EMPLOYMENT AGREEMENT BETWEEN PEOPLES BANK SB AND NORTHWEST INDIANA BANCORP AND DAVID A. BOCHNOWSKI
BETWEEN
PEOPLES
BANK SB
AND
AND
XXXXX
X. XXXXXXXXXX
TABLE
OF CONTENTS
Page
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1.
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EMPLOYMENT
AND TERM.
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1
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(a)
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Employment.
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1
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(b)
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Term.
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1
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2.
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DUTIES.
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1
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3.
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SALARY.
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2
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(a)
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Base
Salary.
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2
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(b)
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Salary
Increases or Decreases.
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2
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(c)
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Expenses,
Automobile and Clubs.
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2
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4.
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ANNUAL
BONUSES.
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2
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5.
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EQUITY
INCENTIVE COMPENSATION.
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2
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6.
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OTHER
BENEFITS.
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3
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(a)
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Insurance
Plans.
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3
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(b)
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Vacation.
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3
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(c)
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Other.
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3
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7.
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TERMINATION.
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4
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(a)
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Death
or Disability.
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4
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(b)
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Discharge
for Cause.
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4
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(c)
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Termination
for Other Reasons.
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5
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8.
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DEFINITIONS.
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5
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9.
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OBLIGATIONS
OF THE BANK UPON TERMINATION.
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7
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(a)
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Death,
Disability, Discharge for Cause or Resignation Without Good
Reason.
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8
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(b)
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Discharge
Without Cause or Resignation with Good Reason.
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8
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(c)
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Disability.
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9
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(d)
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Level
of Bonus and Welfare Benefits after a Change of Control.
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9
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(e)
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Continuing
Obligations After Termination.
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9
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10.
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CERTAIN
ADDITIONAL PAYMENTS BY THE BANK.
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9
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11.
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NO
SET-OFF OR MITIGATION.
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12
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12.
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PAYMENT
OF CERTAIN EXPENSES.
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12
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13.
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INDEMNIFICATION
AND JOINT OBLIGATION.
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12
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i
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14.
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BINDING
EFFECT.
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12
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15.
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NOTICES.
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12
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16.
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TAX
WITHHOLDING.
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13
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17.
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ARBITRATION.
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13
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18.
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NO
ASSIGNMENT.
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13
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19.
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NONSOLICITATION.
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13
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20.
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EXECUTION
IN COUNTERPARTS.
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14
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21.
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JURISDICTION
AND GOVERNING LAW.
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14
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22.
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SEVERABILITY.
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14
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23.
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PRIOR
UNDERSTANDINGS.
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14
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ii
THIS
AGREEMENT, made and entered into as of April 19, 2006 (the “Effective Date”), by
and between Northwest Indiana Bancorp (the “Company”) and Peoples Bank SB
(together, the “Bank” unless otherwise noted) and Xxxxx X. Xxxxxxxxxx (the
“Executive”).
W
I T N E
S S E T H THAT:
WHEREAS,
the Bank acting through its Board of Directors (“Board”) desires to continue to
employ the Executive as its Chairman and Chief Executive Officer, and the
Executive desires to continue in such employment;
NOW,
THEREFORE, the Bank and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
1. Employment
and Term.
(a) Employment.
The
Bank
shall employ the Executive as the Chairman and Chief Executive Officer of
the
Bank, and the Executive shall so serve, for the term set forth in
Paragraph 1(b).
(b) Term.
The
initial term of the Executive’s employment under this Agreement shall commence
as of the Effective Date and end thirty-six calendar months thereafter, subject
to the extension of such term as hereinafter provided and subject to earlier
termination as provided in Paragraph 7, below. Beginning on the day
immediately after the Effective Date, the term of this Agreement shall be
extended automatically for one (1) additional day for each day which has
then elapsed since the Effective Date, unless, at any time after the Effective
Date, either the Board of Directors of the Bank or the Executive gives written
notice to the other, in accordance with Paragraph 15, below, that such
automatic extension of the term of this Agreement shall cease. Any such notice
shall be effective immediately upon delivery. The initial term of this
Agreement, plus any extension by operation of this Paragraph 1, shall be
hereinafter referred to as the “Term.”
