Special Termination Agreement
EXHIBIT
10.1
THIS
SPECIAL TERMINATION AGREEMENT (“Agreement”) is made and entered into as of this
_Seventh
(7th)____
day
of __August______,
2006, by and between Lincoln
Bank,
a
federally chartered savings bank whose address is 000 Xxxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxx 00000 (which, together with any successor thereto which
executes and delivers the assumption agreement provided for in Section 12(a)
hereof or which otherwise becomes bound by the terms and provisions of this
Agreement by operation of law, is hereinafter referred to as the “Bank”), and
_Doug
Bennett______________,
whose
residence address is _2517
Caray Court, Bloomington, IN 47401______________(the
“Employee”).
WHEREAS,
the Employee is currently serving as _Senior
Vice President, Business Development__________of
the Bank; and
WHEREAS,
the Bank is a wholly-owned subsidiary of Lincoln Bancorp, a publicly traded
corporation organized under Indiana law (the “Holding Company”);
and
WHEREAS,
the Board of Directors of the Bank recognizes that, as is the case with publicly
held corporations generally, the possibility of a change in control of the
Holding Company may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure
or
distraction of key management personnel to the detriment of the Bank, the
Holding Company and its shareholders; and
WHEREAS,
the Board of Directors of the Bank believes it is in the best interests of
the
Bank to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to his or her assigned duties
without distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of the Holding Company, although
no
such change is now contemplated; and
WHEREAS,
the Board of Directors of the Bank has approved and authorized the execution
of
this Agreement with the Employee to take effect as stated in Section 1
hereof;
NOW,
THEREFORE, in consideration of the foregoing and of the respective covenants
and
agreements of the parties herein contained, it is agreed as
follows:
1. TERM
OF
AGREEMENT. The
term
of this Agreement shall be deemed to have commenced as of the date hereof (the
“Effective Date”) and shall continue until the anniversary of the Effective
Date. Prior to that anniversary date and at each anniversary date thereafter,
the Board of Directors may review this Agreement and, in its discretion,
authorize extension thereof for an additional one-year period.
2. PAYMENTS
TO THE EMPLOYEE UPON CHANGE IN CONTROL.
(A) Upon
the
occurrence of a change in control of the Bank or the Holding Company (as herein
defined) at any time during the term of this Agreement followed within 12 months
by the involuntary or voluntary termination of the Employee’s employment with
the Bank, other than for cause (as defined in Section 2(d) hereof) whether
or
not such termination occurs during the term of this Agreement, the provisions
of
Section 3 shall apply.
(B) A
“change
in control” of the Bank or the Holding Company shall mean an acquisition of
“control” of the Holding Company or of the Bank within the meaning of 12 C.F.R.
§574.4(a) (other than a change of control resulting from a trustee or other
fiduciary holding shares of capital stock of the Holding Company under an
employee benefit plan of the Holding Company or any of its
subsidiaries).
(C) The
Employee’s employment under this Agreement may be terminated at any time by the
Board of Directors of the Bank. The terms “involuntary termination” or
“involuntarily terminated” in this Agreement shall refer to the termination of
the employment of Employee without his or her express written consent. In
addition, a ma-terial diminution of or interference with the Employee’s duties,
responsibilities and benefits shall be deemed and shall constitute an
involuntary termination of employment to the same extent as express notice
of
such involuntary termination. By way of example and not by way of limitation,
any of the following actions, if unreasonable and materially adverse to the
Employee, shall constitute such diminution or interference unless consented
to
in writing by the Employee: (1) the requirement that the Employee perform his
or
her principal employment duties more than thirty-five (35) miles from his or
her
primary office as of the date of the change in control; (2) a material reduction
in the Employee’s salary, perquisites, contingent benefits or vacation time as
in effect on the date of the change in control as the same may be changed by
mutual agreement from time to time, unless part of an institution-wide
reduction; (3) the assignment to the Employee of duties and responsibilities
materially different from those normally associated with his or her position
as
referenced in this Agreement; or (4) a material diminution or reduction in
the
Employee’s responsibilities or authority (including reporting responsibilities)
in connection with his or her employment with the Bank.
