance payout for another
officer during the second quarter of 1999. The former head of
Heritage Bancorp's commercial lending elected to exercise the
change of control provisions in his contract and the company
incurred a pretax charge of $330,000. All change-of-control
rights related to last year's Heritage/BCB merger have been
waived by current management as part of new employment and
change of control agreements executed during 1999.
Occupancy expense increased $1.3 million, or 81.3%, to $2.9
million for the first nine months of 1999 compared to $1.6
million for the first nine months of 1998. For the third
quarter of 1999, occupancy expense was $1.2 million compared to
$0.6 million for the third quarter of 1998, an increase of $0.6
million, or 100.0%. The increase was due to lease payments
commencing on 17 branches on March 1, 1999 and also due to
expenses related to occupying the 17 new branches - such as
utilities, maintenance and other facilities expenses.
For the first nine months of 1998, the Company incurred
$2.0 million in one-time merger related costs. This resulted
from the May 1, 1998 merger of the Company's predecessors as
fully described in the Notes to the Financial Statements.
Other operating expenses increased $3.1 million, or 58.5%,
to $8.4 million for the first nine months of 1999, compared to
$5.3 million for the first nine months of 1998. For the third
quarter of 1999, other operating expenses increased by $1.2
million, or 66.7%, to $3.0 million from $1.8 million a year
earlier. The increase in other expenses occurred in
advertising, data processing and MAC fees, office supplies and
expenses, and other service fees. An explanation for these
increase follows:
Advertising increased $1.0 million to $1.8 million for the
first nine months of 1999 compared to $0.8 million for the first
nine months of 1998 and increased $405,000 to $681,000 in the
third quarter of 1999 compared to $276,000 in the third quarter
of 1998. The increase from last year was due to advertising and
marketing in conjunction with the opening of the 17 new branches
that opened from the end of March through the end of September.
Approximately half of the increases are one-time expenses
directly connected to opening the branches.
Data processing and MAC fees increased $0.2 million, or
22.2%, from $0.9 million in the first nine months of 1998 to
$1.1 million in the first nine months of 1999. For the third
quarter of 1999, data processing and MAC fees increased
$115,000, or 38.2%, to $416,000 from $301,000 in the third
quarter in 1998. The increase was a result of increased volume
in credit card processing/ATM processing due to the 17 new
branches.
Office supplies and expenses increased $0.5 million, or
50.0%, to $1.5 million for the first nine months of 1999
compared to $1.0 million for the same period in 1998 and
increased $181,000, or 45.9%, to $575,000 in the third quarter
of 1999 from $394,000 in the third quarter of 1998. The
increase was due to supplies necessary to support the Company's
growth and the 17 new branches, as well as an increase in the US
postage rate.
Other service fees increased $360,000, or 467.5%, to
$437,000 for the first nine months of 1999 compared to $77,000
for the first nine months of 1998. For the third quarter of
1999, other service fees increased $19,000 to $46,000 from
$27,000 reported for the same period in 1998. In May of 1999,
the Company elected to prepay $45 million in FHLB borrowings and
incur a prepayment penalty of $300,000. The Bank elected to
make the prepayment in anticipation of significant deposit
growth in the upcoming months which will replace the borrowed
funds with lower cost deposits. The Company expects this non-
recurring prepayment penalty to be earned back over the next
twelve months.
Federal Income Taxes
The provision for federal income taxes was a ($1.8) million
benefit for the first nine months of 1999 compared to $2.5
million expense for the first nine months of 1998. For the
third quarter of 1999, the provision for federal income taxes
was a ($1.1) million benefit compared to $574,000 expense for
the third quarter of 1998. The tax benefit in 1999 resulted
from a higher level of tax-exempt interest income earned on
bank-qualified municipal securities and tax-free loans compared
to pretax income. This is expected to occur through the
remainder of 1999 and the first half of 2000.
Asset Quality
Non-performing assets as a percentage of total assets
decreased from 0.75% at December 31, 1998 to 0.54% at September
30, 1999. Non-performing assets decreased from $8.7 million at
December 31, 1998 to $7.6 million at September 30, 1999. The
ratio of the allowance for loan losses to non-performing loans
was 86.7% at December 31, 1998 and increased to 98.9% at
September 30, 1999. Non-performing loans are comprised of non-
accrual loans, accruing loans that are 90 days or more past due
and restructured loans. The delinquency ratio was 2.50% at
December 31, 1998 and declined to 2.10% at September 30, 1999.
Given the improvement in the above ratios as well as other
qualitative and quantitative factors, the Company permitted the
loan loss reserve ratio as a percentage of total loans to
decline from 1.34% at December 31, 1998 to 1.10% at September
30, 1999. The loan loss reserve as a percentage of total loans,
excluding residential mortgages, was 1.56% at September 30,
1999, down from 1.96% at December 31, 1998.
Management believes the allowance for loan losses was
adequate to cover risks inherent in its loan portfolio at
September 30, 1999. 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, an
increase in loan volume, or for other reasons. Any such increase
could adversely affect the Company's results of operations.
Capital
The Company's Tier 1 capital to risk-weighted assets ratio
at September 30, 1999 was 12.66% compared to 14.83% at December
31, 1998. These ratios exceeded the Tier 1 regulatory capital
requirement of 4.00%. The Company's total capital to risk-
weighted assets ratio at September 30, 1999 was 13.59% compared
to 15.97% at December 31, 1998. These ratios exceeded the total
risk-based capital regulatory requirement of 8.00%. At
September 30, 1999, the Company's leverage ratio was 7.13%
versus 8.70% at December 31, 1998. 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 available-for-sale securities, cash and amounts
due from banks, interest-bearing deposits with banks, and
Federal funds sold.
These liquid assets totaled $428.2 million at September 30,
1999 compared to $564.0 million at December 31, 1998. Maturing
loans are another source of asset liquidity. At September 30,
1999, the Company estimated that an additional $32.0 million of
loans will mature in the next six-month period ended March 31,
2000.
Liability liquidity can be met by attracting deposits,
buying Federal funds or utilizing the facilities of the Federal
Reserve System or the FHLB System. The Bank utilizes a variety
of these methods of liability liquidity. At September 30, 1999,
the Bank had approximately $334.2 million in unused lines of
credit available to it under informal arrangements with
correspondent banks compared to $152.2 million at December 31,
1998. These lines of credit enable the Bank to purchase funds
for short-term needs at current market rates.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Please refer the annual report on Form 10-K for December
31, 1998. There have been no significant changes regarding
market risk since that date.
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 -
None
Item 5. Other Information
Year 2000 Computer Issues
The Year 2000 (Y2K) poses not just technology issues, but
provides an enterprise-wide challenge, not only for the Company,
but for all businesses. Senior management and the Board of
Directors of the Company have been actively involved in the
planning, allocating of resources and monitoring the progress to
evaluate and implement corrective actions to assure Y2K
readiness. The Company has named the Senior Vice-President and
Chief Information Officer as the Y2K officer to oversee the
project. The Y2K officer reports to the Board on a quarterly
basis and to Senior Management on a monthly basis. Remediation
and testing have been completed to ensure that the Company's
computer systems will operate in the Year 2000. The Company's
software systems are products provided by software vendors, and
are not developed in-house. The Company has contacted and
continues to work closely with its vendors to ensure their
readiness. Many noncomputer systems include embedded
technology, such as micro controllers. The Company reviewed our
noncomputer systems, looking for any that could be affected by
Y2K and did renovations as required. As part of the planning
process, the Company has also developed contingency plans that
will provide alternative methods of doing business, should it be
necessary.
