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| PNBC > SEC Filings for PNBC > Form 8-K on 19-Dec-2008 | All Recent SEC Filings |
19-Dec-2008
Change in Directors or Principal Officers
On December 15, 2008, Princeton National Bancorp, Inc. (the "Company")
approved amended and restated employment agreements and deferred compensation
plan with its President and Chief Executive Officer, Tony J. Sorcic and its
Executive Vice President, James Miller. A summary of the material terms of the
amended and restated agreements are as follows.
Employment Agreements
Mr. Sorcic has an employment agreement with the Company, effective
October 23, 2000, which provides for his full-time employment in his present
capacity at a base compensation of $211,172 per year, or such increased amount
as the Board of Directors of Citizens First National Bank (the "Bank") may
determine, plus fringe and health and welfare benefits. His term of employment
is continuously extended so as to have a remaining term of two years, unless
terminated sooner as a result of good cause or for good reason (see discussion
below). The agreement also provides that Mr. Sorcic shall be eligible to
participate in any incentive plans that the Company establishes for its
executives.
Mr. Miller has an employment agreement with the Company, effective January 8,
2003, which provides for his full-time employment in his present capacity at a
base compensation of $139,984 per year, or such increased amount as the Board of
Directors of the Bank may determine, plus fringe and health and welfare
benefits. His term of employment is continuously extended so as to have a
remaining term of eighteen months, unless terminated sooner as a result of good
cause or for good reason (see discussion below). The agreement also provides
that Mr. Miller shall be eligible to participate in any incentive plans that the
Company establishes for its executives.
A post-termination benefit is payable to Mr. Sorcic if, during the term of
his employment agreement, the Company or the Bank terminates his employment
without cause, Mr. Sorcic terminates his employment for good reason, Mr. Sorcic
terminates his employment following a change in control, or the Company or
Citizens Bank terminates Mr. Sorcic's employment within the twenty-four month
period following the change in control. Under any of these circumstances,
Mr. Sorcic would be entitled to receive a lump sum payment equal to the greater
of his monthly salary times twenty-four or the salary payable for the balance of
the term of his employment agreement. For the longer of twenty-four months or
the period remaining in his employment agreement, Mr. Sorcic also would be
entitled to receive all benefits accrued under any incentive and retirement plan
of the Company and he and his dependents would continue to be covered by all
welfare plans of the Company. In addition, all outstanding stock options would
become fully and immediately exercisable.
If Mr. Sorcic dies during the term of his employment agreement, for a period
of 12 months from the date of death, the Company would pay to his beneficiary
Mr. Sorcic's base salary, Mr. Sorcic's spouse and other dependents would
continue participation in the Company's welfare benefit plans on the same terms
as they would have been provided if Mr. Sorcic were an active employee and, for
the period of twenty-four months following the first anniversary of Mr.
Sorcic's death, Mr. Sorcic's spouse and other dependents would continue
participation in the Company's welfare benefit plans on the same terms as would
have been provided if Mr. Sorcic were a retiree of the Company or the Bank.
If Mr. Sorcic's employment terminates due to his disability, the Company will
continue to pay his base salary from the date of disability until Mr. Sorcic is
eligible to receive benefit payments under the Bank's disability plan. During
the period base salary payments continue, Mr. Sorcic will remain eligible to
participate in the Company's welfare benefit plans. Base salary continuation
payments are reduced by disability benefits paid to Mr. Sorcic and cease upon
the cessation of disability, except salary will be paid for an additional twelve
months if neither the Company nor the Bank offer Mr. Sorcic re-employment in the
same position he held prior to his disability.
A post-termination benefit is payable to Mr. Miller if, during the term of
his employment agreement, the Company or the Bank terminates his employment
without cause, Mr. Miller terminates his employment for good reason, Mr. Miller
terminates his employment following a change in control, or the Company or the
Bank terminates Mr. Miller's employment within the twenty-four month period
following the change in control. Under any of these circumstances, Mr. Miller
would be entitled to receive a lump sum payment equal to the greater of his
monthly salary times eighteen or the salary payable for the balance of the term
of his employment agreement. For the longer of eighteen months or the period
remaining in his employment agreement, Mr. Miller also would be entitled to
receive all benefits accrued under any incentive and retirement plan of the
Company and he and his dependents would continue to be covered by all welfare
plans of the Company. In addition, all outstanding stock options would become
fully and immediately exercisable.
