Mid Penn Bank Executive Deferred Bonus Agreement with Alan W. Dakey

Summary

This agreement is between Mid Penn Bank and Alan W. Dakey, providing Mr. Dakey, an executive, with the opportunity to defer up to $100,000 in bonus payments. The deferred bonuses are credited to an account and paid out at a later date, typically after Mr. Dakey leaves the board or reaches age 62. The agreement outlines how deferrals are elected, changed, and paid, including provisions for hardship and change of control. The bank pays benefits from its general assets, and the arrangement is subject to specific conditions and limitations.

EX-10.12 4 exhibit_10-12.txt ================================================================================ (C) 1999 BANK COMPENSATION STRATEGIES GROUP THIS DOCUMENT IS PROVIDED TO ASSIST YOUR LEGAL COUNSEL IN DOCUMENTING YOUR SPECIFIC ARRANGEMENT. IT IS NOT A FORM TO BE SIGNED, NOR IS IT TO BE CONSTRUED AS LEGAL ADVICE. FAILURE TO ACCURATELY DOCUMENT YOUR ARRANGEMENT COULD RESULT IN SIGNIFICANT LOSSES, WHETHER FROM CLAIMS OF THOSE PARTICIPATING IN THE ARRANGEMENT, FROM THE HEIRS AND BENEFICIARIES OF PARTICIPANTS, OR FROM REGULATORY AGENCIES SUCH AS THE INTERNAL REVENUE SERVICE AND THE DEPARTMENT OF LABOR. LICENSE IS HEREBY GRANTED TO YOUR LEGAL COUNSEL TO USE THESE MATERIALS IN DOCUMENTING SOLELY YOUR ARRANGEMENT. ================================================================================ MID PENN BANK EXECUTIVE DEFERRED BONUS AGREEMENT THIS AGREEMENT is made this 15 day of January, 1999, by and between Mid Penn Bank, a state commercial bank located in Millersburg, Pennsylvania (the "Company"), and Alan W. Dakey (the "Executive"). INTRODUCTION To encourage the Executive to remain a member of the Company's Board of Executives, the Company is willing to provide to the Executive a deferred Bonus opportunity. The Company will pay the benefits from its general assets. AGREEMENT The Executive and the Company agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1.1 "CHANGE OF CONTROL" shall mean any of the following: (A) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation, a subsidiary of the Corporation, an employee benefit plan (or related trust) of the Corporation or a direct or indirect subsidiary of the Corporation, or affiliates of the Corporation (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 20% of the combined voting power of the Corporation's then outstanding securities or announces a tender offer or exchange offer for securities of the Corporation representing more than 20% of the combined voting power of the Corporation's then outstanding securities; or (B) the liquidation or dissolution of the Corporation or the Company or the occurrence of, or execution of an agreement providing for, a sale of all or substantially all of the assets of the Corporation or the Company to an entity which is not a direct or indirect subsidiary of the Corporation; or (C) the occurrence of, or execution of an agreement providing for, a reorganization, merger, consolidation or other similar transaction or connected series of transactions of the Corporation as a result of which either (a) the Corporation does not survive or (b) pursuant to which shares of the Corporation 2 common stock ("Common Stock") would be converted into cash, securities or other property, UNLESS, in case of either (a) or (b), the holders of Corporation Common Stock immediately prior to such transaction will, following the consummation of the transaction, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation surviving, continuing or resulting from such transaction; or (D) the occurrence of, or execution of an agreement providing for, a reorganization, merger, consolidation, or similar transaction of the Corporation, or before any connected series of such transactions, if, upon consummation of such transaction or transactions, the persons who are members of the Board of Directors of the Corporation immediately before such transaction or transactions cease or, in the case of the execution of an agreement for such transaction or transactions, it is contemplated in such agreement that upon consummation such persons would cease, to constitute a majority of the Board of Directors of the Corporation or, in a case where the Corporation does not survive in such transaction, of the corporation surviving, continuing or resulting from such transaction or transactions; or (E) any other event which is at any time designated as a "Change of Control" for purposes of this Agreement by a resolution adopted by the Board of Directors of the Corporation with the affirmative vote of a majority of the non-employee directors in office at the time the resolution is adopted; in the event any such resolution is adopted, the Change of Control event specified thereby shall be deemed incorporated herein by reference and thereafter may not be amended, modified or revoked without the written agreement of Executive. Notwithstanding anything else to the contrary set forth in this Agreement, if (i) an agreement is executed by the Corporation or the Company providing for any of 3 the transactions or events constituting a Change of Control as defined herein, and the agreement subsequently expires or is terminated without the transaction or event being consummated, and (ii) Executive's employment with the Company did not terminate during the period after the agreement and prior to such expiration or termination, for purposes of this Agreement it shall be as though such agreement was never executed and no Change of Control event shall be deemed to have occurred as a result of the execution of such agreement. 1.1.2 "CODE" means the Internal Revenue Code of 1986, as amended. 