these change in control agreements, which provide certain benefits in the event an employee’s employment is terminated under specified circumstances, in connection with or following a change in control, such as the merger. The change in control agreements have an initial two-year term that renews for an additional year on each anniversary of the effective date of the agreement, unless either party provides written notice to the other not later than sixty (60) days before such anniversary date of its intent not to renew the agreement. In the event of a termination of employment following a change in control of William Penn, each employee subject to a change in control agreement is entitled to receive a lump sum payment equal to two (2.0) times the sum of (i) the employee’s annual base salary at the greater of either the date of the change in control or on the date the employee is terminated, plus (ii) the employee’s highest cash bonus paid over the prior two-year period. In addition, each employee will be entitled to receive from William Penn a lump sum payment equal to twentyfour (24) times William Penn Bank’s monthly COBRA charge in effect at the time of the employee’s termination to cover the cost of the employee’s health coverage. If the payments to be paid under any change in control agreement is determined to be subject to excise tax or penalties under Sections 280G and 4999 of the Internal Revenue Code, the amount to be paid will be reduced in the order to provide the employee with the largest amount of after-tax proceeds to the extent necessary so that no portion would be subject to excise taxes. Advisory Board All directors of William Penn serving on the William Penn board of directors at the effective time of the merger, except Kenneth J. Stephon, will be appointed to a paid three-year advisory board of Mid Penn following completion of the merger. Employment Agreement with Kenneth J. Stephon In connection with the merger, Kenneth J. Stephon entered into a three-year employment agreement with Mid Penn, Mid Penn Bank, William Penn and William Penn Bank, which supersedes Mr. Stephon’s previous employment agreement with William Penn and William Penn Bank, under which Mr. Stephon will serve as Chief Corporate Development Officer of the combined companies following the completion of the merger with an annual base salary of $400,000. Under the employment agreement, Mr. Stephon will receive a one-time payment of $2,074,776 from William Penn Bank or William Penn immediately prior to the effective time of the merger as consideration for the termination of his existing employment agreement with William Penn and William Penn Bank and his continued employment through the effective time. In addition, subject to his continued employment during the three-year term of the agreement, Mr. Stephon will receive a $900,000 retention bonus payable in three equal annual installments, including in the event of death or disability. Mid Penn will also make an annual $50,000 contribution to a deferred compensation plan to be established for Mr. Stephon’s benefit. During the term of the agreement, Mr. Stephon will be eligible to receive annual and long-term incentive awards on a discretionary basis. If Mr. Stephon’s employment is terminated without cause or if Mr. Stephon terminates his employment for good reason (as defined in the agreement), he would be entitled to receive a lump sum payment equal to the base salary payable over the then remaining term of the agreement, plus any unpaid portion of the retention bonus, and continuation of medical benefits for the same period. If such termination occurs in connection with a change in control, Mr. Stephon would receive a severance payment equal to three times his base salary if the termination occurs in the first year of employment, two times base salary if the termination occurs in the second year of employment, and one times base salary if the termination occurs in the third year of employment. In addition, Mr. Stephon will receive any unpaid portion of the retention bonus and Mr. Stephon’s benefits would be continued for a period of one to three years depending on the year in which the termination occurs. During the employment period, Mr. Stephon will also serve as Vice Chair of the Mid Penn Bank board of directors and will serve on the Mid Penn board of directors. The employment agreement includes non-solicitation provisions for the benefit of Mid Penn bank to expire one year after termination of employment. 90
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