2. Duties.
During
the period of employment as provided in Paragraph 1(b) hereof, the
Executive shall serve as Chairman and Chief Executive Officer of the Bank
and
have all powers and duties consistent with such positions, subject to the
reasonable direction of the Board. The Executive shall also continue to serve
as
a member of the Board if elected. The Executive shall devote his best efforts
to
fulfill faithfully, responsibly and to the best of his ability his duties
hereunder; provided, however, that with the approval of the Board, the Executive
may serve, or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which, in the
Board’s
judgment, will not present any material conflict of interest with the Bank
or
any of its subsidiaries or affiliates or divisions, or unfavorably affect
the
performance of the Executive’s duties, or will not violate any applicable
statute or regulation. The Executive shall keep track of his time and expenses
spent on the affairs of the Company and shall so advise the Bank so as to
allow
for a proper allocation of the Executive’s salary and expenses between the
Company and the Bank.
1
3. Salary.
(a) Base
Salary. For
services performed by the Executive for the Bank pursuant to this Agreement
during the period of employment as provided in Paragraph 1(b) hereof, the
Bank shall pay the Executive a base salary at the rate of Three Hundred
Thirty-Five Thousand Dollars ($335,000.00) per year, payable in substantially
equal installments in accordance with the Bank’s regular payroll practices. The
Executive’s base salary (with any increases under paragraph (b), below)
shall not be subject to reduction, except that prior to a Change of Control,
the
Bank may decrease the Executive’s base salary if the consolidated operating
results of the Company are significantly less favorable than those achieved
for
the fiscal year ended December 31, 2005, and the Bank makes similar
decreases in the base salaries it pays to the executive officers of the Bank.
Any compensation which may be paid to the Executive under any additional
compensation or incentive plan of the Bank (including those under
Paragraphs 4, 5 and 6) or which may be otherwise authorized from time to
time by the Board (or an appropriate committee thereof) shall be in addition
to
the base salary to which the Executive shall be entitled under this
Agreement.
(b) Salary
Increases or Decreases. During
the period of employment as provided in Paragraph 1(b) hereof, the base
salary of the Executive shall be reviewed no less frequently than annually
by
the Board to determine whether or not the same should be increased in light
of
the duties and responsibilities of the Executive and the performance of the
Bank
or decreased under the circumstances permitted in Section 3(a). If it is
determined that an increase or decrease is merited, such increase or decrease
shall be promptly put into effect and the base salary of the Executive as
so
increased or decreased shall constitute the base salary of the Executive
for
purposes of Paragraph 3(a).
(c) Expenses,
Automobile and Clubs. The
Bank
shall pay or reimburse the Executive for all reasonable travel and other
expenses incurred by the Executive in the performance of his services under
this
Agreement. The Bank further agrees to provide the Executive with the full
time
use of an automobile of a make and model selected by the Executive, not more
than two years old, commensurate with his position and as approved by the
Compensation Committee of the Board of Directors. Subject to the approval
of the
Board of Directors of the Bank, the Bank shall reimburse the Executive for
all
initiation fees and dues associated with membership in professional, social,
civic and service organizations which the Executive joins or has joined and
which membership, in whole or in part, furthers the interests of or promotes
the
interests of the Bank or assists the Executive in business relationships
on
behalf of the Bank.
4. Annual
Bonuses. For
each
calendar year during the term of employment, the Executive shall be eligible
to
receive in cash an annual performance bonus as may be set by Board.
5. Equity
Incentive Compensation. During
the term of employment hereunder the Executive shall be eligible to participate,
in an appropriate manner relative to other senior executives of the Bank,
in any
equity-based incentive compensation plan or program approved by the Board
from
time to time, including (but not by way of limitation) the Company’s Amended and
Restated 2004 Stock Option and Incentive Plan.
2
6. Other
Benefits.
(a) Insurance
Plans. The
Bank
agrees to continue funding all premiums as they become due pursuant to the
following insurance policies, and any other insurance policies that may in
the
future be purchased, under which the Executive is an insured until such time
as
the Executive attains the age of sixty-six (66).
|
Company/Policy
No.
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Type
|
Benefit
Amount
|
||||
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Assurant
Employee Benefits
Group
Policy #54075
Certificate
No. 36
|
Group
Life and AD&D
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$400,000
|
||||
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Principal
Financial Group
Group
Policy #N31368
Location
09
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Group
Life and AD&D
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$148,000
|
||||
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Mass.
Mutual Life Insurance
And
New York Life Insurance
Policy
Nos. 0064748 and 56608619
|
Endorsement
Split Dollar Plan
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$200,000
|
||||
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American
States Life Insurance
Policy
No. 0100432728
|
Individual
Life Insurance
|
$500,000
|
||||
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Valley
Forge Life Insurance Co.