1.1.3 "CORPORATION" means Mid Penn Bancorp, Inc. 1.1.4 "DISABILITY" means the Executive's inability to perform substantially all the normal duties of an executive, as determined by the Company's Board of Directors in its sole discretion. As a condition to any benefits, the Company may require the Executive to submit to such physical or mental evaluations and tests as the Board of Directors deems appropriate. 1.1.5 "ELECTION FORM" means the Form attached as Exhibit A. 1.1.6 "BONUSES" means the total bonuses payable to the Executive. 1.1.7 "NORMAL BENEFIT AGE" means the Executive's 62nd birthday. 1.1.8 "NORMAL BENEFIT DATE" means the later of the Normal Benefit Age or the Executive's Termination of Service. 1.1.9 "TERMINATION OF SERVICE" means the Executive's ceasing to be a member of the Company's Board of Directors for any reason other than death. 4 ARTICLE 2 DEFERRAL ELECTION 2.1 INITIAL ELECTION. The Executive shall make an initial deferral election under this Agreement by filing with the Company a signed Election Form within thirty (30) days after the date of this Agreement. The Election Form shall set forth the amount of Bonuses to be deferred, provided such deferral shall not exceed a cumulative total of $100,000. The Election Form shall be effective to defer only bonuses earned after the date the Election Form is received by the Company. 2.2 ELECTION CHANGES 2.2.1 GENERALLY. The Executive may modify the amount of bonuses to be deferred annually by filing a new Election Form with the Company. The modified deferral shall not be effective until the calendar year following the year in which the subsequent Election Form is received by the Company. The Executive may not change the form of benefit payment initially elected under Section 2.1 without the written approval of the Board of Directors of the Company. 2.2.2 HARDSHIP. If an unforeseeable financial emergency arising from the death of a family member, divorce, sickness, injury, catastrophe or similar event outside the control of the Executive occurs, the Executive, by written instructions to the Company may reduce future deferrals under this Agreement. ARTICLE 3 DEFERRAL ACCOUNT 3.1 ESTABLISHING AND CREDITING. The Company shall establish a Deferral Account 5 on its books for the Executive, and shall credit to the Deferral Account the following amounts: 3.1.1 DEFERRALS. The Bonuses deferred by the Executive as of the time the Bonuses would have otherwise been paid to the Executive. 3.1.2 INTEREST. Interest is to be compounded semi-annually on the account balance using an annual rate equal to 8.00%. 3.2 STATEMENT OF ACCOUNTS. The Company shall provide to the Executive, within one hundred twenty (120) days after each anniversary of this Agreement, a statement setting forth the Deferral Account balance. 3.3 ACCOUNTING DEVICE ONLY. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a trust fund of any kind. The Executive is a general unsecured creditor of the Company for the payment of benefits. The benefits represent the mere Company promise to pay such benefits. The Executive's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Executive's creditors. ARTICLE 4 LIFETIME BENEFITS 4.1 NORMAL TERMINATION BENEFIT. Upon the Executive's Normal Benefit Date, the Company shall pay to the Executive the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement. 4.1.1 AMOUNT OF BENEFIT. The benefit under this Section 4.1 is the Deferral 6 Account balance at the Executive's Termination of Service. 4.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Executive [X] in a lump sum [OPTION 2] in equal monthly installments over 10 years commencing on the first day of the month following the Executive's Normal Benefit Date. The Company shall amortize the Deferral Account balance using the interest rate described in Section 3.1.2. 4.2 EARLY TERMINATION BENEFIT. If the Executive terminates service as an executive before the Normal Benefit Age for reasons other than death or Disability, the Company shall pay to the Executive the benefit described in this Section 4.2. in lieu of any other benefit under this Agreement. 4.2.1 AMOUNT OF BENEFIT. The benefit under this Section 4.2 is Deferral Account balance at the Executive's Normal Benefit Age. Interest shall be credited to the account between the Executive's date of Termination of Service and his Normal Benefit Age as specified in Section 3.1.2. 4.2.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Executive [X] in a lump sum [OPTION 2] in equal monthly installments over 10 years commencing on the first day of the month following the Executive's Normal Benefit Age. The Company shall continue to credit interest as described in Section 3.1.2 on the balance of the Deferred Account until all payments have been distributed. 4.3 DISABILITY BENEFIT. Upon Termination of Service for Disability prior to the Normal Benefit Age, the Company shall pay to the Executive the benefit described in this Section 4.3 in lieu of any other benefit under this Agreement. 7 4.3.1 AMOUNT OF BENEFIT. The benefit under this Section 4.3 is the Deferral Account balance at the Executive's Termination of Service. 4.3.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Executive [X] in a lump sum [OPTION 2] in equal monthly installments over 15 years commencing on the first day of the month following the Executive's Termination of Service. The Company shall continue to credit interest as described in Section 3.1.2 on the balance of the Deferred Account until all payments have been distributed. 4.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control while the Executive is in the active service of the Company, the Company shall pay to the Executive the benefit described in this Section 4.4 in lieu of any other benefit under this Agreement. 