Exhibit 10.2

CHANGE IN CONTROL AGREEMENT

(Executive Officers)

 

THIS CHANGE IN CONTROL AGREEMENT entered into as of September 30, 2019 (the
“Effective Date”) by and between Ottawa Savings Bank, (the “Bank”) and Marc N.
Kingry (the “Executive”) and Ottawa Bancorp, Inc., the holding company for the
Bank (the “Company”), as guarantor (the “Agreement”).

 

WHEREAS, to continue to encourage Executive’s dedication to his assigned duties
in the face of potential distractions arising from the prospect of a Change in
Control, the Bank wishes to provide certain benefits and payments in the event
Executive’s employment is terminated involuntarily without Cause or voluntarily
for Good Reason within twelve (12) months of a Change in Control.

 

NOW THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.

 

1.     Termination after a Change in Control.

 

(a)     Cash benefit. Notwithstanding any other provisions in this Agreement, if
the Executive’s employment terminates involuntarily but without Cause (as
defined in paragraph (d) of this Section 1) or voluntarily but with Good Reason
(as defined in paragraph (e) of this Section 1) , in either case within 12
months after a Change in Control, the Bank shall make a lump-sum cash payment
equal to two (2) times the sum of Executive’s: (i) base salary (at the rate in
effect immediately prior to the Change in Control or, if higher, the rate in
effect when the Executive terminates employment) and (ii) the most recent cash
incentive award paid by the Company and/or the Bank to the Executive. Unless a
delay in payment is required under Section 1(b) of this Agreement, the payment
required under this Section 1(a) shall be made within five (5) business days
after the Executive’s employment termination.

 

(b)     Payment of the cash benefit. If the Executive is a “specified employee”
within the meaning of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) at the time his/her employment terminates and the cash
severance benefit under Section 1(a) is considered deferred compensation under
Section 409A of the Code, and finally if an exemption from the six-month delay
requirement of Section 409A(a)(2)(B)(i) of the Code is not available, payment of
the benefit under Section 1(a) shall be delayed and shall be made to the
Executive in a single lump sum without interest on the first business day of the
seventh (7th) month after the month in which the Executive’s employment
terminates, subject to Section 16 of this Agreement.

 

(c)     Change in Control defined. For purposes of this Agreement, a “Change in
Control” means any of the following events:

 

 

(i)

Merger: The Company or the Bank merges into or consolidates with another
corporation, or merges another corporation into the Company or the Bank, and as
a result less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who
were stockholders of the Company or the Bank immediately before the merger or
consolidation.

 

 

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  (ii) Acquisition of Significant Share Ownership: There is filed, or required
to be filed, a report on Schedule 13D or another form or schedule (other than
Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, if the schedule discloses that the filing person or persons acting
in concert has or have become the beneficial owner of 25% or more of a class of
the Company’s voting securities, but this clause (ii) shall not apply to
beneficial ownership of Company voting shares held in a fiduciary capacity by an
entity of which the Company directly or indirectly beneficially owns 50% or more
of its outstanding voting securities.         (iii) Change in Board Composition:
During any period of two consecutive years, individuals who constitute the
Company’s or the Bank’s Board of Directors at the beginning of the two-year
period cease for any reason to constitute at least a majority of the Company’s
or the Bank’s Board of Directors; provided, however, that for purposes of this
clause (iii), each director who is first elected by the board (or first
nominated by the board for election by the stockholders) by a vote of at least
two-thirds (2/3) of the directors who were directors at the beginning of the
two-year period shall be deemed to have also been a director at the beginning of
such period; or         (iv) Sale of Assets: The Company or the Bank sells to a
third party all or substantially all of its assets.

 

(d)     Cause defined. For purposes of this Agreement involuntary termination of
the Executive’s employment shall be considered termination with Cause if the
Executive shall have been terminated for any of the following reasons:

 

 

(i)

Personal dishonesty;

 

(ii)

Willful misconduct;

 

(iii)

Breach of fiduciary duty involving personal profit;

 

(iv)

Intentional failure to perform stated duties;

 

(v)

Willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) that reflect adversely on the reputation of the Bank or the
Company, any felony conviction, any violation of law involving moral turpitude
or any violation of a final cease-and-desist order; or

 

(vi)

Material breach by Executive of any provision of this Agreement.

 

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Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause by the Bank or the Company unless there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of a majority of the entire membership of the Board at a meeting of such
Board called and held for the purpose (after reasonable notice to Executive and
an opportunity for Executive to be heard before the Board with counsel), of
finding that, in the good faith opinion of the Board, Executive was guilty of
the conduct described above and specifying the particulars thereof.

