EXHIBIT 10.5
CITIZENS BANK
January 16, 1998
Xx. Xxxxxx X. Xxxxxx, Chairman
Citizens Bank
000 Xxxxx Xxxx
X.X. Box 171
Leon, Iowa 50144
Re: Chairman's Phantom Stock Long-Term Incentive Plan
Dear Xxx:
This letter shall constitute an Agreement between you and Citizens
Bank, Xxxx, Iowa (the "Bank"). The Plan is designed to reward earnings of at
least 1.2% on average assets. Should extraordinary growth occur so that there
is a 10% growth in earnings even though earnings are less than 1.2% on average
assets, that is rewarded. If both occur, both rewards are made.
1. OFFICE. You have been appointed Chairman of the Bank and have
agreed to so serve. Your base compensation will be determined and agreed from
time to time.
2. STOCK OUTSTANDING. There are 8,000 shares of common stock
outstanding.
3. PHANTOM STOCK. As of January 1, 1998, you are "deemed" to have
purchased One Hundred Sixty (160) shares of common stock of Bank. The Bank will
maintain a record of such "deemed" shares, but no actual acquisition of such
shares shall be made nor shall any shares be issued to you or on your account.
You shall pay nothing for the deemed shares nor shall the Bank pay you or your
beneficiaries anything therefor. Such deemed shares are solely for the purpose
of calculating accruals to your account pursuant to this Agreement.
4. EARNINGS ACCRUAL. Subject to paragraphs 5 and 6 hereof, starting
with the fiscal year of the Bank beginning January 1, 1998, and ending as of the
end of the month preceding the month in which occurs the date of termination of
your employment by Bank, the Bank shall accrue an amount payable to you which
shall be equal to the total earnings per share of the One Hundred Sixty (160)
Bank common shares which are deemed owned by you for such year as if you had
in
Xxxxxx X. Xxxxxx
January 16, 1998
Page 2
fact purchased such common shares from the Bank. In calculating such
earnings per share, the "deemed" common shares shall be divided into the net
after tax earnings of the Bank allocable to common stock. Payment of cash
dividends on the common stock outstanding shall not affect the amount
allocated to the common shares "deemed" purchased by you. Any partial year
accruals shall be computed on an annualized basis.
5. MINIMUM GOALS. In the event the net after tax earnings of the
Bank do not, for any fiscal year, both exceed 1.2% of the average assets of
Bank, and also exceed the prior year's earnings of Bank by at least 10% over the
previous year, then only one-half the amount otherwise allocable to such shares
shall be allocated thereto; however, if the compound earnings growth is 50% or
more for the five-year period ending with a year in which the 10% growth goal is
not met, such goal will be deemed met for that year; PROVIDED, if neither of
said goals be met, then nothing shall be allocated to such deemed shares for
such year. The Bank retains full discretionary right to adjust earnings for any
year from those otherwise shown on the Bank's financial statements to, in its
judgment, make the year's income reasonably comparable to prior years and
amortize or adjust for extraordinary items. Without limitation, such
adjustments may include elimination of tax benefits due to carryover deductions
or credits; change in or correction of accounting methods, amortization of
income from standby or commitment fees, "points" on low interest real estate
mortgages which the Bank keeps in its portfolio, intercorporate transactions,
etc. Any such decision shall be made within 45 days after the Bank's financial
statements are furnished to it by outside auditors. If no change be so made in
such time, the figures on the Bank's financial statement prepared by outside
auditors, audited or unaudited, shall be used for all purposes of this
agreement.
6. MINIMUM EMPLOYMENT PERIOD TO VEST. In the event your employment
by Bank is terminated for reasons other than death, disability or becoming
employed by a company or bank affiliated with Bank, prior to December 31, 2000,
all amounts accrued to your account shall be forfeited. An "affiliate" for
these purposes shall be deemed a bank or company 25% or more of the voting stock
of which is owned or controlled, directly or indirectly by or for any holder
(legally or beneficially) of Bank common stock, or any spouse, parent or
descendant or trust for such spouse, parent or descendant of such holder.