(D) The
Employee shall not have the right to receive termination benefits pursuant
to
Section 3 hereof upon termination for cause. For purposes of this Agreement,
termination for “cause” shall include termination because of, in the good faith
determination of the Board of Directors of the Bank, the Employee’s personal
dishonesty, incompetence, willful misconduct, breach of a fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than a law, rule or regulation
relating to traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement. Notwithstanding
the foregoing, the Employee shall not be deemed to have been terminated for
cause unless and until there shall have been delivered to the Employee a copy
of
a resolution, duly adopted by the affirmative vote of not less than a majority
of the entire membership of the Board of Directors of the Bank at a meeting
of
the Board called and held for such purpose (after reasonable notice to the
Employee and an opportunity for the Employee, together with the Employee’s
counsel, to be heard before the Board), such meeting
-
2
-
and
the
opportunity to be heard to be held prior to, or as soon as reasonably
practicable following, termination, but in no event later than 60 days following
such termination, finding that in the good faith opinion of the Board the
Employee was guilty of conduct constituting “cause” as set forth above and
specifying the particulars thereof in detail. If, following such meeting,
the
Employee is reinstated, he or she shall be entitled to receive back pay for
the
period following termination and continuing through
reinstatement.
3. TERMINATION
BENEFITS.
(A) If
during
the term of this Agreement there is a change in control of the Bank or the
Holding Company, and within 12 months following such change in control there
is
an involuntary termination of the Employee’s employment with the Bank, other
than for cause, whether or not such termination occurs during the term of this
Agreement, the Bank shall pay to the Employee in a lump sum in cash within
25
business days after the date of severance of employment an amount equal to
100
percent of the Employee’s “base amount” of compensation, as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended
(“Code”).
(B) If
during
the term of this Agreement there is a change in control, and within 12 months
following such change in control there is an involuntary termination of the
Employee’s employment, other than for cause, whether or not such termination
occurs during the term of this Agreement, the Bank shall cause to be continued
life, health and disability coverage substantially identical to the coverage
maintained by the Bank for the Employee prior to his or her severance. Subject
to applicable federal and state laws, such coverage shall cease upon the earlier
of the Employee’s obtaining similar coverage by another employer or twelve (12)
months from the date of the Employee’s termination. In the event the Employee
obtains new employment and receives less coverage for life, health or
disability, the Bank shall provide coverage substantially identical to the
coverage maintained by the Bank for the Employee prior to termination for the
balance of the twelve (12) month period.
(C) If
during
the term of this Agreement there is a change in control of the Bank or the
Holding Company, and within 12 months following such change in control, the
Employee voluntarily terminates his or her employment, other then as a result
of
receiving notice that his or her employment is to be terminated for cause,
whether or not such voluntary termination of employment occurs during the term
of this Agreement, the Bank shall continue to pay Employee his or her base
compensation and shall continue to provide life, health and disability coverage
maintained for the Employee prior to his or her voluntary termination of
employment for any remaining portion of the period ending 12 months following
such change in control; provided, however, that subject to applicable federal
and state laws, such life, health and disability coverage shall cease upon
Employee’s obtaining substantially similar coverage from another
employer.
4. CERTAIN
REDUCTION OF PAYMENTS BY THE BANK.
(A) Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Bank to or for the benefit
of
the Employee (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement
-
3
-
or
otherwise) (a “Payment”) would be nondeductible (in whole or part) by the Bank
for Federal income tax purposes because of Section 280G of the Code, then
the
aggregate present value of amounts payable or distributable to or for the
benefit of the Employee pursuant to this Agreement (such amounts payable
or
distributable pursuant to this Agreement are hereinafter referred to as
“Agreement Payments”) shall be reduced to the Reduced Amount. The “Reduced
Amount” shall be an amount, not less than zero, expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing
any
Payment to be nondeductible by the Bank because of Section 280G of the Code.
For
purposes of this Section 4, present value shall be determined in accordance
with
Section 280G(d)(4) of the Code.
