Document:

Exhibit 10.2

 

SECURITY
RESEARCH ASSOCIATES, INC.

 

February 29, 2008

 

Gerard T. Feeney

Chief Financial Officer

Wave Systems Corp.

480 Pleasant Street

Lee, MA 01238

 

Dear Mr. Feeney:

 

We are pleased to confirm the arrangements
under which Security Research Associates, Inc. (“SRA”) is engaged by Wave
Systems Corp. (the “Company”) as non-exclusive
placement agent on a “best-efforts” basis in connection with one or more
equity financing transactions to be completed by the Company (a “Financing”).  The term of this Agreement shall extend to March 7,
2008 (the “Term”).

 

During the term of our engagement, we will
provide you with assistance in connection with the Financing, which may include
performing valuation analyses and assisting you in negotiating the financial
aspects of the transaction.  During the
term of our engagement, we will also identify and contact potential investors
for the Company (the “SRA Investors”).

 

In the event the Financing is consummated,
the Company agrees to pay to SRA a transaction fee (the “Transaction Fee”)
consisting of (i) 6% (six percent) of the gross proceeds from the
Financing received by the Company at closing, and (ii) 18 month warrants
to acquire a number of shares of the Company’s Common Shares equal to 6% (six
percent) of the aggregate gross proceeds from the Financing received by the
Company divided by the price per share of the Company’s securities paid by all
of the investors in the Financing received by the Company at closing (the “SRA
Warrants”).  The warrants will not be exercisable
for a period of 180 days following the closing. 
There will be no Transaction Fees or Warrants issued to SRA on the
exercise of Warrants by Investors.

 

The SRA Warrants issued to SRA pursuant to
this agreement will have a “cashless exercise” provision and will have an
exercise price which will be priced at market value at the time of closing and
the underlying shares will be fully registered and issued from the Company’s
shelf.  Notwithstanding the above to the
extent that the Company places its securities with SRA’s Investors, the Company
will provide the same rights to SRA with respect to the Warrants as the rights
granted by the Company to the SRA Investors.

 

The SRA Warrants received by SRA from the
Company pursuant to this agreement shall be subject to a lock-up restriction
which complies with NASD Conduct Rule 2710(g)(1). The SRA warrants shall
not be sold by SRA during the offering, or sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivative,
put, or call transaction that would result in the effective economic
disposition of the securities by any person for a period of 180 days
immediately following the date of effectiveness or commencement of sales of the
public offering of the Company’s stock, except as provided in NASD Conduct Rule 2710(g) (2).

 

If the Company, in lieu of or in addition to
a Financing or a Financing Commitment, enters into a transaction, during the
term of this Agreement or within 6 months of the termination of this Agreement,
pursuant to which the Company sells or licenses to SRA Investors any of the
Company’s divisions, business segments or material assets, (“Asset Sale”) the
Company will, so long as the Asset Sale occurs 

 

SECURITY RESEARCH ASSOCIATES,
INC.

80 East Sir Francis Drake Blvd., Suite 3F,
Larkspur, CA  94939 / Phone: 415-925-0346
/ Fax: 415-925-0264 / www.sracap.com

Exhibit 10[1].2 WAVX SRA Engagement letter
022908c execution.doc      CONFIDENTIAL

1

 

as a result of SRA’s efforts, pay to SRA an Asset
Sale Fee equal to two and a half percent (2.5%) of the value attributable to
the deal (the acquisition price). The Asset Sale Fee shall be paid upon
consummation of the transaction.  Upon
the termination or expiration of this Agreement, SRA and the Company shall
agree to a list of SRA Investors introduced to the Company by SRA pursuant
hereto.

 

Subject to applicable laws, rules and
regulations, the Company agrees to provide all information and documents
reasonably required to permit the SRA Investors to make an informed investment
decision with respect to an investment in the Company. Such information and
documents shall be provided at the cost of the Company.

 

The Company also agrees to
reimburse SRA periodically, upon request, or upon termination of our services
pursuant to this letter (the “Agreement”), for our reasonable and reasonably
documented out-of-pocket expenses, incurred in connection with our financial
advisory services and the Financing, including the reasonable fees and expenses
of legal counsel, travel expenses and printing. All such out-of-pocket fees and
expenses shall not exceed a combined aggregate amount of $10,000.

 

Please note that any written
or oral opinion or advice provided by SRA in connection with our engagement is
exclusively for the information of the Board of Directors and senior management
of the Company, and may not be disclosed to any third party (other than the
Company’s legal, accounting or other advisors, who shall have been instructed with
respect to the confidentiality of such advice) or circulated or referred to
publicly without our prior written consent, except as to the extent required by
law, judicial or administrative process or regulatory demand.

 

The Company or SRA shall be
entitled to terminate this Agreement before the end of the agreement Term on
written notice to the other party at the address set forth for such party on
the signature page hereof.  In the
event of the termination of this Agreement, SRA shall be entitled to be paid
its existing reasonable out-of-pocket expenses subject to the terms described
above.  The confidentiality provisions of
this Agreement shall be unaffected by the termination of this agreement.  The Company shall not be obligated to
reimburse any expenses incurred by SRA or its advisors with respect to
activities undertaken after notification of termination is given.  In the event this Agreement is terminated and
prior to the expiration of 6 (six) months from the date of such termination, an
agreement is entered into by the Company with respect to any transaction
contemplated by this agreement with any SRA Investors, SRA will be entitled to
the Transaction Fee set forth above, including transactions involving the sale
of the company, its divisions or its material assets.  Upon the termination or expiration of this
Agreement, SRA and the Company shall agree to a list of SRA Investors
introduced to the Company by SRA pursuant hereto.

