EXHIBIT 10.5
XXXXXX BANK & TRUST
EXECUTIVE SALARY CONTINUATION AGREEMENT
THE AGREEMENT, made and entered into this 16 day of September, 1996, by
and between Xxxxxx Bank & Trust, a Tennessee commercial bank (hereinafter called
"Bank"), and Xxxxx Xxxxxxx (hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Executive has been and continues to be a valued Executive
of the Bank, and is now serving the Bank as its Senior Vice President; and
WHEREAS, it is the consensus of the Board of Directors that the
Executive's services to the Bank in the past have been of exceptional merit and
have constituted an invaluable contribution to the general welfare of the Bank
and in bringing it to its present status of operating efficiency, and its
present position in its field of activity; and,
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, his reputation and contacts in the industry are so valuable that
assurance of his continued services is essential for the future growth and
profits of the Bank and it is in the best interests of the Bank to arrange terms
of continued employment for the Executive so as to reasonably assure his
remaining in the Banks employment during his lifetime or until the age or
retirement; and,
WHEREAS, it is the desire of the Bank that his services be retained as
herein provided; and,
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay to him or his beneficiaries certain benefits in
accordance with the terms and conditions hereinafter set forth:
ACCORDINGLY, it is the desire of the Bank and the Executive to enter
into this agreement under which the Bank will agree to make certain payments to
the Executive at retirement or his beneficiary in the event of his premature
death while employed by the Bank; and
FURTHERMORE, it is the intent of the parties hereto that this agreement
be considered an unfunded arrangement maintained primarily to provide
supplemental benefits for the Executive, as a member of a select group of
management or highly compensated employees of the Bank for the purposes of the
Employee Retirement Security Act of 1974.
NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
EMPLOYMENT
1. The Executive is an employee at will of the Bank. Except as
otherwise expressly provided herein, this Agreement does not
alter or affect the Executive's employment relations with the
Bank. Nothing contained herein shall be construed as
conferring upon the Executive the right to be retained as an
employee of the Bank. The Executive agrees to serve the Bank,
under the direction of the Board of Directors, faithfully,
diligently, competently and to the best of his abilities.
FRINGE BENEFITS
2. The salary continuation benefits provided by this agreement
are granted by the Bank as a fringe benefit to the Executive
and are not part of any salary reduction plan or an
arrangement deferring a bonus or a salary increase. The
Executive has no option to take any current payment or bonus
in lieu of these salary continuation benefits except as set
forth hereinafter.
RETIREMENT DATE
3. If Executive remains in the continuous employ of the Bank, he
shall retire from active employment with the Bank of the
December 31st nearest his sixty-fifth (65th) birthday, unless
by action of the Board of Directors his period of active
employment shall be shortened or extended.
RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
4. (a) Upon retirement the Bank in accordance with Paragraph
3 and subject to Paragraphs 4(b) and 8, commencing
with the first day of the month following the date of
such retirement, shall pay Executive an annual
benefit equal to $29,425 in equal monthly
installments (of 1/12 of the annual benefit) for a
period of one hundred eighty (180) months.
(b) The Executive's Retirement Benefit and Post
Retirement Death Benefit as provided for in Paragraph
4(a) shall be reduced if the Bank's average return on
assets is below one percent (1%) upon Executive's
termination of service. Average return on assets
shall be calculated from the effective date of this
Agreement to the Executive's termination of service.
Return on assets for this purpose shall be the return
on assets of the Bank as defined and disclosed in the
Bank's annual report. If the Bank's average return on
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assets during the term of this agreement is below one
percent (1%) then the benefit due to the Executive
under Paragraph 4(a) shall be receive a certain
percentage of such benefit in accordance with the
following schedule:
Average Percentage
Return on Assets Of Benefit
---------------- ----------
1% or greater 100%
0.90% - 0.99% 90%
0.80% - 0.89% 80%
0.70% - 0.79% 70%
Below 0.70% 0%
(c) If the Executive should die subsequent to termination
of service but prior to receiving all one hundred
eighty (180) monthly payments under this Agreement,
then Executive's designated beneficiary shall
continue to receive such monthly payments until one
hundred eighty (180) payments have been made by the
Bank under this Agreement. Such beneficiary
designation shall be accomplished on Exhibit 2 to
this Agreement and filed with the Bank. In the
absence of any effective designation of beneficiary,
any such amounts becoming due and payable upon the
death of the Executive subsequent to termination of
service shall be payable to the duly qualified
executor or administrator of his estate.
