EX-10.2






Exhibit 10.2




EMPLOYMENT AGREEMENT




     This
Employment Agreement (“Agreement”) is entered into as of this 15th day of
December, 2008, by and between Princeton National Bancorp, Inc., a Delaware corporation
(“Bancorp”), and James Miller (“Executive”).



WITNESSETH:




     WHEREAS, Executive is currently employed by Bancorp, as its Executive Vice President;



     WHEREAS, Executive is currently employed by Citizens First National Bank, a national banking
association (the “Bank”), as its Executive Vice President under terms and conditions set forth in
the employment agreement entered into between Executive and the Bank dated January 8, 2003 (the
“Prior Agreement”);



     WHEREAS, the Bank is a wholly-owned subsidiary of Bancorp; and



     WHEREAS, Executive and Bancorp desire to enter into this Agreement pertaining to the terms of
the continued employment of Executive with Bancorp and the Bank and the security Bancorp is
providing to Executive with respect to his employment in lieu of the terms and conditions of the
Prior Agreement;



     NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and
other good and valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:



     1. Employment. Bancorp hereby agrees to continue to employ Executive as its Executive
Vice President, and to cause the Bank to continue to employ Executive as its Executive Vice
President, and Executive hereby accepts such continued employment by Bancorp and the Bank upon the
terms and conditions herein set forth. The primary place of employment shall be at Bancorp’s and
the Bank’s principal offices, located at 606 South Main Street, Princeton, Illinois 61356.



     2. Term and Automatic Renewal. The term of this Agreement and Executive’s
employment hereunder will be eighteen (18) months commencing as of the date first written above.
On each day following the date first written above, this Agreement and the term of Executive’s
employment hereunder will automatically renew for one (1) additional day until such time as: (i)
the Board of Directors of the Company or Executive elects not to extend the term of this Agreement
by
providing written notice to the other of such party’s election not to extend the term beyond
the then current termination date; or (ii) Executive’s employment is terminated in accordance with Section 7




 









 







of this Agreement.




     3. Duties. Executive will, during the term hereof:




	 	(a)	 	faithfully and diligently do and perform all such acts and
duties and furnish such services as the Boards of Directors of Bancorp or the
Bank shall direct;
	 
	 	(b)	 	do and perform any acts in the ordinary course of Bancorp’s or
the Bank’s businesses (with such limits as the Boards of Directors of Bancorp
or the Bank may prescribe) necessary and conducive to Bancorp’s and the Bank’s
best interests;
	 
	 	(c)	 	execute all duties attendant to his office; and
	 
	 	(d)	 	devote his full time, energy, and skill to the business of
Bancorp and the Bank and to the promotion of Bancorp’s and the Bank’s best
interests, except for vacations, absences made necessary because of illness,
authorized leaves of absence, holidays, professional meetings, and seminars.





     During the term of this Agreement, Executive shall not, without the consent of the Boards of
Directors of Bancorp or the Bank, accept other employment or perform other services for
compensation, or have any direct or indirect ownership interest in any business in competition with
the Bank. Notwithstanding anything to the contrary contained herein, the expenditure of reasonable
amounts of time on personal investments and charitable activities shall not be deemed a breach of
this Agreement, provided that such activities do not materially interfere with the performance by
Executive of his obligations under this Agreement. The Board of Directors of the Bank shall not
unreasonably withhold consent to Executive’s service as a member of the board of directors of other
companies.



     4. Compensation. Bancorp shall cause the Bank to pay to Executive for all services to
be performed by Executive during the term of this Agreement:




	 	(a)	 	a base salary at the rate of $ 179,192 Per annum,
payable in substantially equal periodic monthly payments in accordance with
Bancorp’s and the Bank’s practices for other executives, managerial, and
supervisory employees, as such practices may be determined from time to time
(the “Base
Salary”); and
	 
	 	(b)	 	any annual increase in Base Salary, additional or special
compensation, such as incentive pay or other bonuses, based upon Executive’s
performance, as




2









 












	 	 	 	the Board of Directors of the Bank, in its discretion, may from
time to time determine, based upon annual incentive opportunities made
available to Executive by the Bank and upon other discretionary criteria deemed
appropriate by the Board of Directors of the Bank.




