EXHIBIT 10.3
SPECIAL SEPARATION AGREEMENT
This SPECIAL SEPARATION AGREEMENT ("Agreement") is entered into as of this
___ day of ____________, 2004, by and between First National Bank (the
"Company") and ____________________ (the "Executive") and is guaranteed by
National Bancshares Corp. (the "Parent Company").
WHEREAS, the Executive is presently in the employ of the Company as
__________________________ of the Company; and
WHEREAS, the Company has determined that it is desirable to obtain from
the Executive certain protections with respect to non-disclosure,
non-interference and noncompetition; and
WHEREAS, the Company has determined that it is desirable to agree at this
time to provide the Executive with severance benefits under certain
circumstances after a Change in Control has occurred in order that the Executive
may more fully focus his current efforts on expanding the Company's business and
profits without concern for his personal security in the event of a Change in
Control;
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and provisions of these protections; and
WHEREAS, the Parent Company desires to guarantee the benefits payable
under this Agreement;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements set forth in this Agreement, the Company and the Executive agree as
follows:
SECTION 1. DEFINITIONS
1.1 AFFILIATE. The term "Affiliate" shall mean any entity controlling,
controlled by or under common control with the Company, including, but not
limited to, divisions and subsidiaries of the Company.
1.2 CAUSE. The term "Cause" shall include:
a. a breach of the Executive's obligations under Section 5 hereof; or
b. the indictment of the Executive for, conviction of the Executive
for, or written confession of the Executive to a misdemeanor or
felony against the Company or any of its Affiliates, employees or
customers, including but not limited to embezzlement or embezzlement
of customer account assets, but excluding any such misdemeanor or
felony related to an automobile accident.
1.3 CHANGE IN CONTROL. The term "Change in Control" shall include:
a. the first purchase of shares pursuant to a tender offer or exchange
(other than a tender offer or exchange by the Parent Company) for
twenty-five percent (25%) or more of the Parent Company's common
stock of any class and any securities convertible into such common
stock;
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b. the receipt by the Parent Company of a Schedule 13D or other advice
after the date of execution of this Agreement indicating that a
person is the "beneficial owner" (as that term is defined in Rule
13d-3 under the Securities Exchange Act of 1934) of twenty-five
percent (25%) or more of the Parent Company's common stock of any
class or any securities convertible in such common stock
calculated as provided in paragraph (d) of said Rule 13d-3;
c. the date of approval by stockholders of the Parent Company of an
agreement providing for any consolidation or merger of the Parent
Company in which the Parent Company will not be the continuing or
surviving corporation or pursuant to which shares of capital stock,
of any class or any securities convertible into such capital stock,
of the Parent Company would be converted into cash, securities, or
other property, other than a merger of the Parent Company in which
the holders of common stock of all classes of the Parent Company
immediately prior to the merger would own in excess of fifty percent
(50%) of the common stock of the surviving corporation immediately
after the merger;
d. the date of the approval by stockholders of the Parent Company of
any sale, lease, exchange, or other transfer (in one transaction or
a series of related transactions) of all or substantially all the
assets of the Parent Company or the Company;
e. the adoption of any plan or proposal for the liquidation (but not a
partial liquidation) or dissolution of the Company or the Parent
Company;
f. any transaction whereby the Company ceases to be a wholly owned
subsidiary of the Parent Company;
g. any sequence of events whereby the individuals who constitute the
Board of Directors of the Parent Company as of the date of this
Agreement ("Incumbent Directors") together with individuals whose
election or nomination for election by the Parent Company's
shareholders was approved by a majority of the Incumbent Directors
do not constitute at least seventy-five percent (75%) of the then
current Board of Directors of the Parent Company; or
h. such other event as the Outside Committee Members shall, in their
sole and absolute discretion, deem to be a "Change in Control."
1.4 COMPANY. The term "Company" shall mean First National Bank or any
successor corporation or business organization which shall assume the
obligations of the Company under Agreement.