The IBM AS400 computer processes the daily transactions and
is the recordkeeping system for our customer's loan and deposit
accounts and the Company's general ledger system. The Company's
IBM AS400 computer is Y2K compliant, and both the hardware and
operating software were tested in July of 1998. The banking
software package, Peerless 21, was tested successfully for Y2K
compliance by December 31, 1998. Another important area is the
Company's PC network. The Company has upgraded or replaced PC's
that are not Y2K compliant. Testing was complete by December
31, 1998 on the Company's PC network and other systems that are
vital to the successful continuance of the Company's business.
The overall Y2K compliance plan consists of five phases:
awareness, assessment, plan development, testing and
implementation. Systems were also assigned a level of
importance to the daily functioning of the Company: mission
critical, need but not mission critical, and can use but can do
without. All five phases are complete for all systems.
The Company has experienced considerable growth in recent
years, which independent of the Y2K issue, has created the need
to upgrade some hardware and software. Therefore, it is
difficult to isolate expenses and capital investments that have
been implemented or accelerated for Y2K from normal business
replacement and time spent by the Company personnel working on
Y2K issues. Costs, to date which include capital expenditures,
are currently estimated at $90,000 (excluding personnel costs),
and are not considered material to any one fiscal period. The
Company has compiled an estimate of future remediation costs to
be $60,000. Should the Company have to resort to alternative
operating procedures due to major systems or communication
failures at the beginning of the Year 2000, the extra costs
could be material.
Three federal agencies share responsibility for supervising
efforts by banks regarding the Y2K date change. The agencies
are conducting special examinations to make sure that the
insured banks and savings associations are taking the necessary
steps to get ready for Y2K and are closely monitoring their
progress in completing critical steps required by their Y2K
plans. The Company's progress and plan is subject to review and
examination by the Federal Reserve. Our banking application
software vendor is also subject to examination by these agencies
to evaluate their Y2K remediation process, the results of which
have been released to this Company for our review.
The Company's bank subsidiary has many customers and
through the use of questionnaires and our calling officers, the
Company reviewed our larger customers to determine their
potential Y2K risk. No individual customer is significant
enough to materially impact the financial position of the
Company. However, one concern is that the credit risk
associated with lending may increase to the extent that our
borrowers or their suppliers or clients do not adequately
address Y2K issues. As a result, problem loans and losses could
increase. Due to the uncertainties involved, it is not possible
to quantify potential losses due to Y2K, if any, at this time.
The Company continues to be active in the Y2K Public
Awareness Program. The Company is promoting the preparedness of
the financial industry for the Year 2000. The Company is
communicating with our customers that there is no safer place to
keep their money than in a federally insured deposit account
with our bank subsidiary. The Company is educating the staff
and customers on the appropriate action and security procedures
to take regarding Y2K criminal activity.
Senior management has developed a contingency plan to
provide operating alternatives for continuation of services to
the Company's customers in the event of systems or communication
failures at the beginning of the Year 2000. Every significant
banking process has a detailed contingency plan which will be
tested during the remainder of 1999. Based on the contingency
plan, management believes that the Company will be able to
continue to operate in the Year 2000 even if some systems fail.
In a worst case scenario, due to the size of the Company, we
believe that we would be able to operate in a manual mode until
normal operations could be restored. This procedure could
require changing of schedules and significant hiring of
temporary staff, which would increase cost of operations. If
this procedure were to continue for any extended period of time,
or if we ultimately had to change our banking application
software vendor, the cost could be material.
Management believes that adequate resources are available
to fund and address the Year 2000 issues and that the costs
associated with bringing the Company into compliance will not
have a material impact on the Company's financial condition and
results of operation. However, with all remediation, testing
and contingency plans there is no guarantee that these steps
will fully mitigate all failures and problems. In addition, the
Company relies on various third party providers, such as
telecommunications and utility companies, where alternative
sources or arrangements are limited or unavailable. While the
Company continues to address Y2K issues, and work with our
vendors and corporate customers to identify, assess and control
potential Y2K risks, the Company does not manage these
businesses and therefore, potential uncertainties remain.
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 August 13, 1999,
among Main Street Bancorp, Inc, Main Street Bank and Nelson R.
Oswald.
10.2 Executive Employment Agreement, dated August 13, 1999,
among Main Street Bancorp, Inc, Main Street Bank and Robert D.
McHugh, Jr.
10.3 Executive Employment Agreement, dated August 13, 1999,
among Main Street Bancorp, Inc, Main Street Bank and Richard A.
Ketner.
10.4 Executive Employment Agreement, dated August 13, 1999,
among Main Street Bancorp, Inc, Main Street Bank and Steven A.
Ehrlich.
10.5 Executive Employment Agreement, dated August 13, 1999,
among Main Street Bancorp, Inc, Main Street Bank and Norman E.
Heilenman.
10.6 Deferred Compensation Agreement, dated October 14,
1999 by and between Main Street Bancorp, Inc. and Nelson R.
Oswald.
10.7 Deferred Compensation Agreement, dated October 14,
1999 by and between Main Street Bancorp, Inc. and Robert D.
McHugh, Jr.
10.8 Deferred Compensation Agreement, dated October 14,
1999 by and between Main Street Bancorp, Inc. and Richard A.
Ketner.
27 Financial Data Schedule.
(b)Reports on Form 8 - K - None
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)
November 9, 1999 /s/ Robert D. McHugh, Jr.____
Robert D. McHugh, Jr.
Executive Vice President and
Treasurer
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
August 13, 1999, among Main Street Bancorp,
Inc, Main Street Bank and Nelson R. Oswald.
10.2 Executive Employment Agreement, dated
August 13, 1999, among Main Street Bancorp,
Inc, Main Street Bank and Robert D.
McHugh, Jr.
10.3 Executive Employment Agreement, dated
August 13, 1999, among Main Street Bancorp,
Inc, Main Street Bank and Richard A. Ketner.
10.4 Executive Employment Agreement, dated
August 13, 1999, among Main Street Bancorp,
Inc, Main Street Bank and Steven A. Ehrlich.
10.5 Executive Employment Agreement, dated
August 13, 1999, among Main Street Bancorp,
Inc, Main Street Bank and Norman E.
Heilenman.
10.6 Deferred Compensation Agreement, dated
October 14, 1999 by and between Main Street
Bancorp, Inc. and Nelson R. Oswald.
10.7 Deferred Compensation Agreement, dated
October 14, 1999 by and between Main Street
Bancorp, Inc. and Robert D. McHugh, Jr.
10.8 Deferred Compensation Agreement, dated
October 14, 1999 by and between Main Street
Bancorp, Inc. and Richard A. Ketner.
27 Financial Data Schedule.
Page <1>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the _____ day
of August 1999, effective as of January 1, 1999, between MAIN
STREET BANCORP, INC., a Pennsylvania business corporation
("Main"), MAIN STREET BANK, a Pennsylvania banking corporation
(the "Bank"), and NELSON R. OSWALD, an individual (the
"Executive").
WITNESSETH:
WHEREAS, Main, Berks County Bank ("BCB") and the
Executive entered into an agreement dated as of May 1, 1998 (the
"1998 Agreement"), regarding, among other things, the Employment
of the Executive by Main and BCB;
WHEREAS, BCB has, effective January 1, 1999,
consolidated with Heritage National Bank to form the Bank; 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 1998 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 Board 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 Board of Directors of Main. To the extent the
Bank continues to use the "Berks County Bank" trade name,
Executive shall act as the Chairman, Chief Executive Officer and
President of Berks County Bank. 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.