All such payments will be subject to such deductions as may be required to be made pursuant to law,
government regulation or order, or by agreement with, or consent of, Executive.




     5. Fringe Benefits. During the term of this Agreement:




	 	(a)	 	Memberships. Bancorp will cause the Bank to pay or reimburse
Executive for the following:






	 	(i)	 	all reasonable annual dues and membership
expenses in one club selected and joined by Executive in which
memberships are used for or necessary to the performance of Executive’s
duties hereunder and all reasonable expenses incurred in furtherance of
or in connection with the transaction of the business of Bancorp or the
Bank hereunder at such club; and
	 
	 	(ii)	 	all reasonable annual dues and membership
expenses in such civic and lunch clubs selected by Executive as are
necessary or useful to the performance of Executive’s duties hereunder
and all reasonable expenses incurred in furtherance of or in connection
with the transaction of the business of Bancorp or the Bank hereunder
at such civic and lunch clubs.





     All of the aforementioned amounts subject to reimbursement by the Bank to Executive shall be
subject to an accounting by Executive and approval by the Bank. To the extent that the expenses
described in this Section 5 are not paid directly by Bancorp, Bancorp shall reimburse Executive in
accordance with its expense reimbursement policies, but in no event later than March 15 of the
calendar year following the calendar year in which the expenses are incurred.



     6. Additional Benefits. Bancorp shall cause the Bank to provide the following
additional benefits to Executive during the term of this Agreement:




	 	(a)	 	Executive shall be eligible to participate in any incentive
plans or arrangements (“Incentive Plans”) that Bancorp or the Bank may
establish or practices it may follow for the benefit of its executives as in
effect from time




3









 












	 	 	 	to time, and shall be entitled to receive any other bonus or
discretionary compensation payments as Bancorp or the Bank may determine from
time to time.
	 
	 	(b)	 	Executive shall be entitled to paid vacations in accordance
with the Bank’s customary vacation practice. Executive shall also be entitled
to all paid holidays given by the Bank to its other executives.
	 
	 	(c)	 	Executive and his dependents shall be entitled to participate
in and receive benefits under any qualified or supplemental employee pension
plan, including any defined benefit retirement plan or defined contribution
retirement plan (“Retirement Plans”), health and dental plan, disability plan,
survivor income plan, and life insurance plan, or arrangement (“Welfare Plans”)
made available by the Bank in which Executive is currently eligible to
participate, and any additional or substitute Retirement or Welfare Plans
Bancorp or the Bank may make available in the future to its executives, subject
to and on a basis consistent with the terms, conditions, and overall
administration of such Retirement or Welfare Plans.





     7. Termination.




     (a) Good Cause. The Board of Directors of Bancorp may terminate the employment of
Executive with Bancorp and the Bank at any time for “Good Cause”. For purposes of the
preceding sentence, “Good Cause” shall be deemed to exist if:




	 	(i)	 	Executive shall engage in an act or omission
constituting dishonesty, willful misconduct, intentional breach of
fiduciary obligation or intentional wrongdoing or malfeasance;
	 
	 	(ii)	 	Executive shall be convicted of a felony; or
	 
	 	(iii)	 	Executive shall continue to substantially non-perform his
assigned duties for a period of thirty (30) days after the Bank has
given written
notice to Executive of such non-performance and its intention to
terminate the employment of Executive with Bancorp and the Bank
because of such non-performance.






Without limiting the generality of the foregoing, the following shall not constitute cause for



4









 






the termination of employment of Executive or the modification or diminution of any of his
authority hereunder:




	 	(i)	 	any personal or policy disagreement between
Executive and Bancorp or the Bank or any member of the board of
Directors of Bancorp or Bank; or
	 
	 	(ii)	 	any action taken by Executive in connection
with his duties hereunder if Executive acted in good faith and in a
manner he reasonably believed to be in, and not opposed to, the best
interest of Bancorp or the Bank and had no reasonable cause to believe
this conduct was unlawful.





