CHANGE OF CONTROL, NON-COMPETE AND
NON-DISCLOSURE AGREEMENT
THIS CHANGE OF
CONTROL, NON-COMPETE AND NON-DISCLOSURE AGREEMENT (the
"Agreement") is made as of this 6th day of May, 2005, by and between FIRST
NATIONAL BANK OF CHESTER COUNTY, a wholly-owned subsidiary of First Chester
County Corporation and a national banking
association with its principal offices
located at 9 North High Street, West Chester, Pennsylvania (hereinafter
individually referred to as the "Bank") and
Karen D. Walter of 95 Mexico Road,
Oley, PA 19547 (hereinafter referred to as
"Executive").
BACKGROUND
WHEREAS,
the Bank desires to
employ Executive as
Executive Vice President
of Personal Banking ("Officer") and to offer Executive certain benefits in
connection with such employment;
WHEREAS,
Executive is desirous of securing such employment and such
benefits set forth herein; and
WHEREAS,
in consideration of the receipt of such benefits,
Executive is
willing to be bound by certain non-compete
and non-disclosure obligations as set
forth herein;
NOW,
THEREFORE,
in consideration of
the premises and mutual covenants and
agreements hereinafter set forth, the parties, intending to be legally bound
hereby agree as follows:
1) TERM OF
AGREEMENT.
This Agreement is
effective as of the latest to occur of the following
dates: (a) the date this Agreement is executed and
delivered by both Executive
and the Bank, (b) the date on which
Executive's employment as Officer commences,
or (c) the date set forth above.
This Agreement will
continue in effect as long
as Executive is actively employed by the Bank, unless Executive and the Bank
agree in writing to termination of this
Agreement.
2) TERMINATION
COMPENSATION.
If Executive's
employment with the
Bank is terminated
without "Cause"
(as defined in Section 6) at any time
within two years
following a "Change
of
Control" (as defined
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in Section 4), Executive will receive the
"Termination Benefits"
(as defined in
Section 3). Executive will also receive the
Termination
Benefits if
Executive
terminates his or her employment for "Good
Reason" (as defined in Section 5) at
any time within two years following a
Change of Control.
Executive is not
entitled to receive the Termination Benefits if
Executive's employment is terminated by Executive or the Bank for any or
no
reason before a Change of Control
occurs or more than
two years after a Change
of Control has occurred.
In order to receive the Termination Benefits, Executive must
execute any
release of claims that Executive may have pursuant to
this Agreement
(but not
any other claims) that may be requested by
the Bank.
The Termination
Benefits will be paid
to Executive under the terms and
conditions hereof, without regard to whether Executive looks for or obtains
alternative employment following
Executive's
termination of employment with the
Bank.
3) TERMINATION
BENEFITS DEFINED.
For purposes of this
Agreement, the term
"Termination
Benefits" will
mean and include the following:
a) For a period of one year from
Executive's
termination (the "Benefit
Period"), payment of
Executive's base salary on the same basis that
Executive was paid
immediately prior to
Executive's
termination;
Payment of any bonus
Executive would otherwise be eligible to
receive for the year in which Executive's termination occurs and
for
that portion of the following year which is included in the
Benefit
Period, such bonus to be calculated and paid as provided below;
and
b) Continuation
during the Benefit
Period of all fringe
benefits that
Executive was
receiving
immediately
prior
to Executive's
termination,
including,
without limitation,
life, disability,
accident and group health insurance benefits coverage for
Executive
and Executive's
immediate family ("Fringe Benefits"), such Fringe
Benefits to
be provided on substantially the same terms and
conditions as they were provided immediately prior to Executive's
termination.
c) The bonus component
of Executive's
Termination Benefits
will equal
the sum of (i) the bonus to which Executive would have been
entitled
for the year during which Executive's termination occurs
(calculated
after annualizing the Bank's consolidated financial results through
the date of
termination if such bonus is based upon a percentage of
profits) (the
"Annual Amount"), and (ii) an amount equal to the
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product of (x) the Annual Amount times (y) a fraction the
numerator
of which is the number
of days in the year
following termination
which is included in the Benefit Period and the denominator of
which
is 365 (the "Prorated
Amount"). Both the Annual Amount and the
Prorated Amount will
be paid to Executive not later than March 31st
of the year following Executive's termination.
Notwithstanding the
foregoing,
if Executive terminates his or her
employment for Good Reason, Executive's Termination Benefits
will be based upon
the greater of (i) Executive's salary,
bonus and benefits
immediately prior
to
Executive's termination or (ii) Executive's salary, bonus and benefits
immediately prior to the Change of Control
which gives rise to Executive's right
to receive Termination Benefits under this
Agreement.
The Bank does not intend to provide duplicative Fringe Benefits.
Consequently, Fringe Benefits otherwise
receivable pursuant to this Section will
be reduced or eliminated if and to the
extent that Executive receives comparable
Fringe Benefits from any other source (for
example, another employer); provided,
however, that Executive will have no obligation to seek, solicit or accept
employment from another employer in order
to receive such benefits.
