Document:

Exhibit
10.2

 

HESPEROS,
inc.

EMPLOYMENT
AGREEMENT

 

This
Employment Agreement (“Agreement”) is made and entered into effective as of December 6, 2021 (the “Effective
Date”), by and between Hesperos, Inc. (the “Corporation”), a Delaware corporation, and Rose Ann Scanlon
(“Executive”).

 

WHEREAS,
the Corporation desires to hire Executive as its Chief Executive Officer and Executive desires to accept such position, commencing as
of the Effective Date; and

 

WHEREAS,
the Corporation and Executive desire to enter into this Agreement to set forth the terms and conditions of their employment relationship.

 

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

 

1.
Term; At-Will Employment. This Agreement shall
become effective on the Effective Date and continue until Executive’s employment with the Corporation ends pursuant to the terms
hereof; provided, however, that the parties agree and acknowledge that Executive’s employment with the Corporation shall
be at-will, meaning that either party may terminate Executive’s employment under this Agreement by providing written notice to
the other party of the intent to terminate such employment under this Agreement at any time (in accordance with the procedures described
in Section 8 of this Agreement). The period during which Executive is employed by the Corporation under this Agreement shall be referred
to as the “Employment Term.” 

 

2.
Employment; Position. As of the Effective Date,
the Corporation hereby employs Executive, and Executive hereby accepts full-time employment, upon the terms and subject to the conditions
contained in this Agreement. The Corporation shall employ Executive in the capacity of Chief Executive Officer (“CEO”)
of the Corporation during the Employment Term, reporting to the Board of Directors of the Corporation (the “Board”).

 

3.
Duties. During the Employment Term, Executive
shall perform all duties, consistent with her position as CEO, in order to advance the Corporation’s affairs and related business
efforts, assigned or delegated to her by the Board and normally associated with the position of CEO. Subject to reasonable oversight
by the Board, the Executive shall have full discretion as to the day-to-day operations of the Corporation. Executive shall devote all
of her full business time, attention, energies, skills, and efforts to the advancement of the interests and business of the Corporation;
provided, however, that this Agreement shall not be interpreted as prohibiting Executive from managing Executive’s personal
affairs or engaging in charitable or civic activities or professional industry societies so long as such activities do not interfere
in any material respect with the performance of Executive’s duties and responsibilities hereunder or conflict with Section 7. Subject
to the foregoing, Executive may serve on outside boards, including for public companies, privately held companies and not-for-profit
organizations, provided, however, that Executive may not serve at any one time on more than one (1) outside board of directors
of a for-profit company that is in addition to serving on the Board. 

 

4.
Compensation. As compensation for any and all
services to be rendered by Executive to the Corporation pursuant to this Agreement, the Corporation shall pay Executive and provide Executive
with the following compensation and benefits during the Employment Term, which Executive agrees to accept in full satisfaction for her
services: 

 

a.
Base Salary. The Corporation shall pay Executive a base salary, payable in equal installments at such payment intervals as are
the usual payroll practices of the Corporation, at an initial annual rate of $300,000, less such deductions or amounts to be withheld
as shall be required by applicable law or as may be allowed at the request of Executive (the “Base Salary”). The Base
Salary shall be reviewed by the Board or the Compensation Committee of the Board (the “Compensation Committee”) from
time to time and shall be adjusted by such amount, if any, as Compensation Committee or the independent members of the Board, in their
sole discretion, shall determine and approve. Any such adjustment of Base Salary shall be made effective on the date set by the Compensation
Committee or the independent members of the Board, as applicable.

 

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b.
Annual Bonus. For each full fiscal year of the Corporation during the Employment Term, Executive shall be eligible to participate
in the Corporation’s annual cash incentive plans and programs that are generally provided to the senior executives of the Corporation
pursuant to such terms and conditions as the Compensation Committee or the independent members of the Board may prescribe from time to
time (the “Annual Bonus”), provided that Executive’s Annual Bonus potential shall be no less than 50% of Base
Salary, subject to the achievement of Board-approved objectives. 

 

c.
Equity Compensation. Subject to Board and any required shareholder approval, the Corporation shall grant to Executive an award
of 200,000 shares of restricted common stock of the Corporation (the “RSA Award”). The RSA Award shall initially be
subject to forfeiture and shall vest with respect to 20% of the total number of shares subject to the RSA Award on the first anniversary
of Executive’s employment, with respect to 30% of the total number of shares subject to the RSA Award on the second anniversary
of Executive’s employment and with respect to 50% of the total number of shares subject to the RSA Award on the third anniversary
of Executive’s employment, subject in each case to the Executive’s continuous employment until the applicable vesting date.
The RSA Award shall be granted under and subject to any applicable equity incentive plan of the Corporation and shall be evidenced by
a restricted stock award agreement that will (i) include terms and conditions that are no less favorable to Executive than the terms
that apply to the equity compensation awards of other executives of the Corporation made after the date hereof and (ii) provide for accelerated
vesting of the RSA Award on a change of control of the Corporation (as defined in the Corporation’s equity incentive plan under
which the RSA Award is granted). 

 

d.
Benefits. Executive shall be entitled to participate, to the extent she is eligible, in all group insurance programs and other
employee benefit plans, programs and policies which the Corporation
may hereafter in its sole and absolute discretion make available generally to its full-time salaried employees; provided that the Corporation
will reimburse the Executive during the Employment Term for the employee portion of the premiums for coverage under the Corporation’s
group health insurance plan (as in effect from time to time) for Executive and her immediate family. Executive understands that, except
as otherwise expressly provided for herein, the Corporation may amend, change, or cancel its employment policies and benefit plans at
any time as allowed by law or by any applicable plan documents.

 

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e.
Business Expenses. The Corporation shall reimburse Executive for the reasonable and necessary business expenses of Executive incurred
in the performance of her duties under this Agreement in accordance with the Corporation’s expense reimbursement policies and procedures,
provided Executive provides timely and reasonable documentation of those expenses in accordance with the rules and regulations of the
Corporation. Any such reimbursements shall be made as soon as practicable after Executive provides documentation of expenses to the Corporation,
but in no event later than the last day of the calendar year following the end of the calendar year in which such expense is incurred.