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 Board of Directors of Main, 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 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;
(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 Board of Directors of Main, 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 termination and
any benefits payable to the Executive will be determined in
accordance with the pension, welfare, fringe benefit, expense
reimbursement, salary deferral 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 Board of Directors of Main,
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 3(d), 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 $310,000, 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
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) Deferred Compensation. (A) The
Executive will be entitled to continued maintenance of the BCB
Financial Services Corporation Deferred Compensation Plan in
effect for him immediately prior to the date of this Agreement;
and (B) the Executive will be entitled to participation in and
maintenance of the Main Street Bancorp, Inc. Deferred
Compensation Plan to be implemented within 60 days of the date of
this Agreement.
(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. Upon Executive's
retirement Main shall provide to Executive, at Main's expense,
life insurance coverage in an amount equal to one-half of the
life insurance coverage to which Executive was entitled under
Main's life insurance plan immediately preceding Executive's
retirement, plus one-half of the supplemental life insurance
coverage to which employee was entitled under this Agreement,
immediately preceding Executive's retirement.
(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.
(vii) Stock Awards. Main will annually
award to the Executive, no later than February 15, 2140 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.
(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 Board 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) 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; or
(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.
Notwithstanding the foregoing, in the event the Bank discontinues
the use of the "Berks County Bank" name, Executive's inability to
act as Chairman, Chief Executive Officer and President of Berks
County Bank shall not constitute a reduction in title.
(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 one-year period
following the occurrence of a Change in Control (as defined
below), 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.
(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; or
(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
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 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 $120,000 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/or 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 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 provision 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 63 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, or financial service
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;
(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 it 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.
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 Board 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 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 notice given by Main, to the
extent required will be deemed to be given by Main and the Bank.
Any notice given to Main, to the extent required will be deemed
to be given to Main and the Bank. 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 Board of
Directors of Main. No waiver by any party hereto at any time or
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.
(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
effective date of this Agreement and ending on December 31, 2002;
provided, however, that this Agreement will be automatically
renewed on January 1, 2001 for the three-year period commencing
on such date and ending on December 31, 2003, unless either party
gives written notice of nonrenewal to the other party on or
before November 1, 2000 (in which case this Agreement will
continue in effect through December 31, 2002); and provided
further, that if this Agreement is renewed on January 1, 2001, 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 Sections 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.
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. As of the date of this
Agreement, Main and the Bank share one Board of Directors. To
the extent, under this Agreement or law, an action is required by
the Board of Directors of the Bank, a similar action of the Board
of Directors of Main shall be deemed sufficient.
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 1998 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 agreement for the
benefit of 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_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Main")
MAIN STREET BANK
By_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Bank")
Witness:
___________________________ _____________________________(SEAL)
NELSON R. OSWALD
("Executive")
Page <1>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the _____ day
of August 1999, effective as of January 1, 1999, between MAIN
STREET BANCORP, INC., a Pennsylvania business corporation
("Main"), MAIN STREET BANK, a Pennsylvania banking corporation
(the "Bank"), and ROBERT D. MCHUGH, JR., an individual (the
"Executive").
WITNESSETH:
WHEREAS, BCB Financial Services Corporation ("BCBFS"),
Berks County Bank ("BCB") and the Executive entered into an
agreement dated as of January 1, 1989 as amended as of April 24,
1990 and November 26, 1991, and as amended and restated by
agreement dated as of December 31, 1991 (the "1991 Agreement"),
regarding, among other things, the Employment of the Executive by
BCBFS and BCB;
WHEREAS, BCBFS has effective May 1, 1998, consolidated
with Heritage National Bancorp, Inc. to form Main;
WHEREAS, BCB has, effective January 1, 1999,
consolidated with Heritage National Bank to form the Bank; 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 1991 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 Board of Directors of Main or the Chairman of such Board.
The Executive will be employed as Executive Vice President and
Chief Financial Officer of Main and the Bank, and will hold such
other titles as may be given to him from time to time by the
Board of Directors of Main or the Chairman of such Board. 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.
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 Board of Directors of Main or the Chairman of such
Board, 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 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;
(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 Board of Directors of Main or
the Chairman of such Board, 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 termination and
any benefits payable to the Executive will be determined in
accordance with the pension, welfare, fringe benefit, expense
reimbursement, salary deferral 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 Board of Directors of Main or
the Chairman of such Board, 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 3(d), 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 $180,000, 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
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) Deferred Compensation. The Executive
will be entitled to participation in and maintenance of the Main
Street Bancorp, Inc. Deferred Compensation Plan to be implemented
within 60 days of the date of this Agreement.
(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
(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. Upon Executive's retirement Main shall
provide to Executive, at Main's expense life insurance coverage
in an amount equal to one-half of the life insurance coverage to
which Executive was entitled under Main's life insurance plan
immediately preceding Executive's retirement, plus one-half of
the supplemental life insurance coverage to which Executive was
entitled under this Agreement, immediately preceding Executive's
retirement.
(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.
(vii) Stock Awards. Main will annually
award to the Executive, no later than February 15, 1,284 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.
(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 Board 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) 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 Financial Officer of Main and 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; or
(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 one-year following the
occurrence of a Change in Control (as defined below), 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.
(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; or
(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
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 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 $85,000 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/or 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 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 provision 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, or financial services
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;
(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 it 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.
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 Board 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 notice given by Main, to the extent required will
be deemed to be given by Main and the Bank. Any notice give to
Main, to the extent required will be deemed to be given to Main
and the Bank. 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 Board of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time or 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.
(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, 2001 for the two-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, 2000 (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, 2001, 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 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 Sections 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.
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. As of the date of this
Agreement, Main and the Bank share one Board of Directors. To
the extent, under this Agreement or law, an action is required by
the Board of Directors of the Bank, a similar action of the board
of Directors of Main shall be deemed sufficient
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 1991 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 agreement for the
benefit of 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_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Main")
MAIN STREET BANK
By_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Bank")
Witness:
___________________________ _____________________________(SEAL)
ROBERT D. MCHUGH, JR.
("Executive")
12
Page <1>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the _____ day
of August 1999, effective as of January 1, 1999, between MAIN
STREET BANCORP, INC., a Pennsylvania business corporation
("Main"), MAIN STREET BANK, a Pennsylvania banking corporation
(the "Bank"), and RICHARD A. KETNER, an individual (the
"Executive").
WITNESSETH:
WHEREAS, Main, Heritage National Bank ("HNB") and the
Executive entered into an agreement dated as of May 1, 1998 (the
"1998 Agreement"), regarding, among other things, the Employment
of the Executive by Main and HNB which in part superseded a prior
Change in Control dated as of September 15, 1997, by and among
Executive, HNB, and Heritage National Bancorp, Inc. ("Change in
Control Agreement");
WHEREAS, HNB has, effective January 1, 1999,
consolidated with Berks County Bank to form the Bank;
WHEREAS, Main has granted to Executive 25,000 stock
options pursuant to a Stock Option Agreement, with a date of
grant of July 30, 1999, in consideration for the Executive's
termination of any and all rights under the Change in Control
Agreement, 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 1998 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 Board of Directors of Main or the Chairman of such Board.
The Executive will be employed as Executive Vice President and
Chief Administrative Officer of Main and the Bank, and will hold
such other titles as may be given to him from time to time by the
Board of Directors of Main or the Chairman of such Board. 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.