DEATH BENEFIT PRIOR TO RETIREMENT
5. In the event the Executive should die while actively employed
by the Bank at any time after the date of this Agreement but
prior to his retirement upon attaining the age of sixty-five
(65) years (or such later date as may be agreed upon), the
Bank will pay an annual benefit equal to $29,425 in equal
monthly installments (each equal to 1/12 of the annual
benefit) for a period of one hundred eighty (180 months to
such individual or individuals as the Executive may have
designated as his beneficiary on Exhibit 2 and filed with the
Bank. The said monthly payments shall begin the first day of
the third month following the month of the decease of the
Executive. In the absence of any effective designation of
beneficiary, any such amount becoming due and payable upon the
death of the Executive shall be payable to the duly qualified
executor or administrator of his estate. Provided, however,
that anything hereinabove to the contrary notwithstanding no
death benefit shall be payable hereunder if it is determined
that the Executive's death was caused by suicide.
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DISABILITY BENEFIT PRIOR TO RETIREMENT
6. In the event the Executive should become disabled while
actively employed by the Bank at anytime after the effective
date of this Agreement but prior to his attaining the age of
sixty-five (65) years (or such later date as may be agreed
upon), the Bank will pay an annual benefit equal to $29,425 in
equal monthly installments (of 1/12 of the annual benefit) for
a period of one hundred eighty (180) months. "Disabled" for
purposes of this Paragraph 6 shall mean the Executive's
medically determined physical or mental impairment which
qualifies him for disability benefits as determined by the
Social Security Administration. The said monthly payments
shall begin the first day of the third month following the
month that the Executive becomes disabled. If the Executive
should die prior to receiving all one hundred eighty (180)
monthly payments pursuant to this Paragraph 6, then the
Executive's designated beneficiary, as listed on Exhibit 2 to
this Agreement, shall continue to receive such monthly
payments until one hundred eighty (180) payments have been
made by the Bank under this Agreement. In the absence of any
effective designation of beneficiary, any such amounts
becoming due and payable upon the death of the Executive
subsequent to becoming disabled shall be payable to the duly
qualified executor or administrator of his estate.
OTHER TERMINATION OF EMPLOYMENT
7. (a) In the event that the Executive's employment shall
terminate for any reason other than death, disability
(as defined in Paragraph 6) or retirement (in
accordance with Paragraph 3), by his voluntary action
or his discharge by the Bank without cause, the Bank
shall pay to the Executive the vested portion of his
retirement benefit, as provided for in Paragraphs
4(a) and 8 and subject to any reduction in accordance
with Paragraph 4(b), commencing upon the earlier of
the Executive's death or by his attaining sixty-five
(65) years of age, such payment to be paid in one
hundred eighty (180) equal monthly payments. Such
payments shall commence on the first day of the month
after the Executive attains age sixty-five (65) or if
the Executive should die before that time, the first
day of the third month following the month of the
decease of the Executive. In the event the
Executive's death should occur after such severance
but prior to the commencement or completion of the
monthly payments provided for in this Paragraph 7(a),
the remaining installments shall be paid to such
individual or individuals as the Executive may have
designated in writing, and filed with the Bank. In
the absence of any effective designation of
beneficiary, any such amounts shall be payable to the
duly qualified executor or administrator of his
estate.
(b) In the event the Executive shall be discharged by the
Bank for cause, then all of the Executive's rights
under this Agreement shall terminate and he shall
forfeit all benefits under this Agreement. For
purposes of this Paragraph 7(b), "for cause" shall
mean gross negligence or willful misconduct, the
commission of a felony or gross-misdemeanor involving
moral turpitude, fraud, dishonesty, embezzlement,
willful violation of any law or any other behavior or
act that results in any adverse effect on the Bank as
may be determined by the Bank in its sole discretion.
VESTING
8. Except for such benefits provided in Paragraphs 5 and 6, the
Executive shall vest in the benefits which are the subject of
this Agreement in accordance with the schedule listed in
Exhibit 1 to this Agreement. The Executive will be credited
with a year of participation for each anniversary thereafter
of the effective date of this Agreement for which the
Executive remains in the employ of the Bank.
BENEFIT ACCOUNTING
9. The Bank shall account for this benefit using the regulatory
accounting principles of the Bank's primary federal regulators
the Bank shall establish an accrued
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liability retirement account for the Executive into which
appropriate reserves shall be accrued.