 

f.
Travel and Accommodations. During the first two years of the Employment Term, the Corporation shall pay or reimburse Executive
for the reasonable cost of coach airfare for business travel between Philadelphia (or another city in the continental US) and Orlando,
Florida for up to 52 round trips per year. If it is necessary for Executive to fly overnight, Corporation shall pay or reimburse Executive
for business class travel. In addition, during the first eighteen (18) months of the Employment Term, the Corporation shall pay to Executive
up to a gross amount of $2,000 per month to reimburse the cost of Executive’s accommodations in Orlando, Florida (the “Housing
Reimbursement”), as well as, for up to the first eighteen (18) months of the Employment Term, an additional monthly tax gross-up
payment equal to (i) the amount of Executive’s estimated income and payroll taxes on the Housing Reimbursement plus (ii) the amount
of the estimated income and payroll taxes on the payment under clause (i) and the additional payment under this clause (ii).

 

g.
Vacation. Executive shall be entitled to receive four (4) weeks of paid vacation during the first year of the Employment Term
and five (5) weeks of paid vacation per annum for the remainder of the Employment Term (pro-rated for partial years), and shall be entitled
to receive paid holidays as enjoyed by all other employees of the Corporation.

 

5.
Compliance with Policies. Executive acknowledges
and agrees that, except as set forth in this Agreement, compliance with the Corporation’s policies, practices and procedures is
a term and condition of her employment under this Agreement. The Corporation agrees to make available to Executive a copy of all current
policies, practices and procedures and any such changes therein as provided to other similarly-situated employees.

 

6.
Intellectual Property, Inventions and Improvements.
Executive acknowledges, covenants and agrees that the Corporation shall be the sole owner of all the fruits and proceeds of Executive’s
services to the Corporation, including but not limited to all writings, inventions, discoveries, designs, systems, processes, software
or other improvements relating to the business or products of the Corporation, whether or not patentable, registerable, or copyrightable,
which Executive may, alone or with others, conceive, create, develop, produce or make during or as a result of her employment with the
Corporation (collectively, the “Inventions”), free and clear of any claims by Executive of any kind or character whatsoever
other than Executive’s rights to compensation under this Agreement. Executive agrees that she shall disclose each of the Inventions
promptly and completely to the Corporation, and hereby expressly assigns all of her rights, title and interest in, to and under those
Inventions, including any domestic and foreign patents and patent applications directed to same, to the Corporation and shall, at the
request of the Board, execute such forms of assignments, certificates or other instruments as the Board or the Corporation from time
to time deem necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend the Corporation’s right,
title and interest in or to any or all of the Inventions. Executive acknowledges that all works of authorship (including, without limitation,
works of authorship that contain software program code) relating to the business of the Corporation and produced during Executive’s
employment with the Corporation, whether they are or are not created on the Corporation’s premises or during regular working hours,
are works made for hire and are the property of the Corporation, and that copyrights in those works of authorship are the property of
the Corporation. If for any reason the Corporation is not the author of any such work of authorship for copyright purposes, Executive
hereby expressly assigns all of her rights in and to that work to the Corporation and agrees to sign any instrument of specific assignment
requested. Executive, whether or not still employed by the Corporation, agrees to supply evidence, give testimony, sign and execute all
papers, and do all other legal and proper things that the Corporation may deem reasonably necessary for obtaining, maintaining, and enforcing
patents for such Inventions. If Executive is no longer employed by the Corporation at such time, then the Corporation shall pay Executive
her reasonable out-of-pocket expenses incurred in connection with her providing the services rendered by her in the previous sentence.

 

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7.
Restrictive Covenants.

 

a.
Non-Disclosure of Confidential Information . Executive acknowledges that, in and as a result
of her employment by the Corporation, she will be making use of, acquiring and/or adding to the Corporation’s Confidential Information
(as defined below). As a material inducement to the Corporation to employ Executive and to pay Executive the compensation and benefits
set forth in this Agreement, Executive covenants and agrees that she shall not, at any time during or following the term of her employment
with the Corporation, directly or indirectly divulge or disclose for any purposes whatsoever, any Confidential Information that has been
obtained by, or disclosed to, her as a result of her employment with the Corporation. For purposes of this Agreement, “Confidential
Information” means, collectively, all confidential matters and materials of the Corporation, including without limitation,
(i) the Corporation’s proprietary information, inventions, trade secrets, knowledge, data, know-how, intellectual property, systems,
procedures, manuals, pricing policies, operational methods and information relating to the Corporation’s products, processes, formulae,
business plans, marketing plans and strategies, pricing strategies, customer lists, and all other subject matters pertaining to the business
and/or financial affairs of the Corporation; (ii) the Corporation’s information regarding plans and strategies for research, development,
new products, future business plans, budgets and unpublished financial statements, licenses, prices and costs; (iii) information regarding
the skills and compensation of other employees of the Corporation; (iv) information disclosed in confidence to the Corporation by a third
party with a duty on the Corporation to maintain the confidentiality of such information; and (v) information or material that qualifies
as a “trade secret” as defined in F.S. 688.002(4). The term “Confidential Information” shall not include any
information that (x) is generally available to the public on the Effective Date; (y) becomes generally available to the public other
than as a result of a disclosure not otherwise permissible hereunder or made by a third party without the Corporation’s consent.
If Executive is required by a court, arbitration tribunal, or governmental agency (by oral questions, interrogatories, requests for information
or documents, subpoena, civil investigation demand or similar process) to disclose any Confidential Information, Executive may disclose
such Information to such court, tribunal, or agency without liability hereunder, provided, that to the extent allowed by law, Executive
first provides the Corporation with notice of any such requirement(s) as promptly as practicable, but in any case, to the extent allowed
by law, with sufficient timeliness to enable the Corporation to seek an appropriate protective order and/or waive its compliance with
the relevant provisions of this Agreement. Notwithstanding the foregoing, under no circumstances shall Executive be obligated not to
disclose Confidential Information if to so withhold such information would be in violation of law.