(B) All
determinations required to be made under this Section 4 shall be made by the
Bank’s independent auditors, or at the election of such auditors by such other
firm or individuals of recognized expertise as such auditors may select (such
auditors or, if applicable, such other firm or individual, are hereinafter
referred to as the “Advisory Firm”). The Advisory Firm shall within ten business
days of the date of termination of the Employee’s employment by the Bank or the
Holding Company resulting in benefit payments hereunder (the “Date of
Termination”), or at such earlier time as is requested by the Bank, provide to
both the Bank and the Employee an opinion (and detailed supporting calculations)
that the Bank has substantial authority to deduct for federal in-come tax
purposes the full amount of the Agreement Payments and that the Employee has
substantial authority not to report on his or her federal income tax return
any
excise tax imposed by Section 4999 of the Code with respect to the Agreement
Payments. Any such determination and opinion by the Advisory Firm shall be
binding upon the Bank and the Employee. The Employee shall determine which
and
how much, if any, of the Agreement Payments shall be eliminated or reduced
consistent with the requirements of this Section 4, provided that, if the
Employee does not make such determination within ten business days of the
receipt of the calculations made by the Advisory Firm, the Bank shall elect
which and how much, if any, of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section 4 and shall notify
the
Employee promptly of such election. Within five business days of the earlier
of
(i) the Bank’s receipt of the Employee’s determination pursuant to the
immediately preceding sentence of this Agreement or (ii) the Bank’s election in
lieu of such determination, the Bank shall pay to or distribute to or for the
benefit of the Employee such amounts as are then due the Employee under this
Agreement. The Bank and the Employee shall cooperate fully with the Advisory
Firm, including without limitation providing to the Advisory Firm all
information and materials reasonably requested by it, in connection with the
making of the determinations required under this Section 4.
(C) As
a
result of uncertainty in application of Section 280G of the Code at the time
of
the initial determination by the Advisory Firm hereunder, it is possible that
Agreement Payments will have been made by the Bank which should not have been
made (“Overpayment”) or that additional Agreement Payments will not have been
made by the Bank which should have been made (“Underpayment”), in each case,
consistent with the calculations required to be made hereunder. In the event
that the Advisory Firm, based upon the assertion by the Internal Revenue Service
against the Employee of a deficiency which the Advisory Firm believes has a
high
probability of success, determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Bank to or for the benefit of Employee
shall be treated for all purposes as a loan ab initio
which
the Employee shall repay to the Bank together with interest at the
-
4
-
applicable
federal rate provided for in Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and no amount shall be
payable by the Employee to the Bank if and to the extent such deemed loan
and
payment would not either reduce the amount on which the Employee is subject
to
tax under Section 1 and Section 4999 of the Code or generate a refund of
such
taxes. In the event that the Advisory Firm, based upon controlling precedent
or
other substantial authority, determines that an Underpayment has occurred,
any
such Underpayment shall be promptly paid by the Bank to or for the benefit
of
the Employee together with interest at the applicable federal rate provided
for
in Section 7872(f)(2) of the Code.
5. REQUIRED
REGULATORY PROVISIONS.
(A) The
Bank
may terminate the Employee’s employment at any time, but any termination by the
Bank, other than a termination for cause, shall not prejudice the Employee’s
right to compensation or other benefits under this Agreement. The Employee
shall
not have the right to receive compensation or other benefits for any period
after a termination for cause as defined in Section 2(d)
hereinabove.
(B) If
the
Employee is suspended and/or temporarily prohibited from participating in the
conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or (g)(1)
of the Federal Deposit Insurance Act, 12 U.S. C. §1818 (e)(3) and (g)(1), the
Bank’s obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may in its discretion (i) pay the Employee all or part
of the compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of the obligations
which
were suspended.
(C) If
the
Employee is removed from office and/or permanently prohibited from participating
in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or
(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(e)(4) or (g)(1),
all obligations of the Bank under this Agreement shall terminate, as of the
effective date of the order, but vested rights of the parties shall not be
affected.
(D) If
the
Bank is in default (as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act), all obligations under this Agreement shall terminate as of
the
date of default, but this provision (d) shall not affect any vested rights
of
the parties.
(E) All
obligations under this Agreement may be terminated, except to the extent
determined that continuation of this Agreement is necessary for the continued
operation of the Bank: (i) by the Director of the Office of Thrift Supervision
(the “Director”), or his or her designee, at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or
on
behalf of the Bank under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. §1823(c), or (ii) by the Director, or his or
her designee, at the time the Director or his or her designee approves a
supervisory merger to resolve problems related to operation of the Bank or
when
the Bank is determined by the Director to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however, shall not be
affected by any such action.
-
5
-
6. REINSTATEMENT
OF BENEFITS UNDER SECTION 3. In
the
event the Employee is suspended and/or temporarily prohibited from participating
in the conduct of the Bank’s affairs by a notice described in Section 6(b)
hereof (the “Notice”) during the term of this Agreement and a change in control
occurs, the Bank will assume its obligation to pay and the Employee will be
entitled to receive all of the termination benefits provided for under Section
3
of this Agreement upon the Bank’s receipt of a dismissal of charges in the
Notice.
