AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT

EX-10.3 4 w22441exv10w3.htm EX-10.3 exv10w3

Exhibit 10.3

AMENDED AND RESTATED
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT (this “Agreement”) is effective the 20^th day of July 2006, between Laurel Savings Bank (the “Bank”), a Pennsylvania-chartered savings bank and wholly owned subsidiary of Laurel Capital Group, Inc. (the “Corporation”), and Robert A. Stephens (the “Executive”).

INTRODUCTION

The Bank and the Executive previously entered into a certain Change in Control Severance Agreement effective as of July 1, 2003 (the “Prior Agreement”). This Agreement amends and restates the Prior Agreement in its entirety as hereinafter set forth in order to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), including the guidance issued to date by the Internal Revenue Service (the “IRS”) and the proposed regulations issued by the IRS in the fall of 2005.

WITNESSETH

WHEREAS, the Executive is presently an officer of the Bank, and the Bank desires to be ensured of the Executive’s continued active participation in the business of the Bank;

WHEREAS, in order to induce the Executive to remain in the employ of the Bank and in consideration of the Executive’s agreeing to remain in the employ of the Bank, the parties desire to specify the severance benefits which shall be due the Executive in the event that his employment with the Bank is terminated under specified circumstances.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1. Definitions. The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a) Annual Compensation. The Executive’s “Annual Compensation” for purposes of this Agreement shall be deemed to mean the highest level of base salary and cash bonus paid to the Executive by the Corporation, the Bank or any subsidiary of either entity during the calendar year in which the Date of Termination occurs (determined on an annualized basis) or either of the two calendar years immediately preceding the calendar year in which the Date of Termination occurs.

(b) Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order or material breach of any provision of this Agreement. For purposes of

this subparagraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Bank and/or the Corporation.

(c) Change in Control of the Corporation. “Change in Control of the Corporation” shall mean a change in the ownership of the Bank or the Corporation, a change in the effective control of the Bank or the Corporation or a change in the ownership of a substantial portion of the assets of the Bank or the Corporation as provided under Section 409A of the Code and the regulations thereunder.

(d) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) Date of Termination. “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date specified in the Notice of Termination, and (ii) if the Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or as specified in such Notice.

(f) Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank.

(g) Good Reason. Termination by the Executive of the Executive’s employment for “Good Reason” shall mean termination by the Executive following a Change in Control of the Corporation based on:

	(i)		Without the Executive’s express written consent, the assignment by the Bank to the Executive of any duties which are materially inconsistent with the Executive’s positions, duties, responsibilities and status with the Bank immediately prior to a Change in Control of the Corporation, or a material change in the Executive’s reporting responsibilities, titles or offices as an employee and as in effect immediately prior to such a Change in Control of the Corporation or any removal of the Executive from or any failure to re-elect the Executive to any of such responsibilities, titles or offices, except in connection with the termination of the Executive’s employment for Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;

	(ii)		Without the Executive’s express written consent, a reduction by the Bank in the Executive’s base salary as in effect immediately prior to the date of the Change in Control of the Corporation or as the same may be increased

			from time to time thereafter or a reduction in the package of fringe benefits provided to the Executive, taken as a whole;

	(iii)		The principal executive office of the Bank is relocated more than fifty (50) miles from its location as of the date hereof or, without the Executive’s express written consent, the Bank requires the Executive to be based anywhere other than an area in which the Bank’s principal executive office is located, except for required travel on business of the Bank to an extent substantially consistent with the Executive’s business travel obligations immediately preceding the Change in Control of the Corporation;

	(iv)		Any purported termination of the Executive’s employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (i) below; or

	(v)		The failure by the Bank to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 7 hereof.

(h) IRS. IRS shall mean the Internal Revenue Service.

(i) Notice of Termination. Any purported termination of the Executive’s employment by the Bank for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less that thirty (30) nor more that ninety (90) days after such Notice of Termination is given, except in the case of the Bank’s termination of Executive’s employment for Cause; and (iv) is given in the manner specified in Section 8 hereof.

(j) Retirement. Termination by the Bank’s of the Executive’s employment based on “Retirement” shall mean voluntary termination by the Employee in accordance with the Bank’s or the Corporation’s retirement policies, including early retirement, generally applicable to their salaried employees.

2. Benefits Upon Termination. If the Executive’s employment by the Employers shall be terminated within the two (2) year period subsequent to a Change in Control of the Corporation by (i) the Bank for other than Cause, Disability, Retirement or the Executive’s death (ii) the Executive for Good Reason or (iii) the Executive for any reason within the first sixty (60) days following the one year anniversary of the Change in Control of the Corporation, then the Bank shall:

(a) pay to the Executive, in twenty-four (24) equal monthly installments beginning with the first business day of the month following the Date of Termination, a cash severance amount equal to two (2) times the Executive’s Annual Compensation; and