 

b.
Non-Solicitation of Employees. While Executive is employed by the Corporation and for a period of one (1) year, followed by a
second period of six (6) months, for a total period of eighteen (18) months, from the date of termination of Executive’s Employment
Term with the Corporation for any reason, Executive shall not directly or indirectly solicit, induce or encourage any of the Corporation’s
employees to terminate their employment with the Corporation or to accept employment with any competitor, supplier, client, agent or
broker of the Corporation, nor shall Executive cooperate with any others in doing or attempting to do so. As used in this paragraph,
the term “solicit, induce or encourage” includes, but is not limited to, (i) initiating communications with any employee
of the Corporation relating to a possible employment or independent contractor relationship, (ii) offering bonuses or additional compensation
to encourage any employee of the Corporation to terminate his or her employment with the Corporation and accept employment with a competitor,
supplier, client, agent or broker of the Corporation, or (iii) referring any employee of the Corporation to recruiters, personnel or
agents employed by competitors, suppliers, clients, agents or brokers of the Corporation. Notwithstanding the foregoing, the term “solicit,
induce or encourage”, as used in this Section 7.b, specifically excludes any action by Executive related to any of the Corporation’s
employees where it is in the Corporation’s best interest to terminate any such employees as in the case of a planned reduction
in force by the Corporation or any general solicitation not directed specifically to employees of the Corporation.

 

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c.
Non-Compete. Executive recognizes and agrees that Corporation has legitimate business interests that justify this non-compete
restrictive covenant. These legitimate business interests include but are not limited to (a) the Corporation’s Confidential Information;
(b) valuable confidential business or professional information that is not otherwise Confidential Information or a trade secret pursuant
to F.S. 688.002(4); (c) substantial relationships with specific prospective or existing customers or clients; (d) customer or client
goodwill associated with an ongoing business by way of trade name, trademark, service mark or “trade dress, a specific geographic
location, a specific marketing or trade area; and (e) extraordinary or specialized training provided to or received by Executive. Executive
further acknowledges and agrees that the non-compete provisions in this section survive the termination of this Agreement or Executive’s
employment and that Corporation may seek to enforce it, with the practical effect of Executive being unable to engage in certain prohibited
activities or employment for the time specified herein or paying economic damages in the event of a breach. Executive is advised to seek
counsel on the effect of the non-compete provisions herein as Florida law, which governs this Agreement, has strict statutory provisions
that may allow for enforcement of the non-compete provisions without regard to any individualized economic or other hardship that might
be caused to Executive if the non-compete provisions are enforced. In addition to the Assignment provisions contained in Section 15 herein,
Executive acknowledges and agrees that the non-compete provisions herein may be enforced by Corporation’s assignee or successor.

 

d.
While Executive is employed by the Corporation and for a period of one (1) year, followed by a second period of six (6) months, for a
total period of eighteen (18) months, from the date of termination of Executive’s employment with the Corporation for any reason
(or as extended by a court so as to allow the full period of up eighteen (18) months to be fully realized and not delayed due to the
time spent in enforcement proceedings), Executive shall not directly or indirectly, as a principal, agent, contractor, employee, employer,
partner, shareholder, proprietor, investor, member, director, officer or consultant or in any other capacity, engage in or perform any
managerial or executive services for any corporation, partnership, individual or entity which is engaged in a business competitive with
the Corporation or affiliate of the Corporation, where:

 

(i)
The term “engaged in a business competitive with the Corporation” means directly or indirectly engaging in the business of
providing in vitro testing services to biopharmaceutical businesses to provide information on the biophysiological or biochemical
activity, safety and/or efficacy of drug candidates, their metabolites, or modified versions of any of the foregoing substances using
mammalian cells embedded and cultured in cartridges or similar devices or engaging in the same or any substantially similar business
as the Corporation or any of its affiliates in any manner whatsoever within any geographic area in which the Corporation’s products
or services are offered or distributed. Executive understands and agrees that, because the Corporation is engaged in business throughout
the world, the geographic area covered by this non-compete covenant extends throughout North America, South America, Europe, Asia and
Africa; and

 

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(ii)
The term “affiliate” means any legal entity that directly or indirectly through one or more intermediaries controls, is controlled
by, or is under common control with the Corporation.

 

(iii)
Executive acknowledges and agrees that the temporal (time) and geographic (breadth and scope of area and business line) restrictions
are reasonable and necessary to protect Corporation’s legitimate business interests and that such restrictions do not adversely
impact the public safety, health and welfare.

 

e.
Exclusion for Investments. None of the provisions of this Section 7 shall prohibit Executive from investing in securities (i)
listed on a national securities exchange or actively traded over-the-counter so long as such investments are not greater than five percent
(5%) of the outstanding securities of any issuer of the same class or issue or (ii) of entities engaged in a business competitive with
the Corporation so long as any such entity was not engaged in a business competitive with the Corporation at the time Executive made
such investment.

 

f.
Limits on Confidentiality Requirements. Notwithstanding any provision of this Agreement to the contrary, the covenants set forth
in this Section 7 are not intended to, and shall be interpreted in a manner that does not, limit or restrict Executive from exercising
any legally protected whistleblower rights.

 

(i)
Nothing in this Agreement is intended to discourage or restrict Executive from communicating with, or making a report with, any governmental
authority regarding a good faith belief of any violations of law or regulations based on information that Executive acquired through
lawful means in the course of Executive’s employment, including such disclosures protected or required by any whistleblower law
or regulation of the Securities and Exchange Commission, the Department of Labor, or any other appropriate governmental authority.

