AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit
10.1
AMENDED
AND RESTATED
THIS
AGREEMENT entered into this 20th day of November, 2007, by and between River
Valley Financial Bank, a federal savings bank (the “Bank”), and Xxxxxxx X.
Xxxxxxxxx (the “Employee”). The parties agree, however, that the
“Effective Date” of this Agreement shall be January 1, 2005.
This
Agreement ends and restates the prior Employment Agreement between the Bank
and
the Employee dated July 15, 1999 (the “Prior Agreement”). It has been
amended and restated for compliance with the final regulations under Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”), effective as
of January 1, 2005.
WHEREAS,
the Employee is employed by the Bank as its President and has performed and
is
expected to continue to perform valuable services for the Bank; 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 assigned duties;
and
WHEREAS,
the parties desire by this writing to set forth the continuing employment
relationship of the Bank and the Employee.
NOW,
THEREFORE, it is AGREED as follows:
1. Employment. The
Employee is employed as the President of the Bank. The Employee shall
render such administrative and management services for the Bank as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall also promote, by entertainment
or otherwise, as and to the extent permitted by law, the business of the
Bank. The Employee’s other duties shall be such as the Board of
Directors (the “Board”) of the Bank may from time to time reasonably direct,
including normal duties as an officer of the Bank.
2. Base
Compensation. The Bank agrees to pay the Employee during the term
of this Agreement a salary at the rate of $_______ per annum, payable in cash
not less frequently than monthly, and shall be effective and calculated
commencing the Effective Date. The salary shall be reviewed annually
by the Board of Directors of the Bank in September of each year commencing
in
September of 2008 and any adjustment in the future on salary shall be effective
for the payroll period next following any such adjustment.
3. Bonuses. The
Employee shall participate in any year end bonus granted to other employees
by
the Board. The Employee shall further participate in an equitable
manner with all other senior management employees of the Bank in discretionary
bonuses that the Board may award from time to time to the Bank’s senior
management employees. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee’s right to participate
in such discretionary bonuses.
4. (a) Participation
in Retirement, Medical and Other Plans: During the term of this
Agreement, the Employee shall be eligible to participate in the following
benefit plans: group hospitalization, disability, health, dental,
sick leave, retirement, pension, and/or other present or future qualified plans
provided by the Bank, generally, which benefits, taken as a whole, must be
at
least as favorable as those in effect on the Effective Date, unless the
continued operation of such plans would adversely affect the Bank’s operating
results or financial condition in a material way, the Bank’s Board of Directors
concludes that modifications to such plans are necessary to avoid such adverse
effects and such modifications apply consistently to all employees of the
Bank.
(b) Employee
Benefits: Expenses: The Employee shall be eligible to participate
in any fringe benefits which are or may become available to the Bank’s senior
management employees, including, for example, any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable
out-of-pocket business expenses which he shall incur in connection with his
services under this Agreement, upon substantiation of such expenses in
accordance with the policies of the Bank.
5. Term. The
Bank hereby employs the Employee, and the Employee hereby accepts such
employment under this Agreement, for the period commencing on the Effective
Date
and ending on October 1, 2010 (or such earlier date as is determined in
accordance with Section 9). Additionally, on each annual anniversary
date from October 1, 2007, the Employee’s term of employment shall be extended
for an additional one-year period beyond the then effective expiration date,
provided the Board determines in a duly adopted resolution that the performance
of the Employee has met the Board’s requirements and standards, and that this
Agreement shall be extended. Only those members of the Board of
Directors who have no personal interest in this Employment Agreement shall
discuss and vote on the approval and subsequent review of this
Agreement.
6. Loyalty;
Noncompetition.
(a) During
the period of his employment hereunder and except for illnesses, reasonable
vacation periods, and reasonable leaves of absence, the Employee shall devote
all his full business time, attention, skill, and efforts to the faithful
performance of his duties hereunder; provided, however, from time to time,
the
Employee may serve on the Boards of Directors of, and hold any other offices
or
positions in, companies or organizations, which will not present any conflict
of
interest with the Bank or any of its subsidiaries or affiliates, or unfavorably
affect the performance of Employee’s duties pursuant to this Agreement, or will
not violate any applicable statute or regulation. “Full business
time” is hereby defined as that amount of time usually devoted to like companies
by similarly situated executive officers. During the term of his
employment under this Agreement, the Employee shall not engage in any business
or activity contrary to the business affairs or interests of the Bank, or be
gainfully employed in any other position or job other than as provided
above.
