UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 28, 2021
LINKBANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
| Pennsylvania | 333-255908 | 82-5130531 | ||
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(State or Other Jurisdiction) of Incorporation) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
| 3045 Market Street, Camp Hill, PA | 17011 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (855) 569-2265
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
(e) Employment Agreements. On October 28, 2021, LINKBANCORP, Inc. (the “Company”) and The Gratz Bank, a wholly-owned subsidiary of the Company (the “Bank”), entered into employment agreements with Andrew S. Samuel, Chief Executive Officer of the Company and the Bank, Carl Lundblad, President of the Company and Chief Risk Officer of the Bank, and Brent Smith, Executive Vice President of the Company and President of the Bank (collectively, the “Employment Agreements” or individually, the “Employment Agreement”).
The term of the Employment Agreements is three years (two years for Messrs. Lundblad and Smith) and commencing as of October 28, 2022, and on each subsequent October 28, thereafter, the term of the Employment Agreements will renew for an additional year so that the remaining term will again become three years (two years for Messrs. Lundblad and Smith) unless the Company, the Bank (collectively, the “Employer”) or the executive gives written notice to the contrary not less than ninety (90) days prior to a renewal date. In the event written notice of non-renewal is provided, the executive would have no right to receive compensation or other benefits under the Employment Agreement other than payment of the executive’s accrued benefits (as defined in the Employment Agreement), as of the date of the expiration of the Employment Agreement or until the executive voluntarily terminates employment, whichever occurs earlier. The Employment Agreements provide that Messrs. Samuel, Lundblad and Smith will receive an annual base salary of $500,000, $230,000 and $210,000, respectively, and the base salary may be increased. In addition to base salary, the Employment Agreements provide for, among other things, participation in bonus programs and other benefit plans and arrangements applicable to executive employees.
The Employer may terminate the executive’s employment for “cause” (as defined in the Employment Agreement) at any time, in which event the executive would have no right to receive compensation or other benefits for any period after his termination of employment except for the executive’s accrued benefits. Certain events resulting in the executive’s termination of employment entitle the executive to severance benefits. In the event of the executive’s involuntary termination of employment or in the event of a voluntary termination for “good reason” (as defined in the Employment Agreement), the executive would become entitled to a severance payment in the form of a cash lump sum payment equal to three times the executive’s annual base salary and the average cash bonus and other cash incentive compensation earned by the executive with respect to the three calendar years immediately preceding the year of termination. In addition, the executive would become entitled to the continuation of life, disability, medical insurance and other health and welfare benefits for the earlier of three years or until the executive obtains substantially similar benefits through other employment, or if the coverage cannot be provided because the executive is no longer an executive, the Employer shall reimburse the executive in an amount equal to the monthly premium paid by the executive to obtain substantially similar health and welfare benefits which reimbursement shall continue until the earlier of the expiration of three years from the date of termination of employment or until the executive obtains substantially similar benefits through other employment.
In the event of a “change in control” (as defined in the Employment Agreements) of the Employer followed within two years by the executive’s involuntary termination of employment for a reason other than for cause or upon his voluntary termination for good reason, the executive would become entitled to a severance payment in the form of a cash lump sum payment equal to three times the executive’s annual base salary and the average cash bonus and other cash incentive compensation earned by the executive with respect to the three calendar years immediately preceding the year of termination. In addition, the executive would become entitled to the continuation of life, disability, medical insurance and other health and welfare benefits for the earlier of three years or until the executive obtains substantially similar benefits through other employment, or if the coverage cannot be provided because the executive is no longer an executive, the Employer shall reimburse the executive in an amount equal to the monthly premium paid by the executive to obtain substantially similar health and welfare benefits which reimbursement shall continue until the earlier of the expiration of three years from the date of termination of employment or until the executive obtains substantially similar benefits through other employment. In the event that an excise tax under Sections 280G and 4999 of the Internal Revenue Code would be assessed on the payments or other benefits received under the Employment Agreement in connection with a change in control of the Employer, the executive would receive either: (1) all the payments and benefits to which the executive is entitled under the Employment Agreement, subject to the excise tax; or (2) have such payments and benefits reduced by the minimum amount necessary so that the excise tax will not apply, if such reduction would result in a greater net after-tax benefit to the executive.
Upon termination of the executive’s employment, the executive will be subject to certain restrictions on the executive’s ability to compete or to solicit business or employees of the Employer for a period of eighteen (18) months (one year for Messrs. Lundblad and Smith) following his termination of employment. The Employment Agreements also include provisions protecting the Employer’s confidential business information.
Change in Control Agreement. On October 28, 2021, the Employer entered into a change in control agreement with Kristofer Paul, Chief Financial Officer of the Company (the “CIC Agreement”).
In the event of a “change in control” (as defined in the CIC Agreement) of the Employer followed within two years by the executive’s involuntary termination of employment for a reason other than for cause or upon his voluntary termination for certain reasons (as provided in the CIC Agreement), the executive would become entitled to a severance payment in the form of a cash lump sum payment equal to two (2) times: (i) the highest of the executive’s annualized base salary at the time of or during one of the three calendar years immediately preceding the date of termination of employment plus (ii) the average cash bonus earned by the executive with respect to the three calendar years immediately preceding the date of termination of employment. In addition, the executive would become entitled to the continuation of life, disability, medical insurance and other health and welfare benefits for the earlier of two years or until the executive obtains substantially similar benefits through other employment, or if the coverage cannot be provided because the executive is no longer an executive, the Employer will reimburse the executive in an amount equal to the monthly premium paid by the executive to obtain substantially similar health and welfare benefits which reimbursement will continue until
the earlier of the expiration of two years from the date of termination of employment or until the executive obtains substantially similar benefits through other employment. In the event that an excise tax under Sections 280G and 4999 of the Internal Revenue Code would be assessed on the payments or other benefits received under the CIC Agreement in connection with a change in control of the Employer, the executive would receive either: (1) all the payments and benefits to which the executive is entitled under the CIC Agreement, subject to the excise tax; or (2) have such payments and benefits reduced by the minimum amount necessary so that the excise tax will not apply, if such reduction would result in a greater net after-tax benefit to the executive.
Upon termination of the executive’s employment, the executive will be subject to certain restrictions on the executive’s ability to compete or to solicit business or employees of the Employer for a period of twelve (12) months following his termination of employment. The CIC Agreement also includes provisions protecting the Employer’s confidential business information.
Supplemental Executive Retirement Plan Agreement. On October 28, 2021, the Bank entered into a supplemental executive retirement plan agreement (the “SERP”) with Mr. Samuel to provide certain benefits upon retirement or other termination of employment. Under the terms of the SERP, upon separation from service (as defined in the SERP) after normal retirement age (age 70), the executive will be entitled to an annual benefit in the amount of $300,000, payable in monthly installments over a period of fifteen (15) years, commencing the month following separation from service. In the event of a separation from service prior to normal retirement age, except when such separation from service is an involuntary termination (as defined in the SERP) or termination for good reason (as defined in the SERP) occurring within two years after a change in control (as defined in the SERP) or a termination for cause (as defined in the SERP), the executive will be entitled to a reduced benefit, payable in monthly installments over a period of fifteen (15) years, commencing the month following separation from service. If a change in control (as defined in the SERP) occurs, followed within twenty-four (24) months by an involuntary termination or termination for good reason prior to normal retirement age, the executive will be entitled to an annual benefit in the amount of $300,000, payable in monthly installments over a period of fifteen (15) years, commencing the month following separation from service. The SERP also provides a death benefit, payable in a lump sum, in the event the executive dies prior to a separation from service. In the event the executive is terminated by the Bank for cause (as defined in the SERP), the executive will not receive any benefits under the SERP.
Deferred Compensation Agreements. On October 28, 2021, the Bank entered into deferred compensation agreements (collectively, the “Deferral Agreements”) with Carl Lundblad, Kristofer Paul, and Brent Smith. The purpose of the Deferral Agreements is to provide Messrs. Lundblad, Paul and Smith with retirement benefits.
Under the Deferral Agreements, Messrs. Lundblad, Paul and Smith may annually elect to defer the payment of a portion of their base salary and/or bonus by filing a deferral election form with the plan administrator, setting forth the amount of the deferral and its duration. Benefits under the Deferral Agreements will be paid to the executives upon termination of employment after “normal retirement age,” upon “early termination,” or upon a “disability” prior to normal retirement age or “disability” (as each terms are defined in the Deferral Agreements). Benefits
will be distributed in 180 monthly installments if termination of employment occurs after normal retirement age or 120 monthly installments upon the occurrence of an early termination or disability, with the payment commencing in the month following the payment event. In the event a “change in control” (as defined in the Deferral Agreements) followed within twenty-four (24) months by a termination of employment prior to the executive’s normal retirement age, the executive’s deferral account will be paid in a lump sum within thirty (30) days following the date of termination of employment. In addition to any deferrals, the Bank will make a contribution to the executive’s deferral account, commencing in 2022 for Messrs. Lundblad and Smith (2023 for Mr. Paul) and continuing until the earliest of termination of employment, normal retirement age, disability or death of the executive, in an amount up to 15% of base salary for Messrs. Lundblad and Smith (10% for Mr. Paul) based on the Company’s operating return on assets (as defined in the Deferral Agreements). In addition, the executive’s deferral account will be credited with interest at a rate equal to the crediting rate (as defined in the Deferral Agreements).
The foregoing descriptions of the Employment Agreements, Change in Control Agreement, Supplemental Executive Retirement Plan Agreement and Deferred Compensation Agreements do not purport to be complete and are qualified in their entirety by reference to the Employment Agreements, Change in Control Agreement, Supplemental Executive Retirement Plan Agreement and Deferred Compensation Agreements attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8, respectively, of this Current Report on Form 8-K, and are incorporated by reference into this Item 5.02.
Item 9.01 Financial Statements and Exhibits
| (a) |
Financial statements of businesses acquired. Not Applicable. |
| (b) |
Pro forma financial information. Not Applicable. |
| (c) |
Shell company transactions: Not Applicable. |
| (d) |
Exhibits: |
| 10.7 | Deferred Compensation Agreement between The Gratz Bank and Kristofer Paul dated October 28, 2021 | |
| 10.8 | Deferred Compensation Agreement between The Gratz Bank and Brent Smith dated October 28, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LINKBANCORP, INC. | ||||||
| DATE: November 3, 2021 | By: |
/s/ Carl D. Lundblad |
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Carl D. Lundblad President |
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 28th day of October 2021, among LINKBANCORP, Inc., a Pennsylvania Corporation (the “Corporation”), and The Gratz Bank, a Pennsylvania chartered bank (the “Bank”), and Andrew S. Samuel, an adult individual (“Executive”). The Corporation, the Bank and the Executive are each referred to herein as a “Party” and, collectively, the “Parties”.
WITNESSETH:
WHEREAS, the Bank is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Executive is currently serving as an Executive of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank consider the continued service of the Executive to be in the best interests of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank desire to continue to employ the Executive on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants hereinafter set forth, and intending to be legally bound hereby, the Parties agree, effective the date hereof (the “Effective Date”), as follows:
1. Employment. The Bank and the Corporation hereby employ Executive and Executive hereby accepts employment with the Bank and the Corporation, under the terms and conditions set forth in this Agreement.
2. Duties of Executive. Executive shall serve as the Chief Executive Officer of the Corporation and the Bank. Executive shall report to the Boards of Directors of the Bank and the Corporation (the “Boards”), and shall serve as a director and/or officer of any subsidiary of the Corporation or the Bank to which Executive shall be elected or appointed. Executive shall have such other duties and hold such other titles as may be provided by the bylaws of the Bank and the Corporation and as may be assigned to him from time to time by the Boards.
3. Employment in Other Employment. Except as set forth herein, Executive shall devote all of his working time, ability and attention to the business of the Bank and the Corporation and/or their subsidiaries or affiliates, during the term of this Agreement. Executive shall notify the Board of Directors of the Corporation in writing before Executive engages in any other business or commercial duties or pursuit including, but not limited to, directorships of other companies. Under no circumstances may Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates, nor may Executive serve as a director or officer or in any other capacity in a company which competes with the Bank
and the Corporation and/or any of their respective subsidiaries or affiliates. Executive shall not be precluded, however, from engaging in voluntary or philanthropic endeavors, from engaging in activities designed to maintain and improve his professional skills, or from engaging in activities incident or necessary to personal investments, so long as they are not in conflict with or detrimental to Executive’s rendition of services on behalf of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates.
4. Term of Agreement.
(a) The term of Executive’s employment under this Agreement shall commence as of the Effective Date and shall continue through the third anniversary of the Effective Date (the “Initial Term”), unless terminated earlier pursuant to Section 4(b) hereof. The Employment Period shall be extended automatically for one additional year on the first anniversary of the Effective Date, and then on each anniversary date thereafter, unless the Bank and the Corporation or Executive gives contrary written notice to the other not less than ninety (90) days before any such anniversary date. References in this Agreement to “Employment Period” shall refer to the Initial Term and any extensions of the Initial Term. It is the intention of the parties that this Agreement be “evergreen” unless (i) either party gives written notice to the other party of his or its intention not to renew this Agreement as provided above or (ii) this Agreement is terminated pursuant to Section 4(b) hereof.
(b) Notwithstanding the provisions of Section 4(a) of this Agreement, the Bank and the Corporation may terminate Executive’s employment at any time with or without Cause (as defined herein) upon written notice from the Boards to Executive. As used in this Agreement, “Cause” shall mean any of the following:
| (i) |
Executive’s conviction of or plea of guilty or nolo contendere to a felony, a crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive for a period of ten (10) consecutive days or more; |
| (ii) |
Executive’s failure to follow the good faith lawful instructions of the Boards, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iii) |
Executive’s willful failure to substantially perform Executive’s duties to the Bank and the Corporation, other than a failure resulting from Executive’s incapacity because of physical or mental illness, as provided in subsection (d) of this Section 4, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iv) |
Executive’s willful violation of the provisions of this Agreement, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (v) |
dishonesty or gross negligence of Executive in the performance of his duties; provided Executive shall be given written notice from the Bank and the Corporation of the alleged gross negligence and thirty (30) days in which to cure such violation, if such violation is curable; |
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| (vi) |
Executive’s removal or prohibition from being an institutional-affiliated party by a final order of an appropriate federal or state banking agency pursuant to Section 8(e) or 8(g) of the Federal Deposit Insurance Act or any other federal or state regulation; |
| (vii) |
Executive’s breach of fiduciary duty involving personal gain; or |
| (viii) |
the willful violation by Executive of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority. |
If Executive’s employment with the Bank and the Corporation is terminated for Cause, all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits (as defined herein) and the rights under Section 20 hereof with respect to arbitration. As used in this Agreement, “Accrued Benefits” means (i) accrued but unpaid salary through the effective date of termination, (ii) any accrued but unused vacation time as of the effective date of termination, to the extent required by applicable law or the terms of any paid time-off policy of the Bank or the Corporation in effect from time to time, (iii) unreimbursed expenses (if any), in accordance with the expense reimbursement policies and procedures of the Bank and the Corporation in effect from time to time, and (iv) other payments, entitlements or benefits, if any, in accordance with terms of the applicable plans, programs, arrangements or other agreements of the Bank and the Corporation (other than any severance plan or policy) as to which Executive held rights to such payments, entitlements or benefits, whether as a participant, beneficiary or otherwise on the date of termination.
(c) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive may terminate his employment for Good Reason. The term “Good Reason” shall mean (i) the assignment of duties and responsibilities inconsistent with Executive’s status as Chief Executive Officer, (ii) a change by the Corporation or the Bank in Executive’s principal place of employment to a location that increases Executive’s one-way daily commute by more than thirty-five (35) miles; (iii) any removal of Executive from office or any adverse change in the terms and conditions of Executive’s employment, except for any termination of the Executive’s employment for Cause, (iv) any reduction in Executive’s Annual Base Salary as in effect as of the Effective Date or as the same may be increased from time to time, (v) any failure of the Bank and the Corporation to provide Executive with benefits at least as favorable as those enjoyed by Executive during the Employment Period under any of the pension (including 401(k)), life insurance, medical, health and accident, disability or other Executive benefit plans of the Bank and the Corporation, or the taking of any action that would materially reduce any of such benefits unless such reduction is part of a reduction applicable to all Executives, or (vi) any failure by the Bank and the Corporation to require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place.