 

SRA is an independent
contractor and placement agent of the Company. SRA will not have any right or
authority to bind the Company or otherwise create any obligations of any kind
on behalf of the Company and will make no representation to any third party to
the contrary.

 

During the term of this
Agreement and thereafter, each of the Company and SRA agrees to keep
confidential and not disclose to any third party any confidential information
of the other party, and to use such confidential information only in connection
with the engagement hereunder; provided, however, the foregoing will not
prohibit disclosures (i) to the parties’ employees, agents and other
representatives to the extent necessary to enable the Company or SRA to perform
its responsibilities under this 

 

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Agreement, (ii) to the extent required by law,
judicial or administrative process or regulatory demand, or (iii) with
respect to matters which become public other than by the actions of the
disclosing party hereunder. This section will survive the termination of this
Agreement for a period of five years.

 

Each of the Company and SRA
agrees that in connection with any Financing intended to qualify for the
exemption from the registration requirements of the Securities Act of 1933, as
amended (the “Act”), provided by Section 4(2) of the Act, the Company
and SRA shall limit offers to sell, and solicitations of offers to buy,
securities of the Company in connection with the Financing to persons
reasonably believed by it to be “qualified institutional buyers” as such term is
defined in Rule 144A under the Act or “accredited investors” as such term
is defined in Rule 501(a) of Regulation D promulgated under the Act.

 

Each of the Company and SRA
agrees that any offers it makes in connection with the Financing will be made
only to prospective purchasers on an individual basis and that it will not
engage in any form of general solicitation or general advertising (within the
meaning of Rule 502 under the Act) in connection with the Financing.  Each of the Company and SRA agrees to conduct
the Financing in a manner intended to comply with the registration or
qualification requirements, or available exemptions there from, under
applicable state “blue sky” laws and applicable securities laws of other
jurisdictions.

 

The Company may decline to
consummate the Financing with any prospective purchaser in the Company’s sole
discretion.

 

The
Company agrees to:

 

(a)                                  Indemnify and hold SRA
harmless against any and all losses, claims, damages or liabilities to which
SRA may become subject arising out of or in connection with any of the services
rendered by SRA pursuant to this Agreement, unless such losses, claims, damages
or liabilities resulting  from the gross
negligence or willful misconduct of SRA or a breach of this agreement by SRA;
and

 

(b)                                 Reimburse SRA periodically
for reasonable legal or other expenses incurred by SRA in connection with
investigating, preparing to defend or defending, or providing evidence in or
preparing to serve or serving as a witness with respect to, any lawsuits, investigations,
claims or other proceedings arising in any manner out of or in connection with
the rendering of services by SRA pursuant to this Agreement (including, without
limitation, in connection with the enforcement of this Agreement and the indemnification
obligations set forth herein); it being understood however that the Company
shall have no obligation to reimburse SRA for any such expenses and SRA shall
immediately repay any such reimbursements by the Company in the event any
losses, claims, damages or liabilities are finally judicially determined to
have resulted from the gross negligence or willful misconduct of SRA or a
breach of this agreement by SRA.

 

The Company agrees that the
indemnification and reimbursement commitments set forth in this document shall
apply whether or not SRA is a formal party to any lawsuits, arbitrations,
claims or other proceedings and that such commitments shall extend upon the
terms set forth in this paragraph to any controlling person, affiliate,
director, officer, employee or agent of SRA (each, with SRA, an 

 

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“Indemnified Person”).  In the event an Indemnified Person is made a
formal party to a lawsuit, claim or other proceeding arising out of or in
connection with any of the services rendered by SRA pursuant to this Agreement,
and the Company takes over the defense of such action for an Indemnified
Person, the Company further agrees that it will not, without such Indemnified
Person’s prior written consent, which consent shall not be unreasonably
withheld, enter into any settlement of a lawsuit, claim or other proceeding
arising out of or in connection with the transaction unless such settlement
includes an express and unconditional release from the party bringing the
lawsuit, claim or other proceeding of all Indemnified Persons.  With respect to the immediately preceding
sentence, in the event an Indemnified Person reasonably withholds their consent
to a settlement, the Indemnified Person shall be responsible for all subsequent
costs and expenses arising out of the defense of the Indemnified Person.

 

The Company further agrees
that the Indemnified Persons are entitled to retain separate counsel of their
selection in connection with any of the matters in respect of which
indemnification, reimbursement or contribution may be sought under this
Agreement, provided that, in connection with any one action or proceeding, the
Company shall not be responsible for the fees and expenses of more than one
separate law firm or individual attorney in any one jurisdiction for all
Indemnified Persons.

 

Any dispute arising out of
this Agreement shall be resolved in an arbitration conducted pursuant to the rules of
the National Association of Securities Dealers, Inc. in New York, NY.

 

Please confirm that the
foregoing is in accordance with your understanding by signing and returning to
us the enclosed copy of this Agreement, which shall become a binding agreement
upon our receipt. We are delighted to accept this engagement and look forward
to working with you on this assignment.

 

Very truly yours,

Brian G. Swift, Chairman and CEO

 

Agreement Confirmed by:

 

 

	
  Security Research
  Associates, Inc.

  	
  Wave Systems Corp.

  
	
  80 E. Sir Francis Drake Boulevard, Suite 3F

  	
  480 Pleasant Street

  
	
  Larkspur, CA 94939

  	
  Lee, MA 01238

  
	
   

  	
   

  
	
  By: 

  	
  /s/ David N. Olson

  	
   

  	
  By: 

  	
  /s/ Gerard T. Feeney

  
	
   

  	
  David N. Olson

  	
  Mr. Gerard T. Feeney

  
	
   

  	
  Managing Director

  	
  Chief Financial Officer

  
	
  Date: 2/29/08

  	
  Date: 2/29/08

  
					

 

4Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

                This Executive Employment
Agreement (“Agreement”) is made this 28th day of February, 2008,
between Fidelity D&D Bancorp, Inc. (“Corporation”) and Fidelity
Deposit and Discount Bank (“Bank”), and Daniel J. Santaniello (“Executive”).