 

(ii)
Nothing in this Agreement is intended to discourage or restrict Executive from reporting any theft of Trade Secrets (as defined below)
pursuant to the Defend Trade Secrets Act of 2016 (the “DTSA”) or other applicable state or federal law. “Trade
Secret” shall mean information, including a formula, pattern, compilation, program, device, method, technique, process, financial
data, or list of actual or potential customers or suppliers that: (A) derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its
disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The DTSA prohibits
retaliation against an employee because of whistleblower activity in connection with the disclosure of Trade Secrets, so long as any
such disclosure is made either (x) in confidence to an attorney or a federal, state, or local government official and solely to report
or investigate a suspected violation of the law, or (y) under seal in a complaint or other document filed in a lawsuit or other proceeding.

 

(iii)
If Executive believes that any employee or any third party has misappropriated or improperly used or disclosed Trade Secrets or Confidential
Information, Executive should report such activity through applicable policies and procedures of the Corporation. This Agreement is in
addition to and not in lieu of any obligations to protect the Corporation’s Trade Secrets and Confidential Information pursuant
to the Corporation’s Employee Handbook and/or any other then applicable policies and procedures of the Corporation. Nothing in
this Agreement shall limit, curtail or diminish the Corporation’s statutory rights under the DTSA or any applicable state law regarding
trade secrets or common law.

 

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g.
Reasonableness of Restrictions. Executive has carefully read and considered the provisions of this Section 7, and, having done
so, agrees that:

 

(i)
The restrictions set forth in Section 7, including but not limited to the character, duration, and geographical area of restriction,
are fair and reasonable and are reasonably required for the protection of the good will and other legitimate business interests of the
Corporation and its affiliates, officers, directors, shareholders, and other employees;

 

(ii)
Executive has received, or is entitled to receive, adequate consideration for such obligations; and

 

(iii)
Such obligations do not prevent Executive from earning a livelihood.

 

If,
notwithstanding the foregoing, any of the provisions of this Section 7 shall be held to be invalid or unenforceable, the remaining provisions
thereof shall nevertheless continue to be valid and enforceable as though the invalid and unenforceable parts had not been included therein.
If any provision of this Section 7 is determined by a court of competent jurisdiction that the character, duration, geographical scope,
or related aspects are unreasonable in light of the circumstances as they then exist, then it is the intention of the parties that Section
7 shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive that are reasonable
in light of the circumstances as they then exist and as are necessary to assure the Corporation of the intended benefit of this Agreement
and such restrictions, as so modified, shall become and thereafter be the maximum restriction in such regard, and the restriction shall
remain enforceable to the fullest extent deemed reasonable by such court.

 

h.
Remedies for Breach of Restrictive Covenants. Executive recognizes and agrees that the Corporation’s remedy at law for any
breach of Section 7 could be inadequate as such a breach could cause irreparable harm to the Corporation, and she agrees that, for any
actual or threatened breach of such provisions, the Corporation shall, in addition to such other remedies as may be available to it at
law or in equity, be entitled to seek injunctive relief and to enforce its rights by an action for specific performance. All of the Corporation’s
remedies for any breach of this Agreement shall be cumulative and the pursuit of any one remedy shall not exclude the Corporation’s
pursuit of any other remedies. Corporation may seek equitable or injunctive relief in a state or federal court of competent jurisdiction
in and for Orange County, Florida. Executive agrees to the jurisdiction of and venue in a court of Orange County, Florida. Corporation
may, but is not required to alternatively seek enforcement of this Section 7 in an arbitration proceeding pursuant to the process outlined
in Section 23. 

 

8.
Termination and Severance.

 

a.
Termination Procedures.

 

(i)
The Employment Term and Executive’s employment hereunder may be terminated by either the Corporation or Executive at any time and
for any reason or for no reason, provided that Executive must provide the Corporation with thirty (30) days’ advance notice of
her intent to terminate her employment, although if Executive’s termination is without Good Reason, then the Corporation may, in
its discretion, immediately relieve Executive of all duties and responsibilities and choose to terminate Executive’s employment
without further notice or delay, which termination shall not in and of itself constitute a termination without Cause. The Employment
Term and Executive’s employment hereunder shall automatically be terminated upon Executive’s death.

 

(ii)
Any termination of Executive’s employment hereunder by the Corporation or by Executive during the Employment Term (other than termination
on account of Executive’s death) shall be communicated by written notice of termination to the other party hereto (the “Notice
of Termination”) in accordance with Section 14.

 

(iii)
Upon termination of Executive’s employment during the Employment Term, Executive shall only be entitled to the compensation and
benefits described in this Section 8 and shall have no further rights to any compensation or any other benefits from the Corporation
or any of its affiliates under this Agreement.

 

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(iv)
Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all positions held in
the Corporation, including, without limitation, any position as a director, officer, agent, trustee, or consultant of the Corporation
or any affiliate of the Corporation, unless the Board expressly determines otherwise. Upon request of the Corporation, Executive shall
promptly sign and deliver to the Corporation any and all documents reflecting such resignations as of the date of termination of her
employment.

 

b.
Termination due to Death or Disability or Voluntary Resignation by Executive. In the event that Executive’s employment is
terminated during the Employment Term due to Executive’s death or Disability (as defined below), or due to Executive’s voluntary
resignation to which Section 8.d does not apply, then Executive (or, in the case of death, Executive’s legal representatives) shall
be entitled to receive only the following (collectively, the “Accrued Benefits”):

 

(i)
any accrued but unpaid Base Salary and accrued but unused vacation as of Executive’s termination date, which shall be paid in accordance
with the Corporation’s customary payroll procedures;

 

(ii)
any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the date of Executive’s termination
(but no partial bonus for the fiscal year in which termination occurs), paid at the same time such bonus would have been paid if Executive’s
employment had not terminated;

 

(iii)
reimbursement for unreimbursed business expenses properly incurred by Executive, paid in accordance with the Corporation’s expense
reimbursement policy; and

 

(iv)
employee benefits, if any, to which Executive may be entitled under the Corporation’s employee benefit plans as of the date of
Executive’s termination.

 

Except
as otherwise provided herein, the treatment of any outstanding equity-based awards shall be determined in accordance with the terms of
the Plan and any applicable award agreement.

