AMENDED AND RESTATED
AGREEMENT AND GENERAL RELEASE
This AMENDED AND
RESTATED AGREEMENT AND GENERAL RELEASE (this “
Agreement ”) is made as of March 25, 2007 and
entered into by and among PSB BANCORP, INC., a Pennsylvania
corporation (“ PSB ”), FIRST PENN BANK, a
Pennsylvania-chartered bank and a wholly-owned subsidiary of PSB
(“ First Penn ” and, together with PSB, “
Employer ”), and ANTHONY DISANDRO (“
Executive ”).
WHEREAS, PSB has
entered into that certain Agreement and Plan of Merger (the
“Merger Agreement”) dated as of August 30, 2006
and amended on September 21, 2006 with Conestoga Bancorp,
Inc., a Pennsylvania corporation (“Conestoga”),
Conestoga Bank, a Pennsylvania bank and a wholly-owned subsidiary
of Conestoga, and FP Acquisition Corp., a Pennsylvania corporation
and a wholly-owned subsidiary of Conestoga (“Merger
Sub”), pursuant to which Merger Sub will merge with and into
PSB with PSB being the surviving corporation (the
“Merger”);
WHEREAS, Executive
and Employer are parties to that certain Agreement dated as of
April 1, 2003 and Executive and PSB are parties to that
certain Supplemental Executive Retirement Plan Agreement dated as
of July 1, 2004, as amended, (collectively, the
“Existing Employment Arrangements”);
WHEREAS, Conestoga
required, as an essential condition and inducement to its execution
and delivery to PSB of the Merger Agreement, that Executive execute
and deliver to PSB and First Penn this Agreement;
WHEREAS, Conestoga
has asserted certain rights under the Merger Agreement entitling it
to a reduction in the purchase price in the Merger;
WHEREAS, as an
essential condition and inducement to Conestoga agreeing to forego
those rights, Conestoga requires the Executive amend and restate
this Agreement on the terms herein set forth;
WHEREAS, Executive
has determined that it is in his interest as a director, officer,
shareholder and optionholder of PSB to amend and restate this
Agreement on the terms herein set forth; and
WHEREAS, Executive
and Employer expressly acknowledge that Conestoga, Merger Sub and
their respective subsidiaries and affiliates are intended
third-party beneficiaries of this Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants, representations, warranties
and agreements contained herein, and intending to be legally bound
hereby, Employer and Executive agree as follows:
1.
Resignation . Executive hereby resigns from his position as
a member of the Board of Directors of PSB and from all positions
that he holds or has ever held with Employer or any of its
subsidiaries or with any other entity with respect to which
Employer has requested Executive to perform services, in each case,
effective as of the Effective Time (as defined in the Merger
Agreement). Upon the effectiveness of such resignation,
Employer’s employment of Executive shall conclude permanently
and irrevocably.
2.
Amendment and Restatement of Agreements Subject to Code
Section 409A. As of the Effective Time or, if earlier, the
latest date permitted for amendment of plans to conform to the
requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), the Existing Employment
Arrangements are hereby amended and restated in their entirety and
all terms thereof are superseded by the terms set forth herein
effective as of January 1, 2005. In accordance with the
preceding sentence and pursuant to Proposed Treasury Regulation
§ 1.409A-3(h)(2)(viii)(B), this Agreement amends the Existing
Employment Arrangements to permit termination of the arrangements
and acceleration of the time and form of payment within
30 days preceding or the 12 months following a change of
control (as defined in Proposed Treasury Regulations §
1.409A-2(g)(4)(i)).
3.