1.5 CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean any and all information (excluding information in the public domain) which
relates to the business of the Company and its Affiliates, including without
limitation all information relating to the identity and/or location of all past,
present and
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prospective customers of the Company and its Affiliates, strategic
plans, financial plans, financial information, computer programs, information
concerning pricing and pricing policies, marketing techniques, and methods and
manner of operations.
1.6 GOOD REASON. The term "Good Reason" shall include:
a. any reduction in either the current base salary or the annual bonus
of the Executive;
b. any material reduction in the employee benefits and fringe benefits
of the Executive;
c. any material reduction in the position, office or title of the
Executive;
d. the Executive ceases to have the powers, perquisites,
responsibilities or duties commensurate with being the
_____________________________________________ of a bank of
comparable size to the Company;
e. the Executive ceases to report to the ____________________________
of the Bank; or
f. the principal place of employment of the Executive is relocated to
any location which is outside of a twenty (20) mile radius of the
current main office of the Company in Orrville, Ohio.
1.7 OUTSIDE COMMITTEE MEMBERS. The term "Outside Committee Members" shall
mean members of the Executive Committee of the Board of Directors of the Company
who are not employees of the Company or an Affiliate; provided, however, that in
the event of a Change in Control, "Outside Committee Members" shall mean those
same individuals who were Outside Committee Members immediately prior to such
Change in Control.
1.8 PARENT COMPANY. The term "Parent Company" shall mean National
Bancshares Corp. or any successor corporation or business organization which
shall assume the obligations of the Parent Company under Agreement.
1.9 PROTECTION PERIOD. The term "Protection Period" shall mean the
twenty-four (24) month period after a Change in Control occurs.
1.10 SUCCESSOR. The term "Successor" will include any person, firm,
corporation or business entity which acquires all or substantially all of the
assets or succeeds to the business of the Company.
SECTION 2. EMPLOYMENT TERMINATIONS WHICH QUALIFY FOR SEVERANCE BENEFITS
2.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. In the event the
Company terminates the Executive's employment within the Protection Period other
than for Cause, the Executive will be entitled to receive the Severance Benefits
set forth in Section 4 hereof.
2.2 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event
the Executive terminates his employment within the Protection Period with Good
Reason, the Executive will be entitled to receive the Severance Benefits set
forth in Section 4 hereof. In order to terminate employment in accordance with
this
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Section 2.2, an Executive must give sixty (60) days advance written notice
of his impending termination of employment to the Company, specify the reason
for such termination in such notice and provide the Company with an opportunity
to correct the situation which he feels necessitates his termination of
employment with Good Reason under this Section 2.2.
SECTION 3. EMPLOYMENT TERMINATIONS WHICH DO NOT QUALIFY FOR SEVERANCE
BENEFITS
3.1 TERMINATION BY THE COMPANY OUTSIDE THE PROTECTION PERIOD. In the event
the Company terminates the Executive's employment outside the Protection Period,
the Executive will not be entitled to receive the Severance Benefits set forth
in Section 4 hereof. The Executive shall, however, comply with the provisions of
Section 5 hereof. The Company may, in its sole discretion, provide some form or
amount of severance benefits to the Executive in such circumstances as the
Company shall, in its sole discretion, determine.
3.2 VOLUNTARY TERMINATION BY THE EXECUTIVE OUTSIDE THE PROTECTION PERIOD.
In the event the Executive terminates his employment outside the Protection
Period, the Executive will not be entitled to receive the Severance Benefits set
forth in Section 4 hereof. The Executive shall, however, comply with the
provisions of Section 5 hereof.
3.3 TERMINATION BY THE COMPANY FOR CAUSE. In the event the Company
terminates the Executive's employment for Cause (whether before or after a
Change in Control), the Executive will not be entitled to receive the Severance
Benefits set forth in Section 4 hereof. The Executive shall, however, comply
with the provisions of Section 5 hereof. Cause will be determined by the Outside
Committee Members in the exercise of good faith and reasonable judgment.