Policy
No. 84040058
|
Universal
Life Insurance
|
$438,659*
|
||||
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New
York Life
Policy
No. 56612175
|
Universal
Life Insurance
|
$100,000
|
||||
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*Death
Benefit Value as of Feb. 7, 2006
|
||||||
Notwithstanding
the above, in the event of a Change in Control (as defined in
Paragraph 8(c)) of the Bank, the Bank agrees to immediately pay the
Executive the amount of all such future premiums on the above policies as
shall
be reasonably expected to become due, plus any amount as may be necessary
under
Paragraph 10, prior to the Executive attaining the age of
sixty-six (66). In the event such payment is made, the Bank shall be
relieved of its obligation to continue funding premiums as they become
due.
(b) Vacation.
Notwithstanding
anything herein to the contrary, the Executive shall be entitled to a maximum
of
six weeks vacation to be taken during such times as may be chosen by the
Executive. Any vacation time not taken during any calendar year and any unused
vacation days in existence as of the date hereof may be taken with the consent
of the Compensation Committee of the Board, which consent shall not be
unreasonably withheld. Vacation time for each calendar year shall be considered
earned as of the first day of each calendar year.
(c) Other.
The
Executive shall be entitled to participate in all of the various retirement,
welfare, fringe benefit and executive perquisite plans, programs and
arrangements of
3
the
Bank
as they may exist from time to time. Notwithstanding the limitations of any
health benefit plan maintained by the Bank, the Bank agrees to pay the costs
of
any necessary physical examinations and the costs of all diagnostic testing
incurred by the Executive on his own behalf.
7. Termination.
Unless
this Agreement is earlier terminated in accordance with the following provisions
of this Paragraph 7, the Bank shall continue to employ the Executive and
the Executive shall remain employed by the Bank during the entire Term of
this
Agreement as set forth in Paragraph 1(b). Paragraph 9 hereof sets
forth certain obligations of the Bank in the event that the Executive’s
employment hereunder is terminated. Certain capitalized terms used in this
Agreement are defined in Paragraph 8, below.
(a) Death
or Disability. Except
to
the extent otherwise provided in Paragraph 9, this Agreement shall
terminate immediately (a Date of Termination) in the event of the Executive’s
death or in the event that the Executive becomes disabled. The Executive
will be
deemed to be disabled upon the earlier of (i) the end of an
eighteen (18)-consecutive month period during which, by reason of physical
or mental injury or disease, the Executive has been unable to perform
substantially all of his usual and customary duties under this Agreement
or
(ii) the date that a reputable physician, jointly selected by the Board and
the Executive, determines in writing that the Executive will, by reason of
physical or mental injury or disease, be unable to perform substantially
all of
the Executive’s usual and customary duties under this Agreement for a period of
at least eighteen (18) consecutive months. If any question arises as to
whether the Executive is disabled, upon reasonable request therefor by the
Board, the Executive shall submit to reasonable medical examination for the
purpose of determining the existence, nature and extent of any such disability.
In accordance with Paragraph 15, the Board shall promptly give the
Executive written notice of any such determination of the Executive’s disability
and of any decision of the Board to terminate the Executive’s employment by
reason thereof. In the event of disability, until the Date of Termination,
the
base salary payable to the Executive under Paragraph 3(a) hereof shall be
reduced dollar-for-dollar by the amount of disability benefits paid to the
Executive in accordance with any disability policy or program of the
Bank.
(b) Discharge
for Cause. In
accordance with the procedures hereinafter set forth, the Board may discharge
the Executive from his employment hereunder for Cause. Except to the extent
otherwise provided in Paragraph 9, this Agreement shall terminate
immediately as of the Date of Termination in the event the Executive is
discharged for Cause. Any discharge of the Executive for Cause shall be
communicated by a Notice of Termination to the Executive given in accordance
with Paragraph 15 of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide
a
basis for termination of the Executive’s employment under the provision so
indicated and (iii) specifies the termination date, which may be as early
as the date of the giving of such notice. In the case of a discharge of the
Executive for Cause, the Notice of Termination shall include a copy of a
resolution duly adopted by the Board at a meeting called and held for such
purpose (after reasonable notice to the Executive and reasonable opportunity
for
the Executive, together with the Executive’s counsel, to be heard before the
Board prior to such vote), finding that, in the reasonable and good faith
opinion of the
4
Board,
the Executive was guilty of conduct constituting Cause. No purported termination
of the Executive’s employment for Cause shall be effective without a Notice of
Termination.