4) CHANGE OF
CONTROL DEFINED.
For purposes of this Agreement, a "Change of Control" will be
deemed to
have occurred upon the earliest to occur of
the following events:
a) the date the
shareholders of the Bank (or the Board of Directors, if
shareholder action
is not required) approve a plan or other
arrangement pursuant
to which the Bank will be dissolved or
liquidated;
b) the date the
shareholders of the Bank (or the Board of Directors, if
shareholder action is
not required) approve a definitive agreement
to sell or otherwise
dispose of all or substantially all of the
assets of the Bank;
c) the date the
shareholders of the Bank (or the Board of Directors, if
shareholder action is
not required)
and the shareholders of the
other constituent
corporation
(or its board of directors if
shareholder action is
not required)
have approved a definitive
agreement to merge or
consolidate the Bank
with or into such other
corporation, other
than, in either case, a merger or consolidation
of the Bank in which
holders of shares of the common stock of the
Bank (the "Common Stock") immediately prior to the merger or
consolidation will
hold at least a
majority of the
ownership of
common stock of the
surviving corporation (and, if one class of
common stock is not the only class of voting securities
entitled to
vote on the election of directors of the surviving corporation, a
majority of the voting power of the surviving corporation's voting
securities)
immediately after the
merger or
consolidation,
which
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common stock (and, if applicable, voting securities) is to be held
in the same proportion
as such holders'
ownership of Common
Stock
immediately before the merger or consolidation;
d) the date any
entity, person or group, (within the meaning of Section
13(d)(3) or Section
14(d)(2) of the
Securities and Exchange Act of
1934, as amended (the "Exchange Act")), other than the Bank or any
of its subsidiaries or
any employee benefit plan (or related trust)
sponsored or
maintained
by the Bank or any of its subsidiaries,
shall have become the
beneficial owner of,
or shall have
obtained
voting control
over, more than fifty percent (50%) of the
outstanding shares of the Common Stock; or
e) the first day after
the date this Plan is adopted when directors are
elected so that a majority of the Board of Directors shall have
been
members of the Board of Directors for less than twenty-four (24)
months, unless the
nomination for election of each new director who
was not a director at the beginning of such twenty-four (24) month
period was
approved by a vote of at least two-thirds of the
directors then still
in office who were
directors at the beginning
of such period.
Notwithstanding any
provision herein to
the contrary, the
filing of a
proceeding for the reorganization of the Bank under Chapter 11 of
the Federal
Bankruptcy Code or any successor or other
statute of similar import will not be
deemed to be a Change of Control for
purpose of this Agreement.
5) GOOD REASON
DEFINED.
For purposes of this Agreement, the term "Good Reason" will mean
and
include the following situations:
a) any material
adverse change in Executive's status, responsibilities
or Fringe Benefits;
b) any failure to nominate or elect Executive as Executive Vice
President of Personal Banking;
c) causing or
requiring Executive to report to anyone other than
the
President;
d) assignment
to Executive of duties materially inconsistent with
Executive's
position as
Executive Vice President of Personal
Banking;
e)
any reduction of
Executive's annual base salary or annual bonus (or,
if applicable, a
change in the formula for determining Executive's
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annual bonus
which would have the effect of reducing
by more than
10% Executive's
annual bonus as it would otherwise have been
calculated immediately
prior to the Change of
Control that gives
rise to Executive's right to receive Termination Benefits as
provided in this
Agreement) or other
reduction in
compensation or
benefits, or
f) requiring
Executive to be principally based at any office or
location more than 50 miles from the current offices of the Bank in
West Chester, Pennsylvania.
6) CAUSE
DEFINED.
For purposes of this
Agreement, the term
"Cause" will mean and include
the following situations:
a) Executive's
conviction by a court
of competent
jurisdiction of any
criminal offense
involving dishonesty or breach of trust or any
felony or crime involving moral turpitude;
b) Executive's
failure to perform
the duties
reasonably
assigned to
Executive by the
Board of Directors of the Bank fail without
reasonable cause or
excuse, which failure
or breach continues
for
more than ten days after written notice thereof is given to
Executive.
7) CEILING ON
BENEFITS.
Under the "golden
parachute" rules in
the Internal
Revenue Code (the
"Code") Executive will be subject to a 20% excise
tax (over and above
regular
income tax) on any "excess parachute
payment" that
Executive receives following
a Change in Control, and the Bank will not be permitted to deduct any such
excess parachute payment. Very generally,
compensation paid to Executive that is
contingent upon a Change in Control will be
considered a "parachute payment" if
the present value of such consideration equals or exceeds three times
Executive's average annual compensation from the Bank for the
five years prior
to the Change in Control. If payments are
considered "parachute
payments," then
all such payments to Executive in excess of
Executive's base annual compensation
will be