 

WITNESSETH:

 

WHEREAS, Corporation is a bank holding company; and

 

WHEREAS, Bank is a subsidiary of Corporation; and

 

WHEREAS, Corporation and Bank desire to employ Executive
under the terms and conditions set forth herein; and

 

WHEREAS, Executive desires to serve Corporation and Bank in
an executive capacity under the terms and conditions set forth in this
Agreement;

 

                NOW,
THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and intending to be legally bound hereby, the parties agree
as follows:

 

1.             TERM OF
EMPLOYMENT.   Corporation
and Bank hereby shall employ Executive, and Executive hereby accepts employment
with Corporation and Bank, commencing effective February 5, 2008 and
continuing until such time as Executive’s employment is terminated as provided
in this Agreement.  For purposes of this
Agreement, “Employment Period” shall mean any period during which Executive is
employed by Corporation and/or Bank.

 

                                                2.             POSITION
AND DUTIES.  Executive
shall serve as Executive Vice President and Chief Operating Officer of Bank and
as Vice President and Chief Operating Officer of 

 

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                                                Corporation,
and Executive shall serve in such other capacities as Bank and/or Corporation
direct.

 

                                                3.             ENGAGEMENT
IN OTHER EMPLOYMENT.  
Executive will devote his full attention, time and energies to the
business of Corporation, Bank and any of their subsidiaries or affiliates.  Executive shall neither engage in any
business or commercial activities, duties or pursuits, nor serve as a director
or officer or in any other capacity in any other company or enterprise without
written approval from the Board of Directors of Corporation.  Executive shall notify the Board of Directors
of Corporation prior to entering into any significant engagement, including
serving as a director or officer, with any philanthropic organization.  All such positions and the expected period of
service for each, as of the date of this Agreement, are identified on Exhibit “A”
hereto.  Executive shall provide as of
each anniversary date of this Agreement an updated list reflecting Executive’s
then current positions and expected terms of service with any organizations
other than Corporation or Bank.

 

                4.             COMPENSATION.

 

                                                                                                (a)           Annual Direct Salary.  As compensation for services rendered
Corporation and Bank under this Agreement, Executive shall be entitled to
receive from Corporation or Bank an annual direct salary of One Hundred Sixty
Thousand Dollars ($160,000) per year (“Annual Direct Salary”), payable in
substantially equal weekly installments (or such other intervals, consistent
with Bank’s payroll policy), prorated for any partial employment period.  The Annual Direct Salary shall be reviewed
annually and shall be subject to change in the discretion of Corporation and
Bank (but not reduced 

 

5

 

                                                                                                below One
Hundred Sixty Thousand Dollars ($160,000), or the rate later established,
without Executive’s written consent, except in cases of national financial
depression or emergency when compensation reduction has been implemented by the
Board of Directors for Bank’s senior management), as may be set by the Board of
Directors of Corporation and Bank taking into account the position, duties and
performance of Executive.

 

                                                                                                (b)           Bonus.  Corporation or Bank, in their sole
discretion, may provide for payment of a periodic bonus to Executive in such an
amount or nature as they may deem appropriate as an incentive to Executive and
to reward Executive for his performance. 
Any bonus amount shall be paid on or before March 15 of the year
following the year with respect to which the bonus is earned.

 

                5.             FRINGE BENEFITS, VACATION,
EXPENSES AND PERQUISITES.

 

                                                                                                (a)           Employee Benefit Plans.  Executive shall be eligible to participate in
or receive benefits under all Bank employee benefit plans including, but not
limited to, any pension plan, profit-sharing plan, savings plan, life insurance
plan, health insurance plan or disability insurance plan as made available by
Bank to its employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements, and
subject to the right of Bank to modify, change or eliminate such plans or arrangements.

 

                                                                                                                                                                (b)           Vacation, Holidays, Sick Days and Personal Days.  Executive shall be entitled to the number of
Twenty (20) paid vacation days in each calendar year. Executive shall also be
entitled to all paid holidays, 

 

6

 

                                                                                                                                                sick days and
personal days given by Corporation and/or Bank to its employees.  Unused paid vacation, holiday, sick or
personal days may not be accumulated for use in any subsequent year; nor may
compensation be paid in lieu thereof.

 

                                                                                                                                                                (c)           Business Expenses. 
During the term of his employment hereunder, Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by him in
furtherance of his duties and responsibilities, which are properly accounted
for, in accordance with the policies and procedures established by the Board of
Directors of Corporation and/or Bank for its senior executive officers.

 

                                                                                                                                                                (d)           Automobile. 
Executive shall be provided with a company-owned or leased vehicle
during the Employment Period.  The
vehicle is to be used for Corporation or Bank business and/or business
development; provided, however, that Executive may also employ such vehicle for
personal use in accordance with applicable tax rules and at Executive’s
expense.

 

(e)                                  Club Memberships.  Corporation shall provide payment of annual
dues and monthly business development expenses for Executive in connection with
a club membership to a golf club that shall be mutually determined by the
parties.  Unless otherwise agreed,
initiation fees shall be paid by Corporation or Bank only if the membership is
the property of Corporation or Bank.

