EXHIBITS F&M BANK Watertown, South Dakota January 21, 2000
QuickLinks -- Click here to rapidly navigate through this document
EXHIBITS
F&M BANK
Watertown, South Dakota
January 21, 2000
- TO:
- Xx. Xxxxxxx
X. Xxxxxxxx
- RE:
- President's Phantom Stock Long-Term Incentive Plan (the "Plan")
Dear Xxxx:
This letter shall constitute an agreement between you and F&M Bank, Watertown, South Dakota (the "Bank").
- 1.
- Office. You have been appointed President 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 7,070 shares of common stock of Bank outstanding. Other "deemed" shares may be granted in the
future.
- 3.
- Phantom Stock. As of August 1, 1995, you are "deemed" to have been issued one hundred forty-two
(142) 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 therefore. 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 June 30, 1995, 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 forty-two (142) Bank common shares which are deemed owned by you for a full fiscal year as if you had in fact purchased such common shares from the Bank; provided, in no event shall an
amount be so accrued in excess of 50% of the base salary paid to you in such fiscal year. 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 (including all "deemed" shares). Payment of cash dividends on preferred or
common stock outstanding shall not affect the amount allocated to the common shares "deemed" purchased by you. Amounts so accrued shall not bear interest. Any partial year accruals shall be computed
on an annualized basis.
- 5.
- Minimum Goals. The full accrual of earnings per deemed share in any year will be made only if both the following minimum goals are achieved: First, the net after-tax earnings of the Bank must exceed 1.3% of average daily assets of the Bank. Second, the net after-tax earnings of the Bank must exceed the prior year's net after-tax earnings by 10%; however, if this second goal is not achieved, and the current year's earnings exceed 1% of average daily assets for the year, and cumulative earnings of the Bank over the 5-year period ending with the most recent year exceed the cumulative earnings which would have resulted from 10% compound annual earnings growth over such 5-year period, then the 10% earnings growth goal will be deemed to have been met. If only one of the two goals is met, then one-half the earnings per deemed share calculated under paragraph 4 hereof shall be accrued. If neither goal is met, nothing shall be accrued. 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. Should the Bank elect "S" status for federal income tax purposes, all calculations shall be made for the purposes hereof as if the Bank continued to be a "C" corporation.
- 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, within two years of the date
hereof, 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 collectively by any spouse, parent or descendant or trust for such spouse, parent or descendent 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 total and permanent disability as solely determined by the Bank (disability"). In the event of termination of employment prior to age 65 for
reasons other than disability or death, 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, based on the then present value of the accrued amounts, such present value to be computed based on the then current rate for ten year U.S. Government Bonds.
- 8.
- Payment on Death. In the event of your death prior to age 65, the monthly payments under this Agreement shall commence in
the second 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 spouse if
such spouse survives you, otherwise 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 spouse if living, otherwise to your estate. The Bank may discharge its obligations by delivery of an annuity or prepaying the present value at the current rate for ten year U.S.
Government Bonds.
- 9.
- No Trust. The amount credited to your account shall not be held by Bank in trust, escrow or similar fiduciary capacity and
neither you nor any legal representative shall have any right against the Bank with respect to any portion 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 anticipate,
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 your or a beneficiary's debts.
- 11.
- Anti Dilution and 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, the number of shares "deemed" owned by you hereunder shall be adjusted accordingly. If new common shares are sold at more or less than the then book value
(as determined under generally accepted accounting principles), or if capital is contributed to the bank without the issuance of shares, an appropriate adjustment (upward or downward) will be made to
adjust the number of outstanding shares for the purpose of these calculations, as if the issued shares had been sold at book value as of the end of the calendar quarter preceding the sale, or as if
shares had been issued at book value in consideration of such contributions of capital.
- 12.
- Termination of Plan. The Bank reserves the right at its sole option to terminate the Plan at the end of any fiscal year of
the Bank by written notice to you prior to the end of such fiscal year, and, in such event, the deemed shares shall be cancelled and no further accruals shall be made with respect thereto. In the
event of such termination, subject to paragraphs 6, 13, 14, 15, and 16 hereof all amounts accrued to your account shall be vested in you.
- 13.
