EXHIBIT 10.3
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS AGREEMENT, made and entered into this 10 day of June, 2002, by
and between First National Bank of Xxxxxxx, a bank organized and existing under
the laws of the State of Michigan (hereinafter referred to as the "Bank"), and
Xxxxxxx X. Xxxxxxx an Executive of the Bank (hereinafter referred to as the
"Executive").
WITNESSETH:
WHEREAS, the Executive has been and continues to be a valued Executive
of the Bank, and is now serving the Bank; and
WHEREAS, it is the consensus of the Board of Directors (hereinafter
referred to as the "Board") that the Executive's services to the Bank in the
past have been of exceptional merit and have constituted an invaluable
contribution to the general welfare of the Bank in bringing the Bank to its
present status of operating efficiency and present position in its field of
activity;
WHEREAS, the Executive's experience, knowledge of the affairs of the
Bank, reputation, and contacts in the industry are so valuable that assurance of
the Executive's continued services is essential for the future growth and
profits of the Bank and it is in the best interests of the Bank to arrange terms
of continued employment for the Executive so as to reasonably assure the
Executive's remaining in the Bank's employment during the Executive's lifetime
or until the age of retirement;
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided;
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or the Executive's
beneficiary(ies), certain benefits in accordance with the terms and conditions
hereinafter set forth;
ACCORDINGLY, it is the desire of the Bank and the Executive to enter
into this Agreement under which the Bank will agree to make certain payments to
the Executive at retirement or the Executive's beneficiary(ies) in the event of
the Executive's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Executive
Plan be considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Executive, and be considered a
non-qualified benefit plan for purposes of the Employee Retirement Security Act
of 1974, as amended ("ERISA"). The Executive is fully advised of the Bank's
financial status and has had substantial input in the design and operation of
this benefit plan; and
NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
I. EMPLOYMENT
The Bank agrees to employ the Executive in such capacity as the Bank
may from time to time determine. The Executive will continue in the
employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with such compensation
as may be determined from time to time by the Board of Directors of the
Bank.
II. FRINGE BENEFITS
The Salary continuation benefits provided by this Agreement are granted
by the Bank as a fringe benefit to the Executive and are not part of
any Salary reduction plan or an arrangement deferring a bonus or a
Salary increase. The Executive has no option to take any current
payment or bonus in lieu of these Salary continuation benefits except
as set forth hereinafter.
III. RETIREMENT DATE AND NORMAL RETIREMENT AGE
A. Retirement Date:
If the Executive remains in the continuous employ of the Bank,
the Executive shall retire from active employment with the
Bank on the December 31st nearest the Executive's sixty-five
(65) birthday, unless by action of the Board of Directors this
period of active employment shall be shortened or extended.
B. Normal Retirement Age:
Normal Retirement Age shall mean the date on which the
Executive attains age sixty-five (65).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement, the Bank, commencing with the first day of the
month following the date of such retirement, shall pay the Executive an
annual benefit equal to Fifty One Thousand One Hundred Twenty One and
00/100ths Dollars ($51,121.00). Said benefit shall be paid in equal
monthly installments (1/12 of the annual benefit) for a period of one
hundred eighty (180) months. If, however, less than one-hundred eighty
(180) such monthly payments have been made prior to the death of the
Executive, then the Bank shall either, at the discretion of the Bank,
continue such monthly payments to the individual or individuals the
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Executive may have designated in writing and filed with the Bank until
the full number of one-hundred eighty (180) monthly payments have been
made, or make the total amount of said payment due in a lump sum
reduced to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective beneficiary
designation, any such amounts becoming due and payable upon the death
of the Executive shall be payable to the duly qualified executor or
administrator of the Executive's estate. Said payments due hereunder
shall begin the first day of the second month following the decease of
the Executive.
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Executive should die while actively employed by the
Bank at any time after the date of this Agreement but prior to the
Executive attaining the age of sixty-five (65) years (or such later
date as may be agreed upon), the Bank will pay a benefit equal to the
accrued liability retirement account for the Executive, paid in either,
at the discretion of the Bank, a lump sum reduced to present value as
set forth in Subparagraph XI (K) or in equal monthly installments (l/12
of the accrued liability balance) for a period of twelve (12) months to
such individual or individuals as the Executive may have designated in
writing and filed with the Bank. In the absence of any effective
beneficiary designation, any such amounts becoming due and payable upon
the death of the Executive shall be payable to the duly qualified
executor or administrator of the Executive's estate. Said payments due
hereunder shall begin the first day of the second month following the
decease of the Executive. In addition, if applicable, the Bank shall
pay any death benefit as set forth in the Life Insurance Endorsement
Method Split Dollar Plan Agreement between the Executive and the Bank.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Executive
into which appropriate reserves shall be accrued.