 

                                                6.             INDEMNIFICATION.  Corporation and Bank will indemnify Executive
and advance expenses to the same degree as provided by the Bylaws of
Corporation to Members of its Board of Directors and as required under
Pennsylvania and federal law, with respect to 

 

7

 

                                                any threatened,
pending or completed legal or regulatory action, suit or proceeding brought
against him by reason of the fact that he is or was a director, officer,
employee or agent of Corporation or Bank.

 

                                                7.             LIABILITY
INSURANCE.  Bank and/or
Corporation shall use its best efforts to obtain insurance coverage for
Executive under an insurance policy covering officers and directors of Bank and
Corporation against lawsuits, arbitrations or other legal or regulatory
proceedings; however, nothing herein shall be construed to require Bank and/or
Corporation to obtain such insurance if the Board of Directors of Bank and/or
Corporation determine that such coverage cannot be obtained at a reasonable
price.

 

                                                8.             UNAUTHORIZED
DISCLOSURE.  During the
term of his employment hereunder, or at any later time, Executive shall not,
without the written consent of the Board of Directors of Corporation or Bank or
a person authorized thereby, knowingly use for his own benefit or the benefit
of any other person or other entity, or disclose to any person, other than an
employee of Corporation or Bank or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by Executive of his
duties as an executive of Corporation or Bank, any confidential information,
trade secrets or know-how, obtained by him while in the employ of Corporation or
Bank.  Confidential information includes
any services, products, improvements, formulas, projects, proposals, designs or
styles, processes, customers, (including, but not limited to, customers of
Corporation, Bank or any of their affiliates or subsidiaries on whom Executive
called or with whom he became acquainted during the term of his employment),
methods of business or any business practices, research, product or business
plans, customer lists, markets, software, developments, inventions, technology,
drawings, engineering, marketing, 

 

8

 

                                                distribution
and sales methods and systems, finances, sales and profit figures, and other
business information of Corporation, Bank or any of their subsidiaries or affiliates,
the disclosure of which could be or will be materially damaging to Corporation,
Bank or any of their subsidiaries or affiliates, provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Executive or
any person with the assistance, consent or direction of Executive) or any
information of a type not otherwise considered confidential by persons engaged
in the same business or a business similar to that conducted by Corporation or
Bank or any information that must be disclosed as required by law.

 

                                                9.             WORK MADE
FOR HIRE.  Any work
performed by Executive under this Agreement should be considered a “Work Made
for Hire” as that phrase is defined by the U.S. patent laws and shall be owned
by and for the express benefit of Corporation, Bank and any of their
subsidiaries and affiliates.  In the
event it should be established that such work does not qualify as a Work Made
for Hire, Executive agrees to and does hereby assign to Corporation, Bank and
their affiliates and subsidiaries, all of his rights, title, and/or interest in
such work product, including, but not limited to, all copyrights, patents,
trademarks and proprietary rights.

 

10.           RETURN OF COMPANY PROPERTY
AND DOCUMENTS.  Executive
agrees that, at the time of termination of his employment, regardless of the
reason for termination, he will deliver to Corporation or Bank, any and all
company property, including, but not limited to, keys, security codes or
passes, mobile telephones, pagers, computers, devices, confidential information
(as defined in this Agreement), records, data, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints, sketches, software

 

 

9

 

programs,
equipment, other documents or property, or reproductions of any of the
aforementioned items developed or obtained by Executive during the course of
his employment.  Executive further agrees
to sign and return the “Termination Certificate” attached hereto as Exhibit “B,”
together with all company property within three (3) days of the date of
termination of Executive’s employment.

 

                11.           RESTRICTIVE
COVENANT.

 

(a)                                  Non-Competition and Non-Solicitation.  Executive
hereby acknowledges and recognizes the highly competitive nature of the
business of Corporation and Bank and accordingly agrees that, for the
applicable period set forth in Section 11(c) hereof, Executive shall
not:

 

                                                                                                                                                                (i)            be engaged, directly or indirectly, either for his own
account or as agent, consultant, employee, partner, officer, director,
proprietor, investor (except as an investor owning less than 2% of the stock of
a publicly owned company) or otherwise of any person, firm, corporation or
enterprise engaged in (1) the banking or financial services industry
(including a bank holding company), or (2) any other activity in which
Corporation, Bank or any of their subsidiaries or affiliates are engaged during
the Employment Period, within a fifty (50) mile radius of Blakely &
Drinker Streets, Dunmore, Pennsylvania 18512 (the “Non-Competition Area”); or

 

                                                                                                                                                                (ii)           provide financial or other assistance to any person, firm,
corporation or enterprise engaged in (1) the banking or financial services
industry (including a bank holding company), or (2) any 

 

10

 

other
activity in which Corporation, Bank or any of their subsidiaries or affiliates
are engaged during the Employment Period in the Non-Competition Area; or

 

                                                                                                                                                                (iii)          directly or indirectly contact, solicit or induce any
person, firm, corporation or other entity who or which is a customer or
referral source of Corporation, Bank or any of their subsidiaries or affiliates
during the term of Executive’s employment or at the date of termination of
Executive’s employment, to become a client, customer or referral service of any
other person, firm, corporation or other entity; or

 

                                                                                                                                                                (iv)          directly or indirectly solicit, induce or encourage any
employee of Corporation, Bank or any of their subsidiaries or affiliates, who
is employed during the term of Executive’s employment or at the date of
termination of Executive’s employment, to leave the employ of Corporation, Bank
or any of their subsidiaries or affiliates or to seek, obtain or accept
employment with any person or entity other than Corporation, Bank or any of
their subsidiaries or affiliates.