(c) Termination
for Other Reasons. The
Bank
may discharge the Executive for reason other than Cause by giving written
notice
to the Executive in accordance with Paragraph 15 at least thirty (30)
days prior to the Date of Termination. The Executive may resign from his
employment, without liability to the Bank, by giving written notice to the
Bank
in accordance with Paragraph 15 at least thirty (30) days prior to the
Date of Termination. Except to the extent otherwise provided in
Paragraph 9, this Agreement shall terminate immediately as of the Date of
Termination in the event the Executive is discharged for reasons other than
Cause or resigns.
8. Definitions.
For
purposes of this Agreement, the following capitalized terms shall have the
meanings set forth below:
(a) “Accrued
Obligations” shall mean, as of the Date of Termination, the sum of (A) the
Executive’s base salary under Paragraph 3(a) through the Date of
Termination to the extent not theretofore paid, (B) the amount of any
bonus, incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid and (C) any unused vacation, expense reimbursements
(regardless of whether a claim for such has yet been filed) and other cash
entitlements due the Executive as of the Date of Termination. For the purpose
of
this Paragraph 8(a), dollar amounts shall be deemed to accrue ratably over
the period during which they are earned, but no discretionary compensation
shall
be deemed earned or accrued unless it has been specifically approved by the
Board in accordance with the applicable plan, program or policy.
(b) “Cause”
shall mean: (A) the Executive’s commission of an act materially and
demonstrably detrimental to the goodwill of the Bank or any of its subsidiaries,
which act constitutes gross negligence or willful misconduct by the Executive
in
the performance of his material duties to the Bank or (B) the Executive’s
conviction of a felony involving moral turpitude, but specifically excluding
any
conviction based entirely on vicarious liability. No act or failure to act
will
be considered “willful” unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that his action or omission
was in the best interests of the Bank. In addition, no act or omission will
constitute Cause unless the Bank has given detailed written notice thereof
to
the Executive and, where remedial action is feasible, he then fails to remedy
the act or omission within a reasonable time after receiving such
notice.
(c) “Change
of Control” shall mean:
(i) The
acquisition by any “person” (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
provided, however, that “person” shall not include the Executive, members of the
Executive’s immediate family, or any trust of which the beneficial owners are
the Executive or members of his immediate family) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
35% or more of either (i) the then outstanding shares of capital stock of
the Bank or the Company (the
5
“Outstanding
Bank (or Company, as appropriate) Capital Stock”) or (ii) the combined
voting power of the then outstanding voting securities of the Bank or the
Company entitled to vote generally in the election of directors (the “Bank (or
Company, as applicable) Voting Securities”); provided, however, that
(X) any acquisition by or from the Company or any of its subsidiaries,
(Y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or
(Z) any acquisition by any corporation with respect to which, following
such acquisition, more than 65% of the then outstanding shares of capital
stock
of such corporation and the combined voting power of the then outstanding
voting
securities of such corporation entitled to vote generally in the election
of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Bank (or Company, as appropriate)
Capital Stock and Bank (or Company, as appropriate) Voting Securities
immediately prior to such acquisition, in substantially the same proportion
as
their ownership, immediately prior to such acquisition, of the Outstanding
Bank
(or Company, as appropriate) Capital Stock and Bank (or Company, as appropriate)
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(ii) Individuals
who, as of the Effective Date constituted the Board of Directors of the Bank
(or
Company, as appropriate) (the “Incumbent Board”) cease for any reason to
constitute at least a majority of such Board; provided, however, that any
individual who becomes a member of the respective Board subsequent to such
date
whose election, or nomination for election by the stockholders of the Bank
or
the Company, as appropriate, was approved by a vote of at least a majority
of
the directors then comprising the Incumbent Board shall be deemed to be a
member
of the Incumbent Board; but provided further, that no individual whose election
or initial assumption of office as a director occurs as a result of an actual
or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) with respect to the
election or removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board
of
Directors of the Bank (or Company, as appropriate), shall be deemed to be
a
member of the Incumbent Board; or
(iii) Consummation
of a reorganization, merger or consolidation (a “Business Combination”) with
respect to which all or substantially all of the individuals and entities
who
were the respective beneficial owners of the Outstanding Bank (or Company,
as
appropriate) Capital Stock and Bank (or Company, as appropriate) Voting
Securities immediately prior to such Business Combination do not, following
such
Business Combination, beneficially own, directly or indirectly, more than
65%
of, respectively, the then outstanding shares of capital stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from the Business Combination, in substantially the same proportion
as
their ownership immediately prior to such Business Combination of the
Outstanding Bank (or Company, as appropriate) Capital Stock and Bank (or
Company, as appropriate) Voting Securities, as the case may be; or
6
(iv) Consummation
of a sale or other disposition of all or substantially all of the assets
of the
Bank (or Company, as appropriate) other than to a corporation with respect
to
which, following such sale or disposition, more than 65% of, respectively,
the
then outstanding shares of capital stock and the combined voting power of
the
then outstanding voting securities entitled to vote generally in the election
of
directors is then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Bank (or Company, as appropriate)
Capital Stock and Bank (or Company, as appropriate) Voting Securities
immediately prior to such sale or disposition, in substantially the same
proportion as their ownership of the Outstanding Bank (or Company, as
appropriate) Capital Stock and Bank (or Company, as appropriate) Voting
Securities, as the case may be, immediately prior to such sale or disposition;
or
(v) A
complete liquidation or dissolution of the Bank or the Company.