PARTICIPATION IN OTHER PLANS
10. The benefits provided hereunder shall be in addition to
Executive's annual salary as determined by the Board of
Directors, and shall not affect the right of Executive to
participate in any current or future Bank Retirement Plan,
group insurance, bonus, or in any supplemental compensation
arrangement which constitutes a part of the Bank's regular
compensation structure.
NON-COMPETE
11. The payment of benefits under this Agreement shall be
contingent upon the Executive's not engaging in any activity
that directly or indirectly competes with the Bank's interests
for a period of three (3) years commencing on the date the
Executive's employment with the Bank is terminated, within
Wilson, Davidson, Xxxxxx, Trousdale, Smith, DeKalb, Xxxxxx,
Xxxxxxxxxx and Xxxxxxxxxx counties in the State of Tennessee;
provided, however, that the Bank shall not be entitled to
injunctive enforcement of the non-compete provisions of this
Paragraph 11, its sole remedy for a violation by the Executive
of the non-compete provisions of this Paragraph 11 being the
right to cease the payments of benefits under this Agreement.
In the event there is a change of control as defined in
Paragraph 12, the provisions of this Paragraph 11 shall not
apply, and the Executive shall be entitled to the payment of
benefits as set forth in Paragraph 12.
CHANGE OF CONTROL
12. The Bank agrees that if there is a change in control of the
ownership of the Bank or its parent company, Xxxxxx Bank
Holding Company, or if the Bank or Xxxxxx Bank Holding Company
merges or consolidates with any other company or organization,
or permits its business activities to be taken over by any
other organization, or ceases its business activities or
terminates its existence, the Executive will then be
considered to be vested in one hundred percent (100%) of the
retirement benefit to be paid to the Executive pursuant to
Paragraph 4(a) above and shall not be subject to any reduction
as provided for in Paragraph 4(b) and shall not be subject to
the non-compete provisions of Paragraph 11. For purposes of
this Paragraph 12, "change of control" means that 50% or more
of the outstanding common stock of the Bank or Xxxxxx Bank
Holding Company shall be held by persons who did not hold
such stock immediately prior to the transaction or series of
related transactions in which such stock was acquired by such
person or persons, unless such shares were acquired in an
underwritten public offering.
ALIENABILITY
13. It is agreed that neither Executive nor his/her spouse nor any
designated beneficiary, shall have any right to commute, sell,
assign, transfer or otherwise convey the right to receive any
payments hereunder, which payments and the right
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thereto are expressly declared to be non-assignable and
non-transferable; and, in the event of any attempted
assignment or transfer, the Bank shall have no further
liability hereunder.
RESTRICTIONS ON FUNDING
14. The Bank shall have no obligation to set aside earmark, or
entrust any fund or money with which to pay its obligations
under this Agreement. The Bank reserves the absolute right at
its sole discretion to either fund the obligations undertaken
by this Agreement or to refrain from funding the same and
determine the extent, nature, and method of such funding.
GENERAL ASSETS OF THE BANK
15. The rights of the Executive under this Agreement and of any
beneficiary of the Executive shall be solely those of an
unsecured creditor of the Bank. If the Bank shall acquire an
insurance policy or any other asset in connection with the
liabilities assumed by it hereunder, it is expressly
understood and agreed that neither Executive nor any
beneficiary of Executive shall have any right with respect to,
or claim against, such policy or other asset. Such policy or
asset shall not be deemed to be held under any trust for the
benefit of Executive or his beneficiaries or to be held in any
way as collateral security for the fulfilling of the
obligations of the Bank under this Agreement. It shall be, and
remain, a general, unpledged unrestricted asset of the Bank
and Executive or any of his beneficiaries shall not have a
greater claim to the insurance policy or other assets, or any
interest in either of them, than any other general creditor of
the Bank.
CLAIMS PROCEDURE
16. (a) In the event that benefits under this Agreement are
not paid to the Executive (or his beneficiary in the
case of the Executive's death), and such person feels
entitled to receive them, a claim shall be made in
writing to the Board of Directors of the Bank within
sixty (60) days from the date payments are not made.
Such claim shall be reviewed by the Board of
Directors of the Bank and the Bank. If the claim is
denied, in full or in part, the Board of Directors of
the Bank shall provide a written notice within ninety
(90) days setting forth the specific reasons for
denial specific reference to the provisions of this
Agreement upon which the denial is based, and any
additional material or information necessary to
perfect the claim, if any. Also, such written notice
shall indicate the steps to be taken if a review of
the denial is desired.