 

For
purposes of this Agreement, “Disability” means Executive is entitled to receive long-term disability benefits under
the Corporation’s long-term disability plan or, if there is no such plan, Executive has incurred a permanent and total disability
(within the meaning of Section 22(e)(3) of the Code or any successor provision), which has existed for 180 consecutive days. Any question
as to the existence of Executive’s Disability to which Executive and the Corporation cannot agree shall be determined by an independent
qualified physician selected by the Corporation and reasonably acceptable to Executive.

 

c.
Termination by Corporation for Cause. In the event that Executive’s employment is terminated by the Corporation for Cause,
then Executive shall only be entitled to receive the Accrued Benefits, except that Executive shall forfeit any earned but unpaid Annual
Bonus described in Section 8.b(ii) above. For purposes of this Agreement, “Cause” shall mean that any of the following
has occurred, as determined by the Board in good faith:

 

(i)
Executive’s conduct constituting a felony under applicable law or any crime involving moral turpitude or dishonesty;

 

(ii)
Executive’s participation in a fraud or act of dishonesty against the Corporation;

 

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(iii)
Executive’s intentional and material damage to the Corporation’s property;

 

(iv)
Executive’s material breach of Executive’s confidentiality agreement or other agreement between Executive and the Corporation;

 

(v)
Executive’s failure or refusal to follow the reasonable and lawful directives of the Board, provided such failure or refusal continues
after her receipt of reasonable notice in writing of such failure or refusal and an opportunity to correct the problem;

 

(vi)
Executive’s material violation of any Corporation policy that results in damage to the Corporation; or

 

(vii)
Executive’s breach of fiduciary duty.

 

To
terminate Executive’s employment for Cause, the Board must provide Executive with written notice to Executive of the existence
of the circumstances providing grounds for termination for Cause and, except for a circumstance which, by its nature, cannot reasonably
be expected to be cured, Executive shall have fifteen (15) business days after delivery of such notice to cure the circumstances constituting
Cause. If such circumstance is timely cured, it shall not constitute grounds for a termination for Cause.

 

d.
Termination by the Corporation without Cause or Executive for Good Reason. In the event that the Corporation terminates Executive’s
employment without Cause, or Executive terminates her employment for Good Reason, then Executive shall be entitled receive:

 

(i)
the Accrued Benefits; and

 

(ii)
a severance payment in an amount equal to the sum of (A) the product of 1.5 and Executive’s Base Salary as of the date of termination
(excluding any reduction in Base Salary that resulted in Executive’s termination of her employment for Good Reason, unless Executive
has waived her right to terminate for Good Reason as provided herein) plus (B) a pro rata portion, calculated on the basis of the number
of months worked during the year of termination compared to 12, of Executive’s target Annual Bonus for the year of termination.
Such severance payment shall be made over the eighteen (18) month period beginning on the first regular payroll date of the Corporation
following thirty (30) days after Executive’s date of termination of employment (subject to Section 8.e), with payments made to
Executive in equal installments during each of the Corporation’s usual pay periods during such eighteen (18) month period.

 

For
purposes of this Agreement, Executive shall be considered to have terminated her employment for “Good Reason”, if the separation
from service occurs during the one hundred twenty (120) day period following the initial existence of one or more of the following actions
taken by the Corporation or its successor without the consent of Executive (unless such action is taken in response to conduct by the
Executive that constitutes Cause):

 

(A)
A material reduction of Executive’s base compensation in effect immediately prior to such reduction;

 

(B)
A material reduction in Executive’s authority, duties or responsibilities;

 

(C)
A material change in the geographic location of Executive’s principal place of employment; or

 

(D)
Any other action or inaction by the Corporation that constitutes a material breach of the terms of employment under this Agreement.

 

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To
terminate Executive’s employment for Good Reason, Executive must provide notice to the Corporation of the existence of the condition
constituting a Good Reason within a period not to exceed ninety (90) days of the initial existence of the condition, upon the notice
of which the Corporation must be provided a period of at least thirty (30) days from the date of receipt of such notice during which
it may remedy the condition and not be required to pay the amount due under this Section 8. If Executive does not provide notice of Good
Reason within ninety (90) days after she first becomes aware of occurrence of the applicable grounds, then Executive will be deemed to
have waived her right to terminate for Good Reason with respect to such grounds.

 

e.
Requirement of Release. Notwithstanding anything herein to the contrary, no severance or benefits shall be paid under this Section
8 (other than the Accrued Benefits) unless Executive first executes and agrees to be bound by a release of all claims, on a form provided
by the Corporation to Executive promptly upon Executive’s termination, which releases any and all claims that Executive has or
might have against the Corporation, its affiliates, and its respective officers and directors and which contains terms customary in such
agreements. If the Corporation does not receive an executed release prior to the date occurring thirty (30) days after the date of termination
of Executive’s employment with the Corporation (including within such thirty (30) day period any applicable revocation period),
the Corporation shall have no obligation to make any payments or provide any benefits to Executive under this Section 8 (other than the
Accrued Benefits).

 

f.
Compliance with Section 409A of the Code; 6 Month Delay.

 

(i)
Notwithstanding anything to the contrary in this Agreement, to the extent that the Corporation, in the exercise of its reasonable judgment,
shall determine that Section 409A of the Code applies to any amounts payable under this Section 8, any such amounts shall be paid in
such fashion and at such times so as to ensure that the Corporation and Executive are in compliance with Section 409A of the Code. For
purposes of this Agreement, Executive’s termination of employment must constitute a separation from service under Section 409A
of the Code, and its accompanying regulations. In the event that the Corporation, in the exercise of its reasonable judgment, determines
that any portion of the payments and benefits under this Section 8 are subject to the requirements of Section 409A of the Code, and that
Executive is a “specified employee” within the meaning of Section 409A of the Code, then, to the extent required for compliance
with Section 409A of the Code, any portion of the such payments or benefits that are subject to Section 409A of the Code and that would
otherwise be payable or provided within the first six (6) months following such termination of employment shall be delayed, and paid
in a lump sum, on the first regular payroll date of the Corporation following the six (6) month anniversary of Executive’s termination
of employment (or the date of her death, if earlier than that anniversary).

