XXXXX/EXHIBIT 10(h)
EMPLOYMENT SEVERANCE COMPENSATION AGREEMENT
I. INTRODUCTION
Both Pinnacle Financial Services, Inc. ("Pinnacle") and Pinnacle Bank, a
Michigan banking corporation, formerly The Peoples State Bank of St. Xxxxxx
("the Bank") consider the maintenance of a vital management group to be
essential to protecting and enhancing the best interests of those Companies and
their shareholders. Pinnacle and the Bank recognize that, as is the case with
many publicly-held corporations, there is always the possibility of a change in
control, and further, that the uncertainty and questions which arise as a result
of that possibility may result in the departure of key management personnel, to
the detriment of the Companies and their shareholders.
Accordingly, the Board of Directors for Pinnacle and the Bank have
determined that appropriate steps should be taken to protect its Executive Vice
President, Xx. Xxxxxx X. Xxxxx ("Executive"), in the event his employment is
terminated due to a change in control of either Pinnacle or the Bank.
Pinnacle, the Bank and Xx. Xxxxx previously entered into this Employment
Severance Compensation Agreement on April 18, 1995. The Employment Severance
Compensation Agreement is amended and restated by the parties as hereafter
provided.
II. OPERATION OF AGREEMENT
A. EFFECTIVE DATE. This Agreement will be effective and binding
immediately upon its execution by the parties hereto, but will
operate as an employment contract only during the "Term of
Employment" as described below.
B. TERM OF EMPLOYMENT. The "Term of Employment" is the period
beginning on the date of a "Change of Control" and ending on the
earliest of:
1. Retirement at age 65, or any earlier age of retirement
elected by Executive under any of the Company's retirement
plans.
2. Executive's death.
3. Executive's termination of employment as a result of
disability as defined in a disability plan or policy of
disability insurance maintained by the Company and under
which Executive is eligible for payments as a result of his
disability.
4. The date on which all rights and obligations of the parties
hereto have been satisfied in accordance with the terms of
this Agreement.
5. Executive's termination of employment for cause, as defined
in paragraph C of Article V.
The expiration of the Term of Employment will not relieve the
Company of the obligation to provide Executive, in accordance with the
terms hereof, the payments, benefits and coverage to which he has
become entitled under this Agreement.
C. COMPANY. "The Company" means both Pinnacle Financial Services,
Inc., and Pinnacle Bank, a Michigan banking corporation, formerly
named The Peoples State Bank of St. Xxxxxx, collectively and
individually.
D. CHANGE OF CONTROL. "Change of Control" means any of the
following:
1. The Company sells substantially all of its assets to a
single purchaser or to a group of associated purchasers;
2. At least one-half of the outstanding corporate shares of the
Company are sold, exchanged, or otherwise disposed of, in
one transaction;
3. The Company elects to terminate its business or liquidate
its assets; or
4. There is a merger or consolidation of the Company in a
transaction in which the Company's shareholders receive less
than 50% of the outstanding voting shares of the new or
continuing corporation.
III. EMPLOYMENT
A. EMPLOYMENT OF EXECUTIVE. The Company agrees to employ Executive
throughout the Term of Employment as Executive Vice President of
the Company without reducing Executive's authority or status and
without imposing on Executive travel requirements not customary
to the industry or other duties substantially more onerous than
those to which he was subject immediately prior to the Change of
Control. The Company agrees to provide Executive with an office
and executive secretarial support similar to those provided
immediately before the Change of Control and further agrees that
Executive's situs of employment will be in St. Xxxxxx, Michigan,
or any other location mutually agreed upon by Executive and the
Company.
B. DUTIES. Executive agrees, subject to paragraph C of Article V
below, to remain in the Company's employ during the Term of
Employment, as described in paragraph A of this Article III.
Excluding periods of vacation and sick leave, Executive
agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company to the
extent necessary to discharge responsibilities assigned to
Executive hereunder and to use reasonable efforts to perform such
responsibilities faithfully and efficiently. No greater time,
attention or effort to discharge responsibilities shall be
required of Executive than is reasonable and customary to the
industry:
1. Serve on corporate, civic and charitable boards or
committees, and
2. Deliver lectures, fulfill speaking engagements and teach at
educational institutions,
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so long as such activities do not significantly interfere with
the performance of Executive's responsibilities. To the extent
that any such activities have been conducted by Executive prior
to the Change of Control, such prior conduct, and any subsequent
conduct similar in nature and scope, shall not be deemed to
interfere with the performance of Executive's responsibilities.