7. EFFECT
ON
PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS. This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior agreement between the Bank and the Employee.
8. NO
ATTACHMENT.
(A) Except
as
required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy, or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to affect any such action shall be null, void, and of no
effect.
(B) This
Agreement shall be binding upon, and inure to the benefit of, the Employee,
the
Bank and their respective successors and assigns.
9. MODIFICATION
AND WAIVER.
(A) This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.
(B) No
term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver
or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to
the
specific term or condition waived and shall not constitute a waiver of such
term
or condition for the future or as to any act other than that specifically
waived.
10. NO
MITIGATION. Except
as
expressly provided herein, the amount of any payment or benefit provided for
in
this Agreement shall not be reduced by any compensation earned by the Employee
as the result of employment by another employer, by retirement benefits after
the date of termination or otherwise.
11. NO
ASSIGNMENTS.
(A) This
Agreement is personal to each of the parties hereto, and neither party may
assign or delegate any of its rights or obligations hereunder without first
obtaining the written consent of the other party; provided, however, that the
Bank will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the
business and/or assets of the Bank, by an assumption agreement in form and
substance satisfactory to the Employee, to expressly assume and agree to perform
this
-
6
-
Agreement
in the same manner and to the same extent that the Bank would be required
to
perform it if no such succession or assignment had taken place. Failure of
the
Bank to obtain such an assumption agreement prior to the effectiveness of
any
such succession or assignment shall be a breach of this Agreement and shall
entitle the Employee to compensation from the Bank in the same amount and
on the
same terms as the compensation pursuant to Section 3 hereof. For purposes
of
implementing the provisions of this Section 11(a), the date on which any
such
succession becomes effective shall be deemed the Date of
Termination.
(B) This
Agreement and all rights of the Employee hereunder shall inure to the benefit
of
and be enforceable by the Employee’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Employee should die while any amounts would still be payable
to
the Employee hereunder if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of
this Agreement to the Employee’s devisee, legatee or other designee or if there
is no such designee, to the Employee’s estate.
12. NOTICE.
For
the
purposes of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on the first
page of this Agreement (provided that all notices to the Bank shall be directed
to the attention of the Board of Directors of the Bank with a copy to the
Secretary of the Bank), or to such other address as either party may have
furnished to the other in writing in accordance herewith.
13. AMENDMENTS.
No
amendments or additions to this Agreement shall be binding unless in writing
and
signed by both parties, except as herein otherwise provided.
14. PARAGRAPH
HEADINGS. The
paragraph headings used in this Agreement are included solely for convenience
and shall not affect, or be used in connection with, the interpretation of
this
Agreement.
15. SEVERABILITY.
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
16. GOVERNING
LAW. This
Agreement shall be governed by the laws of the United States to the extent
applicable and otherwise by the laws of the State of Indiana.
17. ARBITRATION.
Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered an
the
arbitrator’s award in any court having jurisdiction.
18. REIMBURSEMENT.
In
the
event the Bank purports to terminate the Employee for cause, but it is
determined by a court of competent jurisdiction or by an arbitrator pursuant
to
Section 18 that cause did not exist for such termination, or if in any event
it
is determined by any such court or arbitrator that the Bank has failed to make
timely payment of any amounts owed to
-
7
-
the
Employee under this Agreement, the Employee shall be entitled to reimbursement
for all reasonable costs, including attorneys’ fees, incurred in challenging
such termination or collecting such amounts. Such reimbursement shall be in
addition to all rights to which the Employee is otherwise entitled under this
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
THIS
AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE
PARTIES.
|
LINCOLN
BANK
|
|||
|
By:
|
/s/ Xxxxx X. Xxxxx | ||
|
“BANK”
|
|||
| /s/ Xxxx Xxxxxxx | |||
|
“Employee”
|
|||
-
8
-
The
undersigned, Lincoln Bancorp, sole shareholder of Bank, agrees that if it shall
be determined for any reason that any obligation on the part of Bank to continue
to make any payments due under this Agreement to Employee is unenforceable
for
any reason, Lincoln Bancorp agrees to honor the terms of this Agreement and
continue to make any such payments due hereunder to Employee or to satisfy
any
such obligation pursuant to the terms of this Agreement, as though it were
the
Bank hereunder.
|
LINCOLN
BANCORP
|
||
|
By:
|
/s/ Xxxxx X. Xxxxx | |
- 9
-