7. PAYMENT ON RETIREMENT OR DISABILITY. The total amount accrued to
your account pursuant to paragraph 4 hereof shall be paid to you in 120 equal
monthly installments, beginning on the 31st day of January following the year in
which you shall have terminated your employment with Bank, due to retirement
after having attained an age of not less than 65 years or due to disability. In
the event of termination of employment prior to age 65 for reasons other than
disability or death, but after December 31, 2000, the monthly payments shall
begin in January of the year following the year in which you attain age 65
unless the Bank in its sole discretion elects to commence the payments at an
earlier date. Bank may, at its option, prepay any amount due you in
installments by delivery to you of an annuity contract, or by paying you the
then present value of the amount, such present value to be computed at the
current rate for ten year U.S. Government Bonds.
Xxxxxx X. Xxxxxx
January 16, 1998
Page 3
8. PAYMENT ON DEATH. In the event of your death prior to age 65, the
monthly payments under this agreement shall commence in the third month
following the month during which death occurred and payment shall be made to the
beneficiaries designated by you in writing, or in the absence of such
designation, to your estate. In the event of your death when installments from
the accrual accounts have become payable because of retirement at or after age
65, or due to disability, or due to attainment of age 65 when no longer in the
employment of the Bank, unpaid monthly installments shall continue to be paid to
your living designated beneficiaries, or if none are so designated, to your
estate. Bank may discharge its obligations by delivery of an annuity or
prepaying the present value as set forth in Paragraph 8.
9. NO TRUST. The amount credited to your account shall not be held
by Bank in a trust, escrow or similar fiduciary capacity and neither you nor any
legal representative shall have any right against the Bank with respect to any
portio of the account, except as a general unsecured creditor of the Bank.
10. SPENDTHRIFT CLAUSE. Neither you nor any beneficiary entitled to
payment hereunder shall have any right to participate, alienate, sell, transfer,
assign or encumber any benefit or payment hereunder nor shall such rights
thereto be subject to attachment or other legal process for you or a
beneficiary's debts.
11. ANTI DILUTION. In the event of any common stock split or common
stock dividend by which shares of common stock are issued for no new
consideration, or for less than per share book value, the number of shares
"deemed" owned by you hereunder shall be adjusted accordingly, at book value.
12. CAPTIONS. The captions of the paragraphs are for identification
only and do not affect the meaning of the text.
13. NON-COMPETITION CLAUSE. In the event you become associated with,
employed by, or consultant to, 5% or greater owner of, or otherwise affiliated
with another bank, bank holding company, credit union or similar financial
institution, having a home office, branch, office facility, or subsidiary in
Xxxxx or Xxxxx Counties, Iowa, or an adjoining county, within 3 years following
termination of your employment with Bank, all amounts otherwise due hereunder
shall be forfeited; PROVIDED, HOWEVER, in the event of the sale of Bank, then
there shall thereafter be no forfeiture under this paragraph of amounts
otherwise due you because of your engaging in any act set forth herein, if your
employment by Bank was terminated: (a) involuntarily, or (b) voluntarily in the
event you shall have been demoted from the position of chairman of the Bank or
if your base salary shall have been reduced below the level at which it stood at
the beginning of the year in which such sale was concluded. For these purposes,
a "sale" shall be deemed to have occurred in the event that both of the
following occur:
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January 16, 1998
Page 4
(x) Xxxxx X. Xxxxxx, his family and corporations or other entities
controlled by him or his family collectively fail to own directly or indirectly,
outright or in trust, in the aggregate, at least 51% of the voting stock of the
Bank, and
(ii) there is at least 25% ownership of Bank vested in some other
person or entity.
Please indicate your acceptance of the terms of this Agreement by
signing below.
CITIZENS BANK,
XXXX, IOWA
By /s/ Xxxx X. Xxxxxxx
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Vice Chairman
Accepted:
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