C. SUBSIDIARIES. For purposes of this Agreement, employment by a
subsidiary of the Company will be deemed to be employment by the
Company, and the Company may cause its obligations hereunder to
be discharged through such a subsidiary, provided that the
Company will remain liable for the discharge of all such
obligations and that the rights, benefits, authority and status
of the Executive are in no way diminished thereby. A subsidiary
is any corporation more than 50% of the voting stock of which is
owned by the Company or another subsidiary of the Company.
IV. COMPENSATION
A. EXECUTIVE'S COMPENSATION. The Company will pay as annual salary
to Executive for his services as an employee during the Term of
Employment a base annual salary at a rate equal to or greater
than the rate of base salary in effect for Executive immediately
prior to the Change of Control.
B. BENEFITS. In addition, for his service as an employee during the
Term of Employment, Executive will:
1. Participate fully in the Company's stock option plan (and/or
any successor plan);
2. Participate fully in all pension, profit sharing and similar
benefit plans of the Company;
3. Participate fully, together with his dependents and
beneficiaries, in all life insurance plans, accident and
health plans and other welfare plans, maintained or
sponsored by the Company immediately prior to the Change of
Control, or receive substantially equivalent coverage (or
the full value thereof in cash) from the Company; and
4. Participate fully in any additional benefit plans offered by
the Company to executives before or after the Change of
Control.
C. REASONABLE COMPENSATION. Amounts payable under this Article IV
for services rendered by Executive during his employment
constitute reasonable compensation for such services as provided
for under section 280G(b)(4) of the Code. This paragraph C of
Article IV does not apply to amounts payable under Article V.
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V. TERMINATION OF EMPLOYMENT
X. XXXXXXXXX COMPENSATION. In the event Executive's employment is
terminated by the Company during the Term of Employment for any
reason other than "Cause" (as defined in paragraph E below) the
Company will pay Executive:
1. An amount equal to two times the sum of his annual base
salary at the rate in effect at his date of termination,
plus an amount equal to two times the highest bonus paid to
him in any one year during the most recent five year period.
2. Maintain in full force and effect all life, health (medical
and dental), accidental death, and dismemberment and
disability insurance in effect on the date of termination,
for a period of two years after the date of termination or
until Executive receives equivalent benefits from any new
employer. In Executive's sole discretion, at the end of
that extended coverage period, the Company shall assign to
him any assignable insurance policy owned by the Company
which related to Executive, at no cost to him and with no
appointment of any prepaid premiums.
3. In the event Executive becomes self-employed after his
termination, the Company will pay his reasonable business
travel expenses incurred in that endeavor for a period of
two years after the date of termination, up to the amount
budgeted by the Company for his travel expenses in the year
in which the date of termination occurs.
4. Continue to provide Executive with the executive car
benefits available to him as of the date of termination, for
a period of two years after the date of termination.
5. Continue to provide Executive with benefits of any financial
counseling program available to him through the Company as
of the date of his termination, for a period of two years
after his date of termination.
6. Pay all the reasonable costs of any outplacement service
utilized by Executive until he becomes employed on a full-time
basis.
B. COMPANY BREACH.
1. Upon the occurrence of any breach by the Company of this
Agreement within the meaning of subparagraph 2, below,
Executive may give the Company written notice of his
intention to resign effective the 30th day following the
date of such notice. If the Company does not fully remedy
such breach within 15 days of the date of such notice,
Executive's resignation will become effective on such 30th
day. If the Executive resigns in accordance with this
paragraph during the Term of Employment, his employment will
be deemed to have been terminated by the Company for reasons
other than Cause (and he will be deemed to have offered to
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continue to provide services to the Company), and he will be
entitled to all the payments and rights and benefits
described in paragraph A of this Article V; provided that
such payments and rights and benefits will in no event be
less than they would have been had such termination taken
place on the date that the Company first breached this
Agreement.