Any
other
provision of this Agreement to the contrary notwithstanding, “Change of Control”
shall not include any transaction described in subparagraphs (A), (C) or
(D) of this paragraph (iii) where, in connection with such transaction, the
Executive or any party acting in concert with the Executive substantially
increases his or its, as the case may be, ownership interest in the Bank
or the
Company or a successor to the Bank or the Company.
(d) “Date
of
Termination” shall mean (A) in the event of a discharge of the Executive by
the Board for Cause, the date specified in such Notice of Termination,
(B) in the event of a discharge of the Executive without Cause or a
resignation by the Executive, the date specified in the written notice to
the
Executive (in the case of discharge) or the Bank (in the case of resignation),
which date shall be no less than thirty (30) days from the date of
such written notice, (C) in the event of the Executive’s death, the date of
the Executive’s death, and (D) in the event of termination of the
Executive’s employment by reason of disability pursuant to Paragraph 7(a),
the date the Executive receives written notice of such termination.
(e) “Good
Reason” shall mean any of the following: (A) the failure to re-elect the
Executive as Chairman and Chief Executive Officer and as a member of the
Board
of Directors with full voting rights, (B) assignment of duties inconsistent
with the Executive’s position, authority, duties or responsibilities, or any
other action by the Bank which results in a substantial diminution of such
position, authority, duties or responsibilities, (C) any substantial
failure by the Bank to comply with any of the provisions of this Agreement
or
(D) the Bank’s giving notice to the Executive to stop further operation of
the evergreen feature described in Paragraph 1 above; provided, however,
that actions taken by the Board of Directors of the Bank under
subparagraphs (A) and (B) by reason of the Executive’s inability to perform
the responsibilities contemplated by those sections because of a physical
or
mental injury or disease shall not be deemed “Good Reason.” In addition,
resignation by the Executive for any reason during the one (1)-year period
immediately after a Change of Control shall be deemed to be a resignation
for
Good Reason.
9. Obligations
of the Bank Upon Termination. The
following provisions describe the obligations of the Bank to the Executive
under
this Agreement upon termination of his
7
employment.
However, except as explicitly provided in this Agreement, nothing in this
Agreement shall limit or otherwise adversely affect any rights which the
Executive may have under applicable law, under any other agreement with the
Bank
or any of its subsidiaries, or under any compensation or benefit plan, program,
policy or practice of the Bank or any of its subsidiaries.
(a) Death,
Disability, Discharge for Cause or Resignation Without Good Reason.
In
the
event this Agreement terminates by reason of the death or disability of the
Executive, or by reason of the discharge of the Executive by the Bank for
Cause,
or by reason of the resignation of the Executive other than for Good Reason,
the
Bank shall pay to the Executive, or his heirs or estate in the event of the
Executive’s death, all Accrued Obligations in a lump sum in cash within
thirty (30) days after the Date of Termination; provided, however, that any
portion of the Accrued Obligations which consists of bonus, deferred
compensation or incentive compensation, shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive.
In addition to the foregoing, in the event this Agreement terminates by reason
of the death of the Executive, then within thirty (30) days of the death of
the Executive, the Bank shall pay to the Executive’s heirs or estate in a lump
sum in cash an amount equal to the sum of the Executive’s then-current annual
base salary and the amount of the most recent annual bonus received by the
Executive.