 

(e)     Good Reason defined. For purposes of this Agreement, “Good Reason” shall
mean, unless consented in writing thereto, the occurrence of any of the
following within 12 months of a Change in Control:

 

(i)     The assignment to the Executive of duties that constitute a material
diminution of his authority, duties, or responsibilities (including reporting
requirements)

 

(ii)     A material diminution in the Executive’s base compensation; or

 

(iii)     Relocation of the Executive’s primary workplace to a location outside
a radius of 40 miles of the Company’s corporate headquarters in Ottawa,
Illinois;

 

provided, however, that within ninety (90) days after the initial existence of
such event, the Bank shall be given notice and an opportunity, not less than
thirty (30) days, to effectuate a cure for such asserted “Good Reason” by the
Executive. The Executive’s resignation hereunder for Good Reason shall not occur
later than sixty (60) days following the initial date on which the event the
Executive claims constitutes Good Reason occurred.

 

2.     Continuation of Benefits.

 

(a)     If the Executive timely and properly elects continued Bank-provided
group health plan coverage pursuant to the Consolidated Omnibus Reconciliation
Act of 1985, as amended (“COBRA”), the Bank shall provide the Executive with a
lump sum cash payment, within 30 days of his termination of employment, equal to
(on an after-tax amount determined using an assumed aggregate tax rate of 40%)
the monthly cost for the Bank’s group health and dental plans under which the
Executive was covered at the time of his termination of employment multiplied by
24.

 

(b)     In addition to the cash benefits in Sections 1(a) and 2(a) of the
Agreement, the Bank shall pay to the Executive any earned and unpaid annual cash
incentive award for the completed fiscal year preceding the fiscal year in which
the Change in Control occurs, calculated by taking into account the degree of
achievement of the applicable objective performance goals for such preceding
fiscal year, in a lump sum on the date on which the annual cash incentive award
would have been paid to the Executive but for the Executive’s termination of
employment. The treatment of any outstanding equity awards shall be determined
in accordance with the terms of the applicable equity plan and the applicable
award agreements evidencing such awards.

 

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3.     Termination for Which No Benefits Are Payable. Despite anything in this
Agreement to the contrary, the Executive shall be entitled to no benefits under
this Agreement if the Executive’s employment terminates with Cause, if the
Executive dies while actively employed by the Bank, or if the Executive becomes
totally disabled while actively employed by the Bank. For purposes of this
Agreement, the term “totally disabled” means that because of injury or sickness
the Executive is unable to perform the Executive’s duties. The benefits, if any,
payable to the Executive or the Executive’s beneficiary or estate relating to
the Executive’s death or disability shall be determined solely by such benefit
plans or arrangements as the Bank may have with the Executive relating to death
or disability, not by this Agreement.

 

4.     Term of Agreement.

 

(a)     The term of this Agreement shall consist of: (i) the period commencing
on the Effective Date and ending September 30, 2021, plus (ii) any and all
extensions of the initial term made pursuant to this Section 4.

 

(b)     Commencing on September 30, 2020 (the “anniversary date”) and continuing
on each subsequent anniversary date thereafter, the disinterested members of the
Board of Directors of the Bank may extend the Agreement term for an additional
year, so that the remaining term of the Agreement, following Board action, will
be two (2) years, unless Executive elects not to extend the term of this
Agreement by giving proper written notice. The Board of Directors of the Bank
will review the Agreement and Executive’s performance annually for purposes of
determining whether to extend the Agreement term and will include the rationale
and results of its review in the minutes of the meetings. The Board of Directors
of the Bank will notify Executive as soon as possible after each annual review
whether it has determined to extend the term of the Agreement.

 

5.     Change in Control Best Payments Determination.

 

Notwithstanding any other provision of this Agreement to the contrary, if
payments made or benefits provided pursuant to Sections 1 and 2 or otherwise
from the Bank, the Company or any affiliate of the Bank or the Company are
considered “parachute payments” under Section 280G of the Internal Revenue Code
of 1986, as amended (the “Code”), then such payments or benefits shall be
limited to the greatest amount that may be paid to Executive under Section 280G
of the Code without causing any loss of deduction to the Company or its
affiliates under such section, but only if, by reason of such reduction, the net
after tax benefit to Executive shall exceed the net after tax benefit if such
reduction were not made. “Net after tax benefit” for purposes of this Agreement
shall mean the sum of (i) the total amounts payable to Executive under
Sections 1 and 2, plus (ii) all other payments and benefits which the Executive
receives or then is entitled to receive from the Bank, the Company or any
affiliate of the Bank or the Company that would constitute a “parachute payment”
within the meaning of Section 280G of the Code, less (iii) the amount of
federal, state and local income and payroll taxes payable with respect to the
foregoing calculated at the maximum marginal tax rates for each year in which
the foregoing shall be paid to Executive (based upon the rate in effect for such
year as set forth in the Code at the time of termination of Executive’s
employment), less (iv) the amount of excise taxes imposed with respect to the
payments and benefits described in (i) and (ii) above by Section 4999 of the
Code. The determination as to whether and to what extent payments are required
to be reduced in accordance with this Section 5 shall be made at the Bank’s
expense by an accounting firm or law firm experienced in such matters. Any
reduction in payments required by this Section 5 shall occur in the following
order: (i) any cash severance, (ii) any other cash amount payable to Executive,
(iii) any benefit valued as a “parachute payment,” (iv) the acceleration of
vesting of any equity awards that are options, and (v) the acceleration of
vesting of any other equity awards. Within any such category of payments and
benefits, a reduction shall occur first with respect to amounts that are not
“deferred compensation” within the meaning of Section 409A of the Code and then
with respect to amounts that are. In the event that acceleration of compensation
from equity awards is to be reduced, such acceleration of vesting shall be
canceled, subject to the immediately preceding sentence, in the reverse order of
the date of grant.