 

                                                                                                                                                                (b)           Amendment of Restrictive Covenant.  It is expressly understood and agreed that,
although Executive, Corporation and Bank consider the restrictions contained in
Section 11(a) reasonable for the purpose of preserving for
Corporation, Bank and any of their subsidiaries or affiliates, their good will
and other proprietary rights, if a final judicial 

 

11

 

determination
is made by a court having jurisdiction that the time or territory or any other
restriction contained in Section 11(a) is an unreasonable or
otherwise unenforceable restriction against Executive, the provisions of Section 11(a) shall
not be rendered void, but shall be deemed amended to apply as to such maximum
time and territory and to such other extent as such court may judicially
determine or indicate to be reasonable.

 

                                                                                                                                                                (c)           Period of Restrictive Covenant.  The provisions of this Section 11 shall be
applicable, commencing on the date this Agreement is entered and ending twelve
(12) months after the effective date of termination of Executive’s employment.

 

                                                                                                                                                                (d)           Breach of Restrictive Covenant.  It is expressly understood and agreed that if
Executive violates or breaches any provision of this Section 11, then the
provisions of this Section 11 shall apply to Executive for an additional
one (1) year following the date of such violation or breach.

 

(e)                                  Enforcement of
Covenants.  Executive
acknowledges that his breach of any of the restrictions set forth in this
Agreement in Sections 8, 9, 10 or 11 will result in irreparable injury which is
not compensable in damages or other legal remedies, and Bank, Corporation or
their successors may seek to obtain injunctive relief against the breach, or
threatened breach of this Agreement, and/or specific performance and damages,
as well as other legal and equitable remedies including attorneys’ fees which
may be available and to which Bank, Corporation or their successors may be
entitled.  The right to equitable relief
shall include, without limitation, the right to both preliminary 

 

12

 

and permanent injunctions against any breach or threatened breach and
specific performance of the provisions of this Agreement, and in such case,
Executive shall raise no objection, and hereby waives any objection, to the
form of relief prayed for in any such proceeding.  Bank, Corporation or their successor shall
not be required to post a bond or similar assurance should Bank, Corporation or
their successor bring any action for equitable relief in order to enforce this
Agreement.

 

                12.           TERMINATION.

 

(a)                                  Death.  Notwithstanding any other provision of this
Agreement, this Agreement shall terminate automatically upon Executive’s death,
and Executive’s rights under this Agreement shall cease as of the date of such
termination.

 

(b)                                 Disability.  If, while employed hereunder, Executive
suffers a Disability such that by reason of any physical or mental impairment
he is unable to perform all of the essential functions of his position on a
full time basis, with or without a reasonable accommodation and without posing
a direct threat to himself or others for a period exceeding sixty (60) days,
then all compensation and employment obligations of Bank and Corporation under
this Agreement shall immediately cease (with the exception of Executive’s
rights under Bank’s then existing short term and/or long term disability plans,
if any), and this Agreement shall terminate; provided, however, that nothing in
this Section 12(b) shall prohibit Bank and Corporation, in their sole
discretion, from continuing to pay Executive the regular amount of 

 

13

 

Executive’s
Annual Direct Salary or such other amount as Bank and Corporation may determine
after the expiration of such sixty-day period.

 

(c)                                  Cause.  Notwithstanding any other provisions of this
Agreement, Bank and/or Corporation may terminate Executive’s employment hereunder
for “Cause.” As used in this Agreement, Bank and/or Corporation shall have
Cause to terminate Executive’s employment hereunder upon: (i) the willful
failure by Executive to substantially perform his duties hereunder (other than
a failure resulting from Executive’s incapacity because of physical or mental
illness, as provided in Section 12(b) hereof); (ii) the willful
engaging by Executive in misconduct injurious to Corporation or Bank; (iii) the
willful violation by Executive of the provisions of Sections 3, 8, 9 or 11
hereof; (iv) the dishonesty or gross negligence of Executive in the
performance of his duties; (v) the breach of Executive’s fiduciary duty
involving personal profit; (vi) the violation of any law, rule or
regulation governing banks or bank officers or any final cease and desist order
issued by a bank regulatory authority; (vii) conduct on the part of
Executive which brings public discredit to Corporation or Bank; (viii) unlawful
discrimination by Executive, including harassment against Corporation’s or Bank’s
employees, customers, business associates, contractors or visitors; (ix) theft
or abuse by Executive of Corporation’s or Bank’s property or the property of
Corporation’s or Bank’s customers, employees, contractors, vendors or business
associates; (x) failure of Executive to follow the good faith lawful
instructions of the Board of Directors of Corporation or Bank with respect to
its operations and a failure 

 

14

 

to
cure such violation within five (5) working days of notice from the Board
of Directors of such failure; (xi) the direction or recommendation of a state
or federal bank regulatory authority to remove Executive’s position with
Corporation and/or Bank as identified herein; 
(xii) any final removal or prohibition order to which Executive is
subject, by a federal banking agency pursuant to Section 8(e) or Section 8(g) of
the Federal Deposit Insurance Act, or a state banking agency pursuant to
Pennsylvania Law; (xiii) Executive’s conviction of or plea of guilty or nolo
contendere to a felony,  crime of
falsehood or a crime involving moral turpitude, or the actual incarceration of
Executive; (xiv) any act of fraud, misappropriation or personal dishonesty;
(xv) insubordination; (xvi) misrepresentation of a material fact, or omission
of information necessary to make the information supplied not materially
misleading, in an application or other information provided by Executive to
Bank or Corporation or any representative of Bank or Corporation in connection
with Executive’s employment with Bank or Corporation; (xvii) the existence of
any material conflict between the interests of Corporation and Executive that
is not disclosed in writing by Executive to Bank or Corporation and approved in
writing by the Board of Directors of Bank or Corporation; or (xviii) an action
by Executive that is clearly contrary to the best interests of Bank or
Corporation.