     Notwithstanding anything herein to the contrary, in the event Bancorp shall terminate the
employment of Executive for cause hereunder, Bancorp shall give at least thirty (30) days prior
written notice to Executive.




     (b) Voluntary Termination. Executive shall have the right at any time during the term
of this Agreement to terminate his employment with Bancorp upon giving ninety (90) days
written notice of said termination to Bancorp



          (c) Good Reason. Executive may terminate his employment with Bancorp and the Bank at any time
for “Good Reason”. “Good Reason” shall be deemed to exist if Executive terminates his employment
because, without his express written consent: (i) Bancorp breaches any of the terms of this
Agreement; (ii) He is assigned duties materially inconsistent with the duties and responsibilities
stated in the by-laws of Bancorp and the Bank for his positions; (iii) The duties and
responsibilities for the Executive Vice President stated in the by-laws of Bancorp and the Bank,
respectively, are amended to be materially inconsistent with the duties and responsibilities that
would typically be expected of an Executive Vice President of Bancorp and the Bank, respectively;
or (iv) Bancorp or the Bank changes by 50 miles or more the principal location in which Executive
is
required to perform services. Upon the occurrence of any event referenced in (i) through (iv)
above, Executive shall, within ninety (90) of any occurrence, provide Bancorp notice of the
existence of the condition. Upon receiving notice, Bancorp shall have no more than thirty (30)
days to remedy the condition. Executive shall have two years from the date of the initial
existence of a violation of one of the above events to terminate his employment under this section.
(a)




          (d) Change in Control. A “Change in Control” shall be deemed to occur on the





5









 






 earliest
of:




	 	(i)	 	the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of
beneficial ownership, as that term is defined in rule 13d-3 under the
Exchange Act, of capital stock of Bancorp entitled to exercise more
than twenty-five percent (25%) or more of the outstanding voting power
of all capital stock of Bancorp entitled to vote for the election of
directors (“Voting Stock”);
	 
	 	(ii)	 	the commencement by any entity, person, or
group (other than Bancorp or a subsidiary of Bancorp) of a tender offer
or an exchange offer for more than twenty percent (25%) of the
outstanding Voting Stock of Bancorp;
	 
	 	(iii)	 	the effective time of (A) a merger or consolidation of Bancorp
with one or more other corporations as a result of which the holders of
the outstanding Voting Stock of Bancorp immediately prior to such
merger or consolidation hold less than seventy-five percent (75%) of
the Voting Stock of the surviving or resulting corporation or (B) a
transfer of twenty-five percent (25%) or more of the Voting Stock, or
substantially all of the property of Bancorp, other than to an entity
of which Bancorp owns at least fifty percent (50%) of the Voting Stock;
or
	 
	 	(iv)	 	the effective time of (A) a merger or
consolidation of the Bank with one or more other corporations as a
result of which the holders of the
outstanding Voting Stock of the Bank immediately prior to such merger
or consolidation hold less than seventy-five percent (75%) of the
Voting Stock of the surviving or resulting corporation or (B) a
transfer of twenty-five percent (25%) or more of the Voting Stock, or
substantially all of the property of the Bank, other than to an
entity of which Bancorp or the Bank owns at least fifty percent (50%)
of the Voting Stock.




6









 











     (e) Benefits Upon Termination. The following provisions will apply during the term of this
Agreement: (i) if the employment of Executive with Bancorp or the Bank is terminated by Bancorp or
the Bank for any reason other than Good Cause, (ii) if Executive terminates his employment with
Bancorp or the Bank for Good Reason, or (iii) if the employment of Executive with Bancorp or the
Bank is terminated by Bancorp or the Bank during the twenty-four month period following a Change in
Control:




	 	(i)	 	An amount equal to Executive’s aggregate Base
Salary (at the rate most recently determined) for a period equal to the
greater of (x) eighteen months or (y) the balance of the term of this
Agreement pursuant to Paragraph 2 (the “Severance Period”), shall be
paid to Executive in a lump sum within thirty (30) days after the date
of termination.
	 