 

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6.     This Agreement Is Not an Employment Contract. The parties hereto
acknowledge and agree that (x) this Agreement is not a management or employment
agreement and (y) nothing in this Agreement shall give the Executive any rights
or impose any obligations to continued employment by the Bank or any subsidiary
or successor of the Bank.

 

7.     Withholding of Taxes. The Bank may withhold from any benefits payable
under this Agreement all Federal, state, local or other taxes as may be required
by law, governmental regulation, or ruling.

 

8.     Successors and Assigns.

 

(a)      This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor to the Company and the Bank which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company and the Bank.

 

(b)     Since the Company and the Bank are contracting for the unique and
personal skills of Executive, Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company and the Bank.

 

9.     Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed to the Company and/or the Bank at their principal business
offices and to Executive at his/her home address as maintained in the records of
the Company and the Bank.

 

10.     Captions and Counterparts. The headings and subheadings in this
Agreement are included solely for convenience and shall not affect the
interpretation of this Agreement. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.

 

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11.     Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

 

12.     Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

 

13.     Applicable Law. Except to the extent preempted by federal law, the laws
of Illinois shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.

 

14.     Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 1 and 2. No agreements or representations,
oral or otherwise, expressed or implied concerning the subject matter hereof
have been made by either party that are not set forth expressly in this
Agreement.

 

15.     No Mitigation. Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.

 

16.     Internal Revenue Code Section 409A. The parties to this Agreement intend
for the payments to satisfy the short-term deferral exception under Section 409A
of the Code or, in the case of medical, dental and life insurance benefits, not
constitute deferred compensation (since such amounts are not taxable to the
Executive). However, notwithstanding anything to the contrary in this Agreement,
to the extent payments do not meet the short-term deferral exception of Section
409A of the Code and, in the event the Executive is a “Specified Employee” (as
defined herein) no payment shall be made to the Executive under this Agreement
prior to the first day of the seventh month following termination of employment
in excess of the “permitted amount” under Section 409A of the Code. For these
purposes the “permitted amount” shall be an amount that does not exceed two
times the lesser of: (A) the sum of the Executive’s annualized compensation
based upon the annual rate of pay for services provided to the Company for the
calendar year preceding the year in which the Executive terminates employment,
or (B) the maximum amount that may be taken into account under a tax-qualified
plan pursuant to Section 401(a)(17) of the Code for the calendar year in which
occurs the termination of employment occurs. The payment of the “permitted
amount” shall be made within five (5) business days of the termination of
employment. Any payment in excess of the permitted amount shall be made to the
Executive on the first day of the seventh month following the Executive’s
termination of employment. “Specified Employee” shall be interpreted to comply
with Section 409A of the Code and shall mean a key employee within the meaning
of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an
individual shall be a “Specified Employee” only if the Company is a
publicly-traded institution or the subsidiary of a publicly-traded holding
company. References in this Agreement to Section 409A of the Code include rules,
regulations, and guidance of general application issued by the Department of the
Treasury under Section 409A of the Code.

 

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17.     Regulatory Limitations.      In no event shall the Bank or the Company
be obligated to make any payment pursuant to this Agreement that is prohibited
by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. §
1828(k)), 12 C.F.R. Part 359, or any other applicable law.

 

18.     Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three arbitrators (selected by the Bank and agreed to by the
Executive) who are sitting in Ottawa, Illinois in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator’s award in any court having jurisdiction.

 

 

19.     Source of Payments. All payments provided in this Agreement shall be
timely paid in cash or check from the general funds of the Bank. The Company,
however, unconditionally guarantees payment and provision of all amounts and
benefits due hereunder to Executive and, if such amounts and benefits due from
the Bank are not timely paid or provided by the Bank, such amounts and benefits
shall be paid or provided by the Company.

 

[Signature page to follow]

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IN WITNESS WHEREOF, the parties have executed this Change in Control Agreement
as of September 30, 2019.

 

 

  OTTAWA SAVINGS BANK               /s/ William J. Kuiper   On behalf of the
Board of Directors                   /s/ Marc N. Kingry   Executive          
OTTAWA BANCORP, INC.   (as guarantor)               /s/ Jon L. Kranov

 

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