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In order to terminate his employment for Good Reason, Executive must, within ninety (90) days of the occurrence of any of the foregoing events, provide notice to the Bank and the Corporation of the existence of the “Good Reason” condition and provide the Bank and the Corporation thirty (30) days in which to cure such condition. In the event that the Bank and/or the Corporation do not cure the condition within thirty (30) days of such notice, Executive may resign from employment for “Good Reason” within sixty (60) days of the end of the foregoing cure period by written notice (the “Notice of Termination”) delivered to the Bank and the Corporation.
(d) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive’s employment with the Bank and the Corporation shall terminate automatically upon his death, and the Bank and the Corporation may terminate Executive’s employment due to his Disability (as defined herein). If Executive’s employment with the Bank and the Corporation terminates due to his death or Disability, all of Executive’s rights under this Agreement shall cease as of the date of such termination, except for the right to receive the Accrued Benefits. For purposes of this Agreement, the term “Disability” shall mean that Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months.
(e) Notwithstanding the provision of Section 4(a) of this Agreement, Executive may terminate his employment without Good Reason, in which case all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits and rights under Section 20 hereof with respect to arbitration.
(f) Executive agrees that in the event that the Bank, the Corporation, or Executive provides notice of non-renewal of this Agreement under Section 4(a), the Bank and the Corporation shall have no further obligation under this Agreement, other than payment to Executive of the Accrued Benefits, as of the date of the expiration of this Agreement or until Executive voluntarily terminates his employment, whichever occurs earlier.
(g) In the event Executive’s employment under this Agreement is terminated for any reason, if applicable, Executive’s service as a director of the Corporation, the Bank, and any affiliate or subsidiary thereof shall immediately terminate. This Section 4(g) shall constitute a resignation notice for such purposes.
5. Employment Period Compensation.
(a) Annual Base Salary. For services performed by Executive under this Agreement, the Bank and the Corporation shall pay Executive an annual base salary during the Employment Period at the rate of FIVE HUNDRED THOUSAND AND 00/100 ($500,000.00) DOLLARS, per year, plus any raises approved by the Boards (the “Annual Base Salary”), minus applicable withholdings and deductions, payable at the same times as salaries are payable to other Executives of the Bank and the Corporation. The term Annual Base Salary as utilized in this Agreement shall refer to Executive’s annual base salary as then in effect.
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(b) Bonus. For services performed by Executive under this Agreement, the Bank and the Corporation may, from time to time, pay a bonus or bonuses to Executive as the Bank and the Corporation, in their sole discretion, deem appropriate. The payment of any such bonuses shall not reduce or otherwise affect any other obligation of the Bank and the Corporation to Executive provided for in this Agreement.
(c) Paid Time-off. During the term of this Agreement, Executive shall be entitled to paid time-off in accordance with the manner and amount provided under the paid time-off plan currently in effect and approved by the Boards.
(d) Executive Benefit Plans. During the term of this Agreement, Executive shall be entitled to participate in or receive the benefits of any Executive benefit plan currently in effect at the Bank and the Corporation, subject to the terms of said plan, until such time that the Boards authorize a change in such benefits. The Bank and the Corporation shall not make any changes in such plans or benefits which would adversely affect Executive’s benefits thereunder, unless such change occurs pursuant to a program applicable to all officers of the Bank and the Corporation and does not result in a proportionately greater adverse change in the rights of or benefits to Executive as compared with any other officer of the Bank and the Corporation. Nothing paid to Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to Executive pursuant to Section 5(a) hereof.
(e) Expenses. During the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred in carrying out his duties under this Agreement, which are properly accounted for, in accordance with the policies and procedures established by the Boards for officers of the Bank and the Corporation.
6. Termination of Employment Following a Change in Control.
(a) If a Change in Control (as defined in Section 6(c) of this Agreement) shall occur and Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case within two (2) years following the Change in Control, Executive shall be entitled to receive his Accrued Benefits plus a lump sum payment equal to three (3) times the sum of: (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of three (3) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the three (3) years prior to his termination of employment. If the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of three (3) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if applicable.
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Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 6(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 6 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
(c) As used in this Agreement, “Change in Control” shall mean a change in ownership or effective control applicable to the Corporation or the Bank as described in Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended (or any successor provision thereto) and the regulations thereunder.
7. Rights in Event of Termination of Employment Absent Change in Control.
(a) In the event that Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case other than within two (2) years following a Change in Control, then the Bank and the Corporation shall pay Executive his Accrued Benefits plus a lump sum payment equal to three (3) times (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of three (3) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the three (3) years prior to his termination of employment if the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of three (3) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Code Section 409A if applicable.
Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 7(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
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(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 7 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
8. Covenant Not to Compete.
(a) Executive hereby acknowledges and recognizes the highly competitive nature of the business of the Bank and the Corporation and accordingly agrees that, during and for the applicable period set forth in Section 8(c) hereof, Executive shall not, except as otherwise permitted in writing by the Bank and the Corporation:
| (i) |
be engaged, directly or indirectly, either for his own account or as agent, consultant, Executive, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm, corporation or enterprise engaged in or proposed to be engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of their respective affiliates are engaged during the Employment Period, and remain so engaged at the end of the Employment Period, within a thirty-five (35) mile radius of a branch or other place of business of the Corporation or the Bank (the “Non-Competition Area”); or |
| (ii) |
provide financial or other assistance to any person, firm, corporation or enterprise engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of its affiliates are engaged during the Employment Period, in the Non-Competition Area; or |
| (iii) |
directly or indirectly solicit persons or entities who were customers or referral sources of the Bank and the Corporation or their respective affiliates within one year of Executive’s termination of employment, to a become customer or referral source of a person or entity other than the Bank and the Corporation or their respective affiliates; or |
| (iv) |
directly or indirectly solicit any employee of the Bank and the Corporation or their respective affiliates who were employed within one year of Executive’s termination of employment to work for anyone other than the Bank and the Corporation or their respective affiliates. |
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(b) It is expressly understood and agreed that, although Executive and the Bank and the Corporation consider the restrictions contained in Section 8(a) hereof reasonable for the purpose of preserving for the Bank and the Corporation and their respective subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in Section 8(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 8(a) hereof shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable.
(c) The provisions of Section 8(a) shall be applicable commencing on the Effective Date and ending eighteen (18) months following the effective date of termination of employment.
9. Unauthorized Disclosure. During the term of his employment hereunder, or at any later time, Executive shall not, without the written consent of the Boards or a person authorized thereby, knowingly disclose to any person, other than an Executive of the Bank and the Corporation or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an Executive of the Bank and the Corporation, any material confidential information obtained by him while in the employ of the Bank and the Corporation with respect to any of the Bank’s and the Corporation’s services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices the disclosure of which could be or will be damaging to the Bank and the Corporation; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by Executive or any person with the assistance, consent or direction of Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank and the Corporation or any information that must be disclosed as required by law.
10. Work Made for Hire. Any work performed by Executive under this Agreement should be considered a “Work Made for Hire” as the phrase is defined by the U.S. patent laws and shall be owned by and for the express benefit of the Bank and the Corporation and their respective subsidiaries and affiliates. In the event it should be established that such work does not qualify as a Work Made for Hire, Executive agrees to and does hereby assign to the Bank and the Corporation, and their respective affiliates and subsidiaries, all of his rights, title, and/or interest in such work product, including, but not limited to, all copyrights, patents, trademarks, and propriety rights.
11. Return of Company Property and Documents. Executive agrees that, at the time of termination of his employment, regardless of the reason for termination, he will deliver to the Bank and the Corporation and their respective subsidiaries and affiliates, any and all company property, including, but not limited to, keys, security codes or passes, mobile telephones, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, software programs, equipment, other documents or property, or reproductions of any of the aforementioned items developed or obtained by Executive during the course of his employment.
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12. Liability Insurance. The Bank and the Corporation shall obtain liability insurance coverage for Executive under an insurance policy with similar terms as that which is currently covering officers and directors of the Bank and the Corporation against lawsuits, arbitrations or other legal or regulatory proceedings.
13. Withholding. Any payments provided for hereunder shall be reduced by any taxes or other amounts required to be withheld by the Bank and the Corporation, and any benefits provided hereunder shall be subject to taxation if and to the extent provided, from time to time under applicable employment or income tax laws or similar statutes or other provisions of law then in effect.
14. Section 409A.
(a) The provisions of this Agreement and any payments made herein are intended to comply with, and should be interpreted consistent with, the requirements of Section 409A of the Code and any related regulations or other effective guidance promulgated thereunder (collectively, “Section 409A”). If any provision of this Agreement or any payment made hereunder fails to meet the requirements of Section 409A, neither the Bank, the Corporation nor any of their respective affiliates shall have any liability for any tax, penalty or interest imposed on Executive by Section 409A, and Executive shall have no recourse against the Bank, the Corporation or any of their respective affiliates for payment of any such tax, penalty, or interest imposed by Section 409A.
(b) Each installment payment payable under this Agreement shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2(b)(2). If Executive is a “specified employee” (as determined under the Bank’s and the Corporation’s policy for identifying specified employees) on the date of Executive’s “separation from service” (within the meaning of Code Section 409A) and if any portion of any severance amount payable hereunder would be considered “deferred compensation” under Section 409A, such portion shall not be paid on any date prior to the first business day after the date that is six months following Executive’s separation from service. The first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. Notwithstanding the foregoing, payments delayed pursuant to this six-month delay requirement shall commence earlier in the event of Executive’s death prior to the end of the six-month period.
(c) Section 409A prohibits reimbursement payments from being made any later than the end of the calendar year following the calendar year in which the applicable expense is incurred or paid. Also under Section 409A, (i) the amount of expenses eligible for reimbursement during any calendar year may not affect the amount of expenses eligible for reimbursement in any other calendar year, and (ii) the right to reimbursement cannot be subject to liquidation or exchange for another benefit.
15. Notices. Except as otherwise provided in this Agreement, any notice required or permitted to be given under this Agreement shall be deemed properly given if writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to Executive’s residence, in the case of notices to Executive, and to the principal executive offices of the Bank and the Corporation, in the case of notices to the Bank and the Corporation.
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16. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and an officer specifically designated by the Boards. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
17. Assignment. This Agreement shall not be assignable by any party, except by the Bank and the Corporation to any successor in interest to their respective businesses.
18. Entire Agreement. This Agreement supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of Executive by the Bank and the Corporation, and this Agreement contains all the covenants and agreements between the parties with respect to employment.
19. Successors, Binding Agreement.
(a) The Bank and the Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place. Failure by the Bank and the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a breach of this Agreement. As used in this Agreement, “the Bank and the Corporation” shall mean the Bank and the Corporation, as defined previously and any successor to their respective businesses and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die after a Notice of Termination is delivered by Executive, or following termination of Executive’s employment without Cause, and any amounts would be payable to Executive under this Agreement if Executive had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee, or, if there is no such designee, to Executive’s estate.
20. Arbitration. The Bank and the Corporation and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Consequently, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement (except for any enforcement sought with respect to Sections 8, 9, 10 or 11 which may be litigated in court, including an action for injunction or other relief) are to be submitted for resolution, in Camp Hill, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment Disputes or other applicable rules then in effect (“Rules”). The Bank and the Corporation or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Bank and
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the Corporation and Executive may, as a matter of right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the Courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a request for arbitration, the Bank and the Corporation and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein or any enforcement sought with respect to this Agreement, except as otherwise provided herein or any enforcement sought with respect to Sections 8, 9, 10 or 11 of this Agreement, including an action for injunction or other relief.
21. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
22. Applicable Law. This Agreement shall be governed by and construed in accordance with the domestic, internal laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws principles.
23. Headings. The section headings of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.
24. Limitation of Certain Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined as set forth herein that any payment or distribution by the Corporation or the Bank to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, and that it would be economically advantageous to Executive to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 24, present value shall be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 24 shall be made, in writing, by the Corporation’s independent certified public accountant (the “Accounting Firm”), which firm shall provide its determinations and any supporting calculations in writing to both the Bank and Executive within ten (10) days of the date of termination. Any such determination by the Accounting Firm shall be binding upon the Bank and Executive. Executive shall in his or her sole discretion determine which and how much of the Agreement Payments shall be eliminated or
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reduced consistent with the requirements of this Section 24, which determination shall be made by delivery of written notice to the Bank within ten (10) days of Executive’s receipt of the determination of the Accounting Firm. Within five (5) days after Executive’s timely determination, the Bank shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive, such amounts as are then due to Executive under this Agreement. In the event Executive does not make such timely determination then within fifteen (15) days after the Bank’s receipt of the determination of the Accounting Firm, the Bank in its sole discretion may pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive such portion of the Agreement Payments as it may deem appropriate, but no less than the Reduced Amount.
(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Bank which should not have been made (“Overpayment”) or that additional Agreement Payments which have not been made by the Bank could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. Within two (2) years after the “separation from service” (within the meaning of Code Section 409A), the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to Executive which Executive shall repay to the Bank together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the “Federal Rate”); provided, however, that no amount shall be payable by Executive to the Bank if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive together with interest thereon at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (b) and (c) above shall be borne solely by the Corporation or the Bank. The Corporation agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses of any nature resulting from or relating to its determinations pursuant to paragraphs (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
| ATTEST: | LINKBANCORP, Inc. | |||
|
/s/ Carl Lundblad |
/s/ George Parmer |
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| George Parmer, Chair, Compensation Committee | ||||
| ATTEST: | The Gratz Bank | |||
|
/s/ Carl Lundblad |
/s/ George Parmer |
|||
| George Parmer, Chair, Compensation Committee | ||||
| WITNESS | ||||
|
/s/ Carl Lundblad |
/s/ Andrew S. Samuel |
|||
| Name: Andrew S. Samuel | ||||
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Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 28th day of October 2021, among LINKBANCORP, Inc., a Pennsylvania Corporation (the “Corporation”), and The Gratz Bank, a Pennsylvania chartered bank (the “Bank”), and Carl Lundblad, an adult individual (“Executive”). The Corporation, the Bank and the Executive are each referred to herein as a “Party” and, collectively, the “Parties”.
WITNESSETH:
WHEREAS, the Bank is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Executive is currently serving as an Executive of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank consider the continued service of the Executive to be in the best interests of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank desire to continue to employ the Executive on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants hereinafter set forth, and intending to be legally bound hereby, the Parties agree, effective the date hereof (the “Effective Date”), as follows:
1. Employment. The Bank and the Corporation hereby employ Executive and Executive hereby accepts employment with the Bank and the Corporation, under the terms and conditions set forth in this Agreement.
2. Duties of Executive. Executive shall serve as the President of the Corporation and Chief Risk Officer of the Bank. Executive shall report to the Chief Executive Officer of the Corporation and shall serve as a director and/or officer of any subsidiary of the Corporation or the Bank to which Executive shall be elected or appointed. Executive shall have such other duties and hold such other titles as may be provided by the bylaws of the Bank and the Corporation and as may be assigned to him from time to time by the Boards of Directors of the Bank and the Corporation (collectively, the “Boards”).
3. Employment in Other Employment. Except as set forth herein, Executive shall devote all of his working time, ability and attention to the business of the Bank and the Corporation and/or their subsidiaries or affiliates, during the term of this Agreement. Executive shall notify the Chief Executive Officer of the Corporation in writing before Executive engages in any other business or commercial duties or pursuit including, but not limited to, directorships of other companies. Under no circumstances may Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates, nor may Executive
serve as a director or officer or in any other capacity in a company which competes with the Bank and the Corporation and/or any of their respective subsidiaries or affiliates. Executive shall not be precluded, however, from engaging in voluntary or philanthropic endeavors, from engaging in activities designed to maintain and improve his professional skills, or from engaging in activities incident or necessary to personal investments, so long as they are not in conflict with or detrimental to Executive’s rendition of services on behalf of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates.
