First Security Bank Letterhead] September 15, 2005
Exhibit
10.2
[First
Security Bank Letterhead]
September
15, 2005
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Lexington,
Kentucky 40513
Dear
▇▇▇▇:
We
are
parties to a certain Employment Agreement (herein so called), dated December
1,
2003, pursuant to which you are employed as the President and CEO of First
Security Bancorp, Inc. and First Security Bank of Lexington, Inc. Capitalized
terms used herein that are defined in that Employment Agreement have the
meanings given them in the Employment Agreement.
As
you
know, the Nomination, Compensation & Corporate Governance Committee of the
Board of Directors is in the process of reviewing the severance arrangements
of
our executive officers. In the course of our review, we determined the following
revisions/clarifications to your Employment Agreement are appropriate:
Section
3.B.:
We have
not implemented the split dollar life insurance arrangements contemplated by
your Employment Agreement and agree to eliminate this requirement from your
Employment Agreement. In place of this requirement, Bank has obtained life
insurance benefits for you and agrees to continue to provide you life insurance
benefits in the amount of $250,000, as currently in place, during the term
of
your Employment Agreement.
Section
5:
The
stock options granted to you pursuant to your Employment Agreement are subject
to the terms and conditions of the Stock Award Plan. To the extent the Board
of
Directors, or committee administering the Stock Award Plan, accelerates or
adjusts outstanding options granted under the Stock Award Plan, in accordance
with the terms of the Stock Award Plan, your options shall be accelerated and
adjusted accordingly. Nothing in this paragraph shall be construed in a way
that
would cause the proportion of your options to decrease, except for an issuance
of new shares by Bank.
Section
6.A.:
If Bank
terminates your Employment Agreement, and your employment thereunder, pursuant
to Section 6.A. of the Employment Agreement prior
to
a Change
of Control, you will be entitled to severance pay under Section 8.A., in
accordance with Section 8, subject to compliance with the continuing covenants
under Sections 9 and 10. If Bank terminates the Employment Agreement, and your
employment thereunder, pursuant to Section 6.A. of the Employment Agreement
at
or
after
a Change
of Control, you will be entitled to severance pay under Section 8.B., in
accordance with Section 8, subject to compliance with the continuing covenants
under Sections 9 and 10. You will not be entitled to severance pay under both
8.A. and 8.B.
Section
6.D. and Section 8:
In
order to comply with the American Jobs Creation Act of 2004 (“AJCA”), we agree
to amend the definition of a “Change of Control” under the Employment Agreement
and the severance pay arrangements as set out in Exhibit A attached hereto.
▇▇▇▇
also agrees that it will abide by the rabbi trust provisions set forth in
Exhibit A.
Section
8.D.:
You and
the Bank acknowledge that the discretion permitted the Bank in Section 8.D.
may
be prohibited by the AJCA. In consideration of the amendments made to your
Employment Agreement, and to have a definitive agreement, you agree to the
Release set forth in Exhibit A. In exchange therefore, ▇▇▇▇ agrees to eliminate
the provision regarding discretion.
Section
9:
Bank
acknowledges that it may be necessary, if you are a “key employee” at the time
an amount is payable to you pursuant to Section 8 of the Employment Agreement,
to delay a portion of your payment for six (6) months. Bank agrees that only
that part of your severance package and those payments that must be delayed
under the AJCA will be delayed and that all other payments and benefits will
be
as provided in the Employment Agreement prior to the enactment of the AJCA.
As a
specific example, though not limited to this example, Bank agrees that the
“Non-compete Term” described in Section 9.A. shall commence at the time of your
termination of employment and shall not be extended an additional six (6)
months.
To
evidence your agreement to the foregoing, please sign this letter in the space
provided below. Upon your execution of this letter, the foregoing terms and
Exhibit A will become a part of your Employment Agreement and your Employment
Agreement will be deemed to be modified accordingly.
Sincerely
yours,
FIRST
SECURITY BANK OF LEXINGTON, INC.
By
/s/
▇▇▇▇▇▇ ▇.
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▇▇▇▇▇▇
▇▇▇▇▇,
Chairman
FIRST
SECURITY BANCORP, INC.