	 	(ii)	 	Executive or any other person entitled to receive benefits with
respect to Executive under any Incentive Plan, Retirement Plan, or any
other plan or program maintained by Bancorp or the Bank shall receive
any and all benefits accrued under such Plan or other plan or program,
to the date of termination of employment, the amount, form and time of
payment of such benefits to be determined by the terms of such
Incentive Plan and Retirement Plan and other plan or program, the
Executive’s employment shall be deemed to have terminated by reason of
retirement under each such Plan or other plan or program under
circumstances that have the most favorable result for Executive
thereunder. Payment shall be made at the earliest date permitted
under any such Plan or other plan or program. Notwithstanding the
foregoing, this subsection (ii) shall be interpreted in a manner that
is consistent with Code Section 409A and the timing of payments to
the Executive shall be not be changed to the extent that doing so
would cause another plan or program to violate the requirements of
Code Section 409A and for the Executive to incur excise taxes,
interest costs or both.
	 
	 	(iii)	 	During the Severance Period, Executive and his
spouse and other




7









 












	 	 	 	dependents will continue to be covered by all Welfare
Plans in which he and his spouse and other dependants were
participating immediately prior to the date of his termination as if he
continued to be an employee of Bancorp or the Bank, and Bancorp will,
or will cause the Bank to, continue to pay the costs of coverage of
Executive and his spouse and other dependents under such Welfare Plans
on the same basis as is applicable to active employees covered
thereunder; provided that, if participation in any one or more of such
Welfare Plans is not possible under the terms thereof, Bancorp will, or
will cause the Bank to, provide substantially identical benefits. If
the Company determines that coverage under the Company’s Welfare Plans
can not continue without jeopardizing the tax favored status of such
plans or that value of such benefits to Executive, his spouse and other
dependents exceeds the amount eligible for exemption as separation pay
under Treas. Reg. 1.409-1(b)(9) then, no later than the March 15 of the
calendar year following the calendar year in which Executive’s
employment terminates, the Company may make a lump sum cash payment to
Executive equal to the value of such benefits.
	 
	 	(iv)	 	If the employment of Executive with Bancorp or the Bank is
terminated by Bancorp or the Bank for Good Cause or by the voluntary
action of Executive without Good Reason, other than due to a Change in
Control, Executive’s Base Salary (at the rate most
recently determined) and a bonus (a pro-rata portion of the bonus
paid for the most recent calendar year) shall be paid through the
date of his termination, and Bancorp shall have no obligation to
Executive or any other person under this Agreement. Such termination
shall have no effect upon Executive’s other rights, including but not
limited to rights under any Incentive, Retirement or Welfare Plan.






	(8)	 	Death. If Executive dies during the term of this Agreement, Bancorp
agrees to cause the Bank:






	 	(a)	 	for a period or one year following Executive’s death,
the(“Death Benefit




8









 







	 	 	 	Period”), to cover the spouse and other dependants of
Executive under all Welfare Plans in which Executive and his spouse and other
dependents were participating immediately prior to the date of his death as if
he continued to be an employee of Bancorp or the Bank; provided that, if
participation in any one or more of such plans and arrangements is not possible
under the terms thereof, Bancorp will, or will cause the Bank to, provide
substantially identical benefits; and
	 
	 	(b)	 	for a period of twenty-four (24) months following the Death
Benefit Period, to cover the spouse and other dependents of Executive under all
Welfare Plans in which Executive and his spouse and other dependents were
participating immediately prior to the date of his death as if he were a
retired employee of Bancorp or the Bank; provided that, if participation in any
one or more of such plans and arrangements is not possible under the terms
thereof, Bancorp will, or will cause the Bank to, provide substantially
identical benefits.




Any death benefits payable under this Paragraph 8 are in addition to any other benefits due to
Executive or his beneficiary or dependents from Bancorp, including, but not limited to, payments
under any of the Incentive, Retirement, and Welfare Plans.





	 	9.	 	Disability. If Executive incurs a Disability during the term of this
Agreement, Executive’s obligation to perform such services hereunder will terminate and
in such event Bancorp agrees to cause the Bank:
1.