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If a claim is denied and a review is desired, the
Executive (or his beneficiary in the case of the
Executive's death), shall notify the Board of
Directors of the Bank in writing within sixty (60)
days and a claim shall be deemed denied if the Plan
Administrator does not take any action with the
aforesaid ninety (90)-day period. In requesting a
review, the Executive or his beneficiary may review
this Agreement or any documents relating to it and
submit any written issue and comments he or she may
feel appropriate. In its sole discretion the Plan
Administrator shall then review the claim and provide
a written decision within sixty (60) days. This
decision likewise shall state the specific provisions
of the Agreement on which the decision is based.
(b) For purposes of implementing this claims procedure,
the Board of Directors of the Bank shall be
responsible for the management, control, and
administration of the Agreement as established
herein. The Bank may delegate to certain aspects of
the management a operation responsibilities of the
Agreement including the employment of advisors and
the delegation of ministerial duties to qualified
individuals.
AMENDMENT
17. This Agreement may be amended in whole or in part from time to
time by the Bank. However, any modification to this Agreement
must be in writing.
INTERPRETATION
18. The Bank, acting in good faith, shall have reasonable
discretion to interpret this Agreement. The Bank's
interpretation and actions hereunder, if made in the exercise
of good faith discretion and not in an arbitrary and
capricious manner, shall be conclusive and binding upon all
persons for all purposes. Unless the Board of Directors of the
Bank determines otherwise regarding the interpretation of this
Agreement or the review of claims pursuant to Paragraph 16,
the Chairman of the Board shall interpret this agreement and
review any claim acting on behalf of the Bank. Neither the
Bank nor any of its officers, employees or members of the
Board of Directors (including the Chairman of the Board) shall
be liable to the Executive or any other person for any action
taken in connection with the interpretation of the Agreement.
HEADINGS
19. Headings and subheading of this Agreement are inserted for
reference and convenience only and shall not be deemed a part
of this Agreement.
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APPLICABLE LAW
20. The validity and interpretation of this Agreement shall be
governed by the laws of the State of Tennessee.
BINDING EFFECT
21. Except as herein otherwise expressly stipulated to the
contrary, this Agreement shall be binding upon and inure to
the benefit of the Executive and the Bank and their respective
successors and permited assigns.
EFFECTIVE DATE
22. The effective date of this Agreement shall be
September 16, 1996.
IN WITNESS WHEREOF, Xxxxxx Bank and Trust has caused this Agreement to
be signed in its corporate name by its duly authorized officer, and attested by
its Secretary, and the Executive has hereunto set her hand, all on the day and
year first above written.
XXXXXX BANK AND TRUST
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------
Title: President
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ATTEST:
/s/ Xxxxx X. Xxxxxx
--------------------------
Secretary
/s/ Xxxxx Xxxxxxx
------------------------------
Executive
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EXHIBIT 1
VESTING SCHEDULE
----------------
YEAR(S) OF AMOUNT OF RETIREMENT BENEFIT
PARTICIPATION IN WHICH VESTING OCCURS
------------- -----------------------------
1 6%
2 12%
3 18%
4 24%
5 30%
6 36%
7 42%
8 48%
9 54%
10 60%
11 66%
12 72%
13 78%
14 84%
15 90%
16 96%
17 and thereafter 100%
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EXHIBIT 2
DESIGNATION OF BENEFICIARY
Pursuant to the terms of the Xxxxxx Bank Holding Company Salary
Continuation Agreement (the "Agreement"), dated ______________, 1996 between
myself and Xxxxxx Bank Holding Company, I hereby designated the following
beneficiary(ies) to receive payments which may be due under such Agreement after
my death:
Primary Beneficiary:
------------------- --------------------- -------------
Name Address Relationship
Secondary Beneficiary(ies)
------------------- --------------------- -------------
Name Address Relationship
------------------- --------------------- -------------
Name Address Relationship
The Primary Beneficiary named above shall be the designated
beneficiary referred to in Paragraphs 4 and 5 of the Agreement if he or she is
living at the time a death benefit payment thereunder becomes due and payable,
and the Secondary Beneficiary named above shall be the designated beneficiary
referred to in Paragraphs 4 and 5 of the Agreement only if he or she is living
at the time a death benefit payment becomes payable and the Primary Beneficiary
is not then living.
This designation hereby revokes any prior designation which may have
been in effect.
Date:
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Witness Executive
Acknowledged by:
---------------------------------
(Bank Officer)