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 Board of Directors of Main or the Chairman of such
Board, 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 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;
(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 Board of Directors of Main or
the Chairman of such Board, 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 termination and
any benefits payable to the Executive will be determined in
accordance with the pension, welfare, fringe benefit, expense
reimbursement, salary deferral 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 Board of Directors of Main or
the Chairman of such Board, 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 3(d), 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 $180,000, 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
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) Deferred Compensation. The Executive
will be entitled to participation in and maintenance of the Main
Street Bancorp, Inc. Deferred Compensation Plan to be implemented
within 60 days of the date of this Agreement.
(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
(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. Upon Executive's retirement Main shall
provide to Executive, at Main's expense life insurance coverage
in an amount equal to one-half of the life insurance coverage to
which Executive was entitled under Main's life insurance plan
immediately preceding Executive's retirement, plus one-half of
the supplemental life insurance coverage to which Executive was
entitled under this Agreement, immediately preceding Executive's
retirement.
(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 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.
(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) Stock Awards. Main will annually
award to the Executive, no later than February 15, 1284 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.
(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 Board 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) 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 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; or
(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 one-year following the
occurrence of a Change in Control (as defined below), 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.
(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; or
(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
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 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 $85,000 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/or 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 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 provision 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, or financial services
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;
(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 it 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.
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 Board 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 notice given by Main, to the extent required will
be deemed to be given by Main and the Bank. Any notice given to
Main to the extent required will be deemed to be given to Main
and the Bank. 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 Board of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time or 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.
(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
effective date of this Agreement and ending on December 31, 2001;
provided, however, that this Agreement will be automatically
renewed on January 1, 2001 for the two-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, 2000 (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, 2001, 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 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 Sections 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.
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. As of the date of this
Agreement, Main and the Bank share one Board of Directors. To
the extent, under this Agreement or law, an action is required by
the Board of Directors of the Bank, a similar action of the Board
of Directors of Main shall be deemed sufficient.
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 1998 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 agreement for the
benefit of 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_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Main")
MAIN STREET BANK
By_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Bank")
Witness:
___________________________ _____________________________(SEAL)
RICHARD A. KETNER
("Executive")
8
Page <1>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the _____ day of
September 1999, effective July 30, 1999, between MAIN STREET
BANCORP, INC., a Pennsylvania business corporation ("Main"), MAIN
STREET BANK, a Pennsylvania banking corporation (the "Bank"), and
STEVEN A. EHRLICH an individual (the "Executive").
WITNESSETH:
WHEREAS, Main, Berks County Bank ("BCB") and the
Executive entered into a Change in Control dated as of
May 1, 1998 (the "1998 Agreement");
WHEREAS, BCB, effective January 1, 1999, consolidated with
Heritage National Bank to form the Bank;
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 1998 Agreement, all as
hereinafter set forth;
WHEREAS, in consideration for Executive's execution of this
Agreement, and the termination of certain rights under the 1998
Agreement, Main has granted to Executive options pursuant to a
certain Stock Option Agreement dated July 30, 1999 ("the Stock
Options"); and
WHEREAS, the Executive acknowledges the value of the Stock
Options as adequate consideration for the rights Executive is
relinquishing under the 1998 Agreement, and certain contractual
protections Executive is granting to Main and Bank pursuant to
this Agreement.
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 Board of Directors of Main or the Chairman of such Board.
The Executive will be employed as a Senior Vice President of Main
and the Bank, and will hold such other titles as may be given to
him from time to time by the Board of Directors of Main or the
Chairman of such Board. 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 with pre-approval of the
Chairman of Main, 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.
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 Board of Directors of Main or the Chairman of such Board,
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 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;
(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 Board of Directors of Main or the
Chairman of such Board, 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 termination and
any benefits payable to the Executive will be determined in
accordance with the pension, welfare, fringe benefit, expense
reimbursement, salary deferral 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 Board of Directors of Main or the
Chairman of such Board, 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 3(d), 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 $90,000, 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
senior 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 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 senior officers.
(ii) 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.
(iii) 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 Board 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) 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 from Senior Vice
President;
(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; or
(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 one-year following the occurrence of a
Change in Control (as defined below), 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.
(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; or
(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
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 without Cause,
Executive will be entitled to receive the amounts and benefits
set forth in this section.
(a) Basic Payments (prior to the occurrence of a
Change in Control). In the event of a termination pursuant to
Section 3(b) prior to the occurrence of a Change in Control, or a
termination pursuant to Section 5(a), the Executive will be paid
an amount equal to the highest annualized salary paid to him
during the year of termination or the immediately preceding two
calendar years. Such amount will be paid to the Executive in 12
equal monthly installments (without interest), beginning 30 days
following the date of termination of employment.
(b) Basic Payments (following the occurrence of a
Change in Control). In the event of a termination pursuant to
Section 3(b) at the time of or following the occurrence of a
Change in Control, or a termination pursuant to Section 5(c), 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 three calendar years immediately preceding the year of
termination. 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.
(c) Supplemental Payment in Lieu of Certain Benefits.
In the event of a termination pursuant to Section 3(b) at the
time of or following the occurrence of a Change in Control or a
termination pursuant to Section 5(c), in lieu of continued
pension, welfare and other benefits, a lump sum cash payment of
$22,000 will be paid to the Executive within 30 days following
the date of termination of employment.
(d) 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/or 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 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.
(e) Limited Restriction on Payments and Benefits to
Avoid Excise Tax. Notwithstanding the provision 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 one times the sum of the amounts
described in 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, or financial services 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;
(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 it 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.
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, and he prevails.
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 Board 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 notice given by Main, to the extent required will be deemed
to be given by Main and the Bank. Any notice give to Main, to the
extent required will be deemed to be given to Main and the Bank.
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 Board of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time or 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.
(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, 2001 for the two-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, 2000 (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, 2001, 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 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 Sections 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.
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. As of the date of this
Agreement, Main and the Bank share one Board of Directors. To
the extent, under this Agreement or law, an action is required by
the Board of Directors of the Bank, a similar action of the board
of Directors of Main shall be deemed sufficient
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 1998 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 agreement for the benefit of 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________________________________
(SEAL) Attest:___________________________
(Assistant) Secretary
("Main")
MAIN STREET BANK
By________________________________
(SEAL) Attest:___________________________
(Assistant) Secretary
("Bank")
Witness:
_______________________ ____________________________(SEAL)
STEVEN A. EHRLICH
("Executive")
Page <1>
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made as of the _____ day
of September 1999, effective July 30, 1999, between MAIN STREET
BANCORP, INC., a Pennsylvania business corporation ("Main"), MAIN
STREET BANK, a Pennsylvania banking corporation (the "Bank"), and
NORMAN E. HEILENMAN, an individual (the "Executive").
WITNESSETH:
WHEREAS, Main, Berks County Bank ("BCB") and
the Executive entered into a Change in Control dated as
of May 1, 1998 (the "1998 Agreement");
WHEREAS, BCB, effective January 1, 1999, consolidated
with Heritage National Bank to form the Bank;
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 1998 Agreement, all as
hereinafter set forth;
WHEREAS, in consideration for Executive's execution of
this Agreement, and the termination of certain rights under the
1998 Agreement, Main has granted to Executive options pursuant to
a certain Stock Option Agreement dated July 30, 1999 ("the Stock
Options"); and
WHEREAS, the Executive acknowledges the value of the
Stock Options as adequate consideration for the rights Executive
is relinquishing under the 1998 Agreement, and certain
contractual protections Executive is granting to Main and Bank
pursuant to this Agreement.