 

 (d)                              Termination by
Executive.  Executive
may terminate his employment hereunder (i) for any or no reason or (ii) for
Good Reason.  The term “Good Reason”
shall mean (1) any material diminution, without Executive’s 

 

15

 

consent,
in Executive’s authority, duties or responsibilities described in Section 2
hereof; (2) any material breach of this Agreement by Corporation or Bank,
which breach is not cured within thirty (30) days or such longer time as may be
reasonably required to effect such cure; (3) any reduction in Executive’s
Annual Direct Salary in violation of Section 4(a); or (4) any
assignment of Executive to a principal office location outside a radius of
fifty (50) miles from the intersection of Blakely & Drinker Streets,
Dunmore, Pennsylvania; provided, however, that a Good Reason termination shall
not have occurred unless Executive has notified Corporation or Bank, as
applicable, in writing within thirty (30) days of the initial existence of the
condition constituting such Good Reason and such condition is not cured within
thirty (30) days of such notice, or if said condition cannot be cured within
thirty (30) days, within a reasonable time thereafter if a diligent effort is
being made by Corporation and/or Bank to cure such condition, and further
provided that Executive actually terminates employment within twelve (12)
months of the initial existence of such condition.

 

(e)                                  Termination Without Cause.  Nothing herein shall prohibit Corporation or
Bank from terminating the employment of Executive without Cause (and other than
pursuant to Sections 12(a) (Death) or 12(b) (Disability)), in which
case Executive shall be limited to the remedies provided in Section 13(b).

 

13.                                 PAYMENTS UPON TERMINATION ABSENT
A CHANGE IN CONTROL.

 

(a)                                  Termination for Disability,
Cause or Executive Terminates for Other Than Good Reason.  If Executive’s employment is terminated by
Executive 

 

16

 

pursuant
to Section 12(d)(i) hereof, or if Executive’s employment is
terminated by Bank or Corporation pursuant to Section 12(b) (Disability)
or Section 12(c)(Cause), Corporation or Bank shall pay Executive the
prorated amount of his Annual Direct Salary through the date of termination of
Executive’s employment at the rate in effect at the time of termination and
Corporation and Bank shall have no further obligation to Executive under this
Agreement, subject, in the case of Executive’s Disability, to the terms of Section 12(b).

 

(b)                                 Termination without Cause or for Good Reason. 
If Executive’s employment is terminated by Corporation or Bank other
than for Death, Disability or Cause, or Executive terminates his employment for
Good Reason, then Corporation or Bank shall pay Executive within thirty (30)
days after such termination an amount equal to his Annual Direct Salary.  The obligations of
Corporation and Bank pursuant to this Section 13(b) in the event
Executive terminates his employment for Good Reason shall be contingent upon
receipt of thirty (30) days notice from Executive of Executive’s termination of
employment for Good Reason, and Executive’s best efforts during that thirty
(30) day period to assist in the transition to Executive’s successor, including
training of such successor if chosen. 
Notwithstanding anything in this Section 13(b) to the
contrary, Corporation or Bank shall not be liable for any payment that would
otherwise become due hereunder on or after the date Executive commences other
employment.  Except as specifically
provided in this Section 13(b), or as provided in Section 12(b) or
Section 14 hereof, or as 

 

17

 

otherwise required by law, all benefits
provided Executive under this Agreement shall terminate effective the date of
Executive’s termination of employment.

 

                                                14.           PAYMENTS UPON TERMINATION
FOLLOWING A CHANGE IN CONTROL.

 

(a)                                  If a Change in Control shall
occur, Executive may resign from employment with Corporation and Bank effective
as of the Date of Change of Control subject to Bank’s right to extend his
employment for up to six months under Section 14(c) (or, if
involuntarily terminated, give notice of intention to collect benefits under
this Agreement) by delivering a notice in writing (“Notice of Termination”) to
Corporation and Bank or other successor, and the provisions of Section 14(c) of
this Agreement shall apply.

 

(b)                                 During the period of time
between the execution of an agreement to effect a Change in Control and the
Date of the Change in Control, Executive’s employment may only be terminated by
Corporation or by Bank for Cause.  If,
during that period of time, Executive’s employment is terminated for Cause,
then all rights of Executive under this Agreement shall cease as of the
effective date of such termination.  If,
during that period of time, Executive’s employment is terminated other than for
Cause, then Executive may give notice of intention to collect benefits under
this Agreement by delivering a notice in writing (“Notice of Termination”) to
Corporation and Bank and the provisions of Section 14(c) of this
Agreement shall apply.

 

18

 

 

(c)                                  In the event that Executive
delivers a Notice of Termination to Corporation and Bank or their successor,
following the Change in Control, Executive shall be entitled to receive the
compensation and benefits set forth below:

 

Corporation,
Bank or their successor shall pay Executive a lump sum amount equal to and no
greater than two (2) times Executive’s Annual Direct Salary as defined in Section 4(a),
minus applicable taxes and withholdings. 
Executive shall not be entitled to receive payments pursuant to Section 13(b) in
addition to payments under this Section 14(c).   In addition, for a period of one (1) year
from the date of termination of Executive’s employment, or until Executive
secures substantially similar benefits through other employment, whichever
shall first occur, Executive shall receive a continuation of health care, life
and disability insurance in effect with respect to Executive at the time of his
termination of employment to the extent such benefits remain available under
the terms of any applicable contracts or policies.  To the extent such benefits are unavailable,
Executive shall receive comparable coverage on an individual policy basis,
limited to aggregate payments for such coverage not exceeding the applicable
dollar limitation under Section 402(g)(1)(B) of the Internal Revenue
Code (“Code”) for the year in which Executive terminates employment.  In the event the payments described herein,
when added to all other amounts or benefits provided to or on behalf of
Executive in connection with his termination of employment, would 

 

19

 

result
in the imposition of an excise tax under Code Section 4999, such payments
shall be retroactively (if necessary) reduced to the extent necessary to avoid
such excise tax imposition.  Upon written
notice to Executive, together with calculations of Corporation, Bank or their
successor’s independent auditors, Executive shall remit to Corporation, Bank or
their successor the amount of the reduction, plus such interest, as may be
necessary to avoid the imposition of such excise tax.  Notwithstanding the foregoing or any other
provision of this contract to the contrary, if any portion of the amount herein
payable to Executive is determined to be non-deductible pursuant to the
regulations promulgated under Section 280G of the Code, then Bank,
Corporation or their successor shall be required only to pay to Executive the
amount determined to be deductible under Section 280G.