3.4 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. In
the event the Executive terminates his employment other than for Good Reason
(whether before or after a Change in Control), the Executive will not be
entitled to receive the Severance Benefits set forth in Section 4 hereof. The
Executive shall, however, comply with the provisions of Section 5 hereof.
SECTION 4. SEVERANCE BENEFITS
In the event that the Company shall terminate the employment of the
Executive as described in Section 2.1 hereof, or in the event the Executive
terminates his employment as described in Section 2.2 hereof, the Company will,
in lieu of any other severance which may otherwise be payable:
a. Continue to pay to the Executive, for the twenty-four (24) months
following his termination of employment, his monthly base salary at
the rate in effect as of the date of such termination in accordance
with the Company's normal payroll practices.
b. Pay to the Executive, with respect to each December 31 on which
payments are made pursuant to subsection a. above, a bonus in a cash
lump sum. Each such yearly bonus shall equal the
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bonus paid to the Executive in the year prior to his termination of
employment. Each such yearly bonus will be paid to the Executive on
the same day as bonuses, if any, are paid to the executives of the
Company who are still employed with the Company. If bonuses are not
paid to the executives of the Company who are still employed with
the Company at the time a bonus is to be paid, such bonus will be
paid to the Executive on the first anniversary of the most recent
date bonuses were paid to executives of the Company or, if such
anniversary has already occurred at the time the Executive
terminates employment, on the next subsequent anniversary of said
date.
c. Throughout the twenty-four (24) months following his termination of
employment, continue the normal fringe benefits and perquisites
being provided to the Executive immediately prior to his termination
of employment, including but not limited to life insurance and
health care benefits coverage, in the same amounts and at the same
cost to the Executive as was applicable prior to the Change in
Control; provided, however, that in the event the Executive begins
to receive comparable fringe benefits and perquisites (determined at
the sole discretion of the Outside Committee Members) from a
subsequent employer during such period, the Company may immediately
terminate such fringe benefits and perquisites. Coverage under the
Company's health care benefits plan will be in lieu of health care
continuation under the Consolidated Omnibus Budget Reconciliation
Act ("COBRA") for periods such coverage is in effect under this
Agreement.
d. Pay to the Executive in cash an amount equal to the matching and
discretionary contributions which would have been made by the
Company under any qualified and nonqualified 401(k), profit sharing,
savings or retirement plan of the Company or an Affiliate during the
period described in paragraph a of this Section 4 if the Executive
made 401 (k) contributions and the Company made matching and
discretionary contributions during such period at the same rate as
the Executive and the Company made such contributions during the
twelve (12) month period immediately prior to the Change of Control.
Such amounts shall be paid to the Executive on the same days that
the salary is payable to him under paragraph a. above.
e. Pay for the costs of outplacement services actually used by the
Executive; provided, however, that the total fee paid for such
services will be limited to an amount equal to ten percent (10%) of
the Executive's annual base salary rate as of the effective date of
his termination of employment.
f. Continue to be obligated to pay when due all other benefits to which
the Executive has a vested right according to the provisions of any
applicable retirement or other benefit plan or program.
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SECTION 5. COVENANTS
5.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times
during and after the period of his employment by the Company keep and maintain
the confidentiality of all Confidential Information and will not at any time
either directly or indirectly use such Confidential Information for his own
benefit or otherwise divulge, disclose or communicate such Confidential
Information to any person or entity in any manner whatsoever other than
employees or agents of the Company or its Affiliates who have a need to know
such Confidential Information and then only to the extent necessary to perform
their responsibilities on behalf of the Company or its Affiliates.