(b) Discharge
Without Cause or Resignation with Good Reason. In
the
event that this Agreement terminates by reason of the discharge of the Executive
by the Bank without Cause, or by reason of the resignation of the Executive
for
Good Reason, then the Bank shall pay to Executive, or his heirs or estate
in the
event of the Executive’s death, in addition to the compensation and benefits
described in paragraph (a), the following benefits:
(i) A
cash
bonus for the year of termination equal to the most recent annual bonus received
by the Executive,
(ii) Payment
in a lump sum of an amount equal to three (3) times the Executive’s
then-current base salary as in effect prior to the termination,
(iii) Payment
in a lump sum of an amount equal to three (3) times the most recent annual
bonus received by the Executive,
(iv) Continuation,
for a period of three (3) years after the Date of Termination, of welfare
benefits and senior executive perquisites at least equal to those which would
have been provided if the Executive’s employment had continued for that
time,
(v) A
payment
equal to that described in Paragraph 6(a) as necessary to fund the future
premiums on such insurance policies as shall be reasonably expected to become
due prior to the Executive reaching the age of sixty-six (66);
and
(vi) Outplacement
services, at the expense of the Bank, from a provider reasonably selected
by the
Executive.
8
(c) Disability.
In
the
event this Agreement terminates by reason of the disability of the Executive,
then the Bank shall pay to the Executive in addition to the compensation
and
benefits described in paragraph (a), the following benefits:
(i) A
cash
bonus for the year of termination equal to the most recent annual bonus received
by the Executive;
(ii) Cash
compensation during each year between the Date of Termination and the earlier
of
the date upon which the Executive attains age seventy (70) or the death of
the Executive equal to sixty-six percent (66%) of both the then current
base salary and the most recent annual bonus received by the Executive;
and
(iii) Continuation
of welfare benefits and senior executive perquisites at least equal to those
which would have been provided if the Executive’s employment had continued for
that time as the cash compensation in (ii) continues.
Notwithstanding
the foregoing, the payments due under this section following the Date of
Termination shall be offset dollar-for-dollar by the amount of disability
payments paid to the Executive for periods following the Date of Termination
in
accordance with any disability policy or program of the Bank.
(d) Level
of Bonus and Welfare Benefits after a Change of Control. If
the
Executive’s employment terminates for any reason after a Change of Control, the
phrase “most recent annual bonus” as used in paragraphs (b)(i) and (iii)
and (c) shall be replaced by the phrase “most recent annual bonus received by
the Executive prior to the Change of Control,” and the phrase “would have been
provided if the Executive’s employment had continued for that time” as used in
paragraph (b)(iv) and (c)(iii) shall be replaced by the phrase “were
provided to the Executive immediately prior to the Change of Control;” provided,
however, that this paragraph (d) shall not apply to (b)(i) and (iii) and
(c) or to (b)(iv) and (c)(iii) if the benefits the Executive would receive
under
(b)(i) and (iii) and (c) or (b)(iv) and (c)(iii) would be greater without
the
application of this paragraph (d).
(e) Continuing
Obligations After Termination. If
the
Executive’s employment with the Bank terminates for any reason, the Bank’s
obligations and the Executive’s obligations under Paragraphs 9 through 19
shall continue after termination of the employment relationship.
10. Certain
Additional Payments by the Bank. The
Bank
agrees that:
(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 Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard
to
any additional payments required under this Paragraph 10) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), or if any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise
tax,
together with any such interest and penalties, being hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-
9
Up
Payment”) in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax
imposed upon the Payment.
(b) Subject
to the provisions of paragraph (c), below, all determinations required to
be made under this Paragraph 10, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
accounting firm which is then serving as the auditors for the Bank (the
“Accounting Firm”), which shall provide detailed supporting calculations both to
the Bank and the Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment, or such earlier
time
as is requested by the Bank. In the event that the Accounting Firm is serving
as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint a nationally recognized accounting
firm
to make the determinations required hereunder (which accounting firm shall
then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the
Accounting Firm shall be borne solely by the Bank. Any Gross-Up Payment,
as
determined pursuant to this Paragraph 10, shall be paid by the Bank to the
Executive within five (5) days of the receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive’s applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any good faith determination by the Accounting Firm shall be binding
upon the Bank and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Bank should have been made
(“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Bank exhausts its remedies pursuant to
paragraph (c), below, and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount
of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid
by the Bank to or for the benefit of the Executive.