	 	(a)	 	to continue to pay Executive his aggregate Base Salary (at the rate most
recently determined) from the date of onset of such Disability until such
time as Executive is eligible to receive disability benefits under the
Bank’s disability plan, as presently or hereafter in effect (the “Disability
Period”); and
	 
	 	(b)	 	during the Disability Period and such period of time as
Executive is eligible to receive disability benefits under the Bank’s
disability plan, to continue to cover Executive and his dependents under all
Welfare Plans in which Executive and his spouse and other dependents were
participating immediately prior to the date of onset of such Disability as if
Executive




9









 












	 	 	 	continued to be an employee of Bancorp or the Bank; provided that, if
participating in any one or more of such plans and arrangements is not possible
under the terms thereunder, Bancorp will provide, or cause the Bank to provide,
substantially identical benefits.





          Notwithstanding the foregoing, any payments to Executive pursuant to this Paragraph 9 shall be
reduced by the amount of any disability benefits otherwise payable to Executive under any
disability program maintained by Bancorp or the Bank. Amounts payable to Executive under this
Paragraph 9 shall continue to be paid to a beneficiary designated in writing by him if he dies
during the Disability Period. If Executive is receiving benefits hereunder and his disability
ceases, his benefits under this Paragraph 9 shall terminate, provided that if his employment with
Bancorp and the Bank does not recommence (because no offer of re-employment in the same position is
made), the benefits he is then receiving under this Paragraph 9 shall continue for a period of
twelve (12) additional months. For purposes of this Agreement, the term “Disability” shall mean a
physical or mental disability, as determined by an independent physician selected with the approval
of both Bancorp and Executive, which will render Executive incapable of performing his duties under
this Agreement for six consecutive months.





	 	10.	 	Indemnity. Bancorp shall indemnify Executive to the extent provided in
Article VIII, Sections 1, 2, 3, 4 and 5 of the by-laws of Bancorp, as may be amended
from time-to-time.
	 
	 	11.	 	Setoff. The payments or benefits payable to or with respect
to Executive or his spouse or beneficiary pursuant to this Agreement shall not be
reduced by the amount
of any claim, counterclaim, recoupment defense or other right of Bancorp or the Bank
against Executive or his spouse or other beneficiary or obligation of Executive or
his spouse or other beneficiary owing to Bancorp or the Bank. The payment of
benefits payable to or with respect to Executive or his spouse or other beneficiary
after termination of employment as a result of a change in control shall be absolute
and unconditional. No payments or benefits payable to or with respect to Executive
pursuant to this Agreement shall be reduced by any amount Executive or his spouse or
other beneficiary may earn or receive from employment with another employer or from
any other source. All amounts so payable by Bancorp or the
Bank shall be paid
without notice or demand. Each and every such payment made by Bancorp or the




10









 












	 	 	 	Bank
shall be final, and Bancorp and the Bank will not seek to recover all or any part of
such payment from Executive or from whomsoever may be entitled thereto, for any
reason whatsoever.






	 	12.	 	Confidentiality. Executive acknowledges that preservation of a
continuing business relationship between Bancorp, the Bank and their respective
customers, representatives and employees is of critical importance to the continued
business success of Bancorp and the Bank and that it is the active policy of Bancorp
and the Bank to guard as confidential certain information not available to the public
and relating to the business affairs of Bancorp and the Bank. In view of the
foregoing, Executive agrees that he shall not during the term of this Agreement and at
any time thereafter, without the prior written consent of Bancorp, disclose to any
person or entity any such confidential information that was obtained by Executive in
the course of his employment with Bancorp or the Bank. This section shall not be
applicable if and to the extent Executive is required to testify in a legislative,
judicial, or regulatory proceeding pursuant to an order of Congress, any state or local
legislature, a judge, or an administrative law judge or is otherwise required by law to
disclose such information.
	 
	 	13.	 	Bancorp Assignment. Neither, Bancorp nor Executive may
assign this Agreement without the other party’s prior written consent, except that
Bancorp’s obligations hereunder shall be binding legal obligations of any successor to
all or substantially all
of Bancorp’s business by purchase, merger, consolidation, or otherwise.
	 