5.2 CO-OPERATION. During the term of his employment and for a period of
five (5) years following his termination of employment, the Executive will not
attempt to induce any employee of the Company or an Affiliate to terminate his
or her employment with the Company or an Affiliate nor will he take any action
with respect to any of the customers of the Company and its Affiliates which
would have or might be likely to have an adverse effect upon the business of the
Company and its Affiliates. Executive hereby agrees not to make any statement or
take any action, directly or indirectly, that will disparage or discredit the
Company and its Affiliates, their Officers, Directors of the Company, their
employees or any of their products or services, or in any way damage their
reputation or ability to do business or conduct their affairs. Executive agrees
that subsequent to his termination of employment he will, in conjunction with a
Company request, reasonably cooperate with the Company in connection with
transition matters, disputes and litigation matters upon reasonable notice, at
reasonable times, and will be paid or reimbursed for reasonable expenses
incurred by the Executive relating to such matters.
5.3 NON-COMPETITION. The Executive agrees that, in the event his
employment with the Company terminates prior to a Change in Control for any
reason, he will not for one year after his date of termination of employment,
directly or indirectly, work or otherwise perform services for a financial
institution or any affiliate of a financial institution which has a branch or
location within a twenty (20) mile radius of any branch or location of the
Company or any entity which was an Affiliate during the period the Executive was
employed by the Company; except that the Executive may work or perform services
for such a financial institution provided that his place of employment is
outside of a twenty (20) mile radius of any branch or location of the Company or
any such Affiliate and provided further that the Executive does not have any
direct or indirect control, oversight, supervision or involvement with the
operations which are conducted by any of the branches or locations which are
within a twenty (20) mile radius of any branch or location of the Company or any
Affiliate and does not have any customer contact or solicit customers, potential
customers or business located within a twenty (20) mile radius of any branch or
location of the Company or any Affiliate. This provision will have no force or
effect if the employment of the Executive terminates subsequent to a Change in
Control.
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The Executive understands that the foregoing restrictions of this Section
5.3 may limit his ability to engage in certain business pursuits, but
acknowledges that the protections of this Agreement for the Executive justify
such restrictions. The Executive acknowledges that he understands the effect of
the provisions of this Section 5.3, that he has had reasonable time to consider
the effect of these provisions, and that he was encouraged to and had an
opportunity to consult an attorney with respect to these provisions. The Company
and the Executive consider the restrictions contained in this Section 5.3 to be
reasonable and necessary. Nevertheless, if any aspect of these restrictions is
found to be unreasonable or otherwise unenforceable by a Court of competent
jurisdiction, the parties intend for such restrictions to be modified by such
Court so as to be reasonable and enforceable and, as so modified by the Court,
to be fully enforced.
5.4 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of
any of the provisions of this Section 5 by the Executive, the Executive and the
Company agree that the Company will be entitled to preliminary and permanent
injunctive relief, without bond or security, sufficient to enforce the
provisions thereof. In addition, the Company will be entitled to pursue such
other remedies at law or in equity as it deems appropriate.
SECTION 6. MISCELLANEOUS
6.1 SUCCESSORS. This Agreement is personal to the Executive and will not
be assignable by him without the prior written consent of the Outside Committee
Members. This Agreement will be assigned or transferred to and will be binding
upon and inure to the benefit of any Successor of the Company.
6.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof and constitutes the entire agreement of the
parties with respect thereto.
6.3 ADMINISTRATION. The provisions of this Agreement shall be administered
by the Outside Committee Members. The Outside Committee Members shall have the
sole discretion to make all determinations which may be necessary or advisable
for the administration of this Agreement. Any action expressed from time to time
by a vote at a meeting, or expressed in writing, after notice to all Outside
Committee Members, may be done by a majority of the Outside Committee Members;
and such action shall have the same effect for all purposes as if assented to by
all the Outside Committee Members.