VII. VESTING
Executive's interest in the benefits that are the subject of this
Agreement shall be subject to an annual vesting percentage as set forth
hereinbelow that corresponds to the number of full years of employment
from the date of first employment with the Bank (to a maximum of 100%).
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Total Years of Vested
Employment Percentage
with the Bank (to a maximum of 100%)
------------- ----------------------
0-4 0%
5 50%
PLUS
6-10 10% each year
VIII. OTHER TERMINATION OF EMPLOYMENT
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
employment of the Executive shall terminate prior to retirement, as
provided in Paragraph III, by the Executive's voluntary action, or by
the Executive's discharge by the Bank without cause, then this
Agreement shall terminate upon the date of such termination of
employment and the Bank shall pay to the Executive as severance
compensation an amount of money equal to the accrued balance of the
Executive's liability reserve account multiplied by the Executive's
cumulative vested percentage (Paragraph VII). This severance
compensation shall be paid in twelve (12) equal monthly installments
(1/12 of the accrued liability balance) with interest equal to the
one-year Treasury xxxx as of the date of termination.
In the event the Executive's death should occur after such severance
but prior to the completion of the monthly payments provided for in
this Paragraph VIII, the remaining installments, or a lump sum, at the
discretion of the Bank, shall be paid to such individual or individuals
as the Executive may have designated in writing and filed with the
Bank. In the absence of any effective beneficiary designation, any such
amounts shall be payable to the duly qualified executor or
administrator of the Executive's estate. Said payments due hereunder
shall begin the first day of the second month following the decease of
the Executive.
(i) Discharge for Cause: In the event the Executive shall be
discharged for cause at any time, all benefits provided herein
shall be forfeited. The term "for cause" shall mean any of the
following that result in an adverse effect on the Bank: (i)
gross negligence or gross neglect; (ii) the commission of a
felony or gross misdemeanor involving moral turpitude, fraud,
or dishonesty; (iii) the willful violation of any law, rule,
or regulation (other than a traffic violation or similar
offense); (iv) an intentional failure to perform stated
duties; or (v) a breach of fiduciary duty involving personal
profit. If a dispute arises as to discharge "for cause," such
dispute shall be resolved by arbitration as set forth in this
Executive Plan.
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IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of the Bank from the date
of this Agreement. For the purposes of this Agreement, transfers made
on account of deaths or gifts, transfers between family members or
transfers to a qualified retirement plan maintained by the Bank shall
not be considered in determining whether there has been a change in
control. Upon a Change of Control, if the Executive subsequently
suffers a Termination of Service (voluntary or involuntary), except for
cause, then the Executive shall receive the benefits in Paragraph IV
herein upon attaining Normal Retirement Age (Subparagraph III [B]), as
if the Executive had been continuously employed by the Bank until the
Executive's Normal Retirement Age.
X. RESTRICTIONS ON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Executive
Plan. The Executive, their beneficiary(ies), or any successor in
interest shall be and remain simply a general creditor of the Bank in
the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right, at its sole discretion, to either
fund the obligations undertaken by this Executive Plan or to refrain
from funding the same and to determine the extent, nature and method of
such funding. Should the Bank elect to fund this Executive Plan, in
whole or in part, through the purchase of life insurance, mutual funds,
disability policies or annuities, the Bank reserves the absolute right,
in its sole discretion, to terminate such funding at any time, in whole
or in part. At no time shall any Executive be deemed to have any lien,
right, title or interest in any specific funding investment or assets
of the Bank.
If the Bank elects to invest in a life insurance, disability or annuity
policy on the life of the Executive, then the Executive shall assist
the Bank by freely submitting to a physical exam and supplying such
additional information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
Neither the Executive, nor the Executive's surviving spouse,
nor any other beneficiary(ies) under this Executive Plan shall
have any power or right to transfer, assign, anticipate,
hypothecate, mortgage, commute, modify or otherwise encumber
in advance any of the benefits payable hereunder nor shall any
of said benefits be subject to seizure for the payment of any
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debts, judgments, alimony or separate maintenance owed by the
Executive or the Executive's beneficiary(ies), nor be
transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the Executive or any
beneficiary attempts assignment, commutation, hypothecation,
transfer or disposal of the benefits hereunder, the Bank's
liabilities shall forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest:
The Bank shall not merge or consolidate into or with another
bank or sell substantially all of its assets to another bank,
firm or person until such bank, firm or person expressly
agrees, in writing, to assume and discharge the duties and
obligations of the Bank under this Executive Plan. This
Executive Plan shall be binding upon the parties hereto, their
successors, beneficiaries, heirs and personal representatives.
C. Amendment or Revocation:
It is agreed by and between the parties hereto that, during
the lifetime of the Executive, this Executive Plan may be
amended or revoked at any time or times, in whole or in part,
by the mutual written consent of the Executive and the Bank.