4. Term of Agreement.
(a) The term of Executive’s employment under this Agreement shall commence as of the Effective Date and shall continue through the second anniversary of the Effective Date (the “Initial Term”), unless terminated earlier pursuant to Section 4(b) hereof. The Employment Period shall be extended automatically for one additional year on the first anniversary of the Effective Date, and then on each anniversary date thereafter, unless the Bank and the Corporation or Executive gives contrary written notice to the other not less than ninety (90) days before any such anniversary date. References in this Agreement to “Employment Period” shall refer to the Initial Term and any extensions of the Initial Term. It is the intention of the parties that this Agreement be “evergreen” unless (i) either party gives written notice to the other party of his or its intention not to renew this Agreement as provided above or (ii) this Agreement is terminated pursuant to Section 4(b) hereof.
(b) Notwithstanding the provisions of Section 4(a) of this Agreement, the Bank and the Corporation may terminate Executive’s employment at any time with or without Cause (as defined herein) upon written notice from the Boards to Executive. As used in this Agreement, “Cause” shall mean any of the following:
| (i) |
Executive’s conviction of or plea of guilty or nolo contendere to a felony, a crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive for a period of ten (10) consecutive days or more; |
| (ii) |
Executive’s failure to follow the good faith lawful instructions of the Boards, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iii) |
Executive’s willful failure to substantially perform Executive’s duties to the Bank and the Corporation, other than a failure resulting from Executive’s incapacity because of physical or mental illness, as provided in subsection (d) of this Section 4, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iv) |
Executive’s willful violation of the provisions of this Agreement, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
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| (v) |
dishonesty or gross negligence of Executive in the performance of his duties; provided Executive shall be given written notice from the Bank and the Corporation of the alleged gross negligence and thirty (30) days in which to cure such violation, if such violation is curable; |
| (vi) |
Executive’s removal or prohibition from being an institutional-affiliated party by a final order of an appropriate federal or state banking agency pursuant to Section 8(e) or 8(g) of the Federal Deposit Insurance Act or any other federal or state regulation; |
| (vii) |
Executive’s breach of fiduciary duty involving personal gain; or |
| (viii) |
the willful violation by Executive of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority. |
If Executive’s employment with the Bank and the Corporation is terminated for Cause, all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits (as defined herein) and the rights under Section 20 hereof with respect to arbitration. As used in this Agreement, “Accrued Benefits” means (i) accrued but unpaid salary through the effective date of termination, (ii) any accrued but unused vacation time as of the effective date of termination, to the extent required by applicable law or the terms of any paid time-off policy of the Bank or the Corporation in effect from time to time, (iii) unreimbursed expenses (if any), in accordance with the expense reimbursement policies and procedures of the Bank and the Corporation in effect from time to time, and (iv) other payments, entitlements or benefits, if any, in accordance with terms of the applicable plans, programs, arrangements or other agreements of the Bank and the Corporation (other than any severance plan or policy) as to which Executive held rights to such payments, entitlements or benefits, whether as a participant, beneficiary or otherwise on the date of termination.
(c) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive may terminate his employment for Good Reason. The term “Good Reason” shall mean (i) the assignment of duties and responsibilities inconsistent with Executive’s status President of the Corporation and Chief Risk Officer of the Bank, (ii) a change by the Corporation or the Bank in Executive’s principal place of employment to a location that increases Executive’s one-way daily commute by more than thirty-five (35) miles; (iii) any removal of Executive from office or any adverse change in the terms and conditions of Executive’s employment, except for any termination of the Executive’s employment for Cause, (iv) any reduction in Executive’s Annual Base Salary as in effect as of the Effective Date or as the same may be increased from time to time, (v) any failure of the Bank and the Corporation to provide Executive with benefits at least as favorable as those enjoyed by Executive during the Employment Period under any of the pension (including 401(k)), life insurance, medical, health and accident, disability or other Executive benefit plans of the Bank and the Corporation, or the taking of any action that would materially reduce any of such benefits unless such reduction is part of a reduction applicable to all Executives, or (vi) any failure by the Bank and the Corporation to require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place.
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In order to terminate his employment for Good Reason, Executive must, within ninety (90) days of the occurrence of any of the foregoing events, provide notice to the Bank and the Corporation of the existence of the “Good Reason” condition and provide the Bank and the Corporation thirty (30) days in which to cure such condition. In the event that the Bank and/or the Corporation do not cure the condition within thirty (30) days of such notice, Executive may resign from employment for “Good Reason” within sixty (60) days of the end of the foregoing cure period by written notice (the “Notice of Termination”) delivered to the Bank and the Corporation.
(d) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive’s employment with the Bank and the Corporation shall terminate automatically upon his death, and the Bank and the Corporation may terminate Executive’s employment due to his Disability (as defined herein). If Executive’s employment with the Bank and the Corporation terminates due to his death or Disability, all of Executive’s rights under this Agreement shall cease as of the date of such termination, except for the right to receive the Accrued Benefits. For purposes of this Agreement, the term “Disability” shall mean that Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months.
(e) Notwithstanding the provision of Section 4(a) of this Agreement, Executive may terminate his employment without Good Reason, in which case all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits and rights under Section 20 hereof with respect to arbitration.
(f) Executive agrees that in the event that the Bank, the Corporation, or Executive provides notice of non-renewal of this Agreement under Section 4(a), the Bank and the Corporation shall have no further obligation under this Agreement, other than payment to Executive of the Accrued Benefits, as of the date of the expiration of this Agreement or until Executive voluntarily terminates his employment, whichever occurs earlier.
(g) In the event Executive’s employment under this Agreement is terminated for any reason, if applicable, Executive’s service as a director of the Corporation, the Bank, and any affiliate or subsidiary thereof shall immediately terminate. This Section 4(g) shall constitute a resignation notice for such purposes.
5. Employment Period Compensation.
(a) Annual Base Salary. For services performed by Executive under this Agreement, the Bank and the Corporation shall pay Executive an annual base salary during the Employment Period at the rate of TWO HUNDRED THIRTY THOUSAND AND 00/100 ($230,000.00) DOLLARS, per year, plus any raises approved by the Boards (the “Annual Base Salary”), minus applicable withholdings and deductions, payable at the same times as salaries are payable to other Executives of the Bank and the Corporation. The term Annual Base Salary as utilized in this Agreement shall refer to Executive’s annual base salary as then in effect.
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(b) Bonus. For services performed by Executive under this Agreement, the Bank and the Corporation may, from time to time, pay a bonus or bonuses to Executive as the Bank and the Corporation, in their sole discretion, deem appropriate. The payment of any such bonuses shall not reduce or otherwise affect any other obligation of the Bank and the Corporation to Executive provided for in this Agreement.
(c) Paid Time-off. During the term of this Agreement, Executive shall be entitled to paid time-off in accordance with the manner and amount provided under the paid time-off plan currently in effect and approved by the Boards.
(d) Executive Benefit Plans. During the term of this Agreement, Executive shall be entitled to participate in or receive the benefits of any Executive benefit plan currently in effect at the Bank and the Corporation, subject to the terms of said plan, until such time that the Boards authorize a change in such benefits. The Bank and the Corporation shall not make any changes in such plans or benefits which would adversely affect Executive’s benefits thereunder, unless such change occurs pursuant to a program applicable to all officers of the Bank and the Corporation and does not result in a proportionately greater adverse change in the rights of or benefits to Executive as compared with any other officer of the Bank and the Corporation. Nothing paid to Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to Executive pursuant to Section 5(a) hereof.
(e) Expenses. During the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred in carrying out his duties under this Agreement, which are properly accounted for, in accordance with the policies and procedures established by the Boards for officers of the Bank and the Corporation.
6. Termination of Employment Following a Change in Control.
(a) If a Change in Control (as defined in Section 6(c) of this Agreement) shall occur and Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case within two (2) years following the Change in Control, Executive shall be entitled to receive his Accrued Benefits plus a lump sum payment equal to two (2) times the sum of: (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of two (2) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the two (2) years prior to his termination of employment. If the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of two (2) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if applicable.
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Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 6(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 6 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
(c) As used in this Agreement, “Change in Control” shall mean a change in ownership or effective control applicable to the Corporation or the Bank as described in Section 409A(a)(2)(A(v) of the Internal Revenue Code of 1986, as amended (or any successor provision thereto and the regulations thereunder).
7. Rights in Event of Termination of Employment Absent Change in Control.
(a) In the event that Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case other than within two (2) years following a Change in Control, then the Bank and the Corporation shall pay Executive his Accrued Benefits plus a lump sum payment equal to two (2) times (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of two (2) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the two (2) years prior to his termination of employment if the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of two (2) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Code Section 409A if applicable.
Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 7(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
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(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 7 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
8. Covenant Not to Compete.
(a) Executive hereby acknowledges and recognizes the highly competitive nature of the business of the Bank and the Corporation and accordingly agrees that, during and for the applicable period set forth in Section 8(c) hereof, Executive shall not, except as otherwise permitted in writing by the Bank and the Corporation:
| (i) |
be engaged, directly or indirectly, either for his own account or as agent, consultant, Executive, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm, corporation or enterprise engaged in or proposed to be engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of their respective affiliates are engaged during the Employment Period, and remain so engaged at the end of the Employment Period, within a thirty-five (35) mile radius of a branch or other place of business of the Corporation or the Bank (the “Non-Competition Area”); or |
| (ii) |
provide financial or other assistance to any person, firm, corporation or enterprise engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of its affiliates are engaged during the Employment Period, in the Non-Competition Area; or |
| (iii) |
directly or indirectly solicit persons or entities who were customers or referral sources of the Bank and the Corporation or their respective affiliates within one year of Executive’s termination of employment, to a become customer or referral source of a person or entity other than the Bank and the Corporation or their respective affiliates; or |
| (iv) |
directly or indirectly solicit any employee of the Bank and the Corporation or their respective affiliates who were employed within one year of Executive’s termination of employment to work for anyone other than the Bank and the Corporation or their respective affiliates. |
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(b) It is expressly understood and agreed that, although Executive and the Bank and the Corporation consider the restrictions contained in Section 8(a) hereof reasonable for the purpose of preserving for the Bank and the Corporation and their respective subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in Section 8(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 8(a) hereof shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable.
(c) The provisions of Section 8(a) shall be applicable commencing on the Effective Date and ending on the first anniversary of the effective date of termination of employment.
9. Unauthorized Disclosure. During the term of his employment hereunder, or at any later time, Executive shall not, without the written consent of the Boards or a person authorized thereby, knowingly disclose to any person, other than an Executive of the Bank and the Corporation or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an Executive of the Bank and the Corporation, any material confidential information obtained by him while in the employ of the Bank and the Corporation with respect to any of the Bank’s and the Corporation’s services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices the disclosure of which could be or will be damaging to the Bank and the Corporation; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by Executive or any person with the assistance, consent or direction of Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank and the Corporation or any information that must be disclosed as required by law.
10. Work Made for Hire. Any work performed by Executive under this Agreement should be considered a “Work Made for Hire” as the phrase is defined by the U.S. patent laws and shall be owned by and for the express benefit of the Bank and the Corporation and their respective subsidiaries and affiliates. In the event it should be established that such work does not qualify as a Work Made for Hire, Executive agrees to and does hereby assign to the Bank and the Corporation, and their respective affiliates and subsidiaries, all of his rights, title, and/or interest in such work product, including, but not limited to, all copyrights, patents, trademarks, and propriety rights.
11. Return of Company Property and Documents. Executive agrees that, at the time of termination of his employment, regardless of the reason for termination, he will deliver to the Bank and the Corporation and their respective subsidiaries and affiliates, any and all company property, including, but not limited to, keys, security codes or passes, mobile telephones, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, software programs, equipment, other documents or property, or reproductions of any of the aforementioned items developed or obtained by Executive during the course of his employment.
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12. Liability Insurance. The Bank and the Corporation shall obtain liability insurance coverage for Executive under an insurance policy with similar terms as that which is currently covering officers and directors of the Bank and the Corporation against lawsuits, arbitrations or other legal or regulatory proceedings.
13. Withholding. Any payments provided for hereunder shall be reduced by any taxes or other amounts required to be withheld by the Bank and the Corporation, and any benefits provided hereunder shall be subject to taxation if and to the extent provided, from time to time under applicable employment or income tax laws or similar statutes or other provisions of law then in effect.
14. Section 409A.
(a) The provisions of this Agreement and any payments made herein are intended to comply with, and should be interpreted consistent with, the requirements of Section 409A of the Code and any related regulations or other effective guidance promulgated thereunder (collectively, “Section 409A”). If any provision of this Agreement or any payment made hereunder fails to meet the requirements of Section 409A, neither the Bank, the Corporation nor any of their respective affiliates shall have any liability for any tax, penalty or interest imposed on Executive by Section 409A, and Executive shall have no recourse against the Bank, the Corporation or any of their respective affiliates for payment of any such tax, penalty, or interest imposed by Section 409A.
(b) Each installment payment payable under this Agreement shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2(b)(2). If Executive is a “specified employee” (as determined under the Bank’s and the Corporation’s policy for identifying specified employees) on the date of Executive’s “separation from service” (within the meaning of Code Section 409A) and if any portion of any severance amount payable hereunder would be considered “deferred compensation” under Section 409A, such portion shall not be paid on any date prior to the first business day after the date that is six months following Executive’s separation from service. The first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. Notwithstanding the foregoing, payments delayed pursuant to this six-month delay requirement shall commence earlier in the event of Executive’s death prior to the end of the six-month period.
(c) Section 409A prohibits reimbursement payments from being made any later than the end of the calendar year following the calendar year in which the applicable expense is incurred or paid. Also under Section 409A, (i) the amount of expenses eligible for reimbursement during any calendar year may not affect the amount of expenses eligible for reimbursement in any other calendar year, and (ii) the right to reimbursement cannot be subject to liquidation or exchange for another benefit.
15. Notices. Except as otherwise provided in this Agreement, any notice required or permitted to be given under this Agreement shall be deemed properly given if writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to Executive’s residence, in the case of notices to Executive, and to the principal executive offices of the Bank and the Corporation, in the case of notices to the Bank and the Corporation.
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16. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and an officer specifically designated by the Boards. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
17. Assignment. This Agreement shall not be assignable by any party, except by the Bank and the Corporation to any successor in interest to their respective businesses.
18. Entire Agreement. This Agreement supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of Executive by the Bank and the Corporation, and this Agreement contains all the covenants and agreements between the parties with respect to employment.
19. Successors, Binding Agreement.
(a) The Bank and the Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place. Failure by the Bank and the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a breach of this Agreement. As used in this Agreement, “the Bank and the Corporation” shall mean the Bank and the Corporation, as defined previously and any successor to their respective businesses and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die after a Notice of Termination is delivered by Executive, or following termination of Executive’s employment without Cause, and any amounts would be payable to Executive under this Agreement if Executive had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee, or, if there is no such designee, to Executive’s estate.
20. Arbitration. The Bank and the Corporation and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Consequently, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement (except for any enforcement sought with respect to Sections 8, 9, 10 or 11 which may be litigated in court, including an action for injunction or other relief) are to be submitted for resolution, in Camp Hill, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment Disputes or other applicable rules then in effect (“Rules”). The Bank and the Corporation or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Bank and
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the Corporation and Executive may, as a matter of right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the Courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a request for arbitration, the Bank and the Corporation and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein or any enforcement sought with respect to this Agreement, except as otherwise provided herein or any enforcement sought with respect to Sections 8, 9, 10 or 11 of this Agreement, including an action for injunction or other relief.
21. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
22. Applicable Law. This Agreement shall be governed by and construed in accordance with the domestic, internal laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws principles.