6.4 APPEALS PROCEDURE. Any disputes arising under this Agreement with
regard to any determination made by the Company or the Outside Committee Members
under this Agreement, including but not limited to any dispute with regard to
the denial of Severance Benefits to the Executive, may be appealed to the
Outside Committee Members by the Executive. The Executive, or any authorized
representative of the Executive, may upon written notice to the Outside
Committee Members within sixty (60) days after any such determination or denial
request a review by the Outside Committee Members of any such determination or
denial. Such
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review may be made by written briefs submitted by the Executive and
the Outside Committee Members or at a hearing, or by both, as shall be deemed
necessary by the Outside Committee Members. Any hearing shall be held in the
Corporate Headquarters of the Company, unless the Outside Committee Members
shall specify otherwise. The date and time of any such hearing shall be
designated by the Outside Committee Members upon not less than seven (7) days'
notice to the Executive unless the Executive accepts shorter notice. The Outside
Committee Members shall make every effort to schedule the hearing on a day and
at a time which is convenient to the Executive. The Outside Committee Members
may, in their sole discretion, establish such rules of procedure as it may deem
necessary or advisable for the conduct of any such review or of any such
hearing. After the review has been completed, the Outside Committee Members
shall render a decision in writing, a copy of which shall be sent to the
Executive. In rendering their decision, the Outside Committee Members shall have
full power and discretion to interpret this Agreement, to resolve ambiguities,
inconsistencies and omissions, to determine any question of fact, to determine
the right to Severance Benefits, and the amount of Severance Benefits, if any,
payable to, the Executive in accordance with the provisions of this Agreement.
Such decision shall set forth the specific reason or reasons for the decision
and the specific provisions of this Agreement upon which the decision is based.
There shall be no further appeal from a decision rendered by a quorum of the
Outside Committee Members. Any determination made by the Outside Committee
Members as a result of an appeal shall be final and binding in all respects upon
the Company, the Parent Company and the Executive.
6.5 MODIFICATION. This Agreement will not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement in a written
instrument executed by either two (2) officers of the Company on behalf of the
Board of Directors of the Company or, in the event a Change in Control has
occurred, by the Outside Committee Members, and by the Executive, or by their
legal representatives.
6.6 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
6.7 GOVERNING LAW. To the extent not preempted by federal law, the
provisions of this Agreement will be construed and enforced in accordance with
the laws of the State of Ohio.
6.8 SECTION 280(G) LIMIT. Notwithstanding anything contained in this
Agreement to the contrary, in the event the Company experiences a change
described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code, the amounts
payable to the Executive under this Agreement which are contingent on such
change shall not exceed an amount which; when added to the present value of all
other amounts which are payable to him under other plans and programs of the
Company, shall cause the total present value of all such amounts to equal one
dollar ($1.00) less than three (3) times the base amount (as described in
Section 280G(b)(3) of the Internal Revenue Code.)
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If the Internal Revenue Service subsequently asserts that the amounts
payable to the Executive under this Agreement give rise to an excise tax under
Section 4999 of the Internal Revenue Code and the Executive co-operates with the
Company in appealing the determination of the Internal Revenue Service through
whatever level of administrative or judicial appeals is deemed appropriate by
the Company, the Company shall indemnify the Executive for all costs of
challenging the determination that the excise tax applies to payments hereunder
including any administrative costs, court costs, attorney fees, and accounting
fees, whether incurred by the Company or incurred by the Executive.
6.9 REIMBURSEMENT OF LEGAL FEES. In the event that the Executive brings an
action in a court of law to enforce any provision of this Agreement and prevails
in such action in any respect, the Company shall reimburse the Executive for his
attorney fees and expenses and any other fees and expenses incurred by the
Executive in connection with such cause of action or in connection with the
enforcement of this Agreement against the Company.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written. First National Bank
By: ________________________________________
And:________________________________________
____________________________________________
The Parent Company hereby guarantees the benefits payable under this
Agreement as of the day and year first above written. National Bancshares Corp.
By: ________________________________________
And:________________________________________
____________________________________________
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