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 Board of Directors of Main or the Chairman of such Board.
The Executive will be employed as a Senior Vice President of Main
and the Bank, and will hold such other titles as may be given to
him from time to time by the Board of Directors of Main or the
Chairman of such Board. 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 with pre-approval of the
Chairman of Main, 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.
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 Board of Directors of Main or the Chairman of such
Board, 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 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;
(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 Board of Directors of Main or
the Chairman of such Board, 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 termination and
any benefits payable to the Executive will be determined in
accordance with the pension, welfare, fringe benefit, expense
reimbursement, salary deferral 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 Board of Directors of Main or
the Chairman of such Board, 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 3(d), 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 $90,000, 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
senior 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
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 senior officers.
(ii) 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.
(iii) 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 Board 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) 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 from Senior Vice
President;
(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; or
(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 one-year following the
occurrence of a Change in Control (as defined below), 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.
(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; or
(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
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 without Cause,
Executive will be entitled to receive the amounts and benefits
set forth in this section.
(a) Basic Payments (prior to the occurrence of a
Change in Control). In the event of a termination pursuant to
Section 3 (b) prior to the occurrence of a Change in Control, or
a termination pursuant to Section 5 (a), the Executive will be
paid an amount equal to the highest annualized salary paid to him
during the year of termination or the immediately preceding two
calendar years. Such amount will be paid to the Executive in 12
equal monthly installments (without interest), beginning 30 days
following the date of termination of employment.
(b) Basic Payments (following the occurrence of a
Change in Control). In the event of a termination pursuant to
Section 3 (b) at the time of or following the occurrence of a
Change in Control, or a termination pursuant to Section 5 (c),
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 three calendar years immediately preceding the year of
termination. 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.
(c) Supplemental Payment in Lieu of Certain
Benefits. In the event of a termination pursuant to section 3
(b) at the time of or following the occurrence of a Change in
Control or a termination pursuant to Section 5 (c), in lieu of
continued pension, welfare and other benefits, a lump sum cash
payment of $22,000 will be paid to the Executive within 30 days
following the date of termination of employment.
(d) 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/or 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 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.
(e) Limited Restriction on Payments and Benefits
to Avoid Excise Tax. Notwithstanding the provision 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 one times the sum of the amounts
described in 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, or financial services
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;
(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 it 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.
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, and he prevails.
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 Board 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 notice given by Main, to the extent required will
be deemed to be given by Main and the Bank. Any notice give to
Main, to the extent required will be deemed to be given to Main
and the Bank. 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 Board of
Directors of Main and the Bank, respectively. No waiver by any
party hereto at any time or 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.
(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, 2001 for the two-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, 2000 (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, 2001, 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 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 Sections 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.
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. As of the date of this
Agreement, Main and the Bank share one Board of Directors. To
the extent, under this Agreement or law, an action is required by
the Board of Directors of the Bank, a similar action of the board
of Directors of Main shall be deemed sufficient
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 1998 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 agreement for the
benefit of 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_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Main")
MAIN STREET BANK
By_________________________________
(SEAL) Attest:____________________________
(Assistant) Secretary
("Bank")
Witness:
___________________________ _____________________________(SEAL)
NORMAN E. HEILENMAN
("Executive")
8
Page <1>
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
The Main Street Bancorp, Inc. Deferred Compensation
Plan has been established as a non qualified arrangement for the
benefit of certain selected key employees of Main Street Bancorp,
Inc. and its affiliated companies.
1. Definitions. The following terms, wherever used
herein, shall have the meanings ascribed to them, unless the
context in which such terms are used otherwise clearly requires.
"Account Balance" means the balance at any
relevant time of the contribution(s) set aside on behalf of a
Participant and the accumulated earnings or loss thereon, less
distributions. Such amount shall be reflected in book entry
reserves maintained by the Company.
"Annual Installment Amount" means the amount
determined pursuant to Paragraph 4(h).
"Board of Directors" means the board of directors
of the relevant Company.
"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 MSB, a subsidiary of MSB,
an employee benefit plan of MSB or a subsidiary of MSB (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 MSB representing more than 20% of the
combined voting power of MSB'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 MSB or the Main Street Bank to an entity which is
not a direct or indirect subsidiary of MSB;
(iii) the occurrence of, or execution of an
agreement providing for, a reorganization, merger, consolidation
or similar transaction involving MSB, unless (A) the shareholders
of MSB 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 MSB immediately prior to the
consummation of such transaction will initially represent a
majority of the directors of the surviving or resulting
corporation; or
(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 MSB.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means MSB and each Subsidiary, or any
one or more of them, as appropriate to the context in which such
term is used.
"Designated Beneficiary" means a Participant's
surviving spouse, or if there is no such surviving spouse, then
such person as may have been last specified as the beneficiary in
a writing delivered to the Plan Administrator prior the date of
such individual's death. In default of a Designated Beneficiary,
the term shall mean the Participant's estate.
"Disability" has the meaning ascribed to such term
in Code Section 22(e) (3).
"Eligible Employee" means any executive or
managerial employee of the Company, provided such individual is a
person described in 29 C.F.R. Section 2520.104-23.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Investment Manager" shall have the meaning
ascribed to such term in ERISA Section 3(38).
"MSB" means Main Street Bancorp, Inc., a
Pennsylvania corporation.
"Normal Retirement Age" means age 65 unless
otherwise designated by a separate written agreement between
Company and Participant, executed upon the Participants inclusion
in the Plan.
"Participant" means any Eligible Employee who has
been selected by the Board of Directors of MSB or a Subsidiary to
participate in the Plan and whose participation shall not have
terminated in accordance with or pursuant to the terms of this
Plan document.
"Plan" means the Main Street Bancorp, Inc.
Deferred Compensation Plan, as set forth in this document, and as
the same may be amended from time to time.
"Plan Administrator" means the body determined
pursuant to Paragraph 5.
"Subsidiary" means a corporation the stock of
which owned directly or indirectly by MSB, satisfies the
ownership provisions of Code Section 1504 (a), and which has
adopted the Plan through appropriate action of its Board of
Directors.
"Trust" means any grantor trust created to assist
in the funding of any Plan benefits.
"Trust Agreement" means any agreement between the
Company and a Trustee pursuant to which assets are set aside to
assist in the funding of any Plan benefit.
"Trustee" means the trustee of any grantor trust
established by the Company to assist in the funding of Plan
benefits.
2. Participation. The Board of Directors of the
Company may from time to time designate Eligible Employees as
Plan Participants. Participation by a selected Eligible Employee
shall commence as specified in the relevant Board resolution.
Nothing set forth in this Plan document shall be construed as
requiring that an Eligible Employee be selected as a Plan
Participant.
3. Funding; Plan Benefit.
(a) The Board of Directors of the Company shall
specify a fixed sum, determined by it at its discretion, to be
allocated for the benefit of the designated Participant and shall
segregate such amount in an investment account constituting a
part of the general assets of the Company, in a Trust, or both.
The Board of Directors may thereafter set aside additional
amounts for the benefit of such Participant but shall not be
required to do so. The amount so set aside shall be invested
pursuant to the direction of an Investment Manager selected from
time to time by the Board of Directors of MSB. Such Investment
Manager shall cause such amount to be invested in a manner
consistent with the Plan's investment policy as the same may be
established from time to time by the Plan Administrator.