D. Gender:
Whenever in this Executive Plan words are used in the
masculine or neuter gender, they shall be read and construed
as in the masculine, feminine or neuter gender, whenever they
should so apply.
E. Effect on Other Bank Benefit Plans:
Nothing contained in this Executive Plan shall affect the
right of the Executive to participate in or be covered by any
qualified or non-qualified pension, profit-sharing, group,
bonus or other supplemental compensation or fringe benefit
plan constituting a part of the Bank's existing or future
compensation structure.
F. Headings:
Headings and subheadings in this Executive Plan are inserted
for reference and convenience only and shall not be deemed a
part of this Executive Plan.
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G. Applicable Law:
The validity and interpretation of this Agreement shall be
governed by the laws of the State of Michigan.
H. 12 U.S.C. ss. 1828(k):
Any payments made to the Executive pursuant to this Executive
Plan, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. ss. 1828(k) or any regulations
promulgated thereunder.
I. Partial Invalidity:
If any term, provision, covenant, or condition of this
Executive Plan is determined by an arbitrator or a court, as
the case may be, to be invalid, void, or unenforceable, such
determination shall not render any other term, provision,
covenant, or condition invalid, void, or unenforceable, and
the Executive Plan shall remain in full force and effect
notwithstanding such partial invalidity.
J. Not a Contract of Employment:
This Agreement shall not be deemed to constitute a contract of
employment between the parties hereto, nor shall any provision
hereof restrict the right of the Bank to discharge the
Executive, or restrict the right of the Executive to terminate
employment.
K. Present Value:
All present value calculations under this Agreement shall be
based on the following discount rate:
Discount Rate: The discount rate as used in the FASB 87
calculations for the Executive Plan.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
The "Named Fiduciary and Plan Administrator" of this Executive
Plan shall be First National Bank of Xxxxxxx until its
resignation or removal by the Board. As Named Fiduciary and
Plan Administrator, the Bank shall be responsible for the
management, control and administration of the Executive Plan.
The Named Fiduciary may delegate to others certain aspects of
the management and operation responsibilities of the Executive
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Plan including the employment of advisors and the delegation
of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
In the event a dispute arises over benefits under this
Executive Plan and benefits are not paid to the Executive (or
to the Executive's beneficiary(ies) in the case of the
Executive's death) and such claimants feel they are entitled
to receive such benefits, then a written claim must be made to
the Named Fiduciary and Plan Administrator named above within
sixty (60) days from the date payments are refused. The Named
Fiduciary and Plan Administrator shall review the written
claim and if the claim is denied, in whole or in part, they
shall provide in writing within sixty (60) days of receipt of
such claim the specific reasons for such denial, reference to
the provisions of this Executive Plan upon which the denial is
based and any additional material or information necessary to
perfect the claim. Such written notice shall further indicate
the additional steps to be taken by claimants if a further
review of the claim denial is desired. A claim shall be deemed
denied if the Named Fiduciary and Plan Administrator fail to
take any action within the aforesaid sixty-day period.
If claimants desire a second review they shall notify the
Named Fiduciary and Plan Administrator in writing within sixty
(60) days of the first claim denial. Claimants may review this
Executive Plan or any documents relating thereto and submit
any written issues and comments they may feel appropriate. In
their sole discretion, the Named Fiduciary and Plan
Administrator shall then review the second claim and provide a
written decision within sixty (60) days of receipt of such
claim. This decision shall likewise state the specific reasons
for the decision and shall include reference to specific
provisions of the Plan Agreement upon which the decision is
based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Executive Plan or the meaning
and effect of the terms and conditions thereof, then claimants
may submit the dispute to an arbitrator for final arbitration.
The arbitrator shall be selected by mutual agreement of the
Bank and the claimants. The arbitrator shall operate under any
generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal
representatives, successors and assigns shall be bound by the
decision of such arbitrator with respect to any controversy
properly submitted to it for determination.
Where a dispute arises as to the Bank's discharge of the
Executive "for cause," such dispute shall likewise be
submitted to arbitration as above
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described and the parties hereto agree to be bound by the
decision thereunder.
XIII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE
LAW, RULES OR REGULATIONS
The Bank is entering into this Agreement upon the assumption that
certain existing tax laws, rules and regulations will continue in
effect in their current form. If any said assumptions should change and
said change has a detrimental effect on this Executive Plan, then the
Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), this paragraph
shall become null and void effective immediately upon said Change of
Control.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read
this Agreement and executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.
FIRST NATIONAL BANK OF XXXXXXX
Xxxxxxx, Michigan
/s/ Xxxxxx Xxxxxx /s/ Xxxx X. Xxxxx
------------------------- --------------------------------
Witness President
/s/ Xxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
------------------------- --------------------------------
Witness Xxxxxxx X. Xxxxxxx
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