23. Headings. The section headings of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.
24. Limitation of Certain Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined as set forth herein that any payment or distribution by the Corporation or the Bank to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, and that it would be economically advantageous to Executive to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 24, present value shall be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 24 shall be made, in writing, by the Corporation’s independent certified public accountant (the “Accounting Firm”), which firm shall provide its determinations and any supporting calculations in writing to both the Bank and Executive within ten (10) days of the date of termination. Any such determination by the Accounting Firm shall be binding upon the Bank and Executive. Executive shall in his or her sole discretion determine which and how much of the Agreement Payments shall be eliminated or
11
reduced consistent with the requirements of this Section 24, which determination shall be made by delivery of written notice to the Bank within ten (10) days of Executive’s receipt of the determination of the Accounting Firm. Within five (5) days after Executive’s timely determination, the Bank shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive, such amounts as are then due to Executive under this Agreement. In the event Executive does not make such timely determination then within fifteen (15) days after the Bank’s receipt of the determination of the Accounting Firm, the Bank in its sole discretion may pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive such portion of the Agreement Payments as it may deem appropriate, but no less than the Reduced Amount.
(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Bank which should not have been made (“Overpayment”) or that additional Agreement Payments which have not been made by the Bank could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. Within two (2) years after the “separation from service” (within the meaning of Code Section 409A), the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to Executive which Executive shall repay to the Bank together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the “Federal Rate”); provided, however, that no amount shall be payable by Executive to the Bank if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive together with interest thereon at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (b) and (c) above shall be borne solely by the Corporation or the Bank. The Corporation agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses of any nature resulting from or relating to its determinations pursuant to paragraphs (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
| ATTEST: | LINKBANCORP, Inc. | |||
|
/s/ Brent Smith |
/s/ Andrew Samuel |
|||
| Chief Executive Officer | ||||
| ATTEST: | The Gratz Bank | |||
|
/s/ Brent Smith |
/s/ Andrew Samuel |
|||
| Chief Executive Officer | ||||
| WITNESS | ||||
|
/s/ Brent Smith |
/s/ Carl Lundblad |
|||
| Name: Carl Lundblad | ||||
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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 28th day of October 2021, among LINKBANCORP, Inc., a Pennsylvania Corporation (the “Corporation”), and The Gratz Bank, a Pennsylvania chartered bank (the “Bank”), and Brent Smith, an adult individual (“Executive”). The Corporation, the Bank and the Executive are each referred to herein as a “Party” and, collectively, the “Parties”.
WITNESSETH:
WHEREAS, the Bank is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Executive is currently serving as an Executive of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank consider the continued service of the Executive to be in the best interests of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank desire to continue to employ the Executive on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants hereinafter set forth, and intending to be legally bound hereby, the Parties agree, effective the date hereof (the “Effective Date”), as follows:
1. Employment. The Bank and the Corporation hereby employ Executive and Executive hereby accepts employment with the Bank and the Corporation, under the terms and conditions set forth in this Agreement.
2. Duties of Executive. Executive shall serve as the Executive Vice President of the Corporation and President of the Bank. Executive shall report to the Chief Executive Officer of the Corporation and shall serve as a director and/or officer of any subsidiary of the Corporation or the Bank to which Executive shall be elected or appointed. Executive shall have such other duties and hold such other titles as may be provided by the bylaws of the Bank and the Corporation and as may be assigned to him from time to time by the Boards of Directors of the Bank and the Corporation (collectively, the “Boards”).
3. Employment in Other Employment. Except as set forth herein, Executive shall devote all of his working time, ability and attention to the business of the Bank and the Corporation and/or their subsidiaries or affiliates, during the term of this Agreement. Executive shall notify the Chief Executive Officer of the Corporation in writing before Executive engages in any other business or commercial duties or pursuit including, but not limited to, directorships of other companies. Under no circumstances may Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates, nor may Executive
serve as a director or officer or in any other capacity in a company which competes with the Bank and the Corporation and/or any of their respective subsidiaries or affiliates. Executive shall not be precluded, however, from engaging in voluntary or philanthropic endeavors, from engaging in activities designed to maintain and improve his professional skills, or from engaging in activities incident or necessary to personal investments, so long as they are not in conflict with or detrimental to Executive’s rendition of services on behalf of the Bank and the Corporation and/or any of their respective subsidiaries or affiliates.
4. Term of Agreement.
(a) The term of Executive’s employment under this Agreement shall commence as of the Effective Date and shall continue through the second anniversary of the Effective Date (the “Initial Term”), unless terminated earlier pursuant to Section 4(b) hereof. The Employment Period shall be extended automatically for one additional year on the first anniversary of the Effective Date, and then on each anniversary date thereafter, unless the Bank and the Corporation or Executive gives contrary written notice to the other not less than ninety (90) days before any such anniversary date. References in this Agreement to “Employment Period” shall refer to the Initial Term and any extensions of the Initial Term. It is the intention of the parties that this Agreement be “evergreen” unless (i) either party gives written notice to the other party of his or its intention not to renew this Agreement as provided above or (ii) this Agreement is terminated pursuant to Section 4(b) hereof.
(b) Notwithstanding the provisions of Section 4(a) of this Agreement, the Bank and the Corporation may terminate Executive’s employment at any time with or without Cause (as defined herein) upon written notice from the Boards to Executive. As used in this Agreement, “Cause” shall mean any of the following:
| (i) |
Executive’s conviction of or plea of guilty or nolo contendere to a felony, a crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive for a period of ten (10) consecutive days or more; |
| (ii) |
Executive’s failure to follow the good faith lawful instructions of the Boards, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iii) |
Executive’s willful failure to substantially perform Executive’s duties to the Bank and the Corporation, other than a failure resulting from Executive’s incapacity because of physical or mental illness, as provided in subsection (d) of this Section 4, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
| (iv) |
Executive’s willful violation of the provisions of this Agreement, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice; |
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| (v) |
dishonesty or gross negligence of Executive in the performance of his duties; provided Executive shall be given written notice from the Bank and the Corporation of the alleged gross negligence and thirty (30) days in which to cure such violation, if such violation is curable; |
| (vi) |
Executive’s removal or prohibition from being an institutional-affiliated party by a final order of an appropriate federal or state banking agency pursuant to Section 8(e) or 8(g) of the Federal Deposit Insurance Act or any other federal or state regulation; |
| (vii) |
Executive’s breach of fiduciary duty involving personal gain; or |
| (viii) |
the willful violation by Executive of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority. |
If Executive’s employment with the Bank and the Corporation is terminated for Cause, all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits (as defined herein) and the rights under Section 20 hereof with respect to arbitration. As used in this Agreement, “Accrued Benefits” means (i) accrued but unpaid salary through the effective date of termination, (ii) any accrued but unused vacation time as of the effective date of termination, to the extent required by applicable law or the terms of any paid time-off policy of the Bank or the Corporation in effect from time to time, (iii) unreimbursed expenses (if any), in accordance with the expense reimbursement policies and procedures of the Bank and the Corporation in effect from time to time, and (iv) other payments, entitlements or benefits, if any, in accordance with terms of the applicable plans, programs, arrangements or other agreements of the Bank and the Corporation (other than any severance plan or policy) as to which Executive held rights to such payments, entitlements or benefits, whether as a participant, beneficiary or otherwise on the date of termination.
(c) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive may terminate his employment for Good Reason. The term “Good Reason” shall mean (i) the assignment of duties and responsibilities inconsistent with Executive’s status Executive Vice President of the Corporation and President of the Bank, (ii) a change by the Corporation or the Bank in Executive’s principal place of employment to a location that increases Executive’s one-way daily commute by more than thirty-five (35) miles; (iii) any removal of Executive from office or any adverse change in the terms and conditions of Executive’s employment, except for any termination of the Executive’s employment for Cause, (iv) any reduction in Executive’s Annual Base Salary as in effect as of the Effective Date or as the same may be increased from time to time, (v) any failure of the Bank and the Corporation to provide Executive with benefits at least as favorable as those enjoyed by Executive during the Employment Period under any of the pension (including 401(k)), life insurance, medical, health and accident, disability or other Executive benefit plans of the Bank and the Corporation, or the taking of any action that would materially reduce any of such benefits unless such reduction is part of a reduction applicable to all Executives, or (vi) any failure by the Bank and the Corporation to require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place.
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In order to terminate his employment for Good Reason, Executive must, within ninety (90) days of the occurrence of any of the foregoing events, provide notice to the Bank and the Corporation of the existence of the “Good Reason” condition and provide the Bank and the Corporation thirty (30) days in which to cure such condition. In the event that the Bank and/or the Corporation do not cure the condition within thirty (30) days of such notice, Executive may resign from employment for “Good Reason” within sixty (60) days of the end of the foregoing cure period by written notice (the “Notice of Termination”) delivered to the Bank and the Corporation.
(d) Notwithstanding the provisions of Section 4(a) of this Agreement, Executive’s employment with the Bank and the Corporation shall terminate automatically upon his death, and the Bank and the Corporation may terminate Executive’s employment due to his Disability (as defined herein). If Executive’s employment with the Bank and the Corporation terminates due to his death or Disability, all of Executive’s rights under this Agreement shall cease as of the date of such termination, except for the right to receive the Accrued Benefits. For purposes of this Agreement, the term “Disability” shall mean that Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months.
(e) Notwithstanding the provision of Section 4(a) of this Agreement, Executive may terminate his employment without Good Reason, in which case all of Executive’s rights under this Agreement shall cease as of the effective date of such termination, except for the right to receive the Accrued Benefits and rights under Section 20 hereof with respect to arbitration.
(f) Executive agrees that in the event that the Bank, the Corporation, or Executive provides notice of non-renewal of this Agreement under Section 4(a), the Bank and the Corporation shall have no further obligation under this Agreement, other than payment to Executive of the Accrued Benefits, as of the date of the expiration of this Agreement or until Executive voluntarily terminates his employment, whichever occurs earlier.
(g) In the event Executive’s employment under this Agreement is terminated for any reason, if applicable, Executive’s service as a director of the Corporation, the Bank, and any affiliate or subsidiary thereof shall immediately terminate. This Section 4(g) shall constitute a resignation notice for such purposes.
5. Employment Period Compensation.
(a) Annual Base Salary. For services performed by Executive under this Agreement, the Bank and the Corporation shall pay Executive an annual base salary during the Employment Period at the rate of TWO HUNDRED TEN THOUSAND AND 00/100 ($210,000.00) DOLLARS, per year, plus any raises approved by the Boards (the “Annual Base Salary”), minus applicable withholdings and deductions, payable at the same times as salaries are payable to other Executives of the Bank and the Corporation. The term Annual Base Salary as utilized in this Agreement shall refer to Executive’s annual base salary as then in effect.
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(b) Bonus. For services performed by Executive under this Agreement, the Bank and the Corporation may, from time to time, pay a bonus or bonuses to Executive as the Bank and the Corporation, in their sole discretion, deem appropriate. The payment of any such bonuses shall not reduce or otherwise affect any other obligation of the Bank and the Corporation to Executive provided for in this Agreement.
(c) Paid Time-off. During the term of this Agreement, Executive shall be entitled to paid time-off in accordance with the manner and amount provided under the paid time-off plan currently in effect and approved by the Boards.
(d) Executive Benefit Plans. During the term of this Agreement, Executive shall be entitled to participate in or receive the benefits of any Executive benefit plan currently in effect at the Bank and the Corporation, subject to the terms of said plan, until such time that the Boards authorize a change in such benefits. The Bank and the Corporation shall not make any changes in such plans or benefits which would adversely affect Executive’s benefits thereunder, unless such change occurs pursuant to a program applicable to all officers of the Bank and the Corporation and does not result in a proportionately greater adverse change in the rights of or benefits to Executive as compared with any other officer of the Bank and the Corporation. Nothing paid to Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to Executive pursuant to Section 5(a) hereof.
(e) Expenses. During the term of this Agreement, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred in carrying out his duties under this Agreement, which are properly accounted for, in accordance with the policies and procedures established by the Boards for officers of the Bank and the Corporation.
6. Termination of Employment Following a Change in Control.
(a) If a Change in Control (as defined in Section 6(c) of this Agreement) shall occur and Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case within two (2) years following the Change in Control, Executive shall be entitled to receive his Accrued Benefits plus a lump sum payment equal to two (2) times the sum of: (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of two (2) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the two (2) years prior to his termination of employment. If the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of two (2) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if applicable.
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Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 6(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 6 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
(c) As used in this Agreement, “Change in Control” shall mean a change in ownership or effective control applicable to the Corporation or the Bank as described in Section 409A(a)(2)(A(v) of the Internal Revenue Code of 1986, as amended (or any successor provision thereto and the regulations thereunder).
7. Rights in Event of Termination of Employment Absent Change in Control.
(a) In the event that Executive’s employment is involuntarily terminated by the Bank and the Corporation without Cause or Executive resigns for Good Reason, in each case other than within two (2) years following a Change in Control, then the Bank and the Corporation shall pay Executive his Accrued Benefits plus a lump sum payment equal to two (2) times (i) his Annual Base Salary; and (ii) his average cash bonus and other cash incentive compensation earned by him with respect to the three calendar years immediately preceding the year of termination, which shall be paid to Executive within sixty (60) days following the date of his termination of employment. In addition, for a period of two (2) years from the date of termination of employment, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the two (2) years prior to his termination of employment if the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of two (2) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Code Section 409A if applicable.
Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 7(a) unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
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(b) Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise. Unless otherwise agreed to in writing, the amount of payment or the benefit provided for in this Section 7 shall not be reduced by any compensation earned by Executive as the result of employment by another employer or by reason of Executive’s receipt of or right to receive any retirement or other benefits after the date of termination of employment or otherwise.
8. Covenant Not to Compete.
(a) Executive hereby acknowledges and recognizes the highly competitive nature of the business of the Bank and the Corporation and accordingly agrees that, during and for the applicable period set forth in Section 8(c) hereof, Executive shall not, except as otherwise permitted in writing by the Bank and the Corporation:
| (i) |
be engaged, directly or indirectly, either for his own account or as agent, consultant, Executive, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm, corporation or enterprise engaged in or proposed to be engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of their respective affiliates are engaged during the Employment Period, and remain so engaged at the end of the Employment Period, within a thirty-five (35) mile radius of a branch or other place of business of the Corporation or the Bank (the “Non-Competition Area”); or |
| (ii) |
provide financial or other assistance to any person, firm, corporation or enterprise engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of its affiliates are engaged during the Employment Period, in the Non-Competition Area; or |
| (iii) |
directly or indirectly solicit persons or entities who were customers or referral sources of the Bank and the Corporation or their respective affiliates within one year of Executive’s termination of employment, to a become customer or referral source of a person or entity other than the Bank and the Corporation or their respective affiliates; or |
| (iv) |
directly or indirectly solicit any employee of the Bank and the Corporation or their respective affiliates who were employed within one year of Executive’s termination of employment to work for anyone other than the Bank and the Corporation or their respective affiliates. |
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(b) It is expressly understood and agreed that, although Executive and the Bank and the Corporation consider the restrictions contained in Section 8(a) hereof reasonable for the purpose of preserving for the Bank and the Corporation and their respective subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in Section 8(a) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 8(a) hereof shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable.
(c) The provisions of Section 8(a) shall be applicable commencing on the Effective Date and ending on the first anniversary of the effective date of termination of employment.
9. Unauthorized Disclosure. During the term of his employment hereunder, or at any later time, Executive shall not, without the written consent of the Boards or a person authorized thereby, knowingly disclose to any person, other than an Executive of the Bank and the Corporation or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an Executive of the Bank and the Corporation, any material confidential information obtained by him while in the employ of the Bank and the Corporation with respect to any of the Bank’s and the Corporation’s services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices the disclosure of which could be or will be damaging to the Bank and the Corporation; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by Executive or any person with the assistance, consent or direction of Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank and the Corporation or any information that must be disclosed as required by law.
10. Work Made for Hire. Any work performed by Executive under this Agreement should be considered a “Work Made for Hire” as the phrase is defined by the U.S. patent laws and shall be owned by and for the express benefit of the Bank and the Corporation and their respective subsidiaries and affiliates. In the event it should be established that such work does not qualify as a Work Made for Hire, Executive agrees to and does hereby assign to the Bank and the Corporation, and their respective affiliates and subsidiaries, all of his rights, title, and/or interest in such work product, including, but not limited to, all copyrights, patents, trademarks, and propriety rights.