4.4.1 AMOUNT OF BENEFIT. The benefit under this Section 4.4 is the Deferral Account balance at the date of the Executive's Termination of Service. 4.4.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Executive [X] in a lump sum [OPTION 2] in equal monthly installments over 15 years commencing on the first day of the month following the Executive's Termination of Service. The Company shall continue to credit interest as described in Section 3.1.2 on the balance of the Deferred Account until all payments have been distributed. 4.5 HARDSHIP DISTRIBUTION. Upon the Company's determination (following petition by the Executive) that the Executive has suffered an unforeseeable financial emergency as described in Section 2.2.2, the Company shall distribute to the Executive all or a portion of the Deferral Account balance as determined by the Company, but in 8 no event shall the distribution be greater than is necessary to relieve the financial hardship. ARTICLE 5 DEATH BENEFITS 5.1 DEATH PRIOR TO COMMENCEMENT OF BENEFIT PAYMENTS. If the Executive dies prior to commencement of benefit payments, the Company shall pay to the Executive's beneficiary the benefit described in this Section 5.1 in lieu of any other benefit under this Agreement. 5.1.1 AMOUNT OF BENEFIT. The benefit amount under Section 5.1 is the greater of the Deferral Account balance or $274,000. 5.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the beneficiary [X] in a lump sum [OPTION 2] in equal monthly installments over 10 years commencing on the first day of the month following the Executive's death. The Company shall amortize the Deferral Account balance as described in 3.1.2. 5.2 DEATH DURING BENEFIT PERIOD. If the Executive dies after benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived. ARTICLE 6 BENEFICIARIES 9 6.1 BENEFICIARY DESIGNATIONS. The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive's lifetime. The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's estate. 6.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit. ARTICLE 7 GENERAL LIMITATIONS In lieu of any other benefit under this Agreement, the Company shall pay the Executive (or his beneficiary if applicable) the Executive's Deferral Account Balance in a lump sum within 60 days after Termination of Service under the following conditions: 7.1 TERMINATION FOR CAUSE. If the Company terminates the Executive's service as an executive for: 7.1.1 Gross negligence or gross neglect of duties; 10 7.1.2 Commission of a felony or of a gross misdemeanor involving moral turpitude; or 7.1.3 Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Executive's service and resulting in an adverse financial effect on the Company. 7.2 SUICIDE. If the Executive commits suicide within two years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Company. ARTICLE 8 CLAIMS AND REVIEW PROCEDURES 8.1 CLAIMS PROCEDURE. The Company shall notify any person or entity that makes a claim against the Agreement (the "Claimant") in writing, within ninety (90) days of Claimant's written application for benefits, of Claimant's eligibility or ineligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect Claimant's claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety-day period. 11 8.2 REVIEW PROCEDURE. If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that Claimant is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within sixty (60) days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle Claimant to benefits or to greater or different benefits. Within sixty (60) days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present Claimant's position to the Company orally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Company, but notice of this deferral shall be given to the Claimant. ARTICLE 9 AMENDMENTS AND TERMINATION This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive. ARTICLE 10 MISCELLANEOUS 10.1 BINDING EFFECT. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and transferees. 12 10.2 NO GUARANTEE OF SERVICE. This Agreement is not a contract for services. It does not give the Executive the right to remain an executive of the Company, nor does it interfere with the shareholders' rights to replace the Executive. It also does not require the Executive to remain an executive nor interfere with the Executive's right to terminate services at any time. 10.3 NON-TRANSFERABIlITY. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 10.4 TAX WITHHOLDING. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 10.5 APPLICABLE LAW. The Agreement and all rights hereunder shall be governed by the laws of the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States of America. 10.6 UNFUNDED ARRANGEMENT. The Executive and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim. 10.7 REORGANIZATION. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. 13 10.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. 10.9 ADMINISTRATION. The Company shall have powers which are necessary to administer this Agreement, including but not limited to: 10.9.1 Interpreting the provisions of the Agreement; 10.9.2 Establishing and revising the method of accounting for the Agreement; 10.9.3 Maintaining a record of benefit payments; and 10.9.4 Establishing rules and prescribing any forms necessary or desirable to administer the Agreement. 14 IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement. EXECUTIVE: COMPANY: MID PENN BANK /s/ Alan Dakey By /s/ [ILLEGIBLE] - ---------------------------- ------------------------------ Title Chairman By execution hereof, Mid Penn Bancorp, Inc. consents to and agrees to be bound by the terms and condition of this Agreement. ATTEST: CORPORATION: MID PENN BANCORP, INC. /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE] - ---------------------------- ------------------------------ Title Chairman 15