Termination of Agreements and Plans . As of the Effective
Time, except for this Agreement or as otherwise expressly provided
in this Agreement: (a) all agreements between Executive, on
the one hand, and Employer or one of its subsidiaries or
affiliates, on the other hand, shall be terminated and of no
further force or effect, and Employer and its subsidiaries and
affiliates shall have no continuing obligation to make any payment
or to provide any benefit to Executive under any such agreement;
and (b) Executive’s right to participate or receive any
payments or other benefits under any employee benefit plan or
program maintained by Employer or one of its subsidiaries or
affiliates shall immediately cease or be cancelled, and Employer
and its subsidiaries and affiliates shall have no continuing
obligation to make any payment or to provide any benefit to
Executive under any such plan or program. Notwithstanding the
foregoing, Executive shall remain obligated to repay any amounts
borrowed from Employer or its subsidiaries and otherwise comply
with all of his obligations arising under any note, mortgage or
other agreement relating to the same, and PSB shall remain
obligated to honor the terms of any option to purchase PSB common
shares previously awarded to Executive and any restricted PSB
common shares previously awarded to Executive. Furthermore, nothing
in this Section 3 or elsewhere in this Agreement shall be
construed to preclude Executive from receiving any benefit to which
he is entitled under an “employee pension benefit plan”
as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) that is
qualified under Code Section 401(a). Executive acknowledges
that, to the extent the plan sponsor intended to amend any such
“employee pension benefit plans” to freeze benefit
accruals and eligibility thereunder, such plans have been properly
amended, and subsequently administered (to the extent necessary to
effect any such amendment), in compliance with applicable law and
such amendments have remained in effect at all times thereafter. As
part of Executive’s release of claims in Section 14 of
this Agreement, Executive releases and agrees not to bring any
claims against either the Released Parties (as defined therein) or
any fiduciary with respect to such plans alleging that any such
plan was not so amended (and/or subsequently administered) in
compliance with applicable law or that such amendments failed to
remain in effect at any time thereafter. Nothing in this
Section 3 or
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elsewhere in
this Agreement shall be construed to limit Executive’s rights
under ERISA Section 602 and Code Section 4980B(f).
4.
Non-Competition; Non-Solicitation.
(a) From the date
of this Agreement until 18 months after the Effective Time,
Executive will not directly for himself or any third party, become
engaged in any business or activity which is directly in
competition with any services or financial products sold by, or any
business or activity engaged in by, Employer, Conestoga or their
Subsidiaries (as defined in the Merger Agreement), including,
without limitation, the taking and accepting of deposits, the
making of loans and/or the extension of credit and brokering loans
and/or leases, within a 35 mile radius of 1835 Market Street,
Philadelphia, Pennsylvania. This provision shall not restrict
Executive from owning or investing in publicly traded securities of
financial institutions, so long as his aggregate holdings in any
financial institution do not exceed ten percent (10%) of the
outstanding capital stock of such institution. After the first
anniversary of the Effective Time, Executive may request a waiver
from Conestoga of the applicability of this Section 4(a) to certain
limited activities in which Executive wishes to engage that would
not reasonably be expected to be detrimental to the interests of
Conestoga and its subsidiaries, and Conestoga shall not
unreasonably withhold any such requested waiver.
(b) From the date
of this Agreement until the third anniversary of the Effective
Time, Executive will not solicit any person who is, or within the
five years preceding the date of this Agreement was, a customer of
Employer or its subsidiaries, or solicit potential customers who
are or were identified through leads developed during the course of
employment with Employer or any of its subsidiaries, or otherwise
divert or attempt to divert any existing business of Employer or
any of its subsidiaries within any area of 75 miles of 1835 Market
Street, Philadelphia, Pennsylvania.
(c) From the date
of this Agreement until the third anniversary of the Effective
Time, Executive will not, directly for himself or any third party:
(i) solicit, induce, recruit or cause another person in the
employment of Employer, Conestoga or their subsidiaries to
terminate his or her employment for the purposes of joining,
associating or becoming employed with any business or activity
which is in competition with any services or financial products
sold, or any business or activity engaged in, by Employer,
Conestoga or their subsidiaries; or (ii) hire any person
employed by Employer, Conestoga or their subsidiaries as of the
date of this Agreement or as of the Effective Time, except for any
such person that Conestoga acknowledges was terminated by Conestoga
or one of its subsidiaries following the Effective Time.