11. Return of Company Property and Documents. Executive agrees that, at the time of termination of his employment, regardless of the reason for termination, he will deliver to the Bank and the Corporation and their respective subsidiaries and affiliates, any and all company property, including, but not limited to, keys, security codes or passes, mobile telephones, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, software programs, equipment, other documents or property, or reproductions of any of the aforementioned items developed or obtained by Executive during the course of his employment.
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12. Liability Insurance. The Bank and the Corporation shall obtain liability insurance coverage for Executive under an insurance policy with similar terms as that which is currently covering officers and directors of the Bank and the Corporation against lawsuits, arbitrations or other legal or regulatory proceedings.
13. Withholding. Any payments provided for hereunder shall be reduced by any taxes or other amounts required to be withheld by the Bank and the Corporation, and any benefits provided hereunder shall be subject to taxation if and to the extent provided, from time to time under applicable employment or income tax laws or similar statutes or other provisions of law then in effect.
14. Section 409A.
(a) The provisions of this Agreement and any payments made herein are intended to comply with, and should be interpreted consistent with, the requirements of Section 409A of the Code and any related regulations or other effective guidance promulgated thereunder (collectively, “Section 409A”). If any provision of this Agreement or any payment made hereunder fails to meet the requirements of Section 409A, neither the Bank, the Corporation nor any of their respective affiliates shall have any liability for any tax, penalty or interest imposed on Executive by Section 409A, and Executive shall have no recourse against the Bank, the Corporation or any of their respective affiliates for payment of any such tax, penalty, or interest imposed by Section 409A.
(b) Each installment payment payable under this Agreement shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2(b)(2). If Executive is a “specified employee” (as determined under the Bank’s and the Corporation’s policy for identifying specified employees) on the date of Executive’s “separation from service” (within the meaning of Code Section 409A) and if any portion of any severance amount payable hereunder would be considered “deferred compensation” under Section 409A, such portion shall not be paid on any date prior to the first business day after the date that is six months following Executive’s separation from service. The first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. Notwithstanding the foregoing, payments delayed pursuant to this six-month delay requirement shall commence earlier in the event of Executive’s death prior to the end of the six-month period.
(c) Section 409A prohibits reimbursement payments from being made any later than the end of the calendar year following the calendar year in which the applicable expense is incurred or paid. Also under Section 409A, (i) the amount of expenses eligible for reimbursement during any calendar year may not affect the amount of expenses eligible for reimbursement in any other calendar year, and (ii) the right to reimbursement cannot be subject to liquidation or exchange for another benefit.
15. Notices. Except as otherwise provided in this Agreement, any notice required or permitted to be given under this Agreement shall be deemed properly given if writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to Executive’s residence, in the case of notices to Executive, and to the principal executive offices of the Bank and the Corporation, in the case of notices to the Bank and the Corporation.
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16. Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and an officer specifically designated by the Boards. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
17. Assignment. This Agreement shall not be assignable by any party, except by the Bank and the Corporation to any successor in interest to their respective businesses.
18. Entire Agreement. This Agreement supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of Executive by the Bank and the Corporation, and this Agreement contains all the covenants and agreements between the parties with respect to employment.
19. Successors, Binding Agreement.
(a) The Bank and the Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses and/or assets of the Bank and the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Corporation would be required to perform it if no such succession had taken place. Failure by the Bank and the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a breach of this Agreement. As used in this Agreement, “the Bank and the Corporation” shall mean the Bank and the Corporation, as defined previously and any successor to their respective businesses and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If Executive should die after a Notice of Termination is delivered by Executive, or following termination of Executive’s employment without Cause, and any amounts would be payable to Executive under this Agreement if Executive had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee, or, if there is no such designee, to Executive’s estate.
20. Arbitration. The Bank and the Corporation and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Consequently, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement (except for any enforcement sought with respect to Sections 8, 9, 10 or 11 which may be litigated in court, including an action for injunction or other relief) are to be submitted for resolution, in Camp Hill, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s National Rules for the Resolution of Employment Disputes or other applicable rules then in effect (“Rules”). The Bank and the Corporation or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Bank and
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the Corporation and Executive may, as a matter of right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the Courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a request for arbitration, the Bank and the Corporation and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein or any enforcement sought with respect to this Agreement, except as otherwise provided herein or any enforcement sought with respect to Sections 8, 9, 10 or 11 of this Agreement, including an action for injunction or other relief.
21. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
22. Applicable Law. This Agreement shall be governed by and construed in accordance with the domestic, internal laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws principles.
23. Headings. The section headings of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.
24. Limitation of Certain Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined as set forth herein that any payment or distribution by the Corporation or the Bank to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, and that it would be economically advantageous to Executive to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 24, present value shall be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 24 shall be made, in writing, by the Corporation’s independent certified public accountant (the “Accounting Firm”), which firm shall provide its determinations and any supporting calculations in writing to both the Bank and Executive within ten (10) days of the date of termination. Any such determination by the Accounting Firm shall be binding upon the Bank and Executive. Executive shall in his or her sole discretion determine which and how much of the Agreement Payments shall be eliminated or
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reduced consistent with the requirements of this Section 24, which determination shall be made by delivery of written notice to the Bank within ten (10) days of Executive’s receipt of the determination of the Accounting Firm. Within five (5) days after Executive’s timely determination, the Bank shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive, such amounts as are then due to Executive under this Agreement. In the event Executive does not make such timely determination then within fifteen (15) days after the Bank’s receipt of the determination of the Accounting Firm, the Bank in its sole discretion may pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive such portion of the Agreement Payments as it may deem appropriate, but no less than the Reduced Amount.
(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Bank which should not have been made (“Overpayment”) or that additional Agreement Payments which have not been made by the Bank could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. Within two (2) years after the “separation from service” (within the meaning of Code Section 409A), the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to Executive which Executive shall repay to the Bank together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the “Federal Rate”); provided, however, that no amount shall be payable by Executive to the Bank if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive together with interest thereon at the Federal Rate.
(d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (b) and (c) above shall be borne solely by the Corporation or the Bank. The Corporation agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses of any nature resulting from or relating to its determinations pursuant to paragraphs (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
| ATTEST: | LINKBANCORP, Inc. | |||
|
/s/ Carl Lundblad |
/s/ Andrew Samuel |
|||
| Chief Executive Officer | ||||
| ATTEST: | The Gratz Bank | |||
|
/s/ Carl Lundblad |
/s/ Andrew Samuel |
|||
| Chief Executive Officer | ||||
| WITNESS | ||||
|
/s/ Carl Lundblad |
/s/ Brent Smith |
|||
| Name: Brent Smith | ||||
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Exhibit 10.4
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is made as of the 28th day of October 2021, among LINKBANCORP, Inc., a Pennsylvania Corporation (the “Corporation”), and The Gratz Bank, a Pennsylvania chartered bank (the “Bank”), and Kristofer Paul, an adult individual (“Executive”). The Corporation, the Bank and the Executive are each referred to herein as a “Party” and, collectively, the “Parties”.
WITNESSETH:
WHEREAS, the Bank is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Executive is currently serving as an Executive of the Corporation and the Bank; and
WHEREAS, the Corporation and the Bank consider the continued service of the Executive to be in the best interests of the Corporation and the Bank; and
WHEREAS, the Corporation, the Bank and Executive desire to enter into this Agreement whereby the Bank agrees to make certain payments to Executive upon termination under specific conditions, in order to induce Executive to continue in employment through a Change in Control (as defined herein) of the Corporation or Bank, all as hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the continued employment of Executive and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, Executive, the Corporation and the Bank agree as follows:
ARTICLE I
TERMINATION PURSUANT TO A CHANGE IN CONTROL
1.1 Definition: Termination Pursuant to a Change in Control. Any of the following events occurring during the period commencing with the date of any “Change in Control” (as defined in ARTICLE II hereof) and ending on the second (2nd) anniversary date of the Change in Control, shall constitute a “Termination Pursuant to a Change in Control:”
(A) Executive’s employment is terminated by the Corporation, the Bank or an acquiror or successor of either without “Cause” (as defined below); or
(B) Any of the following events occurs and Executive thereafter terminates Executive’s employment:
(i) any reduction in Executive’s responsibilities, including reporting responsibilities, or authority, including such responsibilities or authorities as may be increased from time to time; or
(ii) any reassignment of Executive to a principal place of employment which is more than thirty-five (35) miles from Executive’s principal place of employment immediately prior to the Change in Control; or
(iii) any reduction in Executive’s annual base salary as the same may be increased from time to time; or
(iv) any failure to provide Executive with benefits at least as favorable as those enjoyed by Executive under Corporation’s or Bank’s retirement or pension, life insurance, medical, health and accident, disability or other employee or incentive compensation plans in which Executive participated or the taking of any action that would materially reduce any of such benefits, unless such reduction is part of a reduction applicable in each case to all similarly situated employees; or
(v) any other action or inaction that constitutes a material breach of this Agreement by the Corporation or the Bank;
provided, however, that the Executive must furnish notice of his intention to terminate his employment due to the existence of one or more of the above-delineated conditions within ninety (90) days of the initial existence of such conditions, after which time the Bank shall have thirty (30) days to remedy such condition. The Executive shall not be required to maintain his employment with the Bank during such thirty (30) day period; however, should the Bank remedy the condition giving rise to the right of termination hereunder within such time period, the Executive shall not be entitled to payment hereunder.
(C) For purposes of Section 1.1(A), “Cause” shall mean:
(i) Executive’s conviction of or plea of guilty or nolo contendere to a felony, a crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive for a period of ten (10) consecutive days or more;
(ii) Executive’s failure to follow the good faith lawful instructions of the Boards, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice;
(iii) Executive’s willful failure to substantially perform Executive’s duties to the Bank and the Corporation, other than a failure resulting from Executive’s incapacity because of physical or mental illness, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice;
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(iv) Executive’s willful violation of the provisions of this Agreement, after written notice from the Bank and the Corporation and a failure to cure such violation within thirty (30) days of said written notice;
(v) dishonesty or gross negligence of Executive in the performance of his duties; provided Executive shall be given written notice from the Bank and the Corporation of the alleged gross negligence and thirty (30) days in which to cure such violation, if such violation is curable;
(vi) Executive’s removal or prohibition from being an institutional-affiliated party by a final order of an appropriate federal or state banking agency pursuant to Section 8(e) or 8(g) of the Federal Deposit Insurance Act or any other federal or state regulation;
(vii) Executive’s breach of fiduciary duty involving personal gain; or
(viii) the willful violation by Executive of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority.
1.2 Compensation Upon Termination Pursuant to a Change in Control. If Executive’s employment is terminated and such termination is a Termination Pursuant to a Change in Control (as defined in Section 1.1), the Bank (or any acquiror or successor thereto) shall provide (or cause to be provided) the following to Executive:
(A) The Bank shall pay Executive within sixty (60) days following the Termination Pursuant to the Change in Control a lump sum payment in an amount equal to two (2) times: (i) the highest of Executive’s annualized base salary at the time of or during one of the three calendar years immediately preceding the Termination Pursuant to a Change in Control plus (ii) the average cash bonus earned by Executive with respect to the three calendar years immediately preceding the date of the Termination Pursuant to a Change in Control; and
(B) For a period of two (2) years, commencing as of the Termination Pursuant to the Change in Control, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of all life, disability, medical insurance and other normal health and welfare benefits in effect with respect to Executive during the two (2) years prior to his termination of employment. If the Bank and the Corporation cannot provide such benefits because Executive is no longer an Executive, the Bank and the Corporation shall reimburse Executive in an amount equal to the monthly premium paid by him to obtain substantially similar health and welfare Executive benefits which he enjoyed prior to termination, which reimbursement shall continue until the expiration of two (2) years from the date of termination of employment or until Executive secures substantially similar benefits through other employment, whichever shall first occur, subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if applicable.
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1.3 Other Benefits. The payments provided by this ARTICLE I shall not affect Executive’s rights to receive any payments or benefits to which Executive may be or become entitled under any other existing or future agreement or arrangement of the Corporation, the Bank or any successor of either with the Executive, or under any existing or future benefit plan or arrangement of the Corporation, the Bank or any successor in which Executive is or becomes a participant, or under which Executive has or obtains rights, including without limitation, any qualified or nonqualified deferred compensation or retirement plans or programs or any outstanding stock options or similar agreements. Any such rights of Executive shall be determined in accordance with the terms and conditions of the applicable agreement, arrangement or plan and applicable law, provided, however, that Executive shall not be entitled to any severance payments in addition to those provided hereunder.
1.4 Withholding for Taxes. All payments required to be made under this Agreement will be made in accordance with the Bank’s or other payor’s normal payroll and will be subject to withholding of such amounts relating to tax and/or other payroll deductions as may be required by law.
1.5 Limitation of Certain Payments.
(A) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined as set forth herein that any payment or distribution by the Corporation or the Bank to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, and that it would be economically advantageous to Executive to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of Executive pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 1.5, present value shall be determined in accordance with Section 280G(d)(4) of the Code.
(B) All determinations to be made under this Section 1.5 shall be made, in writing, by the Corporation’s independent certified public accountant (the “Accounting Firm”), which firm shall provide its determinations and any supporting calculations in writing to both the Bank and Executive within ten (10) days of the date of termination. Any such determination by the Accounting Firm shall be binding upon the Bank and Executive. Executive shall in his or her sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 1.5, which determination shall be made by delivery of written notice to the Bank within ten (10) days of Executive’s receipt of the determination of the Accounting Firm. Within five (5) days after Executive’s timely determination, the Bank shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive, such amounts as are then due to Executive under this Agreement. In the event Executive does not make such timely determination then within fifteen (15) days after the Bank’s receipt of the determination of the Accounting Firm, the Bank in its sole discretion may pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of Executive such portion of the Agreement Payments as it may deem appropriate, but no less than the Reduced Amount.
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(C) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Bank which should not have been made (“Overpayment”) or that additional Agreement Payments which have not been made by the Bank could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. Within two (2) years after the “separation from service” (within the meaning of Section 409A), the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to Executive which Executive shall repay to the Bank together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the “Federal Rate”); provided, however, that no amount shall be payable by Executive to the Bank if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or for the benefit of Executive together with interest thereon at the Federal Rate.
(D) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (B) and (C) above shall be borne solely by the Corporation or the Bank. The Corporation agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses of any nature resulting from or relating to its determinations pursuant to paragraphs (B) and (C) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.
1.6 Release. Notwithstanding any provision of this Agreement to the contrary, Executive shall forfeit his rights to receive the payments and benefits set forth in Section 1.2 unless he executes a general release of claims in favor of the Bank and the Corporation in a form to be provided by the Bank and the Corporation, and such release becomes effective and irrevocable in accordance with its terms, on or before the date that is sixty (60) days after Executive’s termination of employment.
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ARTICLE II
DEFINITION OF CHANGE IN CONTROL
2.1 Change in Control. For purposes of this Agreement, the term “Change in Control” shall mean a change in ownership or effective control applicable to the Corporation or the Bank as described in Section 409A(a)(2)(A(v) of the Internal Revenue Code of 1986, as amended (or any successor provision thereto and the regulations thereunder).
2.2 Notwithstanding anything else to the contrary set forth in this Agreement, if: (i) an agreement is executed by the Corporation or the Bank providing for any of the transactions or events constituting a Change in Control pursuant to this ARTICLE II or an announcement concerning a tender offer or exchange offer is made constituting a Change in Control pursuant to this ARTICLE II, and the agreement, tender offer or exchange offer subsequently expires or is terminated without the transaction or event being consummated and (ii) a “Termination Pursuant to a Change in Control” (as defined in ARTICLE I hereof) has not occurred prior to such expiration or termination, then for purposes of this Agreement (including, without limitation, ARTICLE I hereof) it shall be as though such agreement was never executed or such tender offer or exchange offer was never announced and no Change in Control event shall be deemed to have occurred as a result.
