Exhibit
10.1
SEVERANCE
AND RELEASE AGREEMENT
THIS SEVERANCE AND RELEASE AGREEMENT
(the “Agreement”) is made this 15
th day of August 2008 (the “Effective
Date”) by and between Thomas M. Kelly (the
“Executive”), First Keystone Financial, Inc., a
Pennsylvania corporation (the “Company”), and First
Keystone Bank, a federally chartered savings bank and wholly owned
subsidiary of the Company (the “Bank”). The
Company and the Bank are sometimes collectively referred to herein
as the “Employers”.
W I T N E S S E T
H :
WHEREAS, the Executive currently
serves as President and Chief Executive Officer of each of the
Employers;
WHEREAS, the Executive currently is
a party to separate amended and restated employment agreements with
the Company and the Bank, each dated as of December 1, 2004 and
each amended as of March 28, 2005 (the “Employment
Agreements”), setting forth the terms and conditions of his
employment;
WHEREAS, the Employers and the
Executive have had discussions with respect to the termination of
the Executive’s employment and the payments and benefits the
Employers would agree to make or provide pursuant to such
termination;
WHEREAS, the Company and the Bank
are each a party to separate Supervisory Agreements with the Office
of Thrift Supervision (the “OTS”) dated as February 13,
2006 (the “Supervisory Agreements”);
WHEREAS, the Supervisory Agreements
provide that the Employers are subject to 12 C.F.R. Part 359 and as
a result may not pay any severance or enter into any agreements
with certain specified persons (including the Executive) providing
for severance without obtaining the required approvals or
concurrences from the OTS and the Federal Deposit Insurance
Corporation (the “FDIC”); and
WHEREAS, the Employers have obtained
the requisite approvals or concurrences from the OTS and the FDIC
to enter into this Agreement.
NOW, THEREFORE, in consideration of
the mutual premises and covenants contained herein, and intending
to be legally bound, the parties agree as follows:
1.
Termination of Employment and Employment Agreement; Transition
Period.
(a) Effective
as of November 15, 2008 (the “Date of Termination”),
the Executive shall no longer be an officer or employee of the
Employers and shall be deemed to have resigned as an officer and
employee of the Employers. The Employment Agreements, by mutual
agreement of the parties hereto, shall be terminated and be of no
further force and effect as of the Effective Date, and the
Executive shall be entitled only to the rights and payments set
forth herein in lieu of any and all rights and payments under the
Employment Agreements. In addition, effective as of the
Date of Termination, the Executive shall resign from the Board of
Directors of both the Company and the Bank and shall also resign
from and relinquish any and all other positions that he may have as
a director, officer or employee with either Employer or any of
their subsidiaries or affiliates.
(b) Between
the Effective Date and the Date of Termination (the
“Transition Period”), the Executive shall relinquish
his position as President and Chief Executive Officer of the
Employers but shall remain in the employ of the Employers. During
the Transition Period, the Executive shall report to the Chairman
of the Board of the Company and the Bank or his designee and shall
assist the Chairman in the conduct of the business and operations
of the Employers during the Transition Period in order to provide
for an orderly transition while a new president and chief executive
officer for the Employers is sought and engaged. It is
contemplated that the services provided during the Transition
Period will include, without limitation, meetings or
teleconferences between the Executive and the Chairman of the Board
and other executive officers of the Company and the Bank with
respect to the business activities and operations of the Employers;
meeting with existing and potential customers of the Employers;
attendance at meetings of the Board of Directors of the Company and
the Bank to report on the business activities and operations of the
Company and the Bank; and attendance at certain functions of the
Employers.
2.
Payments and Benefits to the Executive .
(a) During
the Transition Period, the Employers agree to continue to pay the
Executive at an annualized rate equal to his current annual base
salary of $230,000 ($19,166.67 per month), paid in accordance with
the Employers’ normal procedures applicable to employees. In
addition, during the Transition Period, the Executive will be
entitled to continued medical and dental insurance for the benefit
of the Executive, his spouse and his minor children (the
“Covered Persons”). Notwithstanding anything
to the contrary herein, as provided in Section 2(d), subsequent to
the Effective Date, other than medical and dental
insurance for the Covered Persons, the Executive will not be
entitled to participate in or accrue or earn any benefits under any
other benefit plan or arrangement maintained by the Employers as of
the Effective Date or implemented during the Transition
Period.
(b) In
addition to the amounts paid during the Transition Period pursuant
to Section 2(a), the Employers agree to pay an aggregate of
$230,000 to the Executive, representing one times the
Executive’s current annual base salary, payable in 12 equal
monthly installments on the first business day of each month,
commencing on the first business day of the month immediately
following the Date of Termination.