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(b) Nothing
contained in this Paragraph 6 shall be deemed to prevent or limit the Employee’s
right to invest in the capital stock or other securities of any business
dissimilar from that of the Bank, or, solely as a passive or minority investor,
in any business.
(c) While
Employee is employed by the Bank and for a period of three years after
termination of Employee’s employment by the Bank or by the Employee for reasons
other than those set forth in Section 9 (d) hereof, the Employee shall not
directly or indirectly, engage in any bank or bank-related business which
competes with the business of the Bank as conducted during Employee’s employment
by the Bank for any financial institution, including but not limited to banks,
savings and loan associations, and credit unions within a forty mile radius
of
Madison, Indiana.
7. Standards. The
Employee shall perform his duties under this Agreement in accordance with such
reasonable standards as the Board may establish from time to
time. The Bank will provide Employee with the working facilities and
staff customary for similar executives and necessary for him to perform his
duties.
8. Vacation,
Sick Leave and Disability. The Employee shall be entitled to
twenty days vacation annually and shall be entitled to the same sick leave
and
disability leave as other employees of the Bank.
The
Employee shall not receive any additional compensation from the Bank on account
of his failure to take a vacation or sick leave, and the Employee shall not
accumulate unused vacation or sick leave from one fiscal year to the next,
except in either case to the extent authorized by the Board.
In
addition to the aforesaid paid vacations, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of
his
employment with the Bank for such additional periods of time and for such valid
and legitimate reasons as the Board may in its discretion
determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
9. Termination
and Termination Pay. Subject to Section 11 hereof, the Employee’s
employment hereunder may be terminated under the following
circumstances:
(a) Death. The
Employee’s employment under this Agreement shall terminate upon his death during
the term of this Agreement, in which event the Employee’s estate shall be
entitled to receive the compensation due the Employee through the last day
of
the calendar month in which his death occurred.
(b) Disability.
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(1) The
Bank may terminate the Employee’s employment, should the Employee become
disabled, in a manner consistent with the Bank’s and the Employee’s rights and
obligations under the Americans With Disabilities Act or other applicable state
and federal laws concerning disability. For the purpose of this
Agreement, “Disability” means any medically determinable physical or mental
impairment which can be expected to result in death or to last for a continuous
period of not less than 12 months and which (i) renders Employee unable to
engage in any substantial gainful activity or (ii) entitles Employee to income
replacement benefits for a period of not less than three months under an
accident and benefit plan covering employees of the Bank, as reasonably
determined by a duly licensed physician selected in good faith by the
Bank.
(2) During
any period that the Employee shall receive disability benefits and to the extent
that the Employee shall be physically and mentally able to do so, he shall
furnish such information, assistance and documents so as to assist in the
continued ongoing business of the Bank and, if able, shall make himself
available to the Bank to undertake reasonable assignments consistent with his
prior position and his physical and mental health. The Bank shall pay
all reasonable expenses incident to the performance of any assignment given
to
the Employee during the disability period.
(c) Just
Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The
Employee shall have no right to receive compensation or other benefits for
any
period after termination for Just Cause. Termination for “Just Cause”
shall mean termination because of, in the good faith determination of the Board,
the Employee’s personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. Notwithstanding the
foregoing, in the event of termination for Just Cause there shall be 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 at a meeting
of
the Board called and held for that 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 and the opportunity to
be
heard to be held at least 30 days prior to such termination, finding that in
the
good faith opinion of the Board the Employee was guilty of conduct set forth
above in the second sentence of this Subsection (c) and specifying the
particulars thereof in detail.
(d) Without
Just Cause; Constructive Discharge.
(1) The
Board may, by written notice to the Employee, immediately terminate his
employment at any time for a reason other than Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits
(unless such termination occurs following a Change in Control (as hereinafter
defined), in which event the benefits and compensation provided for in Section
11 shall apply): (i) the salary provided pursuant to
Section 2 hereof, up to the date of termination of the term as provided in
Section 5 hereof (including any renewal term) of this Agreement (the “Expiration
Date”), plus said salary for an additional 12-month period, and (ii) at the
Employee’s election, either (A) cash in an amount equal to the cost to the
Employee of obtaining all health, life, disability and other benefits (excluding
stock options) which the Employee would have been eligible to participate in
through the Expiration Date, based upon the benefit levels substantially equal
to those that the Bank provided for the Employee at the date of termination
of
employment, or (B) continued participation under such Bank benefit plans through
the Expiration Date, but only to the extent the Employee continues to qualify
for participation therein.