2. The following events are breaches by the Company of this
Agreement within the meaning of this paragraph B of Article V:
(a) any reduction of, or failure to pay, Executive's
salary as described in paragraph A of Article IV;
(b) any failure to provide the benefits required by
paragraph B of Article IV or to make any payment
which might be due in accordance with paragraph C
of Article IV;
(c) assignment to Executive of any duties inconsistent
in any respect with his position (including
status, offices and titles), authority, duties or
responsibilities as contemplated by paragraph A of
Article III and as is further inconsistent with
those customary to the industry, or any other
action by the Company which results in a
diminution of such position, authority, duties or
responsibilities as not customary in the industry;
(d) failure after a Change of Control to comply with
and satisfy Article IX;
(e) relocation of the Company's principal executive
offices, or any event that causes Executive to
have his principal place of work changed, to any
location outside the St. Xxxxxx, Michigan area,
unless such relocation is mutually agreed upon by
Executive and the Company;
(f) any requirement by the Company that Executive
travel away from his office in the course of his
duties significantly more than what is customary
to the industry; and
(g) without limiting the generality or effect of the
foregoing, any other material breach of this
Agreement by the Company or any successor thereto
or transferee of substantially all the assets
thereof.
C. CAUSE. If Executive is dismissed by the Company for Cause, he
will not be entitled to payments or benefits provided under
paragraph A of Article V above. "Cause" means only the willful
commission by Executive of theft, embezzlement or other serious
and substantial crimes against the Company. For purposes of this
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definition, no act or omission shall be considered to have been
"willful" unless it was not in good faith and Executive had
knowledge at the time that the act or omission was not in the
best interest of the Company.
D. DISPUTE. If Executive's employment is alleged to be terminated
for Cause or if Executive's right to resign under paragraph B of
Article V is disputed, Executive may initiate binding arbitration
in St. Xxxxxx, Michigan, before the American Arbitration
Association by serving a notice to arbitrate upon the Company or,
at Executive's election, institute judicial proceedings, in
either case within 90 days of the effective date of his
termination or, if later, his receipt of notice of termination,
or such longer period as may be reasonably necessary for
Executive to take such action if illness or incapacity should
impair his taking such action within the 90-day period. The
Company agrees to pay the costs and expenses (including fees of
counsel to Executive of any such arbitration and/or judicial
proceedings, including Executive's counsel fees).
E. DEATH OR DISABILITY. Termination of employment due to death or
disability of Executive will not be considered a termination for
purposes of this Article V.
F. BENEFICIARY. If Executive dies following a termination of
employment which entitled him to benefits under this Article V
but prior to receipt of all such benefits, his beneficiary (as
designated to the Company in writing) or, if none, his estate,
will be entitled to receive all unpaid amounts due hereunder.
VI. NO OBLIGATION TO MITIGATE
There shall be no requirement on the Executive's part to seek other
employment or otherwise mitigate in order to be entitled to the full
amount of any payments or benefits hereunder.
VII. LIMITATION ON SEVERANCE COMPENSATION
A. REDUCTION. Notwithstanding any other provision of this
Agreement, the payments or benefits to which Executive will be
entitled under Article V of this Agreement, plus any payments
payable to Executive outside this Agreement which are determined
to be in the nature of compensation for purposes of whether
payment of a "parachute payment" has occurred under Section
280G(b)(2) of the Code, or the applicable regulations will be
reduced to the extent necessary so that Executive will not be
liable for the federal excise tax levied on certain "excess
parachute payments" under section 4999 of the Code.
B. EXECUTIVE DETERMINATION. If a reduction is made pursuant to
paragraph A of this Article VII, Executive will have the right to
determine which payments and benefits will be reduced.
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VIII. EXPENSES
It is the intent of the Company that the Executive not be required to
incur any expenses associated with the enforcement of his rights under
this Agreement by legal action or arbitration proceeding because the
cost and expenses thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder.