 

(ii)
For purposes of this Agreement, Executive’s termination of employment must constitute a “separation from service” under
Section 409A of the Code and its accompanying regulations. It is the intent of the parties hereto that the payments and benefits under
this Agreement comply with or be exempt from Section 409A of the Code, and, accordingly, to the maximum extent permitted, this Agreement
shall be interpreted and administered to be in compliance therewith. Each amount to be paid or benefit to be provided (including any
installment payments) under this Agreement shall be construed as a separate payment for purposes of Section 409A of the Code.

 

(iii)
Any reimbursements of Executive by the Corporation under this Agreement shall be made as soon as practicable after Executive provides
sufficient documentation of expenses to the Corporation and in accordance with the Corporation’s expense reimbursement policy,
but in no event later than the last day of the calendar year following the end of the calendar year in which such expense is incurred.
The amount of expenses eligible for reimbursement pursuant to this Agreement during a given taxable year of Executive shall not affect
the amount of expenses eligible for reimbursement in any other taxable year of Executive. The Executive’s right to reimbursement
under this Agreement is not subject to liquidation or exchange for another benefit.

 

    	10

    	 

    

 

10.
Set Off; Mitigation. The Corporation’s obligation to pay Executive the amounts and to provide the benefits hereunder shall
be subject to set-off, counterclaim or recoupment of amounts determined by a final judicial or arbitral decision to be owed by Executive
to the Corporation for a breach of this Agreement or her fiduciary duties to the Corporation. However, Executive shall not be required
to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise.

 

9.
Taxes. All compensation and benefits provided
for in this Agreement shall be subject to applicable withholding for taxes, (federal, state, and local), and any other proper deductions.
The Corporation shall in no event be obligated to make any gross-up or make-whole payments relating to taxes or withholdings on amounts
or benefits received by Executive.

 

10.
Waiver. A party’s failure to insist on
compliance or enforcement of any provision of this Agreement shall not affect the validity or enforceability or constitute a waiver of
future enforcement of that provision or of any other provision of this Agreement by that party or any other party.

 

11.
Governing Law. This Agreement shall in all respects
be subject to, and governed by the laws of the State of Florida without reference to its conflict of laws.

 

12.
Severability. Subject to the provisions of Section
13, Executive and the Corporation agree that the invalidity or unenforceability of any provision in the Agreement shall not in any way
affect the validity or enforceability of any other provision and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision had never been in the Agreement.

 

13.
Judicial Modification. If a court of competent
jurisdiction determines that the character, duration, geographic scope, activity and/or subject of the provisions in Section 7 of this
Agreement is or are unreasonable under the circumstances as they then exist, then Executive and the Corporation agree that such provisions
should be limited and reduced, and request that any reviewing court limit and reduce such provisions, so as to make them enforceable
under applicable law to assure the Corporation of the intended maximum benefit of such provisions under this Agreement.

 

14.
Notice. Any and all notices required or permitted
herein shall be in writing and shall be deemed to have been duly given (a) when delivered if delivered personally, (b) on the fifth day
following the date of deposit in the United States mail if sent first class, postage prepaid, or by certified mail, or (c) one day after
delivery to a nationally recognized overnight courier service. The parties’ respective addresses for such notices shall be those
set forth below, or such other address or addresses as either party may hereafter designate in writing to the other.

 

	If
    to the Corporation: 	Hesperos,
    Inc.
	 	12501
    Research Parkway
	 	Orlando,
    FL 32826
	 	Attention:
    Chairman of the Board of Directors
	 	 
	With
    a copy to:	Foley
    & Lardner LLP
	 	Attention:
    Michael B. Kirwan
	 	One
    Independent Drive 
	 	Suite
    1300
	 	Jacksonville,
    FL 32202-5017
	 	 
	If
    to Executive:	To
    the most recent address then on file with the Corporation.

 

    	11

    	 

    

 

15.
Assignment. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Corporation may merge or consolidate or to which all or substantially all of its assets may be transferred.
The duties and covenants of Executive under this Agreement, being personal, may not be delegated.

 

16.
Amendments. This Agreement may be amended at
any time by mutual consent of the parties hereto, with any such amendment to be invalid unless in writing and signed by the Corporation
and Executive and expressly referring to this Agreement.

 

17.
Entire Agreement. This Agreement contains the
entire agreement and understanding by and between Executive and the Corporation with respect to the employment of Executive and supersedes
all existing agreements between the Corporation and Executive with respect to such subject matter. No representations, promises, agreements,
or understandings, written or oral, relating to the employment of Executive by the Corporation, or any of its officers, directors, employees,
or agents, not contained herein shall be of any force or effect, provided that, Sections 6 and 7 shall be supplemental to any other agreement
of Executive with the Corporation related to the matters identified therein.

 

18.
No Undue Influence - Construction. This Agreement
is executed voluntarily and without any duress or undue influence. Executive acknowledges that she has read this Agreement and executed
it with her full and free consent. No provision of this Agreement shall be construed against any party by virtue of the fact that such
party or its counsel drafted such provision or the entirety of this Agreement.

 

19.
Representations
of Executive. Executive represents and warrants
to the Corporation that, to the best of her knowledge and belief:

 

a.
Executive’s acceptance of employment with the Corporation and the performance of her duties hereunder will not conflict with or
result in a violation of, a breach of, or a default under any contract, agreement or understanding to which she is a party or is otherwise
bound.

 

b.
Executive’s acceptance of employment with the Corporation and the performance of her duties hereunder will not violate any non-solicitation,
non-competition, or other similar covenant or agreement of a prior employer or third party.

 

c.
This Agreement has been jointly drafted by both parties and is the result of full and otherwise fair and good faith bargaining over its
terms following a full and otherwise fair opportunity to have legal counsel for Executive review this Agreement, propose modifications
and changes, and to verify that the terms and provisions of this Agreement are reasonable and enforceable.