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(2) The
Employee may voluntarily terminate his employment under this Agreement, and
the
Employee shall thereupon be entitled to receive the compensation and benefits
payable under Section 9(d)(1) hereof, within ninety (90) days following the
occurrence of any of the following events, which has not been consented to
in
advance by the Employee in writing and which has not been corrected by the
Bank
within 30 days after notice from the Employee (unless such voluntary termination
occurs following a Change in Control, in which event the benefits and
compensation provided for in Section 11 shall apply): (i) the requirement that
the Employee move his personal residence, or perform his principal executive
functions, more than thirty (30) miles from his primary office; (ii) a material
reduction in the Employee’s base compensation, unless part of an
institution-wide reduction; (iii) the failure by the Bank to continue to provide
the Employee with compensation and benefits provided for under this Agreement,
as the same may be increased from time to time, or with benefits substantially
similar to those provided to him under any of the employee benefit plans in
which the Employee now or hereafter becomes a participant, or the taking of
any
action by the Bank which would directly or indirectly reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by
him,
unless part of an institution-wide reduction; (iv) the assignment to the
Employee of duties and responsibilities materially different from those normally
associated with his position as referenced in Section 1; (v) a failure to elect
or re-elect the Employee to the Board of Directors of the Bank; or (vi) a
material diminution or reduction in the Employee’s responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Bank.
(3) Notwithstanding
the foregoing, but only to the extent required under federal banking law, the
amount payable under clause (d)(1)(i) hereof shall be reduced to the extent
that
on the date of the Employee’s termination of employment, the present value of
the benefits payable under clauses (d)(1)(i) and (ii) hereof exceeds the
limitation on severance benefits that is set forth in Regulatory Bulletin 27a
of
the Office of Thrift Supervision, as in effect on the Effective
Date. In the event that Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”), becomes applicable to payments made under this
Section 9(d), and the payments exceed the “Maximum Amount” as defined in Section
11(a)(1) hereof, the payments shall be reduced as provided by Section 11(a)(2)
of this Agreement.
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(e) Termination
or Suspension Under Federal Law.
(1) If
the Employee is removed and/or permanently prohibited from participating in
the
conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) and
(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.
(2) If
the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations
under this Agreement shall terminate as of the date of default; however, this
Paragraph shall not affect the vested rights of the parties.
(3) All
obligations under this Agreement shall terminate, 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
(“Director of OTS”), or his or her designee, at the time that the Federal
Deposit Insurance Corporation (“FDIC”) enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section
13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee,
at
the time that the Director of the OTS, 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 of the OTS to be in an unsafe or unsound
condition. Such action shall not affect any vested rights of the
parties.
(4) If
a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Employee from
participating in the conduct of the Bank’s affairs, the Bank’s obligations under
this Agreement shall be suspended as of the date of such 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 contract obligations were suspended, and
(ii) reinstate (in whole or in part) any of its obligations which were
suspended.
(f) Voluntary
Termination by Employee. Subject to Section 11 hereof, the
Employee may voluntarily terminate employment with the Bank during the term
of
this Agreement, upon at least ninety (90) days’ prior written notice to the
Board of Directors, in which case the Employee shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination (unless such termination occurs pursuant to Section 9(d)(2) hereof,
in which event the benefits and compensation provided for in section 9(d) shall
apply).
10. No
Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of
any
compensation or benefits provided to the Employee in any subsequent
employment.
11. (a)
Change in Control.
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(1) Expiration
of Term of Agreement. The term of this Agreement shall expire
upon a Change in Control. If the term of this Agreement expires upon
a Change in Control and the Employee’s employment has not previously terminated,
the Bank shall continue to be bound by, and shall cause any successor in
interest to be bound by, the terms of this Section 11(a)(1) and Section 12
hereof.
(i) If on or before the Change in Control the Bank or its successor in interest offers to continue the employment of Employee as President of the Bank at the same compensation and substantially the same benefits he was receiving under this Agreement immediately prior to the Change in Control without placing any material limits on Employee’s duties or authority as President (including his authority, subject to corporate controls no more restrictive than those in effect on the date hereof, to hire and discharge employees who are not bona fide officers of the Bank), for at least 36 months (whether or not pursuant to a written agreement), and if the Employee accepts such offer and the Bank or its successor in interest continues to employ the Employee on such terms for at least 36 months following the Change in Control, the Employee shall be entitled to no further payments under this Agreement (other than any payments to which he may have become entitled prior to the expiration of the term of the Agreement).