(b) The Plan benefit to be received by a
Participant shall be determined by reference to his or her
Account Balance. Nothing in this Plan document or elsewhere
shall give a Participant the right to control the manner in which
his or her Account Balance is invested, and neither the Company,
nor a Trustee, nor the Investment Manager, shall be liable to a
Participant for the investment performance of an Account Balance
or any selected investment policy, the determination of which
shall be made, in its sole discretion from time to time, by the
Plan Administrator.
(c) Notwithstanding the use of any Trust in
connection with the provision of Plan benefits, this Plan is
intended to constitute an unfunded plan of deferred compensation
for all purposes under the Code and ERISA.
(d) Unless otherwise agreed between MSB and the
Company employing a Participant, the cost of any contribution on
behalf of such Participant shall be borne by the employing
Company.
4. Events Triggering Distribution; Mode of Payment.
(a) Upon the death of a Participant, such
Participant shall be 100% vested in his or her Account Balance,
and such balance, as determined as of the nearest practical date
to the day of distribution, shall be distributed to his or her
Designated Beneficiary in one lump sum within 30 days after such
date of death.
(b) Upon the termination of employment of a
Participant by reason of Disability prior to the attainment of
Normal Retirement Age, such Participant shall be 100% vested in
his or her Account Balance, and such balance shall commence to be
paid to the Participant in annual installments, beginning with
the fifteenth day of the month next following such termination of
employment.
(c) Upon the occurrence of a Change in Control of
MSB, a Participant shall be 100% vested in his or her Account
Balance, and such balance, as determined as of the nearest
practical date to the date of distribution, shall be distributed
to him or her in one lump sum within 30 days after such
occurrence.
(d) Upon termination of employment of a
Participant on or after his or her Normal Retirement Age for any
reason other than death, such Participant shall be 100% vested in
his or her Account Balance, and such balance shall commence to be
paid to the Participant in annual installments, beginning with
the fifteenth day of the month next following such termination of
employment.
(e) Upon termination of employment of a
Participant prior to attainment of Normal Retirement Age for any
reason other than death or Disability, a portion of his or her
Account Balance shall be distributed to him or her in one lump
sum within 30 days after such termination of employment.
Provided termination occurs upon or after the Participant has
reached age 55, the amount distributable shall be equal to the
Account Balance, as determined as of the date of termination,
times a fraction, the numerator of which is the number of years
of Plan participation to the date of termination (rounded to the
nearest one-tenth of a year) and the denominator of which is the
number of years from the initial commencement of Plan
participation through the Participant's Normal Retirement Age
(rounded to the nearest one-tenth of a year). The remainder of
such Account Balance shall be forfeited. In the event the
termination occurs prior to the Participant reaching age 55, the
entire Account Balance shall be forfeited. The Company may, by
separate written agreement between Company and Participant
executed upon the Participant's inclusion in the Plan, modify the
vesting schedule set forth in this section.
(f) For purposes of paragraph 4(c), in the event
the Company that is the primary employer of a Participant is sold
or otherwise ceases to be a Subsidiary and the Participant does
not thereafter continue as an employee of MSB or any other
remaining Subsidiary, then a Change in Control of MSB shall be
deemed to have occurred with respect to such Participant.
(g) For purposes of determining the amount of any
annual installment payment required under Paragraph 4(b) and
4(d), such payment shall equal the Annual Installment Amount.
(h) For purposes of this paragraph 4, the term
"Annual Installment Amount" shall be the amount determined by
dividing the Participant's initially determined Account Balance
by fifteen (15). Thereafter, each Annual Installment shall be
paid on the anniversary date of the first installment in an
amount determined by dividing the Participant's Account Balance,
as determined not more than 30 days prior to payment of the
installment, by the divisor used for the immediately preceding
year minus 1.0.
(i) In the event a Participant dies prior to the
receipt of his or her entire Plan benefit, the then balance
thereof shall be paid to his or her Designated Beneficiary in one
lump sum within 30 days following death.
5. Administration. The Plan shall be construed,
administered and enforced by the Board of Directors of MSB, or
such committee thereof as it may designate from time to time,
which body shall be referred to as the Plan Administrator. The
Plan Administrator shall have such power, authority and duties as
may be necessary or appropriate for the efficient operation and
administration of the Plan. No member of the Plan Administrator
shall be liable for any act taken (or omitted to be taken) in
good faith in connection with the discharge of his or her duties.
Notwithstanding any provision in this Plan document to the
contrary, the Plan Administrator may, in its good faith judgment,
elect to pay any Plan benefit in one lump sum in lieu of an
otherwise required annual installment payment. The Plan
Administrator shall take such steps and make such filings with
the federal government as may be necessary for the Plan to avail
itself of the provisions of 29 C.F.R. Section 2520.104-23.
6. Rights of Participants. Whether or not any assets
may be transferred to a Trust to assist in the funding of Plan
benefits, no Participant shall be entitled to, or have any
interest in, any specific asset to secure the receipt his or her
benefit. Each Participant shall be an unsecured, general
creditor of the Company with respect to his or her entitlement to
Plan benefits.
7. Amendment and Termination. This Plan may be amended
from time to time, or terminated at any time, by the Board of
Directors of MSB. In the event of Plan termination, each
individual who is then a Participant shall thereafter be deemed
fully vested so that the pro ration provisions of Paragraph 4 (e)
shall no longer apply to such Participant.
8. Miscellaneous Provisions.
(a) The Plan does not constitute a contract of
employment, and participation in the Plan shall not give any
person the right to be retained as an employee of any Company.
(b) The right of a Participant to the payment of
a Plan benefit shall not be subject to voluntary or involuntary
transfer, assignment, pledge, encumbrance, attachment or levy.
(c) Wherever any words are used herein in the
singular, they shall be construed as though they were used in the
plural, and vice versa.
(d) In the event any provision in this Plan
document is held illegal or invalid, such provision shall not
affect the remaining provisions of the Plan, and the Plan
document shall be construed as though such illegal or invalid
provision were not contained herein.
(e) Except to the extent preempted by federal
law, this Plan document shall be construed, administered and
enforced in accordance with the domestic internal law of the
Commonwealth of Pennsylvania.
(f) In the event there is a conflict between this
Plan document and any Trust Agreement, the terms of the Plan
shall prevail.
(g) As a condition of participation in the Plan,
an Eligible Employee selected for participation shall consent, in
writing, to the withholding from his or her base salary, bonus or
other similar compensation any tax liability caused by reason of
his or her Plan participation.
9. Effective Date. The effective date of this Plan
shall be October 15, 1999.
IN WITNESS WHEREOF, MAIN STREET BANCORP, INC. has
caused this Plan document to be executed, on its behalf and on
behalf of each Subsidiary, by its duly authorized officers on the
14th day of October, 1999.
MAIN STREET BANCORP, INC.
By:________________________________
(CORPORATE SEAL) Attest:____________________________
Page <1>
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
AGREEMENT WITH
ROBERT D. MCHUGH, JR.
This Agreement, executed this 14th day of October,
1999, by and between MAIN STREET BANCORP, INC., a Pennsylvania
bank holding company of, 601 Penn Street, Reading, Pennsylvania
19601 (hereinafter referred to as the "Company") and ROBERT D.
MCHUGH, JR. (hereinafter referred to as the "Participant"), an
employee of the Company.