	 	14.	 	Executive Assignment. No interest of Executive or his spouse or other
beneficiary under this Agreement, or any right to receive any payment or distribution
hereunder, shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment or other alienation or encumbrance of any kind, nor may such
interest or right to receive payment or distribution be taken, voluntarily or
involuntarily, for the satisfaction of the obligations or debts of, or other claims
against, Executive or his spouse or other beneficiary, including claims for alimony,
support, separate maintenance and claims in bankruptcy proceedings.
	 
	 	15.	 	Benefits Unfunded. All rights under this Agreement of Executive and
his spouse or other beneficiary, shall at all times be entirely unfunded, and no
provision shall at




11









 












	 	 	 	any time be made with respect to segregating any assets of Bancorp
or the Bank for payment of any amounts due hereunder. Neither Executive nor his spouse
or other beneficiary, shall have any interest in or rights against any specific assets
of Bancorp or the Bank, and Executive and his spouse and other beneficiary shall have
only the rights of a general unsecured creditor of Bancorp and the Bank.
	 
	 	16.	 	Waiver. No waiver by any party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other provisions or
conditions at the same time or at any prior or subsequent time.
	 
	 	17.	 	Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
	 
	 	18.	 	Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be affected
thereby.
	 
	 	19.	 	Successors. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, representatives, and
successors.
	 
	 	20.	 	Notice. Notices required under this Agreement shall be in writing and
sent by registered mail, return receipt requested, to the following addresses or to
such address as the party being notified may have previously furnished to the other
party by written notice.




     If to Bancorp: Princeton National Bancorp, Inc.




	 	 	 
	 

	 	606 South Main Street
	 

	 	Princeton, Illinois 61356
	 

	 	Attention: Chairman of the Board
	 
	 	 
	     If to Executive:

	 	James Miller
	 

	 	C/O Princeton National Bancorp, Inc.
	 

	 	606 South Main Street
	 

	 	Princeton, Illinois 61356







	 	21.	 	Applicable Law. This Agreement shall be construed and interpreted
pursuant to the laws of the State of Illinois.
	 
	 	22.	 	Entire Agreement. This Agreement contains the entire agreement between
Bancorp




12









 












	 	 	 	and Executive and supersedes any and all previous agreements, written or oral,
between the parties relating to the subject matter hereof, including but not limited to
the Prior Agreement. No amendment or modification of the terms of this Agreement shall
be binding upon the parties hereto unless reduced to writing and signed by Bancorp and
Executive.
	 
	 	23.	 	Withholding. Bancorp or the Bank may withhold from any payment that is
required to make under this Agreement amounts sufficient to satisfy applicable
withholding requirements under any federal, state or local law.
	 
	 	24.	 	Headings. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of any provision of
this Agreement.
	 
	 	25.	 	Compliance with Section 409A. Notwithstanding anything contained herein
to the contrary, if at the time of a termination of employment, (i) Executive is a
“specified employee” as defined in Section 409A of the Internal Revenue Code of 1986
(the “Code) , and the regulations and guidance thereunder in effect at the time of such
termination (“409A”), and, (ii) any of the payments or benefits provided hereunder may
constitute “deferred compensation” under 409A, then, and only to the extent required by
such provisions, the date of payment of such payments or benefits
otherwise provided shall be delayed for a period of up to 6 months following the
date of termination. The parties intend, however, that this Agreement shall be
exempt from the 409A as either a separation pay arrangement under Treas. Reg.
1.409A-1(b)(9) or a short term deferral of compensation under 1.409A-1(b)(4). In
addition, the provisions of this Agreement relating to Code Section 409A and the
severance provisions of Section 7 of this Agreement are effective January 1, 2005.




13









 











          IN WITNESS WHEREOF, Executive has hereunto set his hand, and Bancorp has caused this
Agreement to be executed in its name and on its behalf, all as of the day and year first above
written.




	 	 	 
	 

	 	PRINCETON NATIONAL BANCORP, INC.
	 
	 	 
	 

	 	/s/ Craig O. Wesner
	 

	 	 
	 

	 	     Craig O. Wesner
	 

	 	     Chairman of the Board of Directors
	 
	 	 
	 

	 	/s/ James Miller
	 

	 	 
	 

	 	     James Miller, Executive







14