ITEM
5
.0
2
Departure of Directors o
r Certain Officers; Election of
Directors; Appointment of Certain Offi
cers; Compensatory Arrangements
with Certain Officers
O
n
March
20
,
201
9
,
Fidelity D & D Bancorp, Inc. (
the
“
Company
”)
and
its wholly owned subsidiary
,
The
Fidelity Deposit and Discount Bank (
the
“
Bank
”)
entered into
an
e
mployment
a
greement with
Michael J. Pacyna
(the
“
Employment Agreement
”
), under which Mr.
Pacyna
will serve as Executive Vice President and Chief
Business Development Officer
of
the
Bank, and in such other capacities as the Bank or the Corporation direct.
The material terms of
the Employment A
greement
are as follows:
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1.
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The initial terms of the Employment Agreement is on the first anniversary date, unless notice to terminate is given by either party at least ninety (90) calendar days before that anniversary date, the Employment Agreement shall continue through the remainder of the initial term. On the second anniversary date, unless the Employment Agreement was previously terminated or unless notice to terminate is given by either party at least ninety (90) calendar days before the anniversary date, the employment period shall be deemed to continue through the third and final year of the initial term plus two additional years. Rolling three-year employment term will therefore continue to apply effective on each subsequent anniversary date.
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2.
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If
the
Employment A
greement
is terminated without “Cause”, involuntarily
terminated within one year
af
ter
a
“Change in Control”
, as defined in the Employment A
greement
,
or voluntarily by the executive for “Good Reason”, the executive shall be entitled to receive and two (2) times his annual base salary and continuation of all life, disability, medical insurance and other normal health and welfare benefits for two
(2)
years.
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3.
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If the executive terminates
the Employment A
greement
without “Good Reason”, all of the executive’s rights terminate under the
Employment A
greement
except for arbitration.
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4.
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Mr.
Pacyna
shall receive an annual base salary
of $
1
93
,
0
00
,
subject to customary withholdings and taxes, which may
be increased from time to time.
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5.
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As consideration for entering into the Employment Agreement,
Mr.
Pacyna
shall
be included in (1) a Supplemental Executive Retirement Plan (SERP) and (2) a special Executive Life Insurance program to begin this calendar year (201
9
)
.
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6.
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The
executive is entitled to
be considered for
bonuses each year
, as determined
in the Bank’s sole discretion, vacation and/or paid time off, as well as is entitled to participate in employee benefit plans.
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7.
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Upon termination of
the Employment A
greement
for any reason,
the
executive is subject to certain customary confidentiality
and n
on-competition provisions for two
(2)
years.
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The description above is only a summary of the material terms of
the
Employment A
greement
and is not intended to be a full description of the
Employment A
greement
.
T
he
Employment A
greement
is
attached hereto as Exhibit 99.1
and is incorporated herein by reference
.
On March
20
, 2019,
the
Bank entered into a supplemental executive retirement
plan
agreement (the “SERP Agreement”) with
Michael
J.
Pacyna,
Jr.,
Executive Vice President and Chief Business Development Officer of the Bank
; pursuant to which the Bank will credit an amount to a SERP account established for
the
participant’s behalf while they are actively employed by the Bank for each calendar month from March 1, 201
9
until normal retirement age of 67. Each month, until the age stated previously or until the participant is not an active employee of the Bank, the Bank plans to credit $
4,588
to Mr.
Pacyna
’s SERP account; however, the Bank’s Board of Directors has the discretion to increase or decrease the amount to be credited to any participant’s account at any time.
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·
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The SERP account will be credited with interest at an annual rate equal to 4.00%, compounded monthly. This rate is fixed from plan inception until all payments are distributed.
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The SERP account is payable in 180 monthly installments commencing upon separation from service after attaining age 67.
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If separation from service occurs following the first day of the fourth plan year for a reason other than death, disability or following a change in control, the participant will receive the SERP account balance at that date, payable in 60 monthly installments beginning at normal retirement age (age 67). Interest will be credited at an annual rate of 4.00%, compounded monthly. If separation from service occurs before the first day of the fourth plan year for a reason other than death, disability or following a change in control, the participant will not receive a benefit.
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·
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If separation from service occurs due to death, the participant’s beneficiary will receive his SERP account balance paid over 60 months beginning the month after death. If death occurs after payments have begun, the beneficiary will receive the remaining payments. If death occurs after separation from service, but before payments have begun, the beneficiary will receive the SERP account balance at the date of death, payable over 60 months, beginning the month after death.
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If the participant becomes disabled, he will be entitled to his SERP account balance. Such amount will be paid in 60 equal monthly installments commencing upon disability.
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If a change in control occurs while the participant is employed by the Bank, the participant will receive his SERP account balance plus the present value of the expected future contributions as described above, discounted at a rate .3274% per month, payable over 36 months beginning the month following the change in control.
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If the participant is terminated for cause, all amounts under the SERP agreement are forfeited. In addition, any unpaid amounts are forfeited in the event that, following separation from service, the participant breaches certain post-employment restrictive covenants set forth in the SERP Agreement.
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The description above is only a summary of the material terms of
the
SERP Agreement and is not intended to be a full description of each SERP Agreement. The form of SERP Agreement for
Mr. Pacyna
is attached hereto as Exhibit 99.
2
and is incorporated herein by reference.
On March 20, 2019, the Bank entered into a separate split dollar life insurance agreement (the “Split Dollar Agreement”) with Mr. Pacyna, Executive Vice President and Chief Business Development Officer of the Bank; pursuant to which the Bank will share a portion of the net death proceeds of certain bank-owned life insurance (BOLI) policies should the participant die while employed by the Bank. Net death proceeds are the total death proceeds from the BOLI policies less the greater of the cash surrender value or aggregate premiums paid. Under the Split Dollar Agreement, the participant’s beneficiary will receive death benefit equal to the lesser of three times the participant’s base salary at the date of death or the net death proceeds from the BOLI policies. The Bank will include the current $50,000 group term plan coverage amount towards the three times salary benefit provided by this plan.
In addition, M
r. Pacyna
ha
s
the opportunity to retain a split dollar benefit equal to two times their highest base salary after separation from service if the vesting requirements are met. Vesting occurs if the participant is employed by the Bank at the earliest of the following events: (i) disability, (ii) the Bank undergoes a change in control, (iii) the participant attains normal retirement age (
67
), or (iv) the Board of Directors chooses to amend the Split Dollar Agreement to vest the participant.
The description above is only a summary of the material terms of
the
Split Dollar Agreement and is not intended to be a full description of
the
Split Dollar Agreement. The form of Split Dollar Agreement for
Mr. Pacyna
is attached hereto as Exhibit 99.3 and is incorporated herein by reference.