- Covenant Not to Solicit Customers.
a. During Employment. During the period of your employment with the Bank, you shall not, directly or indirectly, solicit or work for existing Bank customers, or prospective customers with whom Bank is discussing a business relationship, for your own account, or for the account of one or more of Bank's competitors, with a view to providing, then or at a future date, goods or services of a nature similar to those provided by Bank.
b. After Employment. For a period of twenty-four (24) months following your separation from employment with Bank, voluntarily or involuntarily, with or without cause, you shall not solicit or work for, directly or indirectly, existing Bank customers with whom you actually did business and had personal contact, or prospective Bank customers with whom you actually discussed a business relationship and had personal
2
contact, for your own account or for the account of one or more of the Bank's competitors, with a view to providing, then or at a future date, goods or services of a nature similar to those provided by the Bank to those customers, or offered or presented by the Bank to those prospective customers. Termination or other separation of your employment with the Bank shall not affect the validity or enforceability of the provisions of this Covenant.
c. Scope of Covenant. This Covenant shall apply only to the following: (1) Existing Bank customers with whom you actually did business and had personal contact; and (2) Prospective Bank customers with whom you actually discussed a business relationship and had personal contact. A prospective Bank customer is defined as any person or entity you have actively solicited during the 12-month period immediately prior to the termination of your employment with the Bank. This Covenant shall apply only to goods or services similar in nature to those offered by the Bank.
d. Violations. Should you violate this Covenant not to compete, any amounts otherwise due you pursuant to this Agreement shall be forfeited, and any amounts previously paid hereunder shall be refunded by you to the Bank. Bank may further exercise its rights against you or any third party, in law or in equity, in the event you solicit Bank customers in violation of this Agreement or applicable statutory provisions.
- 14.
- Trade Secrets. The parties agree that the following information, without limitation, shall constitute "trade secrets" for
the purposes of South Dakota's Trade Secrets Act and that the Bank makes reasonable efforts to maintain the secrecy of its information:
- a.
- Names,
addresses, telephone and fax numbers, account balances, loan balances, trust relationships, financial statements and credit reports concerning Bank customers.
- b.
- The
Bank's pricing models for loans, deposits and other financial services.
- c.
- The
Bank's expansion plans, whether through new geographic locations, proposed products and services, or through new means of distributions such as the internet.
- d.
- The Bank's strategic and marketing plans.
By accepting this Agreement, you agree not to disclose the Bank's trade secrets to anyone except other Bank personnel (or personnel of affiliates) in the course of your employment with Bank during or for a period of two years following termination of your employment by the Bank.
In the event you disclose the Bank's trade secrets in violation of this Agreement, all amounts otherwise due you hereunder shall be forfeited, and any amounts previously paid hereunder shall be refunded by you to the Bank. Bank may further exercise its rights against you or any third party, in law or in equity, in the event you reveal the Bank's trade secrets in violation of this Agreement or applicable statutory provisions.
- 15.
- Non-Hire Agreement. In the event of termination of your employment, voluntarily or involuntarily, with or
without cause, you shall not, for a period of twelve (12) months following such termination, hire, seek to hire, or encourage your employer or any other person to hire any person who was an
employee of the Bank on the date of announcement to the Bank or to any such employee of termination or the decision to terminate your employment. Further, you shall not attempt to induce any such
employee to leave the employ of the Bank to work for you or any other person, firm or corporation during such period. Should you violate this non-hire agreement, any amounts otherwise due
you pursuant to this Agreement shall be forfeited and any amounts previously paid hereunder shall be refunded by you to the Bank. Bank may further exercise its rights against you or any third party,
in law or in equity, in the event you violate this non-hire agreement in violation of this Agreement or applicable statutory provisions.
- 16.
- Sale/Severance. In the event of the sale of Bank, then there shall thereafter be no forfeiture under paragraph 13
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 President 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:
- (i)
- Xxxxx X. Xxxxxx, his family and trusts, corporations or other entities controlled by him or his family (including descendants and spouses of descendants of Xxxxx X. Xxxxxx) collectively fail to own directly, or indirectly whether through a holding company, outright or in trust, in the aggregate, at least 51% of the Voting stock of the Bank, and
3
- (ii)
- There
is at least 25% ownership of Bank vested in some other person or entity.
- 17.
- Captions. The captions of the paragraphs are for identification only and do not affect the meaning of the text.
- 18.
- Binding on Parties. This Agreement shall be binding on and inure to the benefit of the parties hereto, their heirs,
personal representatives and successors in interest.
- 19.
- Prior Similar Plan. This Plan supercedes any and all prior plans or agreements of similar nature or import, which shall
become void upon execution hereof. For your services through June 30, 1999, the gross amount allocated to your account hereunder is $154,340.
- 20.
- Governing Law. This Agreement shall be governed by the laws of the State of South Dakota.
Please indicate your acceptance of the terms of this Agreement by signing below.
| F&M BANK, Watertown, South Dakota |
||||
By: |
/s/ XXXXX X. XXXXXX Chairman |
|||
| Accepted: /s/ XXXXXXX X. XXXXXXXX Xxxxxxx X. Xxxxxxxx |
||||
4