(c) The
Employers agree to pay the insurance premiums for continued medical
and dental insurance for the benefit of
the Covered Persons until the earlier to occur of (i) the passage
of 24 months following the Date of Termination or (ii) the date of
the Executive’s full-time employment with another employer
pursuant to which he becomes entitled under the terms of such
employment to medical benefits. The coverage provided during such
period will be comparable to the coverage currently provided by the
Employers to the Covered Persons; provided that any insurance
premiums payable by the Employers or any successors pursuant to
this Section 2(c) shall be payable at such times and in such
amounts as if the Executive was still an employee of the Employers,
subject to any increases in such amounts imposed by the insurance
company or COBRA, and the amount of insurance premiums required to
be paid by the Employers in any taxable year shall not affect the
amount of insurance premiums required to be paid by the Employers
in any other taxable year.
(d) The
Employers shall have no obligation to make contributions for
service subsequent to the Date of Termination with respect to the
Bank’s 401(k) Plan, the Bank’s defined contribution
supplemental executive retirement plan (the “SERP”),
the Company’s Employee Stock Ownership Plan (the
“ESOP”) or any other tax-qualified or non-tax-qualified
retirement or profit sharing plan on behalf of the Executive, and
the Executive shall have no right to participate in or accrue any
additional benefit related to such plans for service after the Date
of Termination. All of the Executive’s accrued and
vested benefits held under the Employers’ 401(k) Plan, SERP,
ESOP or other retirement or benefit plans as of the Effective Date
shall be payable to the Executive in accordance with the terms of
such plans.
(e) The
value of three weeks of vacation leave shall be paid to the
Executive within ten business days following the Date of
Termination.
(f) The
Executive shall not be entitled to any cash bonus for service in
fiscal 2008 under any Employer bonus plan.
(g) With
respect to that certain mortgage loan (the "Loan") extended to the
Executive in 2003 by the Bank bearing an interest rate of 4.875%
(the "Advantaged Rate") that was 1% below that charged on similar
loans to non-employees (5.875%) (the "Prevailing Rate") in
accordance with the Bank's Lending Policy as permitted under
Regulation O promulgated by the Board of Governors of the Federal
Reserve System, the Advantaged Rate will be maintained through
December 31, 2008 at which time the interest rate on the Loan will
convert to the Prevailing Rate.
3.
Stock Option Plans . Except as provided herein,
it is acknowledged that no additional arrangements are being
provided by the Employers to the Executive under any of the
Company’s stock option plans (the “Option
Plans”). All outstanding stock options currently
held by the Executive under the Option Plans are exercisable, and
such stock options shall remain exercisable for the time periods
set forth in the Option Plans and related grant agreements except
as provided hereby. As permitted by the terms of the
2005 Stock Option Plan (“2005 Plan”), the period for
exercise subsequent to the Date of Termination of the options
granted pursuant to the 2005 Plan as set forth on Exhibit A shall
be extended as permitted by Section 8.05(a) thereof from three
months to the lesser of one year from the Date of Termination or
the expiration date of such options. Set forth as
Exhibit A hereto is a listing of Executive's stock options and the
relevant terms thereof (as modified pursuant to the terms
hereof).
4.
Solicitation of Employees and Customers; Use of Customer Lists,
etc. The Executive acknowledges that, except as
required by law or in his own good faith use in any proceeding, he
has no right personally to use or disclose to any person, firm or
corporation, information concerning any customer list, business
secrets or confidential financial information of the Employers that
he knew was intended by the Employers to be confidential and that
he did not have reason to believe had been made public
(collectively, “Confidential Information”).
Accordingly, the Executive covenants and agrees that he shall not
use or permit the use of any Confidential Information, and shall
not divulge any Confidential Information to any person, firm or
corporation, except as may be required by applicable law arising
out of his employment with or participation in the affairs of the
Employers. Further, during the Transition Period and for
a period of 24 months subsequent to the Date of Termination, the
Executive agrees that he will not (i) solicit or induce, or cause
others to solicit or induce, any employee of the Employers or their
subsidiaries to leave the employment of such entities, or (ii)
solicit (whether by mail, telephone, electronically, personal
meeting or any other means, excluding general solicitations of the
public that are not based in whole or in part on any list of
customers of the Employers or their subsidiaries) any customer of
the Employers or their subsidiaries to transact business with any
other person or entity, or their subsidiaries, or interfere with or
damage (or attempt to interfere with or damage) any relationship
between the Employers and their subsidiaries and any such
customers.
(a) During the
Transition Period and for a period of 24 months subsequent to the
Date of Termination, the Executive agrees that he will not,
directly or indirectly, through one or more intermediaries or
otherwise, (i) acquire, agree to acquire or make any proposal to
acquire, more than 5 percent of the securities of the Company or
any of its subsidiaries, any warrant or option to acquire any such
securities, any security convertible into or exchangeable for any
such securities or any other right to acquire any such securities;
(ii) seek or propose any merger, consolidation, business
combination, tender or exchange offer, sale or purchase of assets
or securities, dissolution, liquidation, restructuring,
recapitalization or similar transaction of or involving the
Employers or any of their subsidiaries; (iii) make, or in any way
participate in, any “solicitation” of proxies or
consents (whether or not relating to the election or removal of
directors) within the meaning of Rule 14a
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