By
/s/
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▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇,
Chairman
Agreed:
/s/
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Date:
September
15, 2005
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15167168.1
EXHIBIT
“A” TO
LETTER
AGREEMENT FOR ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Effective
September 15, 2005, the following additional provisions are added to and made
a
part of the Letter Agreement (and the Employment Agreement) between ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and First Security Bancorp, Inc. and First Security Bank of
Lexington, Inc. To the extent the provisions set forth in this Exhibit A are
contrary to the provisions in the Employment Agreement, the provisions in this
Exhibit A shall control.
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1.
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Change
in Control Provisions.
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a.
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For
purposes of this Section 1, except for 1.b.(ii)(B), “Company” shall mean,
with respect to a particular transaction, one of the following:
(i) First Security Bancorp, Inc. and First Security Bank of
Lexington, Inc. (“Bank”); (ii) any entity that owns more than fifty
percent (50%) of the total fair market value and total voting power
of the
Bank (“Majority
Shareholder”);
or (iii) any entity in a chain of entities in which each entity
is a
Majority Shareholder of the next entity in the chain, with one entity
in
the chain ultimately being a Majority Shareholder of the Bank. For
the
purposes of 1.b.(ii)(B), the Company shall mean of the entities listed
in
the immediately preceding sentence, only that entity that has no
corporate
Majority Shareholder.
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b.
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For
purposes of this Section 1, “Person” shall mean (i) any person, or
(ii) a group of more than one person where the surrounding
circumstances demonstrate that the persons are acting as a group.
Without
limiting the generality of the foregoing, persons shall be considered
to
be acting as a group if they are owners of an entity that enters
into a
merger, consolidation, purchase or acquisition of stock, or similar
business transaction with the Company.
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c.
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For
the purposes of this Section 1, “Gross Fair Market Value” shall mean the
value of an asset (or assets) determined without regard to any liabilities
associated with the asset (or assets).
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d.
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For
purposes of this Letter Agreement and the Employment Agreement, “Change in
Control” shall be interpreted and applied in accordance with Code Section
409A and any and all guidance issued, now or hereafter, with respect
thereto by the United States Department of the Treasury.
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e.
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A
“Change in Control” shall occur when:
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i.
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There
is a change in ownership in the Company. A “change in ownership” shall
occur when a Person acquires ownership of more than fifty percent
(50%) of
the fair market value or voting power of the Company, provided:
(A) the fifty percent (50%) ownership calculation takes into
consideration stock previously held by the Person; (B) if
a Person
already owns more than fifty percent (50%) of the fair market value
or
voting power of the Company, the Person’s acquisition of more stock shall
not trigger a change in ownership; and (C) a change in ownership
shall not occur if there is no
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1
stock
in
the Company outstanding after the transaction that results in the transfer
of
stock; or
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iii.
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There
is a change in the effective control of the Company. A “change in
effective control” shall occur when, within a twelve month period:
(A) a Person who does not already own thirty-five percent
(35%) of
the Company acquires thirty-five percent (35%) or more of the total
voting
power of the Company; or (B) the majority of the Company’s directors
are replaced, but only if the replacement is hostile—that is, the change
in the majority is not endorsed by a majority of the corporate directors
in place immediately prior to the replacement; or
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iv.
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There
is a transfer of a substantial portion of corporate assets. A “transfer of
a substantial portion of corporate assets” occurs when a Person acquires,
within a twelve-month period, Company assets having a Gross Fair
Market
Value equal to forty percent (40%) or more of the total Gross Fair
Market
Value of Company assets owned prior to such acquisition(s); provided,
however, a transfer of a substantial portion of corporate assets
does not
occur if the Company transfers ownership of assets to (A) a
Person
who is a shareholder of the Company immediately prior to the asset
transfer in exchange for or with respect to the shareholder’s stock;
(B) an entity of which Company owns, directly or indirectly,
fifty
percent (50%) or more of the total value or voting power; (C) a
Person who owns fifty percent (50%) or more of the total value or
voting
power of the Company; or (D) an entity of which fifty percent
(50%)
or more of the total value or voting power is owned, directly or
indirectly, by a Person who owns 50% or more of the total value or
voting
power of the Company. For purposes of this Section 1.e.(iii), except
as
otherwise provided, a Person’s status is determined immediately after the
transfer of the assets.
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2.
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Springing
Rabbi Trust.