BACKGROUND
A. The Company established the Main Street Bancorp,
Inc. Deferred Compensation Plan (the "Plan") to offer deferred
compensation in addition to current compensation to those
officers and key employees of the Company. A copy of the Plan is
attached hereto as Exhibit "A."
B. The Board of Directors of the Company has elected
to include Participant in the Plan.
C. Participant's participation in the Plan shall be
governed by the terms of the Plan except as may be modified by
the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby agree as follows:
1. Contribution. Within thirty days following the
execution of this Agreement the Company shall deposit with the
Trustee of the Trust (as those terms are defined in the Plan) the
sum of $250,000, on account of the Participant. This sum shall
constitute the sole contribution of the Company to the Plan on
behalf of the Participant.
2. Beneficiary Designation. Under the Plan certain
benefits may accrue to the Designated Beneficiary (as defined in
the Plan) of the Participant. Participant shall from time to
time file with the Plan Administrator (as defined in the Plan) a
beneficiary designation. Participant's initial beneficiary
designation form is attached hereto as Exhibit "B." The Plan's
claim procedure is included with the beneficiary designation
form.
3. Employment. This agreement does not constitute a
contract of employment, and participation in the plan shall not
give any person the right to be retained as an employee of the
Company. At the time of the execution of this Agreement,
employee's employment with the Company is governed by a certain
employment agreement by and between the Company and Employee
dated August 17, 1999, as may be amended and/or restated from
time to time.
4. Miscellaneous.
(a).Governing Law. Except to the extent preempted
by federal law, this Agreement shall be construed, administered
and enforced in accordance with the domestic internal laws of the
Commonwealth of Pennsylvania.
(b).Construction. In the event any parts of this
Agreement are found to be void, the remaining provisions of this
Agreement shall nevertheless be binding with the same effect as
though the void parts were deleted.
(c). Gender. Except when otherwise required by
the context, and masculine, feminine or neuter terminology in
this Agreement shall include the other genders, and any singular
terminology shall include the plural and vice versa.
(d). Agreement Binding. This Agreement shall be
binding upon the parties hereto, their heirs, executors,
administrators, successors and assigns. The company agrees that
it will not be a party to any merger, consolidation or
reorganization, unless and until its obligations hereunder shall
either (i) be expressly assumed by its successor or successors;
or (ii) otherwise provided for by the Company.
(e).Conflicts. In the event there is a conflict
between this Agreement and the Plan, this Agreement shall,
prevail.
IN WITNESS WHEREOF, the parties hereto have hereunto
set their hands the day and year first above written.
COMPANY:
MAIN STREET BANCORP, INC.
Witness:
___________________________ By: _______________________________
PARTICIPANT:
___________________________ ___________________________________
ROBERT D. MCHUGH, JR.
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION
Participant's Name: Robert D. McHugh, Jr.
Address: 306 Nottingham Drive
Barton Meadows
City: Spring City
State: PA
Zip: 19475
Employer: Main Street Bancorp, Inc.
Date of Birth: 08/23/54
Social Security Number: ###-##-####
Marital Status: ___ unmarried/divorced
X married
___ separated
Instructions: Use this form to designate the person or
persons to whom benefits under the Main Street Bancorp, Inc.
Deferred Compensation Plan (the "Plan"), if any, are to be paid
in the event of your death without a surviving spouse. If you
are married or separated (but not divorced) at the time of your
death, your spouse is deemed your designated beneficiary under
the Plan. If you are not married at the time of your death and
you have not completed this form, your estate shall be deemed to
be your designated beneficiary.
PART 1 - PRIMARY BENEFICIARY (BENEFICIARIES)
I name the following as the Primary Beneficiary or
Beneficiaries to receive any benefits payable upon my death in
the proportions indicated:
1. Name: Denise M. McHugh
Relationship: Spouse
Address: 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 100%
2. Name:
Relationship:
Address:
Percentage of total benefit to be paid to this person: ____%
3. Name:
Relationship:
Address:
Percentage of total benefit to be paid to this person: ____%
If I have named more than one Primary Beneficiary, and
if one or more of those Primary Beneficiaries fail to survive me,
I direct that the death benefit be divided among my surviving
Primary Beneficiaries in the ratio established by the percentages
indicated. If the percentages do not add up to 100%, the benefit
payable shall be allocated by the ratio of the percentages.
PART 2 - SECONDARY BENEFICIARY (BENEFICIARIES)
If all of my Primary Beneficiaries designated in Part 1
die before I die, and if I fail, prior to my death, to name
substitute Primary beneficiaries, any benefit payable upon my
death shall be paid to the following Secondary Beneficiaries:
1. Name: Jennifer L. McHugh
Relationship: Daughter
Address: c/o 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 20%
2. Name: Michelle D. McHugh
Relationship: Daughter
Address: c/o 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 20%
3. Name: Shawna R. McHugh
Relationship: Daughter
Address: c/o 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 20%
4. Name: Donald (Buddy) Glaty
Relationship: Stepson
Address: c/o 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 20%
5. Name: Mary Elizabeth Glaty
Relationship: Stepdaughter
Address: c/o 306 Nottingham Drive
Barton Meadows
Spring City, PA 19475
Percentage of total benefit to be paid to this person: 20%
If I have named more than one Secondary Beneficiary,
and if one or more of those Secondary Beneficiaries fails to
survive me, I direct that the death benefit be divided among my
surviving Secondary Beneficiaries in the ratio established by the
percentages indicated. If the percentages do not add up to 100%,
the benefit payable shall be allocated by the ratio of the
percentages.
The execution of this form and delivery thereof to the
Plan Administrator revokes all prior designations of
beneficiaries that I have made.
Date: ________________ ____________________________________
Signature
Witnesses:______________ ____________________________________
Received, Plan Administrator,
By __________________________ ______________
Month/Day/Year
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
CLAIM PROCEDURE
The Plan Administrator will supply you or your
beneficiary with all forms necessary to request payment of your
benefit. Upon receipt of a claim for a benefit, the Plan
Administrator will, generally within 90 days, make a
determination as to whether the claim will be honored. (The Plan
Administrator may, in special circumstances, extend the initial
90-day determination period for an additional 90 days if, within
the initial 90-day period, written notice is sent to you or your
beneficiary indicating what the special circumstances are and the
date by which a decision will be made).
In the event your or your designated beneficiary's
claim is initially denied in whole or in part, the Plan
Administrator will notify you or your beneficiary of the denial
and give the following information:
(a) the specific reason or reasons for the denial;
(b) specific references to the Plan provisions upon
which the denial is based;
(c) a description of any additional information which
may be needed and an explanation of which such information is
needed; and
(d) an explanation of the Plan's review procedure.
Within 60 days of the receipt of the initial denial,
you or your beneficiary (or a duly authorized representative,
such as a lawyer) may request a review of the Plan
Administrator's decision, review pertinent documents, and submit
issues and comments in writing for the Plan Administrator's
consideration.
Upon receipt of an appeal, the Plan Administrator shall
render a final decision with in 60 days unless special
circumstances require an extension of time for processing, in
which case a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of the appeal. If an
extension is required because of special circumstances, written
notice of such extension will be furnished to you or your
beneficiary prior to the beginning of the extension.
The Plan Administrator's decision on appeal will be in
writing and will list specific reasons for the decision, as well
as specific references to the Plan document upon which the
decision is based. If a decision is not rendered by the
deadline, the appeal is automatically treated as denied.