2.3 The expiration of the two-year period after any Change in Control event without the occurrence of a Termination Pursuant to a Change in Control shall not have any effect on this Agreement, which shall remain in full force and effect until its termination by written agreement of the parties or the earlier termination of Executive’s employment under circumstances not constituting a Termination Pursuant to a Change in Control.
ARTICLE III
CODE SECTION 409A
3.1 The provisions of this Agreement and any payments made herein are intended to comply with, and should be interpreted consistent with, the requirements of Section 409A of the Code and any related regulations or other effective guidance promulgated thereunder (collectively, “Section 409A”). If any provision of this Agreement or any payment made hereunder fails to meet the requirements of Section 409A, neither the Bank, the Corporation nor any of their respective affiliates shall have any liability for any tax, penalty or interest imposed on Executive by Section 409A, and Executive shall have no recourse against the Bank, the Corporation or any of their respective affiliates for payment of any such tax, penalty, or interest imposed by Section 409A.
3.2 Each installment payment payable under this Agreement shall be treated as a separate payment as defined under Treasury Regulation §1.409A-2(b)(2). If Executive is a “specified employee” (as determined under the Bank’s and the Corporation’s policy for identifying specified employees) on the date of Executive’s “separation from service” (within the meaning of Code Section 409A) and if any portion of any severance amount payable hereunder would be considered “deferred compensation” under Section 409A, such portion shall not be paid on any date prior to the first business day after the date that is six months following Executive’s separation from service. The first payment that can be made shall include the cumulative amount of any amounts that could not be paid during such six-month period. Notwithstanding the foregoing, payments delayed pursuant to this six-month delay requirement shall commence earlier in the event of Executive’s death prior to the end of the six-month period.
3.3 Section 409A prohibits reimbursement payments from being made any later than the end of the calendar year following the calendar year in which the applicable expense is incurred or paid. Also under Section 409A, (i) the amount of expenses eligible for reimbursement during any calendar year may not affect the amount of expenses eligible for reimbursement in any other calendar year, and (ii) the right to reimbursement cannot be subject to liquidation or exchange for another benefit.
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ARTICLE IV
RESTRICTIVE COVENANTS
4.1 Covenant not to Compete.
(A) Executive hereby acknowledges and recognizes the highly competitive nature of the business of the Bank and the Corporation and accordingly agrees that, during and for the applicable period set forth in Section 4.1(C) hereof, Executive shall not, except as otherwise permitted in writing by the Bank and the Corporation:
(i) be engaged, directly or indirectly, either for his own account or as agent, consultant, Executive, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm, corporation or enterprise engaged in or proposed to be engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of their respective affiliates are engaged during the Employment Period, and remain so engaged at the end of the Employment Period, within a thirty-five (35) mile radius of a branch or other place of business of the Corporation or the Bank (the “Non-Competition Area”); or
(ii) provide financial or other assistance to any person, firm, corporation or enterprise engaged in (1) the banking (including bank and corporation holding company) or financial services industry, or (2) any other activity in which the Bank and the Corporation or any of its affiliates are engaged during the Employment Period, in the Non-Competition Area; or
(iii) directly or indirectly solicit persons or entities who were customers or referral sources of the Bank and the Corporation or their respective affiliates within one year of Executive’s termination of employment, to a become customer or referral source of a person or entity other than the Bank and the Corporation or their respective affiliates; or
(iv) directly or indirectly solicit any employee of the Bank and the Corporation or their respective affiliates who were employed within one year of Executive’s termination of employment to work for anyone other than the Bank and the Corporation or their respective affiliates.
(B) It is expressly understood and agreed that, although Executive and the Bank and the Corporation consider the restrictions contained in Section 4.1(A) hereof reasonable for the purpose of preserving for the Bank and the Corporation and their respective subsidiaries their good will and other proprietary rights, if a final judicial determination is made by a court having jurisdiction that the time or territory or any other restriction contained in Section 4.1(A) hereof is an unreasonable or otherwise unenforceable restriction against Executive, the provisions of Section 4.1(A) hereof shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable.
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(C) The provisions of Section 4.1(A)(i) and 4.1(A)(ii) shall be applicable commencing on the date hereof and ending on the first anniversary date of the effective date of termination of employment. The provisions of Section 4.1(A)(iii) and 4.1(A)(iv) shall be applicable commencing on the date hereof and ending twelve (12) months following the effective date of termination of employment.
4.2 Unauthorized Disclosure. During the term of his employment hereunder, or at any later time, Executive shall not, without the written consent of the Chief Executive Officer of the Corporation, knowingly disclose to any person, other than an Executive of the Bank and the Corporation or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an Executive of the Bank and the Corporation, any material confidential information obtained by him while in the employ of the Bank and the Corporation with respect to any of the Bank’s and the Corporation’s services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices the disclosure of which could be or will be damaging to the Bank and the Corporation; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by Executive or any person with the assistance, consent or direction of Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank and the Corporation or any information that must be disclosed as required by law.
ARTICLE V
MISCELLANEOUS
5.1 Termination of Employment. This Agreement shall not in any way obligate either the Corporation or the Bank to continue the employment of Executive, nor shall this Agreement limit the right of the Corporation or the Bank to terminate Executive’s employment for any reason.
5.2 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors and, to the extent permitted hereunder, assigns. All of the obligations of the Corporation and the Bank hereunder shall be legally binding on any successor to the Corporation or the Bank, including without limitation, any successor as a result of the consummation of a Change in Control. The right of Executive to receive payments hereunder may not be assigned, alienated, pledged or otherwise encumbered by Executive and any attempt to do so shall be void and of no force or effect.
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5.3 Entire Agreement; Amendment. This Agreement represents the entire understanding between the parties hereto with respect to the subject matter hereof and may be amended only by an instrument in writing signed by the parties hereto.
5.4 Jurisdiction. The parties hereto consent to the exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania in any and all actions arising hereunder.
5.5 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
5.6 Governing Laws. This Agreement shall be governed and construed under the laws of the Commonwealth of Pennsylvania, without regard to the conflict of laws principles thereof.
5.7 Unfunded Obligations. The obligations to make payments hereunder shall be unfunded and Executive’s right to receive any payments hereunder shall be the same as any other unsecured general creditor.
5.8 Individual Agreement. This Agreement constitutes an agreement solely between the Corporation, the Bank and Executive named herein. This Agreement is intended to constitute a non-qualified arrangement for the benefit of the Executive and shall be construed and interpreted in a manner consistent with such intention.
5.9 Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and an officer specifically designated by the Board of Directors of the Corporation or Bank. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
5.10 Headings. All headings preceding the text of the several paragraphs hereof are inserted solely for reference and shall not constitute a part of this Agreement, nor affect its meaning, construction or effect.
5.11 Notices. Except as otherwise provided in this Agreement, any notice required or permitted to be given under this Agreement shall be deemed properly given if writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to Executive’s residence, in the case of notices to Executive, and to the principal executive offices of the Bank and the Corporation, in the case of notices to the Bank and the Corporation.
[signature page follows
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
| ATTEST: | LINKBANCORP, Inc. | |
|
/s/ Carl Lundblad |
/s/ Andrew Samuel Chief Executive Officer |
|
| ATTEST: | The Gratz Bank | |
|
/s/ Carl Lundblad |
/s/ Andrew Samuel Chief Executive Officer |
|
| WITNESS | ||
|
/s/ Carl Lundblad |
/s/ Kristofer Paul Name: Kristofer Paul |
|
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Exhibit 10.5
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
This Supplemental Executive Retirement Plan Agreement (the “Agreement”) by and between The Gratz Bank, located in Gratz, Pennsylvania (the “Employer”), and Andrew Samuel (the “Executive”), made this 28th day of October 2021, formalizes the agreements and understanding between the Employer and the Executive.
WITNESSETH:
WHEREAS, the Executive is employed by the Employer;
WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;
WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;
WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and
WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer;
NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:
1.1 “Accrued Benefit” means the dollar value of the liability that should be accrued by the Employer, under Generally Accepted Accounting Principles, for the Employer’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10 and the Discount Rate.
1.2 “Administrator” means the Board or its designee.
1.3 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Code Section 414(b) and 414(c). Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.
1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.
1.5 “Board” means the Board of Directors of the Employer.
1.6 “Cause” means any of the following acts or circumstances: (i) conviction of or plea of guilty or no contest to felony, crime of falsehood or moral turpitude or actual incarceration for ten (10) or more consecutive days; (ii) failure to follow good faith lawful instruction of Board, after written notice and failure to cure within thirty (30) days; (iii) willful failure to substantially perform duties, other than failure resulting from incapacity because of physical or mental illness, after written notice and failure to cure within thirty (30) days; (iv) willful violation of provisions of this Agreement, or the employment agreement between the Employer and the Executive, after written notice and failure to cure within thirty (30) days; (v) dishonesty or gross negligence in performance of duties, provided written notice of gross negligence and thirty (30) days to cure; (vi) removal or prohibition from being an institutional-affiliated party by final order of an appropriate federal or state banking agency; (vii) breach of fiduciary duty involving personal gain; (viii) willful violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority.
1.7 “Change in Control” means a change in the ownership or effective control of the Employer or the Holding Company, or in the ownership of a substantial portion of the assets of the Employer or the Holding Company, as such change is defined in Code Section 409A and regulations thereunder.
1.8 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.
1.9 “Code” means the Internal Revenue Code of 1986, as amended.
1.10 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.
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1.11 “Discount Rate” means the rate used by the Administrator for determining the Accrued Benefit. The initial Discount Rate is three percent (3%). The Administrator may adjust the Discount Rate to maintain the rate within reasonable standards according to Generally Accepted Accounting Principles and applicable bank regulatory guidance.
1.12 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service is an Involuntary Termination or Termination for Good Reason occurring within twenty-four (24) months following a Change in Control or due to termination for Cause.
1.13 “Effective Date” means November 1, 2021.
1.14 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.15 “Involuntary Termination” means a Separation from Service which (i) occurs after a Change in Control, (ii) is not a termination for Cause, and (iii) is due to the independent exercise of the Employer’s unilateral authority to terminate the Executive’s services, other than due to the Executive’s implicit or explicit request, where the Executive was willing and able to continue performing services.
1.16 “Holding Company” means LINKBANCORP, Inc. or any successor entity.
1.17 “Normal Retirement Age” means the Executive attaining age seventy (70).
1.18 “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date and end on the following December 31.
1.19 “Schedule A” means the schedule attached hereto and made a part hereof. Schedule A shall be updated upon a change to any of the benefits described in Article 2 hereof.
1.20 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a
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statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of such six (6) month period. In determining whether a Separation from Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury Regulation Section 1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.
1.21 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code Section 416(i) (without regard to Code Section 416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Treasury Regulation Section 1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.
1.22 “Termination for Good Reason” means a Separation from Service initiated by the Executive which occurs following: (i) the assignment of duties and responsibilities inconsistent with status as CEO; (ii) Change in principal place of employment to a location that increases one-way commute by more than 35 miles; (iii) any removal from office or adverse change in terms of employment (except termination for Cause); (iv) any reduction in the Executive’s annual base salary as may be increased from time to time; (v) any failure to provide benefits as least as favorable as those enjoyed during the term of employment under any pension or other benefit plan, or any action that would reduce any benefits unless part of a reduction applicable to all the Employer’s executives; or (vi) any failure to require any successor to expressly assume and agree to perform the employment agreement between the Employer and the Executive.
ARTICLE 2
PAYMENT OF BENEFITS
2.1 Normal Retirement Benefit. Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive an annual benefit in the amount of Three Hundred Thousand Dollars ($300,000) in lieu of any other benefit hereunder. The annual benefit will be paid in equal monthly installments commencing the month following Separation from Service and continuing for fifteen (15) years.
2.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the Early Termination annual benefit shown on Schedule A for the Plan Year ending immediately prior to Separation from Service in lieu of any other benefit hereunder. Additionally, the benefit amount shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Separation from Service takes place. The annual benefit will be paid in equal monthly installments commencing the month following Separation from Service and continuing for fifteen (15) years.
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2.3 Disability Benefit. In the event the Executive suffers a Disability prior to Normal Retirement Age, the Employer shall pay the Executive the annual benefit shown on Schedule A for the Plan Year ending immediately prior to Disability in lieu of any other benefit hereunder. Additionally, the benefit amount shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Disability takes place. The annual benefit will be paid in equal monthly installments commencing the month following Disability and continuing for fifteen (15) years.
2.4 Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by an Involuntary Termination or a Termination for Good Reason prior to Normal Retirement Age, the Employer shall pay the Executive an annual benefit in the amount of Three Hundred Thousand Dollars ($300,000) in lieu of any other benefit hereunder. The annual benefit will be paid in equal monthly installments commencing the month following Separation from Service and continuing for fifteen (15) years.
2.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary the benefit in the amount shown on the table below in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following the Executive’s death.
|
Year of Executive’s Death |
Amount of Benefit | |||
|
2021 |
$ | 2,744,150 | ||
|
2022 |
$ | 2,983,406 | ||
|
2023 |
$ | 3,229,940 | ||
|
2024 |
$ | 3,483,972 | ||
|
2025 or later |
$ | 3,629,187 | ||
2.6 Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive had the Executive survived.
2.7 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall not be entitled to any benefits under the terms of this Agreement.
2.8 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.
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2.9 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation Section 1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code Section 402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.
2.10 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated employees on a reasonably consistent basis.
(a) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.
(b) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.
2.11 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.
2.12 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.
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2.13 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:
(a) must take effect not less than twelve (12) months after the amendment is made;
(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;
(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and
(d) may not accelerate the time or schedule of any distribution.
ARTICLE 3
BENEFICIARIES
3.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.
3.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.
ARTICLE 4
ADMINISTRATION
4.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.
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4.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.
4.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.
4.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and/or recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.
4.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.
4.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to cease further benefit accruals hereunder.
4.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1 Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.
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(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.
(c) Notice of Decision. If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Agreement’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).
5.2 Review Procedure. If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.
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(a) Additional Evidence. Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.
(b) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.
(c) Additional Submissions – Information Access. After such request the Claimant may submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.
(d) Considerations on Review. In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination. Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.
(e) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.
(f) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of
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charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist.
5.3 Exhaustion of Remedies. The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.
5.4 Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.
ARTICLE 6
AMENDMENT AND TERMINATION
6.1 Agreement Amendment Generally. Except as provided in Section 6.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.
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6.2 Amendment to Ensure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or (iii) to comply with the written instructions of the Employer’s auditors or banking regulators.
6.3 Agreement Termination Generally. Except as provided in Section 6.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2.
6.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 6.3, and subject to the requirements of Code Section 409A and Treasury Regulation Section 1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of a termination described in subsection (a) or (c) below, the Employer shall pay the Executive the Accrued Benefit. In the event of a termination described in subsection (b), the Employer shall pay the Executive the present value, calculated using an annual interest rate of three percent, compounded monthly, of the benefit described in Section 2.4. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.
(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court, provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulation Section 1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.
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(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulation Section 1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulation Section 1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.
7.2 State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania except to the extent preempted by the laws of the United States of America.
7.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
7.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
7.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.
7.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.
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7.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.
7.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.
7.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.
7.10 Forfeiture Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
(i) within eighteen (18) months following a Separation from Service, becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within thirty-five (35) miles of any office maintained by the Employer as of the date of the termination of the Executive’s employment;
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(ii) within eighteen (18) months following a Separation from Service, participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;
(iii) within eighteen (18) months following a Separation from Service, assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;
(iv) within eighteen (18) months following a Separation from Service, sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;
(v) within eighteen (18) months following a Separation from Service, divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
The forfeiture provision detailed in this Section shall not apply following a Change in Control.
7.11 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.
7.12 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
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7.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.
7.14 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.
7.15 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.
7.16 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.
7.17 Responsibility for Taxes. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder. The Executive acknowledges that in no event will the Employer be liable to the Executive for any taxes resulting from the Executive’s participation in the Agreement, including any additional penalty, excise or other taxes that might be imposed as a result of Code Section 409A.