Notwithstanding anything in this Letter Agreement or the Employment
Agreement (or the Trust Agreement) to the contrary, upon a Change
in
Control, if you are a “key employee” (as defined in Code section 416(i))
so that your payout (as described in Section 8 of the Employment
Agreement) is delayed as described in Section 4 of this Letter Agreement,
to the extent so doing does not foul any grandfathering of your severance
benefits, the Bank shall (i) establish a trust (if not already
established) as described in subsection b. below, and (ii) maintain
in the Trust an amount of money which is at all times at least equal
to
its obligations under this Letter Agreement and the Employment Agreement
to you (as well as any other key employee with a similar agreement),
by
making sufficient contributions to the Trust, immediately upon such
Change
in Control in an amount equal to the Bank’s total liabilities to you and
all other key employees.
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a.
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The
obligation of the Bank to provide benefits pursuant to this Letter
Agreement and the Employment Agreement shall be the sole unsecured
promise
of the Bank with respect to this Letter Agreement and the Employment
Agreement. Notwithstanding the foregoing, prior to any Change in
Control,
the Bank may establish a trust, pursuant to a Trust Agreement, for
the
purpose of setting aside funds to provide for the payment of benefits
under this Agreement. However, the assets of the Trust shall at all
time
remain subject to the claims of the general creditors of the Bank,
and you
shall not have any claim or right
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2
with
respect to the assets held in the Trust, except to the extent that you are
a
general creditor of the Bank.
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b.
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For
purposes of this Section 2, the following words and phrases shall
have the
following meanings:
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i.
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Trust:
The revocable grantor/rabbi trust established by the Bank for purposes
of
making payments under certain of the Bank’s nonqualified plans of deferred
compensation. The Bank shall have the discretion to determine whether
or
not a Trust shall be established in connection with any agreement
or
nonqualified plan, including this Letter Agreement and the Employment
Agreement; provided, however, in the event of a Change in Control,
such
discretion shall be removed from the Bank, and a Trust shall be
established (if not already in existence) and fully funded in accordance
with this Section 2.
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ii.
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Trust
Agreement:
An agreement entered into between the Trustee and the Bank providing
for
trust services in connection with a grantor trust that may be established
in connection with this Letter Agreement. As of the effective date
of this
Letter Agreement, the Trust Agreement is First Security Bancorp,
Inc. Key
Employee Trust, effective ___________, and as may be amended from
time to
time.
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iii.
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Trustee:
That corporate entity having trust powers that is appointed by the
Bank
prior to a Change in Control to perform trust services in connection
with
the Letter Agreement and the Employment Agreement, whose responsibilities
shall be governed by the Letter Agreement and the Employment Agreement
and
by the Trust Agreement.
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3.
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Your
Release.
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a.
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In
consideration of the promises set forth herein, the sufficiency of
which
consideration is hereby acknowledged, you hereby release and forever
discharge the Bank, and its directors, affiliates, officers, agents
and
employees, from any and all causes of action or claims of any type
that
you might have from the beginning of the world through the date of
your
execution of this Letter Agreement, arising or which could have arisen
out
of your employment relationship with the Bank, including but not
limited
to causes of action or claims of any type arising under the Age
Discrimination In Employment Act of 1967, 29 USC §626 et seq. (“ADEA”),
Title VII of the Civil Rights Act of 1964, 42 USC §2000e et seq. (“Title
VII”), the Civil Rights Act of 1866, 42 USC §1981, the National Labor
Relations Act, 29 USC §151 et seq., the Fair Labor Standards Act, 29 USC
§201 et seq., the Americans With Disabilities Act, 42 USC §12101 et seq.
(“ADA”), the Employee Retirement Income Security Act of 1974, 29 USC §1001
et seq., the Kentucky Human Rights Act, and any other Federal, state
or
local statute, law, ordinance, regulation or order that may give
rise to
any cause of action including, but not limited to, claims of age
or sex
discrimination or breach of contract and claims for back pay, earned
or
accrued vacation pay, bonus, earned commissions, damages and any
other
relief or remedy at law or at equity. You further covenant and agree
never
to institute directly or indirectly or to participate in (unless
otherwise
required by law) any action or
proceeding
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3
of
any
kind against the Bank, its directors, affiliates, officers, agents and
employees, based on or related to your employment relationship with the Bank,
including, but not limited to, an action asserting that the Bank discriminated
against you on the basis of age or sex or an action asserting breach of
contract, it being understood that there is no intent herein to interfere with
the Equal Employment Opportunity Commission’s right to enforce Title VII, the
ADA, or the ADEA.