 

d.
Executive has truthfully answered all questions asked by the Board prior to the Effective Date, has disclosed all information that a
reasonable person would believe is material to the Board’s decision to extend an offer of employment to Executive, and has not
falsified any materials or other information requested by the Corporation in connection with her employment.

 

e.
Executive has not been the subject of any complaint or allegation regarding her sexual harassment, her sexual misconduct, fraud or embezzlement
in any prior employment situation.

 

20.
References to Gender and Number Terms. In construing
this Agreement, feminine or neutral pronouns shall be substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the context so requires.

 

    	12

    	 

    

 

21.
Counterparts: Headings; Sections. This Agreement
may be executed in multiple counterparts, each of which shall be considered to have the force and effect of any original but all of which
taken together shall constitute but one and the same instrument. The various headings in this Agreement are inserted for convenience
only and are not part of the Agreement. All references to “Sections” in this Agreement refer to the various corresponding
sections of this Agreement.

 

22.
Survival. The covenants and agreements contained
in Sections 5 through 10 shall survive any termination of Executive’s employment with the Corporation.

 

23.
Arbitration: Waiver of Trial by Jury.
Executive and the Corporation shall submit any disputes arising under this Agreement to an arbitration panel conducting a binding arbitration
in Orlando, Florida or at such other location as may be agreeable to the parties, in accordance with the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association in effect on the date of such arbitration (the “Rules”),
and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof; provided,
however, that nothing herein shall impair the Corporation’s right to seek equitable relief in any court for any breach or threatened
breach of Section 7. The award of the arbitrators shall be final and shall be the sole and exclusive remedy between the parties regarding
any claims, counterclaims, issues or accountings presented to the arbitration panel. The parties hereto further agree that the arbitration
panel shall consist of one (l) person mutually acceptable to the Corporation and Executive, provided that if the parties cannot agree
on an arbitrator within thirty (30) days of filing a notice of arbitration, the arbitrator shall be selected by the manager of the principal
office of the American Arbitration Association serving the State of Florida. Each party will pay for the fees and expenses of its own
attorneys, experts, witnesses, and preparation and presentation of proofs and post-hearing briefs (unless the party prevails on a claim
for which attorney’s fees and expenses are recoverable under the Rules and those amounts are included as part of the award). Any
action to enforce or vacate the arbitrator’s award shall be governed by the federal Arbitration Act, if applicable, and otherwise
by applicable state law. If either the Corporation or Executive pursues any claim, dispute or controversy against the other in a proceeding
other than the arbitration provided for herein, the responding party shall be entitled to dismissal or injunctive relief regarding such
action and recovery of all costs, losses and attorney’s fees related to such action. Executive acknowledges and expressly agrees
that this arbitration provision constitutes a knowing and voluntary waiver of trial by jury in any action or proceeding to which Executive
and the Corporation may be parties arising out of or pertaining to this Agreement.

 

THE
NEXT PAGE IS THE SIGNATURE PAGE

 

    	13

    	 

    

 

IN
WITNESS WHEREOF, the Corporation and Executive have duly executed this Agreement to be effective as of the Effective Date:

 

	CORPORATION:	 
	 	 	 
	HESPEROS,
    INC.	 
	 	 	 
	By:	/s/
    Michael Shuler	 
	Name:	Michael
    Shuler	 
	Title:	President	 
	 	 	 
	EXECUTIVE:	 
	 	 	 
	By:	/s/
    Rose Ann Scanlon	 
	Name:	Rose
    Ann Scanlon	 

 

    	14ex_394857.htm

SOUND COMMUNITY BANK

AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 

AGREEMENT

 

This Amended and Restated Supplemental Executive Retirement Plan Agreement (the “Agreement”) is entered into as of this 11th day of July 2022 (the “Effective Date”) by and between Sound Community Bank (the “Employer”), and Laura Lee Stewart (the “Executive”), and amends and restates the Sound Community Bank Supplemental Executive Retirement Plan f/b/o Laura Lee Stewart (the “Plan”). This Agreement amends and restates the Supplemental Executive Retirement Plan Agreement between the Employer and the Executive as originally adopted effective December 30, 2011 and as last amended and restated on November 23, 2015 (the “Prior Agreement”).

 

WHEREAS, the Executive has contributed substantially to the success of the Employer and the Employer desires that the Executive continue in its employ;

 

WHEREAS, the Employer desires to provide certain supplemental nonqualified pension benefits to the Executive;

 

WHEREAS, the Employer and the Executive desire to enter into this Agreement to provide a retirement benefit under this Plan and to be paid to the Executive upon Separation from Service as provided herein;

 

WHEREAS, because the Executive has reached her Normal Retirement Age of 65 under the Agreement and is fully vested in her Retirement Benefit, the provisions regarding the amount of benefits payable under the Prior Agreement in the event her employment was terminated prior to Normal Retirement Age are no longer applicable, including those provisions regarding disability, early retirement or vesting upon a change in control;

 

        WHEREAS, the Bank and the Executive desire to amend and restate the Prior Agreement in order to (1) provide that the amount of benefits to be payable to the Executive under this Agreement shall be equal to the amount payable under the Annuity (as defined below), and (2) make certain other changes;

 

WHEREAS, the parties hereto intend that this Agreement shall be an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and shall be considered a plan described in Section 301(a)(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

 

WHEREAS, this Plan is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and, accordingly, the intent of the parties hereto is that the Plan shall be operated and interpreted consistent with the requirements thereof;

 

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

 

 

 

 

   ARTICLE 1

    DEFINITIONS

 

Whenever used in this Agreement, the following terms have the meanings specified:

 

1.1.    “Annuity” means the annuity product provided under the Annuity Contract.

 

1.2.    “Annuity Contract” means the American Valor 10 Fixed-Index Annuity issued by Great American Life Insurance Company, Contract Number 1195053889, with the following endorsements: Income Rider.