7.18 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.
IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:
| Executive: | Employer: | |||||
|
/s/ Andrew Samuel |
By: |
/s/ George Parmer |
||||
| Its: | Chair, Compensation Committee | |||||
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Exhibit 10.6
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 28th day of October, 2021, by and between The Gratz Bank, located in Gratz, Pennsylvania (the “Employer”), and Carl Lundblad (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.
WITNESSETH:
WHEREAS, the Executive is employed by the Employer;
WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;
WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;
WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and
WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer;
NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:
1.1 “Administrator” means the Board or its designee.
1.2 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.
1.3 “Base Salary” means the cash compensation relating to services performed during any calendar year, excluding bonuses, commissions, distributions from nonqualified deferred compensation plans, fringe benefits, incentive payments, non-monetary awards, overtime, relocation expenses, stock options and other fees, and automobile and other allowances paid to the Executive for services rendered (whether or not such allowances are included in the Executive’s gross income). Base Salary shall be calculated before reduction for amounts voluntarily deferred or contributed by the Executive pursuant to qualified or non-qualified plans and shall be calculated to include amounts not otherwise included in the Executive’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by the Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Executive.
1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.
1.5 “Board” means the Board of Directors of the Employer.
1.6 “Bonus” means the cash bonus, if any, awarded to the Executive for services performed during a calendar year.
1.7 “Cause” means any of the following acts or circumstances: (i) conviction of or plea of guilty or no contest to felony, crime of falsehood or moral turpitude or actual incarceration for ten (10) or more consecutive days; (ii) failure to follow good faith lawful instruction of Board, after written notice and failure to cure within thirty (30) days; (iii) willful failure to substantially perform duties, other than failure resulting from incapacity because of physical or mental illness, after written notice and failure to cure within thirty (30) days; (iv) willful violation of provisions of Agreement, after written notice and failure to cure within thirty (30) days; (v) dishonesty or gross negligence in performance of duties, provided written notice of gross negligence and thirty (30) days to cure; (vi) removal or prohibition from being an institutional-affiliated party by final order of an appropriate federal or state banking agency; (vii) breach of fiduciary duty involving personal gain; (viii) willful violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority.
1.8 “Change in Control” means a change in the ownership or effective control of the Employer or the Holding Company, or in the ownership of a substantial portion of the assets of the Employer or the Holding Company, as such change is defined in Code Section 409A and regulations thereunder.
1.9 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.
1.10 “Contribution” means the amount the Employer contributes to the Deferral Account, calculated according to the provisions of Article 2.
1.11 “Code” means the Internal Revenue Code of 1986, as amended.
1.12 “Crediting Rate” means an annual rate equal to one percent plus the annual rate on a ten-year Treasury Note determined by taking the average rate of all the rates of the Treasury Note in the month of December of the prior Plan Year provided that the Crediting Rate shall not be less than three percent (3%).
1.13 “Deferral Account” means the Employer’s accounting of the accumulated Deferrals and Contributions plus accrued interest.
1.14 “Deferral Election Form” means each form established from time to time by the Administrator that the Executive completes, signs and returns to the Administrator to designate the amount of Deferrals.
1.15 “Deferrals” means the amount of Base Salary or Bonus the Executive elects to defer according to this Agreement.
1.16 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.
1.17 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs within twenty-four (24) months following a Change in Control or due to termination for Cause.
1.18 “Effective Date” means November 1, 2021.
1.19 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.20 “Holding Company” means LINKBANCORP, Inc. or any successor entity.
1.21 “Normal Retirement Age” means the Executive attaining age sixty-five (65).
1.22 “Operating Return on Assets” means the Holding Company’s after-tax net income at the end of the most recent fiscal year, excluding merger related expenses and other non-recurring items as determined by Holding Company management and the Board of Directors, divided by the Holding Company’s average assets for the same fiscal year, as reported in the Holding Company’s general Ledger.
1.23 “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date and end on the following December 31.
1.24 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of such six (6) month period. In determining whether a Separation from Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.
1.25 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.
1.26 “Unforeseeable Emergency” means a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Beneficiary, or the Executive’s dependent (as defined in Section 152(a) of the Code), loss of the Executive’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive.
ARTICLE 2
DEFERRALS
2.1 Elections Generally. The Executive may annually file a Deferral Election Form with the Administrator no later than the end of the Plan Year preceding the Plan Year in which services leading to the compensation to be deferred will be performed.
2.2 Initial Election. After being notified by the Administrator of becoming eligible to participate in this Agreement, the Executive may make an initial deferral election by delivering to the Administrator a signed Deferral Election Form within thirty (30) days of becoming eligible. The Deferral Election Form shall set forth the amount of compensation to be deferred. However, if the Executive was eligible to participate in any other elective deferral non-qualified deferred compensation plans sponsored by the Employer prior to becoming eligible to participate in this Agreement, the initial election to defer compensation under this Agreement shall not be effective until the Plan Year following the Plan Year in which the Executive became eligible to participate in this Agreement.
2.3 Election Changes. The Executive may modify the amount of Deferrals annually by filing a new Deferral Election Form with the Employer. The modified deferral shall not be effective until the calendar year following the year in which the subsequent Deferral Election Form is received by the Employer.
2.4 Hardship. If an Unforeseeable Emergency occurs, the Executive, by written instructions to the Employer, may discontinue deferrals hereunder. Any subsequent Deferral Elections may be made only in accordance with Section 2.1 hereof.
2.5 Employer Contributions. In addition to any Deferrals, within forty-five (45) days following the end of each Plan Year, the Employer shall make a Contribution to the Deferral Account based on Operating Return on Assets for the immediately preceding Plan Year determined in accordance with the table below. The Contributions will start in 2022 and continue until the earliest of Separation from Service, Normal Retirement Age, Disability or the death of the Executive.
|
Operating Return on Assets |
Percent of Base Salary | |||
|
Less than .50% |
0 | % | ||
|
At least .50% and less than .80% |
3 | % | ||
|
At least .80% and less than 1.0% |
10 | % | ||
|
At least 1.0% |
15 | % | ||
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishing and Crediting. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:
(a) Any Deferrals or Contributions hereunder; and
(b) Interest as follows: on the last day of each month interest shall be credited on the Deferral Account at an annual rate equal to the Crediting Rate, compounded monthly.
(c) In the event any Contribution to the Deferral Account is subsequently determined to have been based on inaccurate financial statements or any other inaccurate performance metric criteria, the Deferral Account balance shall be adjusted to reflect the proper amount of such Contribution, including related interest thereon, in accordance with the corrected information. If such determination occurs after the Executive begins to receive distributions under Article 4 hereof, any future installment payments will be adjusted to account for any change in the Deferral Account balance.
3.2 Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.
ARTICLE 4
PAYMENT OF BENEFITS
4.1 Normal Retirement Benefit. Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred eighty (180) consecutive monthly installments and shall commence the month following Separation from Service.
4.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following Separation from Service.
4.3 Disability Benefit. If the Executive experiences a Disability prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated as of the date of determination of Disability. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following the date of determination of Disability.
4.4 Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service occurring prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in a lump sum within thirty (30) days following Separation from Service, with the actual date of payment determined by the Employer in its sole discretion.
4.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary the Deferral Account balance calculated at the Executive’s death. This benefit will be paid in a lump sum within ninety (90) days of the Executive’s death, with the actual date of payment determined by the Employer in its sole discretion.
4.6 Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.
4.7 Hardship Distribution. If an Unforeseeable Emergency occurs, the Executive may petition the Board to receive a distribution from the Agreement (a “Hardship Distribution”). The Board in its sole discretion may grant such petition. If granted, the Executive shall receive, within sixty (60) days, a distribution from the Agreement only to the extent deemed necessary by the Board to remedy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution. In any event, the maximum amount which may be paid out as a Hardship Distribution is the Deferral Account balance as of the day the Executive petitioned the Board to receive a Hardship Distribution. A Hardship Distribution shall reduce the Deferral Account balance.
4.8 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall forfeit all amounts credited to the Deferral Account except the Deferrals.
4.9 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.
4.10 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.
4.11 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated employees on a reasonably consistent basis.
(a) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.
(b) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.
4.12 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.
4.13 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.
4.14 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:
(a) must take effect not less than twelve (12) months after the amendment is made;
(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;
(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and
(d) may not accelerate the time or schedule of any distribution.
ARTICLE 5
BENEFICIARIES
5.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.
5.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.
ARTICLE 6
ADMINISTRATION
6.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.
6.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.
6.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.
6.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.
6.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.
6.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit the Executive from making any additional Deferrals hereunder.
6.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.
ARTICLE 7
CLAIMS AND REVIEW PROCEDURES
7.1 Claims Procedure. A Claimant who believes that he or she is being denied a benefit to which he or she is entitled hereunder shall make a claim for such benefits as follows.
(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.
(c) Notice of Decision. If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Plan’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).
7.2 Review Procedure. If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.
(a) Additional Evidence. Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.
(b) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.
(c) Additional Submissions – Information Access. After such request the Claimant may submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.
(d) Considerations on Review. In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination. Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.
(e) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.
(f) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist.
7.3 Exhaustion of Remedies. The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.
7.4 Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.
8.2 Amendment to Ensure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or (iii) to comply with the written instructions of the Employer’s auditors or banking regulators.
8.3 Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 4.
8.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of such a complete termination, the Employer shall pay the Deferral Account balance to the Executive. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.
(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court, provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.
(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.
9.2 State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania except to the extent preempted by the laws of the United States of America.
9.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
9.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.
9.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.
9.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.
9.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.
9.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.
9.10 Forfeiture Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
(i) within twelve (12) months following a Separation from Service, becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within thirty-five (35) miles of any office maintained by the Employer as of the date of the termination of the Executive’s employment;
(ii) within twelve (12) months following a Separation from Service, participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;
(iii) within twelve (12) months following a Separation from Service, assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;
(iv) within twelve (12) months following a Separation from Service, sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;
(v) within twelve (12) months following a Separation from Service, divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
The forfeiture provision detailed in this Section shall not apply following a Change in Control.
9.11 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.
9.12 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
9.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.
9.14 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.
9.15 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.
9.16 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.
9.17 Responsibility for Taxes. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder. The Executive acknowledges that in no event will the Employer be liable to the Executive for any taxes resulting from the Executive’s participation in the Agreement, including any additional penalty, excise or other taxes that might be imposed as a result of Code Section 409A.
9.18 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.
IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement as indicated below:
| Executive: | Employer: | |||||
|
/s/ Carl Lundblad |
By: |
/s/ Andrew Samuel |
||||
| Its: | Chief Executive Officer | |||||
Exhibit 10.7
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 28th day of October, 2021, by and between The Gratz Bank, located in Gratz, Pennsylvania (the “Employer”), and Kris Paul (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.
WITNESSETH:
WHEREAS, the Executive is employed by the Employer;
WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;
WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;
WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and
WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer;
NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:
1.1 “Administrator” means the Board or its designee.
1.2 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.
1.3 “Base Salary” means the cash compensation relating to services performed during any calendar year, excluding bonuses, commissions, distributions from nonqualified deferred compensation plans, fringe benefits, incentive payments, non-monetary awards, overtime, relocation expenses, stock options and other fees, and automobile and other allowances paid to the Executive for services rendered (whether or not such allowances are included in the Executive’s gross income). Base Salary shall be calculated before reduction for amounts voluntarily deferred or contributed by the Executive pursuant to qualified or non-qualified plans and shall be calculated to include amounts not otherwise included in the Executive’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by the Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Executive.
1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.
1.5 “Board” means the Board of Directors of the Employer.
1.6 “Bonus” means the cash bonus, if any, awarded to the Executive for services performed during a calendar year.
1.7 “Cause” means any of the following acts or circumstances: (i) conviction of or plea of guilty or no contest to felony, crime of falsehood or moral turpitude or actual incarceration for ten (10) or more consecutive days; (ii) failure to follow good faith lawful instruction of Board, after written notice and failure to cure within thirty (30) days; (iii) willful failure to substantially perform duties, other than failure resulting from incapacity because of physical or mental illness, after written notice and failure to cure within thirty (30) days; (iv) willful violation of provisions of Agreement, after written notice and failure to cure within thirty (30) days; (v) dishonesty or gross negligence in performance of duties, provided written notice of gross negligence and thirty (30) days to cure; (vi) removal or prohibition from being an institutional-affiliated party by final order of an appropriate federal or state banking agency; (vii) breach of fiduciary duty involving personal gain; (viii) willful violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority.
1.8 “Change in Control” means a change in the ownership or effective control of the Employer or the Holding Company, or in the ownership of a substantial portion of the assets of the Employer or the Holding Company, as such change is defined in Code Section 409A and regulations thereunder.
1.9 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.
1.10 “Contribution” means the amount the Employer contributes to the Deferral Account, calculated according to the provisions of Article 2.
1.11 “Code” means the Internal Revenue Code of 1986, as amended.
1.12 “Crediting Rate” means an annual rate equal to one percent plus the annual rate on a ten-year Treasury Note determined by taking the average rate of all the rates of the Treasury Note in the month of December of the prior Plan Year provided that the Crediting Rate shall not be less than three percent (3%).
2
1.13 “Deferral Account” means the Employer’s accounting of the accumulated Deferrals and Contributions plus accrued interest.
1.14 “Deferral Election Form” means each form established from time to time by the Administrator that the Executive completes, signs and returns to the Administrator to designate the amount of Deferrals.
1.15 “Deferrals” means the amount of Base Salary or Bonus the Executive elects to defer according to this Agreement.
1.16 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.
1.17 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs within twenty-four (24) months following a Change in Control or due to termination for Cause.
1.18 “Effective Date” means November 1, 2021.
1.19 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.20 “Holding Company” means LINKBANCORP, Inc. or any successor entity
1.21 “Normal Retirement Age” means the Executive attaining age sixty-five (65).
1.22 “Operating Return on Assets” means the Holding Company’s after-tax net income at the end of the most recent fiscal year, excluding merger related expenses and other non-recurring items as determined by Holding Company management and the Board of Directors, divided by the Holding Company’s average assets for the same fiscal year, as reported in the Holding Company’s general Ledger.
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1.23 “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date and end on the following December 31.
1.24 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of such six (6) month period. In determining whether a Separation from Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.
1.25 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.
1.26 “Unforeseeable Emergency” means a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Beneficiary, or the Executive’s dependent (as defined in Section 152(a) of the Code), loss of the Executive’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive.
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ARTICLE 2
DEFERRALS
2.1 Elections Generally. The Executive may annually file a Deferral Election Form with the Administrator no later than the end of the Plan Year preceding the Plan Year in which services leading to the compensation to be deferred will be performed.
2.2 Initial Election. After being notified by the Administrator of becoming eligible to participate in this Agreement, the Executive may make an initial deferral election by delivering to the Administrator a signed Deferral Election Form within thirty (30) days of becoming eligible. The Deferral Election Form shall set forth the amount of compensation to be deferred. However, if the Executive was eligible to participate in any other elective deferral non-qualified deferred compensation plans sponsored by the Employer prior to becoming eligible to participate in this Agreement, the initial election to defer compensation under this Agreement shall not be effective until the Plan Year following the Plan Year in which the Executive became eligible to participate in this Agreement.
2.3 Election Changes. The Executive may modify the amount of Deferrals annually by filing a new Deferral Election Form with the Employer. The modified deferral shall not be effective until the calendar year following the year in which the subsequent Deferral Election Form is received by the Employer.
2.4 Hardship. If an Unforeseeable Emergency occurs, the Executive, by written instructions to the Employer, may discontinue deferrals hereunder. Any subsequent Deferral Elections may be made only in accordance with Section 2.1 hereof.