5.
Cooperation . From the date of this Agreement and at all
times thereafter, Executive shall cooperate fully with Employer and
its counsel as Employer reasonably requests with respect to any
matter (including any litigation, arbitration, investigation or
governmental proceeding) relating to matters with which Executive
was involved during the term of his employment with Employer,
including full disclosure of all relevant information and
truthfully testifying in connection with any such proceeding or
investigation. Executive shall render such cooperation in a timely
manner and at such times and places as may be mutually agreeable to
the
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parties.
Notwithstanding the foregoing, Executive shall have no cooperation
obligation under this Section 5 in respect of any litigation,
arbitration, investigation or governmental proceeding in which
Executive is, or is reasonably likely to be, a named party who is
adverse to Employer, Conestoga or their subsidiaries in such
litigation, arbitration, investigation or governmental proceeding.
Executive shall promptly notify Employer if he is contacted for an
interview or if he receives a subpoena in any matter relating in
any way to matters with which he was involved during his employment
with Employer, except as may be prohibited by law or
regulation.
6.
Payments and Benefits .
(a) Upon the
occurrence of the Effective Time and the consummation of the
Merger, Employer shall make the payments specified to Executive in
paragraphs 2, 3, 4 and 5 on Exhibit A hereto, subject to
adjustment as provided in subsection (b) below, by wire
transfer of immediately available funds to an account designated by
Executive in writing. Executive acknowledges that, except as
specifically and expressly set forth in this Agreement and on
Exhibit A hereto, Employer does not have and will not have any
obligation to provide Executive at any time in the future with any
payments, benefits or considerations.
(b) The amount set
forth in paragraph 3 on Exhibit A shall be subject to
adjustment up or down as follows. If the aggregate sum of fees and
expenses set forth on the closing statements delivered by
PSB’s professional and other advisors pursuant to
Section 8.2(e) of the Merger Agreement exceeds $1,112,600, the
payment provided in paragraph 3 on Exhibit A shall be reduced
by an amount equal to one half of such excess. If the aggregate
amount of such fees and expenses is less than $1,112,600, the
payment provided in paragraph 3 on Exhibit A shall be
increased by an amount equal to one half of such
shortfall.
(c) Nothing
contained in this Agreement shall be deemed a waiver by Executive
of any rights Executive may have to indemnification and other
benefits under Section 7.7 of the Merger Agreement except that
Executive hereby waives any right to indemnification by Employer,
Conestoga or any of their successors or affiliates for any damages,
liabilities, costs or expenses, including attorneys fees, related
to or arising from any matter included or referenced in the Revised
and Updated Schedules delivered by PSB to Conestoga on the date
hereof in connection with the second amendment to the Merger
Agreement that was not included in the original disclosure schedule
delivered by PSB to Conestoga on August 30, 2006.
7.
Retention. Executive shall continue to serve as the
President of PSB and the President and Chief Executive Officer of
First Penn until the Effective Time and shall faithfully and
diligently fulfill the duties and responsibilities of such
positions. If Executive continues to be employed by Employer from
the date hereof until the Effective Time, he shall receive the
retention bonus specified in paragraph 2 of Exhibit A hereto.
If Executive’s employment with Employer is terminated for any
reason prior to the Effective Time other than as a result of
Executive’s death or Disability (as defined in
Section 409A of the Code): (a) Executive shall not be
entitled to receive the retention bonus specified on Exhibit A
hereto; (b) Executive shall continue to be bound by this
Agreement and each of his obligations hereunder,
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including,
without limitation, his obligations under Section 4 hereof;
(c) upon the Effective Time, Executive shall receive the
payments contemplated by paragraphs 4 and 5 of Exhibit A
hereto; and (d) Executive shall be entitled to receive the
payments and benefits (but only to the extent such benefits are not
subject to
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