(b) maintain and provide for a period ending at the earlier of (i) twelve (12) months from the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (b)), at no cost to the Executive, the Executive’s continued participation in all group insurance, life insurance, health and accident insurance, disability insurance and other employee benefit plans, programs and arrangements offered by the Employers in which the Executive was entitled to participate immediately prior to the Date of Termination (excluding (x) any additional contributions under any of the Bank’s or the Corporation’s qualified defined contribution or defined benefit plans, (y) stock option plans or restricted stock plans of the Corporation and (z) cash incentive compensation included in Annual Compensation), provided that in the event that the Executive’s participation in any plan, program or arrangement as provided in this subparagraph (b) is barred, or during such period any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Employers shall arrange to provide the Executive with either (A) benefits substantially similar to those which the Executive was entitled to receive under such plans, programs and arrangements immediately prior to the Date of Termination or (A) a cash payment equal to the then current monthly cost of benefits multiplied by the number of whole months remaining in the period during which benefits are required to be provided under the terms of this subparagraph (b); provided further, however, that if the provision of any of the benefits covered by this Section 2(b) would trigger the 20% tax and interest penalties under Section 409A of the Code, then the benefit(s) that would trigger such tax and interest penalties shall not be provided (collectively, the “Excluded Benefits”), and in lieu of the Excluded Benefits the Bank shall pay to the Executive, in a lump sum within 10 business days after such determination, a cash amount equal to the cost to the Bank (or its successor) of providing the Excluded Benefits.

3. Limitation of Benefits under Certain Circumstances. If the payments and benefits due Executive pursuant to Section 2 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Bank or the Corporation, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits payable by the Bank or Corporation pursuant to Section 2 hereof shall be reduced by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits payable by the Bank or the Corporation under Section 2 being non-deductible to the Bank and the Corporation pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. If the payments and benefits under Section 2 are required to be reduced, any costs assigned to fringe benefits which are not provided for the full twelve (12) months because the Executive obtains subsequent employment shall be reduced first. If the Executive receives fringe benefits for the full 12-month period specified in Section 2(b) above, then any remaining cash severance to be provided in the 24 monthly installments specified in Section 2(a) above shall be reduced by the minimum amount necessary so that the present value of all of the payments and benefits are less than three (3) times the Executive’s “base amount” under Section 280G, starting by reducing the last scheduled installment in whole or in part, then the next to last scheduled installment, et cetera. The determination of any

reduction in the payments and benefits to be made pursuant to Section 2 shall be based upon the opinion of independent counsel selected by the Bank and paid by the Bank. Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose. Nothing contained herein shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 3, or a reduction in the payments and benefits specified in Section 2 below zero.

4. Mitigation; Exclusivity of Benefits.

(a) The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor, except as otherwise provided herein, shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Bank pursuant to employee benefits plans of the Bank or the Corporation or otherwise.

5. Withholding. All payments required to be made by the Bank hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation.

6. Severability. If any term, provision, paragraph or section of this Agreement shall be determined by a court of competent jurisdiction to be invalid or unenforceable for any reason, such determination shall not effect the remaining terms, provisions or paragraphs or sections of this Agreement which shall continue to be given full force and effect. Should any court of competent jurisdiction find any term, provision, paragraph or section of this Agreement invalid or unenforceable, or enforceable only in restricted form, then any such finding shall apply only to the jurisdiction of such Court and shall not serve to alter or amend this Agreement in any other jurisdiction.

7. Assignability. The Bank may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Bank or the Corporation may hereafter merge or consolidate or to which the Bank or the Corporation may transfer all or substantially all of their assets, if in any such case said corporation, bank or other entity shall by operation of laws or expressly in writing assume all obligations of the Bank hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have

been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:


		To the Bank:		President
				Laurel Savings Bank.
				2724 Harts Run Road
				Allison Park, Pennsylvania 15101

		To the Executive:		Robert A. Stephens
				At the address last appearing
				On the records of the Bank

9. Amendment; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Bank to sign on its behalf, except as set forth below. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. In addition, notwithstanding anything in this Agreement to the contrary, the Bank may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code. In no event shall the Corporation or the Bank be liable for any taxes or interest penalties incurred by the Executive under Section 409A of the Code.

10. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the Commonwealth of Pennsylvania. Any actions brought with respect to this Agreement or performance of services hereunder may be brought only in the state or federal courts of Allegheny County, Pennsylvania, and the parties consent to the jurisdiction and venue therein.

11. Nature of Employment and Obligations.

(a) Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Bank and the Executive, and the Bank may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b) Nothing contained herein shall create or require the Bank to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Bank hereunder, such right shall be no greater than the right of any unsecured general creditor of the Bank.

12. Term of Agreement. The term of this Agreement shall be for two (2) years, commencing as of July 1, 2003 (the “Effective Date”). Commencing on the first anniversary of the Effective Date, the term of this Agreement shall extend for an additional year on each annual

anniversary of the Effective Date of this Agreement until such time as the Board of Trustees of the Bank or the Executive give notice in accordance with the terms of Section 8 hereof of its or his election, respectively, not to extend the term of this Agreement. As a consequence, subsequent to the first anniversary of the Effective Date, the remaining term of this Agreement will be between one (1) two and two (2) years. Such written notice of the election not to extend must be given not less than thirty (30) days prior to any such anniversary date. If any party gives timely notice that the term will not be extended as of any annual anniversary date, then this Agreement shall terminate at the conclusion of its remaining term. References herein to the term of this Agreement shall refer both to the initial term and successive terms.

13. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

15. Regulatory Prohibition. Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and any regulations promulgated thereunder, including 12 C.F.R. Part 359.

16. Entire Agreement. This Agreement embodies the entire agreement between the Bank and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Bank and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.


Attest:	LAUREL SAVINGS BANK:

/s/ John A. Howard	By:	/s/ Edwin R. Maus

John A. Howard, Jr., Secretary		Edwin R. Maus
		President and Chief Executive Officer

Witness:	EXECUTIVE:

/s/ John A. Howard	By:	Robert A. Stephens

		Robert A. Stephens