2.5 Employer Contributions. In addition to any Deferrals, within forty-five (45) days following the end of each Plan Year, the Employer shall make a Contribution to the Deferral Account based on Operating Return on Assets for the immediately preceding Plan Year determined in accordance with the table below. The Contributions will start in 2023 and continue until the earliest of Separation from Service, Normal Retirement Age, Disability or the death of the Executive.
|
Operating Return on Assets |
Percent of Base Salary | |||
|
Less than .50% |
0 | % | ||
|
At least .50% and less than .80% |
3 | % | ||
|
At least .80% and less than 1.0% |
8 | % | ||
|
At least 1.0% |
10 | % | ||
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishing and Crediting. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:
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(a) Any Deferrals or Contributions hereunder; and
(b) Interest as follows: on the last day of each month interest shall be credited on the Deferral Account at an annual rate equal to the Crediting Rate, compounded monthly.
(c) In the event any Contribution to the Deferral Account is subsequently determined to have been based on inaccurate financial statements or any other inaccurate performance metric criteria, the Deferral Account balance shall be adjusted to reflect the proper amount of such Contribution, including related interest thereon, in accordance with the corrected information. If such determination occurs after the Executive begins to receive distributions under Article 4 hereof, any future installment payments will be adjusted to account for any change in the Deferral Account balance.
3.2 Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.
ARTICLE 4
PAYMENT OF BENEFITS
4.1 Normal Retirement Benefit. Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred eighty (180) consecutive monthly installments and shall commence the month following Separation from Service.
4.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following Separation from Service.
4.3 Disability Benefit. If the Executive experiences a Disability prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated as of the date of determination of Disability. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following the date of determination of Disability.
4.4 Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service occurring prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in a lump sum within thirty (30) days following Separation from Service, with the actual date of payment determined by the Employer in its sole discretion.
4.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary the Deferral Account balance calculated at the Executive’s death. This benefit will be paid in a lump sum within ninety (90) days of the Executive’s death, with the actual date of payment determined by the Employer in its sole discretion.
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4.6 Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.
4.7 Hardship Distribution. If an Unforeseeable Emergency occurs, the Executive may petition the Board to receive a distribution from the Agreement (a “Hardship Distribution”). The Board in its sole discretion may grant such petition. If granted, the Executive shall receive, within sixty (60) days, a distribution from the Agreement only to the extent deemed necessary by the Board to remedy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution. In any event, the maximum amount which may be paid out as a Hardship Distribution is the Deferral Account balance as of the day the Executive petitioned the Board to receive a Hardship Distribution. A Hardship Distribution shall reduce the Deferral Account balance.
4.8 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall forfeit all amounts credited to the Deferral Account except the Deferrals.
4.19 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.
4.10 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.
4.11 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated employees on a reasonably consistent basis.
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(a) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.
(b) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.
4.12 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.
4.13 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.
4.14 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:
(a) must take effect not less than twelve (12) months after the amendment is made;
(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;
(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and
(d) may not accelerate the time or schedule of any distribution.
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ARTICLE 5
BENEFICIARIES
5.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.
5.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.
ARTICLE 6
ADMINISTRATION
6.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.
6.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.
6.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.
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6.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.
6.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.
6.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit the Executive from making any additional Deferrals hereunder.
6.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.
ARTICLE 7
CLAIMS AND REVIEW PROCEDURES
7.1 Claims Procedure. A Claimant who believes that he or she is being denied a benefit to which he or she is entitled hereunder shall make a claim for such benefits as follows.
(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.
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(c) Notice of Decision. If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Plan’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).
7.2 Review Procedure. If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.
(a) Additional Evidence. Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.
(b) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.
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(c) Additional Submissions – Information Access. After such request the Claimant may submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.
(d) Considerations on Review. In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination. Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.
(e) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.
(f) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist.
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7.3 Exhaustion of Remedies. The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.
7.4 Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.
8.2 Amendment to Ensure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or (iii) to comply with the written instructions of the Employer’s auditors or banking regulators.
8.3 Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 4.
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8.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of such a complete termination, the Employer shall pay the Deferral Account balance to the Executive. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.
(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court, provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.
(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.
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ARTICLE 9
MISCELLANEOUS
9.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.
9.2 State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania except to the extent preempted by the laws of the United States of America.
9.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
9.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.
9.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.
9.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.
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9.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.
9.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.
9.10 Forfeiture Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
(i) within twelve (12) months following a Separation from Service, becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within thirty-five (35) miles of any office maintained by the Employer as of the date of the termination of the Executive’s employment;
(ii) within twelve (12) months following a Separation from Service, participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;
(iii) within twelve (12) months following a Separation from Service, assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;
(iv) within twelve (12) months following a Separation from Service, sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;
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(v) within twelve (12) months following a Separation from Service, divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
The forfeiture provision detailed in this Section shall not apply following a Change in Control.
9.11 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.
9.12 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
9.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.
9.14 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.
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9.15 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.
9.16 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.
9.17 Responsibility for Taxes. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder. The Executive acknowledges that in no event will the Employer be liable to the Executive for any taxes resulting from the Executive’s participation in the Agreement, including any additional penalty, excise or other taxes that might be imposed as a result of Code Section 409A.
9.18 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.
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IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement as indicated below:
| Executive: | Employer: | |||||||
|
/s/ Kristofer Paul |
By: |
/s/ Andrew Samuel |
||||||
| Its: | Chief Executive Officer | |||||||
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Exhibit 10.8
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT (this “Agreement”), adopted this 28th day of October 2021, by and between The Gratz Bank, located in Gratz, Pennsylvania (the “Employer”), and Brent Smith (the “Executive”), formalizes the agreements and understanding between the Employer and the Executive.
WITNESSETH:
WHEREAS, the Executive is employed by the Employer;
WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;
WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;
WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and
WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer;
NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:
1.1 “Administrator” means the Board or its designee.
1.2 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.
1.3 “Base Salary” means the cash compensation relating to services performed during any calendar year, excluding bonuses, commissions, distributions from nonqualified deferred compensation plans, fringe benefits, incentive payments, non-monetary awards, overtime, relocation expenses, stock options and other fees, and automobile and other allowances paid to the Executive for services rendered (whether or not such allowances are included in the Executive’s gross income). Base Salary shall be calculated before reduction for amounts voluntarily deferred or contributed by the Executive pursuant to qualified or non-qualified plans and shall be calculated to include amounts not otherwise included in the Executive’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by the Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Executive.
1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.
1.5 “Board” means the Board of Directors of the Employer.
1.6 “Bonus” means the cash bonus, if any, awarded to the Executive for services performed during a calendar year.
1.7 “Cause” means any of the following acts or circumstances: (i) conviction of or plea of guilty or no contest to felony, crime of falsehood or moral turpitude or actual incarceration for ten (10) or more consecutive days; (ii) failure to follow good faith lawful instruction of Board, after written notice and failure to cure within thirty (30) days; (iii) willful failure to substantially perform duties, other than failure resulting from incapacity because of physical or mental illness, after written notice and failure to cure within thirty (30) days; (iv) willful violation of provisions of Agreement, after written notice and failure to cure within thirty (30) days; (v) dishonesty or gross negligence in performance of duties, provided written notice of gross negligence and thirty (30) days to cure; (vi) removal or prohibition from being an institutional-affiliated party by final order of an appropriate federal or state banking agency; (vii) breach of fiduciary duty involving personal gain; (viii) willful violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority.
1.8 “Change in Control” means a change in the ownership or effective control of the Employer or the Holding Company, or in the ownership of a substantial portion of the assets of the Employer or the Holding Company, as such change is defined in Code Section 409A and regulations thereunder.
1.9 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.
1.10 “Contribution” means the amount the Employer contributes to the Deferral Account, calculated according to the provisions of Article 2.
1.11 “Code” means the Internal Revenue Code of 1986, as amended.
1.12 “Crediting Rate” means an annual rate equal to one percent plus the annual rate on a ten-year Treasury Note determined by taking the average rate of all the rates of the Treasury Note in the month of December of the prior Plan Year provided that the Crediting Rate shall not be less than three percent (3%).
1.13 “Deferral Account” means the Employer’s accounting of the accumulated Deferrals and Contributions plus accrued interest.
1.14 “Deferral Election Form” means each form established from time to time by the Administrator that the Executive completes, signs and returns to the Administrator to designate the amount of Deferrals.
1.15 “Deferrals” means the amount of Base Salary or Bonus the Executive elects to defer according to this Agreement.
1.16 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.
1.17 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs within twenty-four (24) months following a Change in Control or due to termination for Cause.
1.18 “Effective Date” means November 1, 2021.
1.19 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
1.20 “Holding Company” means LINKBANCORP, Inc. or any successor entity.
1.21 “Normal Retirement Age” means the Executive attaining age sixty-five (65).
1.22 “Operating Return on Assets” means the Holding Company’s after-tax net income at the end of the most recent fiscal year, excluding merger related expenses and other non-recurring items as determined by Holding Company management and the Board of Directors, divided by the Holding Company’s average assets for the same fiscal year, as reported in the Holding Company’s general Ledger.
1.23 “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date and end on the following December 31.
1.24 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of such six (6) month period. In determining whether a Separation from Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.
1.25 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.
1.26 “Unforeseeable Emergency” means a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Beneficiary, or the Executive’s dependent (as defined in Section 152(a) of the Code), loss of the Executive’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive.
ARTICLE 2
DEFERRALS
2.1 Elections Generally. The Executive may annually file a Deferral Election Form with the Administrator no later than the end of the Plan Year preceding the Plan Year in which services leading to the compensation to be deferred will be performed.
2.2 Initial Election. After being notified by the Administrator of becoming eligible to participate in this Agreement, the Executive may make an initial deferral election by delivering to the Administrator a signed Deferral Election Form within thirty (30) days of becoming eligible. The Deferral Election Form shall set forth the amount of compensation to be deferred. However, if the Executive was eligible to participate in any other elective deferral non-qualified deferred compensation plans sponsored by the Employer prior to becoming eligible to participate in this Agreement, the initial election to defer compensation under this Agreement shall not be effective until the Plan Year following the Plan Year in which the Executive became eligible to participate in this Agreement.
2.3 Election Changes. The Executive may modify the amount of Deferrals annually by filing a new Deferral Election Form with the Employer. The modified deferral shall not be effective until the calendar year following the year in which the subsequent Deferral Election Form is received by the Employer.
2.4 Hardship. If an Unforeseeable Emergency occurs, the Executive, by written instructions to the Employer, may discontinue deferrals hereunder. Any subsequent Deferral Elections may be made only in accordance with Section 2.1 hereof.
2.5 Employer Contributions. In addition to any Deferrals, within forty-five (45) days following the end of each Plan Year, the Employer shall make a Contribution to the Deferral Account based on Operating Return on Assets for the immediately preceding Plan Year determined in accordance with the table below. The Contributions will start in 2022 and continue until the earliest of Separation from Service, Normal Retirement Age, Disability or the death of the Executive.
|
Operating Return on Assets |
Percent of Base Salary | |||
|
Less than .50% |
0 | % | ||
|
At least .50% and less than .80% |
3 | % | ||
|
At least .80% and less than 1.0% |
10 | % | ||
|
At least 1.0% |
15 | % | ||
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishing and Crediting. The Employer shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:
(a) Any Deferrals or Contributions hereunder; and
(b) Interest as follows: on the last day of each month interest shall be credited on the Deferral Account at an annual rate equal to the Crediting Rate, compounded monthly.
(c) In the event any Contribution to the Deferral Account is subsequently determined to have been based on inaccurate financial statements or any other inaccurate performance metric criteria, the Deferral Account balance shall be adjusted to reflect the proper amount of such Contribution, including related interest thereon, in accordance with the corrected information. If such determination occurs after the Executive begins to receive distributions under Article 4 hereof, any future installment payments will be adjusted to account for any change in the Deferral Account balance.
3.2 Recordkeeping Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement and is not a trust fund of any kind.
ARTICLE 4
PAYMENT OF BENEFITS
4.1 Normal Retirement Benefit. Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred eighty (180) consecutive monthly installments and shall commence the month following Separation from Service.
4.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following Separation from Service.
4.3 Disability Benefit. If the Executive experiences a Disability prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated as of the date of determination of Disability. This benefit shall be paid in one hundred twenty (120) consecutive monthly installments and shall commence the month following the date of determination of Disability.
4.4 Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by a Separation from Service occurring prior to Normal Retirement Age, the Employer shall pay the Executive the Deferral Account balance calculated at Separation from Service. This benefit shall be paid in a lump sum within thirty (30) days following Separation from Service, with the actual date of payment determined by the Employer in its sole discretion.
4.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary the Deferral Account balance calculated at the Executive’s death. This benefit will be paid in a lump sum within ninety (90) days of the Executive’s death, with the actual date of payment determined by the Employer in its sole discretion.
4.6 Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive, had the Executive survived.
4.7 Hardship Distribution. If an Unforeseeable Emergency occurs, the Executive may petition the Board to receive a distribution from the Agreement (a “Hardship Distribution”). The Board in its sole discretion may grant such petition. If granted, the Executive shall receive, within sixty (60) days, a distribution from the Agreement only to the extent deemed necessary by the Board to remedy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution. In any event, the maximum amount which may be paid out as a Hardship Distribution is the Deferral Account balance as of the day the Executive petitioned the Board to receive a Hardship Distribution. A Hardship Distribution shall reduce the Deferral Account balance.
4.8 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall forfeit all amounts credited to the Deferral Account except the Deferrals.
4.9 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.
4.10 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.
4.11 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated employees on a reasonably consistent basis.
(a) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.
(b) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.
4.12 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.
4.13 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.
4.14 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:
(a) must take effect not less than twelve (12) months after the amendment is made;
(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;
(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and
(d) may not accelerate the time or schedule of any distribution.
ARTICLE 5
BENEFICIARIES
5.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.
5.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.
ARTICLE 6
ADMINISTRATION
6.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.
6.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.
6.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.
6.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.
6.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.
6.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit the Executive from making any additional Deferrals hereunder.
6.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.
ARTICLE 7
CLAIMS AND REVIEW PROCEDURES
7.1 Claims Procedure. A Claimant who believes that he or she is being denied a benefit to which he or she is entitled hereunder shall make a claim for such benefits as follows.
(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.
(c) Notice of Decision. If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Plan’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).
7.2 Review Procedure. If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.
(a) Additional Evidence. Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.
(b) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.
(c) Additional Submissions – Information Access. After such request the Claimant may submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.
(d) Considerations on Review. In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination. Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.
(e) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.
(f) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist.
7.3 Exhaustion of Remedies. The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.
7.4 Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 Agreement Amendment Generally. Except as provided in Section 8.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.
8.2 Amendment to Ensure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or (iii) to comply with the written instructions of the Employer’s auditors or banking regulators.
8.3 Agreement Termination Generally. Except as provided in Section 8.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 4.
8.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of such a complete termination, the Employer shall pay the Deferral Account balance to the Executive. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.
(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court, provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.
(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.
9.2 State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania except to the extent preempted by the laws of the United States of America.
9.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
9.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.
9.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.
9.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.
9.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.
9.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.
9.10 Forfeiture Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
(i) within twelve (12) months following a Separation from Service, becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within thirty-five (35) miles of any office maintained by the Employer as of the date of the termination of the Executive’s employment;
(ii) within twelve (12) months following a Separation from Service, participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer as of the date of termination of the Executive’s employment;
(iii) within twelve (12) months following a Separation from Service, assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Employer or transaction involving the Employer;
(iv) within twelve (12) months following a Separation from Service, sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment;
(v) within twelve (12) months following a Separation from Service, divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
The forfeiture provision detailed in this Section shall not apply following a Change in Control.
9.11 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.
9.12 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
9.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.
9.14 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.
9.15 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.
9.16 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.
9.17 Responsibility for Taxes. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder. The Executive acknowledges that in no event will the Employer be liable to the Executive for any taxes resulting from the Executive’s participation in the Agreement, including any additional penalty, excise or other taxes that might be imposed as a result of Code Section 409A.
9.18 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.
IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement as indicated below:
| Executive: | Employer: | |||||||
|
/s/ Brent Smith |
By: |
/s/ Andrew Samuel |
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| Its: | Chief Executive Officer | |||||||