 

In addition, notwithstanding the payments to Executive contemplated by
this Section 14(c), if Executive is requested by Corporation, Bank or a
successor thereto to remain in the employ of Corporation, Bank or such
successor following the Date of Change of Control, Executive expressly agrees to
remain in the employ of Corporation, Bank or such successor for not less than
six months, or such shorter period as Corporation, Bank or such successor may
request, following the Date of Change of Control.  Executive agrees to remain an employee of
Corporation, Bank or a successor pursuant to such request conditioned upon
Executive being compensated in the same 

 

20

 

amount and on the same terms as he was compensated immediately prior to
the Date of Change of Control, including participation in all employee benefit
plans to which he would otherwise be entitled. 
In such case the payment contemplated by this Section 14(c) shall
be paid after termination of the employment relationship.

 

(d)                                 Payment
pursuant to Section 14(c) hereof shall be made on the first business
day of the month following the date that is six (6) months after Executive’s
termination of employment.

 

15.          DEFINITION OF CHANGE IN
CONTROL.  For purposes of
this Agreement, the term “Change in Control” (other than one occurring by
reason of an acquisition of Bank or Corporation by Executive) shall be deemed
to have occurred if the Board of Directors of Corporation or Bank certifies on
an objective basis that one of the following has occurred:

 

(a)                                 a sale or other transfer of
ownership of forty percent (40%) or more of the total gross fair market value
of the assets of Corporation and Bank to any individual, corporation,
partnership, trust or other entity or organization (“Person”) or group of
Persons acting in concert as a partnership or other group, other than a Person
controlling, controlled by or under common control with Corporation or Bank;

 

(b)                                 any Person or group of
Persons acting in concert as a partnership or other group, other than a Person controlling,
controlled by or under common control with Corporation or Bank, acquires
ownership of stock in Corporation, that together with stock held by such Person
or group, constitutes more than 50 percent of the total fair market value or
total voting 

 

21

 

power
of the stock of Corporation, provided such Person or group did not own more
than 50 percent of the total fair market value or total voting power of the
stock of Corporation prior to such acquisition; or

 

(c)                                  the replacement of a
majority of members of Corporation’s Board of Directors over any period of one
year or less by directors whose appointment or election is not endorsed by a
majority of the members of Corporation’s Board of Directors prior to the date
of the appointment or election.

 

16.          DEFINITION OF DATE OF
CHANGE IN CONTROL.  For
purposes of this Agreement, the Date of Change in Control shall mean:

 

(a)           the date of closing of any agreement for the transfer of
ownership of forty percent (40%) or more of the total gross fair market value
of the assets of Corporation and Bank to any Person or group of Persons acting
in concert as a partnership or other group, other than a Person controlling,
controlled by or under common control with Corporation or Bank;

 

(b)           the first date on which any Person or group of Persons
acting in concert as a partnership or other group, other than a Person
controlling, controlled by or under common control with Corporation or Bank,
acquires ownership of stock in Corporation, that together with stock held by
such Person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of Corporation, provided such Person
or group did not own more than 50 percent of the total fair market value or
total voting power of the stock of Corporation prior to such acquisition; or

 

22

 

(c)           the date on which individuals who formerly constituted a
majority of the Board of Directors of Corporation under Section 15(c) hereof
ceased to be a majority.

 

17.          ARBITRATION.  Corporation, Bank and Executive recognize
that in the event a dispute should arise between them concerning the
interpretation or implementation of this Agreement, lengthy and expensive
litigation will not afford a practical resolution of the issues within a
reasonable period of time.  Consequently,
with the exception of the Engagement in Other Employment provisions in Section 3,
the Unauthorized Disclosure provisions of Section 8, the Return of Company
Property and Documents provisions of Section 10 and the Restrictive
Covenant provisions in Section 11, which Corporation or Bank may seek to
enforce in any court of competent jurisdiction, each party agrees that all
disputes, disagreements and questions of interpretation concerning this
Agreement are to be submitted for resolution, in Scranton, Pennsylvania, to the
American Arbitration Association (“Association”) in accordance with the
Association’s National Rules for the Resolution of Employment Disputes or
other applicable rules then in effect (“Rules”).  Corporation, Bank or Executive may initiate
an arbitration proceeding at any time by giving notice to the other in
accordance with the Rules.  Corporation,
Bank and Executive may, as a matter of right, mutually agree on the appointment
of a particular arbitrator from the Association’s pool.  The arbitrator shall not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of Pennsylvania but
shall be bound by the substantive law applicable to this Agreement.  The arbitration proceeding and all filings,
testimony, documents and information, relating to or presented during the
proceeding, shall be disclosed exclusively for the purpose of facilitating the
arbitration process and for no other 

 

23

 

purpose
and shall be deemed to be information subject to the confidentiality provisions
of this Agreement.  The decision of the
arbitrator, absent fraud, duress, incompetence or gross and obvious error of
fact or law, shall be final and binding upon the parties and shall be
enforceable in courts of proper jurisdiction. 
Following written notice of a request for arbitration, Corporation, Bank
and Executive shall be entitled to an injunction restraining all further
proceedings in any pending or subsequently filed litigation concerning this
Agreement, except as otherwise provided herein.