Page <1>
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
AGREEMENT WITH
RICHARD A. KETNER
This Agreement, executed this 14th day of October, 1999, by
and between MAIN STREET BANCORP, INC., a Pennsylvania bank
holding company of, 601 Penn Street, Reading, Pennsylvania 19601
(hereinafter referred to as the "Company") and RICHARD A. KETNER
(hereinafter referred to as the "Participant"), an employee of
the Company.
BACKGROUND
A. The Company established the Main Street Bancorp, Inc.
Deferred Compensation Plan (the "Plan") to offer deferred
compensation in addition to current compensation to those
officers and key employees of the Company. A copy of the Plan is
attached hereto as Exhibit "A".
B. The Board of Directors of the Company has elected to
include Participant in the Plan.
C. Participant's participation in the Plan shall be
governed by the terms of the Plan except as may be modified by
the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby agree as follows:
1. Contribution. Within thirty days following the
execution of this Agreement the Company shall deposit with the
Trustee of the Trust (as those terms are defined in the Plan) the
sum of $283,000, on account of the Participant. This sum shall
constitute the sole contribution of the Company to the Plan on
behalf of the Participant.
2. Beneficiary Designation. Under the Plan certain
benefits may accrue to the Designated Beneficiary (as defined in
the Plan) of the Participant. Participant shall from time to
time file with the Plan Administrator (as defined in the Plan) a
beneficiary designation. Participant's initial beneficiary
designation form is attached hereto as Exhibit "B". The Plan's
claim procedure is included with the beneficiary designation
form.
3. Employment. This agreement does not constitute a
contract of employment, and participation in the plan shall not
give any person the right to be retained as an employee of the
Company. At the time of the execution of this Agreement,
employee's employment with the Company is governed by a certain
employment agreement by and between the Company and Employee
dated August 13, 1999, as may be amended and/or restated from
time to time.
4. Miscellaneous.
(a). Governing Law. Except to the extent preempted by
federal law, this Agreement shall be construed, administered and
enforced in accordance with the domestic internal laws of the
Commonwealth of Pennsylvania.
(b). Construction. In the event any parts of this
Agreement are found to be void, the remaining provisions of this
Agreement shall nevertheless be binding with the same effect as
though the void parts were deleted.
(c). Gender. Except when otherwise required by the
context, and masculine, feminine or neuter terminology in this
Agreement shall include the other genders, and any singular
terminology shall include the plural and vice versa.
(d). Agreement Binding. This Agreement shall be
binding upon the parties hereto, their heirs, executors,
administrators, successors and assigns. The company agrees that
it will not be a party to any merger, consolidation or
reorganization, unless and until its obligations hereunder shall
either (i) be expressly assumed by its successor or successors;
or (ii) otherwise provided for by the Company.
(e). Conflicts. In the event there is a conflict
between this Agreement and the Plan,
this Agreement shall, prevail.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands the day and year first above written.
COMPANY:
Witness: MAIN STREET BANCORP, INC.
_________________________ By:_______________________________
PARTICIPANT:
_________________________ __________________________________
RICHARD A. KETNER
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION
Participant's Name: Richard A. Ketner
Address: 118 Avenue E
City: Schuylkill Haven State: PA Zip: 17972
Employer: Main Street Bancorp, Inc.
Date of Birth: 07/12/54 Social Security Number: ###-##-####
Marital Status: ___ unmarried/divorced
X married
___ separated
Instructions: Use this form to designate the person or persons
to whom benefits under the Main Street Bancorp, Inc. Deferred
Compensation Plan (the "Plan"), if any, are to be paid in the
event of your death without a surviving spouse. If you are
married or separated (but not divorced) at the time of your
death, your spouse is deemed your designated beneficiary under
the Plan. If you are not married at the time of your death and
you have not completed this form, your estate shall be deemed to
be your designated beneficiary.
PART 1 - PRIMARY BENEFICIARY (BENEFICIARIES)
I name the following as the Primary Beneficiary or
Beneficiaries to receive any benefits payable upon my death in
the proportions indicated:
1. Name: Deborah J. Ketner Relationship: Spouse
Address: 118 Avenue E
Schuylkill Haven, PA 17972
Percentage of total benefit to be paid to this person 100%
2. Name: Relationship:
Address:
Percentage of total benefit to be paid to this person: ___%
3. Name: Relationship:
Address:
Percentage of total benefit to be paid to this person: ___%
If I have named more than one Primary Beneficiary, and if one or
more of those Primary Beneficiaries fail to survive me, I direct
that the death benefit be divided among my surviving Primary
Beneficiaries in the ratio established by the percentages
indicated. If the percentages do not add up to 100%, the benefit
payable shall be allocated by the ratio of the percentages.
PART 2 - SECONDARY BENEFICIARY (BENEFICIARIES)
If all of my Primary Beneficiaries designated in Part 1 die
before I die, and if I fail, prior to my death, to name
substitute Primary beneficiaries, any benefit payable upon my
death shall be paid to the following Secondary Beneficiaries:
1. Name: Relationship:
Address:
Percentage of total benefit to be paid to this person: ___%
2. Name: Relationship:
Address:
Percentage of total benefit to be paid to this person: ___%
3. Name: Relationship:
Address:
Percentage of total benefit to be paid to this person: ___%
If I have named more than one Secondary Beneficiary, and if one
or more of those Secondary Beneficiaries fails to survive me, I
direct that the death benefit be divided among my surviving
Secondary Beneficiaries in the ratio established by the
percentages indicated. If the percentages do not add up to 100%,
the benefit payable shall be allocated by the ratio of the
percentages.
The execution of this form and delivery thereof to the Plan
Administrator revokes all prior designations of beneficiaries
that I have made.
Date: ___________________ __________________________________
Signature
Witnesses: ______________ __________________________________
Received, Plan Administrator, by _______________________________
__________________
Month/Day/Year
MAIN STREET BANCORP, INC.
DEFERRED COMPENSATION PLAN
CLAIM PROCEDURE
The Plan Administrator will supply you or your beneficiary
with all forms necessary to request payment of your benefit.
Upon receipt of a claim for a benefit, the Plan Administrator
will, generally within 90 days, make a determination as to
whether the claim will be honored. (The Plan Administrator may,
in special circumstances, extend the initial 90-day determination
period for an additional 90 days if, within the initial 90-day
period, written notice is sent to you or your beneficiary
indicating what the special circumstances are and the date by
which a decision will be made).
In the event your or your designated beneficiary's claim is
initially denied in whole or in part, the Plan Administrator will
notify you or your beneficiary of the denial and give the
following information:
(a) the specific reason or reasons for the denial;
(b) specific references to the Plan provisions upon which
the denial is based;
(c) a description of any additional information which may
be needed and an explanation of which such information is needed;
and
(d) an explanation of the Plan's review procedure.
Within 60 days of the receipt of the initial denial, you or
your beneficiary (or a duly authorized representative, such as a
lawyer) may request a review of the Plan Administrator's
decision, review pertinent documents, and submit issues and
comments in writing for the Plan Administrator's consideration.
Upon receipt of an appeal, the Plan Administrator shall
render a final decision with in 60 days unless special
circumstances require an extension of time for processing, in
which case a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of the appeal. If an
extension is required because of special circumstances, written
notice of such extension will be furnished to you or your
beneficiary prior to the beginning of the extension.
The Plan Administrator's decision on appeal will be in
writing and will list specific reasons for the decision, as well
as specific references to the Plan document upon which the
decision is based. If a decision is not rendered by the
deadline, the appeal is automatically treated as denied.
Page <1>
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