(c) The
Executive shall notify the Bank in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Bank of a Gross-Up
Payment. Such notification shall be given as soon as practicable but no later
than thirty (30) business days after the Executive is informed in writing
of such claim and shall apprise the Bank of the nature of such claim and
the
date on which such claim is requested to be paid. The Executive shall not
pay
such claim prior to the expiration of the thirty (30)-day period following
the
date on which Executive gives such notice to the Bank (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due).
If the Bank notifies the Executive in writing prior to the expiration of
such
period that it desires to contest such claim, the Executive shall:
(i) Give
the
Bank any information reasonably requested by the Bank relating to such
claim,
10
(ii) Take
such
action in connection with contesting such claim as the Bank shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Bank,
(iii) Cooperate
with the Bank in good faith in order effectively to contest such claim,
and
(iv) Permit
the Bank to participate in any proceedings relating to such claim;
provided,
however, that the Bank shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with
such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties
with
respect thereto) imposed as a result of such representation and payment of
costs
and expenses. Without limiting the foregoing provisions of this
paragraph (c), the Bank shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the
claim
in any permissible manner; and the Executive agrees to prosecute such contest
to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Bank shall determine;
provided, however, that if the Bank directs the Executive to pay such claim
and
xxx for a refund, the Bank shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Bank’s control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If,
after
the receipt by the Executive of an amount advanced by the Bank pursuant to
paragraph (c), above, the Executive receives any refund with respect to
such claim, the Executive shall (subject to the Bank’s complying with the
requirements of said paragraph (c)) promptly pay to the Bank the amount of
such refund (together with any interest paid or credited thereon, after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Bank pursuant to said paragraph (c), a determination is
made that the Executive shall not be entitled to any refund with respect
to such
claim and the Bank does not notify the Executive in writing of its intent
to
contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not
be
required to be repaid; and the amount of such advance shall offset, to the
extent thereof, the amount of the Gross-Up Payment required to be
paid.
11
(e) Notwithstanding
anything contained in this Paragraph 10 to the contrary, if the present value
of
the payments made under this Agreement, without taking into account the Gross-Up
Payment, is no greater than one hundred and five percent (105%) of the amount
payable to the Executive assuming the Executive’s payments under this Agreement
were limited to the maximum amount that could be payable without application
of
the excise tax imposed by Section 4999 of the Code (the “Section 4999 Limit”),
the Executive’s payments shall be limited to the Section 4999
Limit.
11. No
Set-Off or Mitigation. The
Bank’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, bankers right of set-off, counterclaim, recoupment, defense or other
claim, right or action which the Bank may have against the Executive or others.
In no event shall the Executive be obligated to seek other employment or
take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and such amounts shall not
be
reduced whether or not the Executive obtains other employment.
12. Payment
of Certain Expenses. The
Bank
agrees to pay promptly as incurred, to the fullest extent permitted by law,
all
legal fees and expenses which the Executive may reasonably incur as a result
of
any contest by the Bank, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest initiated by the Executive about the
amount of any payment due pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable federal rate provided for
in
Section 7872(f)(2)(A) of the Code.
13. Indemnification
and Joint Obligation. To
the
fullest extent permitted by law, the Bank shall indemnify the Executive
(including the advancement of expenses) for any judgments, fines, amounts
paid
in settlement and reasonable expenses, including attorneys’ and experts’ fees,
incurred by the Executive in connection with the defense of any lawsuit or
other
claim to which he is made a party by reason of being an officer, director
or
employee of the Bank or any of its subsidiaries. The Company and the Bank
are
jointly and severally liable to provide the payment of all compensation,
payments and/or benefits due to the Executive or his beneficiaries under
this
Agreement or any of the plans, programs or arrangements referred to
hereby.
14. Binding
Effect. This
Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of the Executive and the successors and assigns of the Bank
and
the Company. The Bank and the Company shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
substantial portion of its assets, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Bank and the
Company would be required to perform this Agreement if no such succession
had
taken place. Regardless of whether such an agreement is executed, this Agreement
shall be binding upon any successor of the Bank and the Company in accordance
with the operation of law, and such successor shall be deemed the “Bank” or the
“Company,” as appropriate, for purposes of this Agreement.
15. Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand
or by
12
recognized
commercial delivery service or if mailed within the continental United States
by
first class certified mail, return receipt requested, postage prepaid, addressed
as follows:
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If
to the Board or the Bank, to:
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Peoples
Bank SB
0000
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx 00000
Attention:
Corporate Secretary
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If
to the Executive, to:
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Xxxxx
X. Xxxxxxxxxx
00000
Xxxxxxxxxx Xxxx
Xxxxxxx,
Xxxxxxx 00000
|
Such
addresses may be changed by written notice sent to the other party at the
last
recorded address of that party.
16. Tax
Withholding. The
Bank
shall provide for the withholding of any taxes required to be withheld by
federal, state or local law with respect to any payment in cash, shares of
stock
and/or other property made by or on behalf of the Bank to or for the benefit
of
the Executive under this Agreement or otherwise. The Bank may, at its option:
(a) withhold such taxes from any cash payments owing from the Bank to the
Executive, (b) require the Executive to pay to the Bank in cash such amount
as may be required to satisfy such withholding obligations and/or (c) make
other satisfactory arrangements with the Executive to satisfy such withholding
obligations.
17. Arbitration.
Except
as
to any controversy or claim which the Executive elects, by written notice
to the
Bank, to have adjudicated by a court of competent jurisdiction, any controversy
or claim arising out of or relating to this Agreement or the breach hereof
shall
be settled by arbitration at a mutually agreed site in accordance with the
laws
of the State of Indiana. The arbitration shall be conducted in accordance
with
the rules of the American Arbitration Association. The costs and expenses
of the
arbitrator(s) shall be borne by the Bank. The award of the arbitrator(s)
shall
be binding upon the parties. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
18. No
Assignment. Except
as
otherwise expressly provided herein, this Agreement is not assignable by
any
party and no payment to be made hereunder shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or other
charge.
19. Nonsolicitation.
The
Executive covenants that upon his Date of Termination, he shall not, for
a
period of one (1) year following the Date of Termination directly recruit
any person who is an employee of the Bank; solicit, encourage or induce any
such
employee to leave the Bank’s employ or solicit, encourage or induce any customer
of the Bank to cease doing business with the Bank.
13
20. Execution
in Counterparts. This
Agreement may be executed by the parties hereto in two (2) or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
21. Jurisdiction
and Governing Law. This
Agreement shall be construed and interpreted in accordance with and governed
by
the laws of the State of Indiana, without regard to the conflict of laws
provisions of such laws.
22. Severability.
If
any
provision of this Agreement shall be adjudged by any court of competent
jurisdiction to be invalid or unenforceable for any reason, such judgment
shall
not affect, impair or invalidate the remainder of this Agreement. Furthermore,
if the scope of any restriction or requirement contained in this Agreement
is
too broad to permit enforcement of such restriction or requirement to its
full
extent, then such restriction or requirement shall be enforced to the maximum
extent permitted by law, and the Executive consents and agrees that any court
of
competent jurisdiction may so modify such scope in any proceeding brought
to
enforce such restriction or requirement. Nothing herein shall be construed
as
requiring the Bank to make any payment which would be prohibited under 12
C.F.R.
359. In the event a payment required under the terms of this Agreement cannot
lawfully be made because of the limitations of 12 C.F.R. 359, the
obligation to make such payment shall be deferred until such time as the
limitations of 12 C.F.R. 359 shall no longer apply. Upon deferring any
payment required under this Agreement due to the limitations of 12 C.F.R.
359,
the Bank shall provide the Executive with a legal opinion of counsel addressing
the exact provisions of 12 C.F.R. 359 which pose the barrier to
payment.
23. Prior
Understandings. This
Agreement embodies the entire understanding of the parties hereto and supersedes
all other oral or written agreements or understandings between them regarding
the subject matter hereof. No change, alteration or modification hereof may
be
made except in a writing, signed by each of the parties hereto. The headings
in
this Agreement are for convenience of reference only and shall not be construed
as part of this Agreement or to limit or otherwise affect the meaning
hereof.
(Signature
Page Follows)
14
IN
WITNESS WHEREOF, each of the Company and the Bank have caused this Agreement
to
be executed by its duly authorized officer and the Executive has signed this
Agreement, effective as of the date first written above.
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PEOPLES
BANK SB
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By:
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Name:
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Title:
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By:
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Name:
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Title:
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XXXXX
X. XXXXXXXXXX
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00000
Xxxxxxxxxx Xxxx
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Xxxxxxx,
Xxxxxxx 00000
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