(ii) If
on or
before the Change in Control, the Bank or its successor in interest does not
offer to continue the employment of Employee as President of the Bank at the
same compensation and substantially the same benefits he was receiving under
this Agreement immediately prior to the Change in Control without placing any
material limits on Employee’s duties or authority as President (including his
authority subject to corporate controls no more restrictive than those in effect
on the date hereof, to hire and discharge employees who are not bona fide
officers of the Bank), for at least 36 months (whether or not pursuant to a
written agreement), the Employee shall be entitled to a lump sum payment equal
to the difference between (i) the product of 2.99 times his “base amount” as
defined in Section 280G(b)(3) of the Code and regulations promulgated thereunder
(“Maximum Amount”), and (ii) the sum of any other parachute payments (as defined
under Section 280G(b)(2) of the Code), that the Employee receives on account
of
the Change in Control. Such payment shall be made on the effective
date of the Change in Control.
(iii) If
Employee accepts an offer of employment from the Bank or its successor in
interest which satisfies the requirements of Section 11(a)(1)(i) but the Bank
or
its successor in interest terminates the Employee’s employment involuntarily
within that 36-month period or does not honor those requirements for at least
36
months following the Change in Control, other than as a result of a termination
for Just Cause as defined in Section 9(c), Employee shall be entitled to the
payment described in Section11(a)(1)(ii), which payment shall be made within
10
days after Employee notifies the Bank or its successor in interest of its
failure to continue to employ Employee on such terms for at least 36 months
following the Change in Control, other than as a result of a termination for
Just Cause as defined in Section 9(c). For purposes of clarification, the
payment to be made pursuant to this Section 11(a)(1)(iii) will not be payable
if
Employee’s employment with the Bank is terminated during that 36-month period
for Just Cause as defined in Section 9(c) or as a result of the Employee’s
death, Disability or voluntary resignation.
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(iv) If
any successor in interest fails or refuses to be bound by the terms of this
Section11(a)(1), the Employee shall be entitled to the payment described in
Section 11(a)(1)(ii), payable promptly after the breach by such successor in
interest of its obligations under this Section 11(a)(1).
(v) In
the event that the independent public accountants of the Bank or its successor
in interest determine that any payment to or for the benefit of the Employee
made pursuant to this Section 11(a)(1) would be non-deductible by the Bank
or
its successor in interest for federal income tax purposes because of Section
280G of the Code, then the amount payable to or for the benefit of the Employee
pursuant to this Section 11(a)(1) shall be reduced (but not below zero) to
the
Reduced Amount. For purposes of this Section 11(a)(1) the “Reduced
Amount” shall be the amount which maximizes the amount payable without causing
the payment to be non-deductible by the Bank or its successor in interest
because of Section 280G of the Code.
(2) In
the event that the Employee and the Bank jointly determine and agree that the
total parachute payments receivable under clauses (i) and (ii) of Section
11(a)(1) hereof exceed the Maximum Amount, notwithstanding the payment procedure
set forth in Section 11(a)(1) hereof, the Employee shall determine which and
how
much, if any, of the parachute payments to which he is entitled shall be
eliminated or reduced so that the total parachute payments to be received by
the
Employee do not exceed the Maximum Amount. If the Employee does not
make his determination within ten business days after receiving a written
request from the Bank, the Bank may make such determination, and shall notify
the Employee promptly thereof. Within five business days of the
earlier of the Bank’s receipt of the Employee’s determination pursuant to this
paragraph or the Bank’s determination in lieu of a determination by the
Employee, 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.
(3) As
a result of uncertainty in application of Section 280G of the Code at the time
of payment hereunder, it is possible that such payments will have been made
by
the Bank which should not have been made (“Overpayment”) or that additional
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 under Section 11(a)(1) hereof. In the event that the Employee,
based upon the assertion by the Internal Revenue Service against the Employee
of
a deficiency which the Employee 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
applicable federal rate provided for in Section 7872(f)(2)(B) 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 Employee and the Bank
determine, based upon controlling precedent or other substantial authority,
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)(B) of the
Code.