If Mr. Miller dies during the term of his employment agreement, for a period
of 12 months from the date of death, Mr. Miller's spouse and other dependents
would continue participation in the Company's welfare benefit plans on the same
terms as they would have been provided if Mr. Miller were an active employee and
for the period of twenty-four months following the first anniversary of
Mr. Miller's death, Mr. Miller's spouse and other dependents would continue
participation in the Company's welfare benefit plans on the same terms as would
have been provided if Mr. Miller were a retiree of the Company or the Bank.
If Mr. Miller's employment terminates due to his disability, the Company will
continue to pay his base salary from the date of disability until Mr. Miller is
eligible to receive benefit payments under the Bank's disability plan. During
the period base salary payments continue, Mr. Miller will remain eligible to
participate in the Company's welfare benefit plans. Base salary continuation
payments are reduced by disability benefits paid to Mr. Miller and cease upon
the cessation of disability, except salary will be paid for an additional twelve
months if neither the Company nor the Bank offer Mr. Miller re-employment in the
same position he held prior to his disability.
A change in control is deemed to occur (i) upon the acquisition by any
individual, entity or group of beneficial ownership of more than 25% of the
Company's voting stock; (ii) the commencement of a tender offer or an exchange
offer for more than 20% of the Company's outstanding voting stock; (iii) upon a
merger or consolidation of the Company after which the Company's stockholders
immediately prior to the merger hold less than 25% of the voting stock
of the surviving corporation; (iv) upon a transfer of 25% or more of the
Company's voting stock or substantially all of the property of Company, other
than to an entity of which Company owns at least 50% of the voting stock;
(v) upon a merger or consolidation of the Bank after which the Bank's
stockholders immediately prior to the merger hold less than 25% of the voting
stock of the surviving corporation; or (vi) upon a transfer of 25% or more of
the Bank's voting stock or substantially all of the property of the Bank, other
than to an entity of which the Bank owns at least 50% of the voting stock.
Amendments to Employment Agreements with Mr. Sorcic and Mr. Miller
Effective December 15, 2008 the employment agreements have been amended to
reflect current base salaries in effect for Mr. Sorcic and Mr. Miller which are
$319,748 and $179,192 respectively. The employment agreements have also been
amended to qualify the compensation payable under the employment agreements for
exemption from treatment as deferred compensation under Section 409A of the
Internal Revenue Code of 1986 (the "Code"). Payments upon death, in the case of
Mr. Sorcic and severance payments following termination of employment in the
case of Mr. Sorcic and Mr. Miller will generally be paid in a single lump sum
payment within 30 days following termination of employment or in the case of the
death benefit payable to Mr. Sorcic by March 15 of the calendar year following
the calendar year in which Mr. Sorcic dies. In addition, Mr. Sorcic's and Mr.
Miller's employment agreements have been amended to eliminate Mr. Sorcic's and
Mr. Miller's right to receive severance benefits following their decision to
voluntarily terminate employment following a change in control of the Company
for any reason. Finally, as discussed below, Mr. Sorcic's employment agreement
has been amended to provide for certain rights to Company contributions pursuant
to the Company's 2005 Deferred Compensation Plan.
2005 Deferred Compensation Plan
Mr. Sorcic participates in the Princeton National Bancorp, Inc. 2005 Deferred
Compensation Plan. Under the plan, prior to the beginning of each calendar year,
Mr. Sorcic may elect to defer the receipt of all or part of his compensation
otherwise payable to him for the forthcoming calendar year. The plan provides
that amounts Mr. Sorcic defers are credited with earnings at the prime rate
minus one and one-half percent, adjusted annually, as reported in the Wall
Street Journal.
Amounts under the plan are generally payable to Mr. Sorcic upon the earliest
of (i) the date his employment terminates; (ii) his death; (iii) his total and
permanent disability; or (iv) the date of a change in control of the Company or
the Bank. A distribution following Mr. Sorcic's termination of employment may
not occur until 6 months following the date of that termination. In addition,
Mr. Sorcic may elect to be paid all or a portion of his plan benefits upon an
unforeseeable financial emergency, but only to the extent that the payment is
necessary to relieve that emergency.
Amounts payable under the plan are paid either in a lump sum or ten
substantially equal payments. Mr. Sorcic may change the form of benefit or waive
the payment of plan accounts upon a change in control and elect to receive
payments on the next payment date under the plan, but such a change in the form
of benefit or a waiver of payment upon a change in control would generally
require a five-year delay in the first scheduled payment under the plans.