 

18.          NOTICE.  Notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when hand-delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:

 

	
  If
  to Executive:

  	
  Daniel
  J. Santaniello

  	
   

  	
   

  
	
   

  	
  307
  Relda Rd.

  	
   

  	
   

  
	
   

  	
  Roaring
  Brook, PA 18444

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  If
  to Bank:

  	
  Steven
  C. Ackmann, President

  The
  Fidelity Deposit and Discount Bank

  Blakely
  and Drinker Streets

  Dunmore,
  PA 18512

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  If
  to Corporation:

  	
  Steven
  C. Ackmann, President

  FidelityD&D Bancorp, Inc.

                                                                                                                                                  Blakely and
  Drinker Streets

                                                                                                                                                  Dunmore, PA
  18512

  	
   

  	
   

  

 

 

or
to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

 

 

24

 

19.          SUCCESSORS.  This Agreement shall inure to the benefit of
and be binding upon Executive, his personal representatives, heirs or assigns
and to Bank and/or Corporation and any of their successors or assigns.

 

20.          SEVERABILITY.  If any provision of this Agreement is
declared unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and
effect.

 

21.          AMENDMENT.  Except as otherwise provided herein, this
Agreement may be amended or terminated only by mutual agreement of the parties
in writing.

 

22.          PAYMENT OF MONEY DUE
DECEASED EXECUTIVE.  In
the event of Executive’s death, any monies that may be due him from Corporation
or Bank under this Agreement as of the date of death, shall be paid to the
person designated by him in writing for this purpose, or in the absence of any
such designation, to his estate.

 

23.          LAW GOVERNING.  This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.  Further, subject to Section 17, the
parties agree to the exclusive jurisdiction and venue of the Court of Common
Pleas in Lackawanna County, Pennsylvania and the United States District Court
for the Middle District of Pennsylvania for all disputes between the parties
not subject to arbitration, and for purposes of appeal from any arbitration
award.  The provisions of this Agreement
shall be construed consistent with Section 409A of the Code and all
applicable guidance thereunder so as not to result in the inclusion in
Executive’s income of any benefit under this Agreement by reason of the
application of such section.

 

24.          ENTIRE AGREEMENT.  This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof and supersedes
any and all prior or 

 

25

 

contemporaneous
agreements, oral or in writing, between the parties with respect to the
employment of Executive by Corporation and Bank, including, but not limited to,
that certain Change of Control and Severance Agreement entered on or about March 21,
2006, which is hereby terminated.

 

IN WITNESS WHEREOF, the parties hereto,
intending to be legally bound hereby, have caused this Agreement to be duly
executed in their respective names and, in the cases of Corporation and Bank,
by their authorized representatives the day and year first above written.

 

	
  ATTEST:

  	
   

  	
  THE
  FIDELITY DEPOSIT AND DISCOUNT BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  John T. Piszak

  	
   

  	
  By:

  	
  /s/
  Steven C. Ackmann

  
	
   

  	
   

  	
   

  	
  Steven
  C. Ackmann, President

  

 

 

	
  ATTEST:

  	
   

  	
  FIDELITY
  D&D BANCORP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  John T. Piszak

  	
   

  	
  By:

  	
  /s/
  Steven C. Ackmann

  
	
   

  	
   

  	
   

  	
  Steven
  C. Ackmann, President

  

 

 

	
  WITNESS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Salvatore R. DeFrancesco, Jr.

  	
   

  	
   

  	
  /s/
  Daniel J. Santaniello

  
	
   

  	
   

  	
   

  	
  Daniel
  J. Santaniello

  

 

 

26

 

EXHIBIT A

 

OUTSIDE POSITIONS HELD BY EXECUTIVE

AS OF
                          ,
200_

 

 

	
  ORGANIZATION

  	
   

  	
  POSITION

  	
   

  	
  TERM OF
  SERVICE

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

27

 

EXHIBIT B

 

TERMINATION CERTIFICATE

 

                This document
certifies that I do not have in my possession, nor have I failed to return, any
keys, security codes or passes, mobile telephones, pagers, computers, devices,
confidential information, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints or reproductions of any of
the aforementioned items belonging to Fidelity D&D Bancorp, Inc.,
Fidelity Deposit and Discount Bank or any of their affiliates or subsidiaries,
or any of their respective successors or assigns (hereinafter collectively, “Companies”).

 

              I further certify
that I have complied and will continue to comply with all the terms of the
Executive Employment Agreement (“Employment Agreement”) entered by me, Fidelity
D&D Bancorp, Inc. and Fidelity Deposit and Discount Bank, with respect
to my employment, which began thereunder effective February 5, 2008.

 

              Without limiting the
generality of the preceding paragraph, I will, in accordance with the
Employment Agreement, preserve as confidential, all proprietary and
confidential information, trade secrets and know-how of Companies, including,
but not limited to, research, product or business plans, products, services,
projects, proposals, customer lists or customers (including, but not limited
to, customers of Companies on whom I called or with whom I became acquainted
during the term of my employment), markets, software, developments, inventions,
processes, formulas, technology, designs or styles, drawings, engineering,
marketing, distribution, and sales methods and systems, sales and profit
figures, finances and other business information disclosed to me by Companies,
either directly or indirectly in writing, orally or by drawings or inspection
of documents or otherwise.

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
  Daniel
  J. Santaniello

  

 

28

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