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(4) For
purposes of this Agreement, a “Change in Control” shall mean any of the
following:
(i) a
change in the ownership of the Bank or its sole shareholder, River Valley
Bancorp (the “Holding Company”), which shall occur on the date that any one
person, or more than one person acting as a group, acquires ownership of stock
of the Bank or the Holding Company that, together with stock held by such person
or group, constitutes more than fifty percent (50%) of the total fair market
value or total voting power of the stock of the Bank or the Holding
Company. Such acquisition may occur as a result of a merger of the
Holding Company or the Bank into another entity which pays consideration for
the
shares of capital stock of the merging Holding Company or
Bank. However, if any one person, or more than one person acting as a
group, is considered to own more than fifty percent (50%) of the total fair
market value or total voting power of the stock of the Bank or the Holding
Company, the acquisition of additional stock by the same person or persons
is
not considered to cause a change in the ownership of the Bank or the Holding
Company (or to cause a change in the effective control of the Bank or the
Holding Company (within the meaning of subsection (ii)). An increase
in the percentage of stock owned by any one person, or persons acting as a
group, as a result of a transaction in which the Bank or the Holding Company
acquires its stock in exchange for property will be treated as an acquisition
of
stock for purposes of this subsection. This subsection applies only
when there is a transfer of stock of the Bank or the Holding Company (or
issuance of stock of the Bank or the Holding Company) and stock in the Bank
or
the Holding Company remains outstanding after the transaction.
(ii) a
change in the effective control of the Bank or the Holding Company, which shall
occur only on either of the following dates:
1) the
date any one person, or more than one person acting as a group acquires (or
has
acquired during the 12 month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Bank or the
Holding Company possessing thirty percent (30%) or more of the total voting
power of the stock of the Bank or the Holding Company.
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2) the
date a majority of members of the Holding Company’s board of directors is
replaced during any 12 month period by directors whose appointment or election
is not endorsed by a majority of the members of the Holding Company’s board of
directors before the date of the appointment or election; provided, however,
that this provision shall not apply if another corporation is a majority
shareholder of the Holding Company.
If
any
one person, or more than one person acting as a group, is considered to
effectively control the Bank or the Holding Company, the acquisition of
additional control of the Bank or the Holding Company by the same person or
persons is not considered to cause a change in the effective control of the
Bank
or the Holding Company (or to cause a change in the ownership of the Bank or
the
Holding Company within the meaning of subsection (i) of this
section).
(iii) a
change in the ownership of a substantial portion of the Bank’s assets, which
shall occur on the date that any one person, or more than one person acting
as a
group, acquires (or has acquired during the 12 month period ending on the date
of the most recent acquisition by such person or persons) assets from the Bank
that have a total gross fair market value equal to or more than forty percent
(40%) of the total gross fair market value of all of the assets of the Bank
immediately before such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the Bank,
or
the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets. No change in control occurs
under this subsection (iii) when there is a transfer to an entity that is
controlled by the shareholders of the Bank immediately after the
transfer. A transfer of assets by the Bank is not treated as a change
in the ownership of such assets if the assets are transferred to –
1) a
shareholder of the Bank (immediately before the asset transfer) in exchange
for
or with respect to its stock;
2) an
entity, 50 percent or more of the total value or voting power of which is owned,
directly or indirectly, by the Bank.
3) a
person, or more than one person acting as a group, that owns, directly or
indirectly, 50 percent or more of the total value or voting power of all the
outstanding stock of the Bank; or
4) an
entity, at least 50 percent of the total value or voting power of which is
owned, directly or indirectly, by a person described in paragraph
(iii).
For
purposes of this subsection (iii) and except as otherwise provided in paragraph
1) above, a person’s status is determined immediately after the transfer of the
assets.
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(iv) For
purposes of this section, persons will not be considered to be acting as a
group
solely because they purchase or own stock of the same corporation at the same
time, or as a result of the same public offering. Persons will be
considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the Bank or the Holding Company; provided,
however, that they will not be considered to be acting as a group if they are
owners of an entity that merges into the Bank or the Holding Company where
the
Bank or the Holding Company is the surviving corporation.