Accordingly, if Executive determines in good faith that the Company
has failed to comply with any of its obligations under this Agreement,
or if the Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any legal action or
arbitration proceedings designed to deny Executive, or to recover from
him, the benefits intended to be provided hereunder, or in the event
of action instituted as contemplated by paragraph D of Article V
above, the Company irrevocably authorizes Executive from time to time
to retain counsel of his choice, at the expense of the Company as
hereafter provided, to represent Executive in connection with any and
all actions and proceedings, whether by or against the Company which
may adversely affect Executive's rights under this Agreement. In
addition, notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company
irrevocably consents to Executive's entering into an attorney-client
relationship with such counsel and agrees that a confidential
relationship shall exist between Executive and such counsel. Without
limiting the effect of paragraph D of Article V above or of the
foregoing provisions of this Article VIII, the Company shall pay or
cause to be paid and shall be solely responsible for any and all
attorneys' and related fees and expenses incurred by Executive as a
result of the Company failure to perform under this Agreement.
IX. MERGER OR ACQUISITION
A. ASSUMPTION. If the Company is at any time before or after a
Change of Control merged with or consolidated into or with any
other corporation or other entity (whether or not the Company is
the surviving entity), or if substantially all of the assets of
the Company are transferred to another corporation or other
entity, the corporation or other entity resulting from such
merger or consolidation, or the acquirer of such assets, shall
(by agreement in form and substance satisfactory to Executive)
expressly assume the obligations of the Company under this
Agreement. In any event, however, the provisions of this
Agreement shall be binding upon and inure to the benefit of the
corporation or other entity resulting from such merger or
consolidation or the acquirer of such assets, and this Article IX
will apply in the event of any subsequent merger or consolidation
or transfer of assets.
B. BENEFITS AFTER MERGER. In the event of any merger, consolidation
or sale of assets described above, nothing contained in this
Agreement will detract from or otherwise limit Executive's right
to or privilege of participation in any stock option or purchase
plan or any bonus, profit sharing, pension, group insurance,
hospitalization or other incentive or benefit plan or arrangement
which may be or become applicable to executives of the
corporation resulting from such merger or consolidation or the
corporation acquiring such assets of the Company.
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C. SUCCESSOR ENTITY. In the event of any merger, consolidation or
sale of assets described above, references to the Company in this
Agreement shall unless the context suggest otherwise be deemed to
include the entity resulting from such merger or consolidation or
the acquirer of such assets of the Company.
X. WITHHOLDING
All payments required to be made by the Company hereunder to Executive
or his dependents, beneficiaries or estate will be subject to the
withholding of such amounts relating to tax and/or other payroll
deductions as may be required by law.
XI. AMENDMENT
A. No amendment, change or modification of this Agreement may be
made except in writing, signed by all parties.
XII. GENERAL
A. ENTIRE AGREEMENT. This Agreement supersedes all other agreements
previously made between the parties relating to its subject
matter. There are no other understandings or agreements.
B. NOTICE. Any notice to be delivered in the furtherance of this
Agreement shall be given in writing and delivered, personally or
by certified mail, postage prepaid, addressed to the Company or
to Executive at their last known address.
C. NON-WAIVER. No delay or failure by either party to exercise any
right under this Agreement, and no partial or single exercise of
that right, shall constitute a waiver of that or any other right.
D. HEADINGS. Headings in this Agreement are for convenience only,
and shall not be used to interpret or construe its provisions.
E. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of Michigan. In the
event any of the provisions of this Agreement are determined by a
court of law to be void or unenforceable, then the remaining
provisions shall be interpreted to give the fullest effect
possible to the stated intentions of this Agreement.
F. MODIFICATION. This Agreement may be terminated or modified only
upon the written agreement of the Company and Executive.
XII. ACKNOWLEDGEMENTS
The parties to this Agreement acknowledge and certify that full and
fair consideration has been given for the promises made, that they
have had an opportunity to review this Agreement with the advisors of
their choice, and that, when signing on behalf of Pinnacle
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or the Bank, they have full authority to enter into this Agreement and so
bind those organizations.
The effective date of this amended Agreement shall be April 30, 1996.
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
PINNACLE FINANCIAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx
Its: Chairman and Director, respectively
PINNACLE BANK, a Michigan Banking Corporation,
Formerly PEOPLES STATE BANK OF ST. XXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx
Its: Chairman and Director, respectively
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