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b.
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The
Letter Agreement and the Employment Agreement are a full, complete
and
final settlement by you of any and all claims, actions, causes of
action,
damages or costs against the Bank resulting from or pertaining to
your
employment with the Bank.
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c.
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The
Letter Agreement and the Employment Agreement shall supersede and
replace
any and all prior written or oral agreements previously entered into
between the you and the Bank and such prior agreements shall be null
and
void and of no consequence.
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d.
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You
shall have up to twenty-one (21) days from the date the Letter Agreement
is presented to you to sign the Letter Agreement. If you sign the
Letter
Agreement, you shall have seven (7) days from the date you sign the
Letter
Agreement to revoke the Letter Agreement. You shall not be entitled
to any
benefits contained herein until the seven (7) day revocation period
has
expired. This Letter Agreement was presented to you on September
13,
2005.
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e.
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Except
to the extent required to be disclosed by state or federal securities
law,
the Letter Agreement and Employment Agreement and all their terms
and
provisions are strictly confidential and shall not be divulged or
disclosed in any way to any person other than your spouse and legal
counsel if you so desire, and you will protect the confidentiality
of the
Letter Agreement and the Employment Agreement in all regards. Should
you
choose to divulge the terms and conditions of the Letter Agreement
and
Employment Agreement to your spouse or legal counsel, you shall ensure
that they will be similarly bound to protect their confidentiality
and
that a breach of this paragraph by your spouse or legal counsel shall
be
considered a breach of this paragraph by you.
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f.
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You
and the Bank have executed the Letter Agreement voluntarily, with
full
knowledge of its significance. Both parties have had full opportunity
to
consult their respective legal counsel, as well as other persons
of their
choosing, before executing the Letter Agreement. You acknowledge
that you
have carefully read the entire Letter Agreement, that a copy of the
Letter
Agreement was available to you prior to execution, that you know
and
understand the provisions of the Agreement, and that you have signed
the
Letter Agreement as your own free act and
deed.
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4
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4.
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Intent
to Comply with American Jobs Creation Act.
To the extent that this Letter Agreement and the Employment Agreement
are
considered a deferred compensation plan, as contemplated by Code
Section
409A, this Section 4 shall apply. It is intended that this Letter
Agreement and the Employment Agreement shall comply with Code Section
409A
and all provisions contained herein shall be read and construed to
so
comply.
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a.
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All
deferrals of compensation with respect to your service performed
after December 31, 2004, and as described in this Letter Agreement
and the
Employment Agreement, shall be governed by the terms of this Section
4.
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b.
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To
the extent so required, any deferral election made by you or deemed
to be
made by you, with respect to compensation payable on services performed
in
a calendar year shall be made before the end of the preceding calendar
year; provided, that in the case of performance-based compensation,
the
deferral election may be made not later than 6 months before the
end of
the performance period. You shall be considered to have made all
deferral
elections under this Letter Agreement and the Employment Agreement
in
accordance with the preceding sentence, and shall not be permitted
nor
deemed to be permitted to modify any deferral election.
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c.
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Bank
will not accept transfers under this Letter Agreement or the Employment
Agreement from any other nonqualified deferred compensation plan
in which
you might participate.
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d.
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No
rabbi trust that might be used to pay amounts due under this Letter
Agreement or the Employment Agreement, nor the assets held by such
trust,
shall be located outside the United States. In addition, no such
trust
shall provide for the assets thereof to become restricted to the
provision
of benefits under the Agreement, or distributed to you, as a result
of a
change in the financial health or condition of the Bank. Nothing
herein
shall be construed to require the Bank or entitle you to have amounts
due
him under this Agreement paid from a rabbi trust.
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e.
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In
the event that you are considered to be a key employee (as defined
in
§416(i) of the Code without regard to paragraph (5) thereof), distribution
to you may not be made earlier than the date which is 6 months after
your
termination of employment. The preceding sentence shall not apply
to the
extent that none of the stock of the Bank is publicly traded on an
established securities market or otherwise.
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f.
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The
timing of any distributions pursuant to your deferral election, if
any,
shall not be accelerated. Notwithstanding anything contained in this
Section 4, you shall not be permitted to alter the payment of your
severance pay.
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15167168.1
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