To
the
extent the Employee is a “specified employee” (as defined below), payments due
to the Employee under this Agreement that represent payment of deferred
compensation that is subject to Section 409A of the Code shall begin no sooner
than six months after the Employee’s separation from service; provided, however,
that any payments not made during the six month period described in this Section
11(a)(4)(iv) shall be made in a single lump sum as soon as administratively
practicable after the expiration of such six month period; provided, further,
that the six month delay required under this Section 11(a)(4)(iv) shall not
apply to the portion of any payment resulting from the Employee’s “involuntary
separation from service” (as defined in Treasury Reg. Section 1.409A-1(n) and
including a “separation from service for good reason,” as defined in Treasury
Reg. Section 1.409A 1(n)(2)) that (i) is payable no later than the last day
of
the second year following the year in which the separation from service occurs,
and (ii) does not exceed two times the lesser of (1) the Employee’s annualized
compensation for the year prior to the year in which the separation from service
occurs, or (2) the dollar limit described in Section 401(a)(17) of the
Code. It is expressly intended and understood that payments made
under Section 11(a)(1) do not represent payments of deferred compensation
subject to Section 409A of the Code and are not subject to the six month delay
required by this Section 11(a)(4)(iv).
To
the
extent any life, health, disability or other welfare benefit coverage provided
to the Employee under this Agreement would be taxable to the Employee, the
taxable amount of such coverage shall not exceed the applicable dollar amount
under Section 402(g)(1)(B) of the Code determined as of the year in which the
Employee’s separation from service occurs. The intent of the
foregoing sentence is to permit the Holding Company and the Bank to treat the
provision of such benefits as a limited payment under Treasury Reg. Section
1.409A-1(a)(9)(v)(D) so as to avoid application of the six month delay rule
for
specified employees. For purposes of this Agreement, any reference to
severance of employment or termination of employment shall mean a “separation
from service” as defined in Treasury Reg. Section 1.409A-1(h).
For
purposes of this Agreement, the term “specified employee” shall have the meaning
set forth in Treasury Reg. Section 1.409A-1(i) and shall include, without
limitation, (1) an officer of the Bank or the Holding Company having annual
compensation greater than $130,000 (as adjusted for inflation under the Code),
(2) a five percent owner of the Bank or the Holding Company, or (3) a one
percent owner of the Bank or the Holding Company having annual compensation
of
more than $150,000. The determination of whether the Employee is a
“specified employee” shall be made by the Bank in good faith applying the
applicable Treasury regulations.
11
Notwithstanding
the foregoing, but only to the extent required under federal banking law, the
amount payable under Subsection(a)(1) of this Section 11 shall be reduced to
the
extent that on the date of the Employee’s termination of employment, the amount
payable under Subsection(a)(1) of this Section 11 exceeds the limitation on
severance benefits that is set forth in Regulatory Bulletin 27a of the Office
of
Thrift Supervision, as in effect on the Effective Date.
(b) Compliance
with 12 U.S.C. Section 1828(k). Any payments made to the Employee
pursuant to this Agreement, or otherwise, are subject to and conditioned upon
their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.
(c) Trust. (1)
Within five business days before a Change in Control as defined in Section
11(a)(4) of this Agreement which was not approved in advance by a resolution
of
a majority of the Continuing Directors of the Bank, the Bank shall (i) deposit,
or cause to be deposited, in a grantor trust (the “Trust”), designed to conform
with Revenue Procedure 93-64 (or any successor) and having a trustee independent
of the Bank, an amount equal to 2.99 times the Employee’s “base amount” as
defined in Section 280G(b)(3) of the Code, and (ii) provide the trustee of
the
Trust with a written direction to hold said amount and any investment return
thereon in a segregated account for the benefit of the Employee, and to follow
the procedures set forth in the next paragraph as to the payment of such amounts
from the Trust.
(2) During
the thirty-six (36) consecutive month period following the date on which the
Bank makes the deposit referred to in the preceding paragraph, the Employee
may
provide the trustee of the Trust with a written notice requesting that the
trustee pay to the Employee an amount designated in the notice as being payable
pursuant to Section 11(a). Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail, return receipt requested. On
the tenth (10th) business day after mailing said notice to the association,
the
trustee of the Trust shall pay the Employee the amount designated therein in
immediately available funds, unless prior thereto the Bank provides the trustee
with a written notice directing the trustee to withhold such
payment. In the latter event, the trustee shall submit the dispute to
non-appealable binding arbitration for a determination of the amount payable
to
the Employee pursuant to Section 11(a) hereof, and the party responsible for
the
payment of the costs of such arbitration (which may include any reasonable
legal
fees and expenses incurred by the Employee) shall be determined by the
arbitrator. The trustee shall choose the arbitrator to settle the
dispute, and such arbitrator shall be bound by the rules of the American
Arbitration Association in making his or her determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay
from
the Trust the amounts required to be paid to the Employee and/or the Bank,
and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
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(3) Upon
the earlier of (i) any payment from the Trust to the Employee, or (ii) the
date
thirty-six (36) months after the date on which the Bank makes the deposit
referred to in the first paragraph of this subsection (d)(1), the trustee of
the
Trust shall pay to the Bank the entire balance remaining in the segregated
account maintained for the benefit of the Employee. The Employee
shall thereafter have no further interest in the Trust pursuant to this
Agreement.