Under the plan, the events that are deemed to constitute a change in control
are substantially similar to the events that constitute a change in control
under the employment agreement between the Company and Mr. Sorcic. See
description above under the section entitled "Employment Agreements."
Amendments to 2005 Deferred Compensation Plan
Generally effective January 1, 2005, the plan has been amended to comply with
Code Section 409A. Amendments include a revision to the definition of the term
"change in control" to increase from 25% to 30% the threshold at which a change
in ownership of the Company's outstanding voting stock will be considered a
change in control. In addition, certain provisions restricting the payments of
plan benefits upon a plan termination and the amendment of certain defined terms
to conform with the requirements of Code Section 409A have been added to the
plan. Effective January 1, 2009, the rate at which earnings will be credited to
a participant's account has been changed from the prime rate minus 1 1/2
percentage points to the greater of the prime rate minus 1 1/2percentage points
or 4%.
In addition to the changes to plan to conform to the requirements of Code
Section 409A, the Company has amended the plan to provide for the crediting of
discretionary contributions. Each year, the Company may authorize a
discretionary contribution to a participant's account in the plan. The amount
and the terms of vesting for such discretionary contribution may be set forth in
an award agreement or an employment agreement between the Company and the
participant.
Effective January 1, 2009, the Company and Mr. Sorcic have agreed to
amendments to Mr. Sorcic's employment agreement providing for an annual
allocation to Mr. Sorcic's account in the plan. Commencing on January 1, 2009
and on each of the following four successive anniversaries of that date,
provided that Mr. Sorcic remains employed with the Company as of such date, the
Company shall credit $25,000 to Mr. Sorcic's discretionary contributions account
in the plan. Mr. Sorcic shall become vested in such contributions at the rate of
20% per year beginning January 1, 2010, provided he is employed by the Company
on that date until he is 100% vested in such contributions on January 1, 2014.
The vested contributions described above and any earnings thereon shall be
paid to Mr. Sorcic in 5 substantially equal installments, with the first
installment being paid on the date Mr. Sorcic attains age 61 (i.e., June 3,
2014) and the remaining four installments being paid on each June 3rd of the
following four years. The contributions described above shall otherwise be made
and administered in accordance with the terms and conditions of the plan.
Summary of Federal Income Tax Consequences of the Employment Agreements and the
Plan
The amounts payable to the Mr. Sorcic and Mr. Miller pursuant to the
employment agreements are generally not included in their income for federal
income tax purposes until they are actually paid. Except for any portion of
severance payments under the employment agreements that are treated as excess
parachute payments, as described below, the payments are intended to be
deductible by the Company.
The payments under the employment agreements may be considered to be
indirectly contingent upon a Change in Control of the Company pursuant to the
provisions of Section 280G of the Internal Revenue Code. If the present value as
of the date of a Change in Control of the Company, together with all other
payments to the Mr. Sorcic or Mr. Miller that are considered directly or
indirectly contingent upon a Change in Control, exceeds three times the
executive's base amount, then the amount in excess the executive's base amount
is considered an excess parachute payment. The executive's base amount is
generally defined as the executive's taxable compensation paid by the Company or
its bank affiliates for the five calendar years preceding the year in which the
Change in Control of the Company occurs. Excess parachute payments are not
deductible by the Company and subject the executive to an excise tax equal to
20% of the excess parachute payment.
The Company intends that amounts payable pursuant to the employment
agreements shall qualify for an exemption from certain requirements of Code
Section 409A which include rules regarding the timing of payments to the
executives. If the executives are considered key employees pursuant to Code
Section 416, then payments to the executives that are considered deferred
compensation must not be made until six months following the executive's
termination of employment. The Company intends that the payments under the
employment agreements, as amended, will qualify for the short-term deferral
exemption under Section 409A. If the employment agreements are subject to, but
do not comply with Section 409A, the executive would incur an excise tax equal
to 20% of the deferred compensation amounts payable under the employment
agreements, plus interest in certain cases.
Payments under the plan are generally not included in participant's income
for federal income tax purposes until they are actually paid and the payments
are intended to be deductible by the Company for federal income tax purposes.
Amounts under the plan are generally included in the executive's compensation
for purposes of social security payroll tax purposes at the time such amounts
become vested and are not subject to a substantial risk of forfeiture. The
Company intends that the plan comply with the requirements with Code
Section 409A, including the provision for a six month delay in payments to
participants who are considered key employees of the Company as described in the
preceding paragraph. If the plan fails to comply with Section 409A, plan
participants would be subject to the excise tax and interest described in the
preceding paragraph.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
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