(d) In
the event that any dispute arises between the Employee and the Bank as to the
terms or interpretation of this Agreement, including this Section 11, whether
instituted by formal legal proceedings or otherwise, including any action that
the Employee takes to enforce the terms of this Section 11 or to defend against
any action taken by the Bank, the Employee shall be reimbursed for all costs
and
expenses, including reasonable attorneys’ fees, arising from such dispute,
proceedings or actions, provided that the Employee shall obtain a final judgment
by a court of competent jurisdiction in favor of the Employee. Such
reimbursement shall be paid within ten (10) days of Employee’s furnishing to the
Bank written evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by the
Employee.
Should
the Employee fail to obtain a final judgment in favor of the Employee and a
final judgment is entered in favor of the Bank, then the Bank shall be
reimbursed for all costs and expenses, including reasonable Attorneys’ fees
arising from such dispute, proceedings or actions. Such reimbursement
shall be paid within ten (10) days of the Bank furnishing to the Employee
written evidence, which may be in the form, among other things, of a canceled
check or receipt, of any costs or expenses incurred by the Bank.
12. The
Bank will permit Employee or his personal representative(s) or heirs, during
a
period of three months following Employee’s termination of employment by the
Bank for the reasons set forth in Subsections 9(d), if such termination follows
a Change of Control, to require the Bank, upon written request, to purchase
all
outstanding stock options previously granted to Employee under any stock option
plan then in effect to the extent the options are vested at a cash purchase
price equal to the amount by which the aggregate “fair market value” of the
shares subject to such options exceeds the aggregate option price for such
shares. For purposes of this Agreement, the term “fair market value”
shall mean the higher of (1) the average of the highest asked prices for shares
in the over-the-counter market as reported on the NASDAQ system or other
exchange if the shares are traded on such system for the 30 business days
preceding such termination, or (2) the average per share price actually paid
for
the most highly priced 1% of the shares acquired in connection with the Change
of Control by any person or group acquiring such control.
13 Federal
Income Tax Withholding. The Bank may withhold all federal and
state income or other taxes from any benefit payable under this Agreement as
shall be required pursuant to any law or government regulation or
ruling.
14. Successors
and Assigns.
(a) Bank. This
Agreement shall not be assignable by the Bank, provided that this Agreement
shall inure to the benefit of and be binding upon any corporate or other
successor of the Bank which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all of the assets
or
stock of the Bank.
13
(b) Employee. Since
the Bank is contracting for the unique and personal skills of the Employee,
the
Employee shall be precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Bank; provided,
however, that nothing in this paragraph shall preclude (i) the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives
of
the Employee or his estate from assigning any rights hereunder to the person
or
persons entitled thereunto.
(c) Attachment. 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 exclusion, attachment, levy or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no
effect.
15. Amendments. No
amendments or additions to this Agreement shall be binding unless made in
writing and signed by all of the parties, except as herein otherwise
specifically provided.
16. Applicable
Law. Except to the extent preempted by federal law, the laws of
the State of Indiana shall govern this Agreement in all respects, whether as
to
its validity, construction, capacity, performance or otherwise.
17. 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.
18. Entire
Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto and supersedes any other
agreement between the parties hereto relating to the employment of the
Employee
14
IN
WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
|
ATTEST:
|
RIVER
VALLEY FINANCIAL BANK
|
||
| /s/ Xxxxxx X. Xxxxxxx |
By:
|
/s/ Xxxx X. Xxxxxxx | |
|
Xxxxxx
X. Xxxxxxx, Secretary
|
Xxxx
X. Xxxxxxx, Chairman of the Board
|
||
| /s/ Xxxxxxx X. Xxxxxxxxx | |||
|
Xxxxxxx
X. Xxxxxxxxx
|
|||
The
undersigned, River Valley 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, River Valley 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.
15