 

1.3.    “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive, determined according to Article 4.

 

1.4.    “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

 

1.5.    “Board” means the Board of Directors of the Employer.

 

1.6.    “Change in Control” shall be deemed to have taken place if:

 

(a)    any person or entity, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other than the Employer, a wholly-owned subsidiary thereof, the Company or any employee benefit plan of the Employer or any of its parent holding company or subsidiaries becomes the beneficial owner of securities of the Company having fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of the issuance of securities initiated by the Company in the ordinary course of business); or

 

(b)    as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, the holders of all securities of the Company entitled to vote generally in the election of directors of the Company immediately prior to such transaction constitute, following such transaction, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transactions; or

 

(c)    such other change of ownership or control event as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequent, applicable Treasury Regulation.

 

1.7.    “Company” shall mean Sound Financial Bancorp, Inc., the parent holding company of the Employer.

 

1.8.    “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expect to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Employer, provided that the definition of Disability applied under such Disability insurance program complies with the requirements of Section 409A. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration’s or the provider’s determination. The said monthly payments shall begin the first day of the third month following the month that the Executive becomes Disabled.

 

 

2

 

 

1.9.     “Rider” means the Income Rider attached to the Annuity Contract as an endorsement.

 

1.10.    “Normal Retirement Age” means age sixty-five (65).

 

1.11.    “Plan Administrator” means the plan administrator described in Article 8.

 

1.12.    “Separation from Service” means a termination of the Executive’s employment with the Employer (and all corporations, entities or organizations with whom the Employer would be considered a single employer pursuant to subsections (b) and (c) of Section 414 of the Code), in each case as determined in accordance with Section 409A of the Code and Treasury Regulation §1.409A-1(h). In determining whether a Separation from Service has occurred, the Employer shall take into account all of the facts and circumstances, special rules and presumptions set forth in the above regulation.

 

ARTICLE 2

    DEFERRED COMPENSATION AND VALUATION OF ACCOUNT

 

2.1.    Annuity Contract. With respect to the Annuity purchased by the Employer, all right, title, and interest in and to the Annuity (or any other assets which may be purchased by the Employer) shall at all times be the sole property of the Employer and shall in no event be deemed to constitute a fund or collateral security for the payments under the Agreement. The Annuity and any other asset purchased by the Employer shall for all purposes be a part of the general funds of the Employer. To the extent that the Executive or the Executive’s Beneficiary acquires rights to receive payments under the Plan, such rights shall be no greater than the rights of any unsecured general creditor of the Employer. The Annuity Contract shall merely be the mechanism for tracking the benefits owed to the Executive under the Agreement.

 

2.2.    No Requirement to Purchase Any Additional Annuity Contract. While the Employer is not required to acquire and maintain any additional Annuity Contract, it may do so, and if the Employer does acquire any additional Annuity Contract, then the Executive consents thereto and agrees to assist the Employer in making application for the additional Annuity Contract by submitting to any required physical examination and providing any information necessary for the completion of such application.

 

3

 

 

2.3.    Rabbi Trust. The Employer may establish a “rabbi trust” to which contributions may be made to provide the Employer with a source of funds for purposes of satisfying the obligations of the Employer under the Plan. The trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan. The Executive and her Beneficiaries shall have no beneficial ownership interest in any assets held in the trust.

 

ARTICLE 3

    RETIREMENT AND OTHER BENEFITS

 

3.1.    Retirement Benefit. Upon the Executive’s Separation from Service on or after Normal Retirement Age for any reason other than death, the Executive will be entitled to the monthly benefit payment described in this Section. The monthly benefit will commence on the first (1st) day of the month following the Executive’s Separation from Service (the “Commencement Date”) and will be paid on the first day of each following month until the Executive’s death, subject to any delay required by paragraph 3.4 below to comply with Section 409A of the Code. The amount of the monthly benefit will equal the amount which would be paid from the Annuity each month for the Executive’s life, based on (a) the riders in effect as of the Effective Date of this Agreement, which provide for lifetime benefits, and (b) the applicable mortality assumptions as of the Commencement Date (the “Retirement Benefit”). This shall be the Executive’s benefit in lieu of any other benefit under this Agreement.

 

3.2.    Early Retirement. Upon the Executive’s Separation from Service prior to Normal Retirement Age for any reason other than death, the Executive will be entitled to the amount accrued for the Retirement Benefit by the Employer as of the early retirement date, payable on the first (1st) day of the second month following the date of the early retirement in 180 equal monthly installments. The discount rate used by the Plan Administrator for determining the early retirement benefit will be based on the yield on a 20-year corporate bond rated Aa by Moody’s, rounded to the nearest 1⁄4%, or as otherwise determined by the governing regulatory body. The initial discount rate is 5.00%. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP and consistent with the Interagency Advisory on Accounting for Deferred Compensation Agreements which states that the “cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.”

 

3.3.    Disability. In the event the Executive should become Disabled while actively employed by the Employer any time after the original effective date of the Prior Agreement but prior to Normal Retirement Age or early retirement, the Executive will be entitled to the amount accrued for the Retirement Benefit by the Employer as of the date of Disability, payable on the first (1st) day of the second month following the date of the Disability in 180 equal monthly installments. The discount rate used by the Plan Administrator for determining the Disability benefit will be based on the yield on a 20-year corporate bond rated Aa by Moody’s, rounded to the nearest 1⁄4%, or as otherwise determined by the governing Regulatory body. The initial discount rate is 5.00%. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP and consistent with the Interagency Advisory on Accounting for Deferred Compensation Agreements which states that the “cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.”

 

4

 

 

3.4.    Restriction on Timing of Distributions. Notwithstanding the applicable provisions of this Agreement regarding timing of payments, the following special rules shall apply if the stock of the Company is publicly traded at the time of the Executive’s Separation from Service in order for this Agreement to comply with Section 409A of the Code: (i) to the extent the Executive is a “specified employee” (as defined under Section 409A of the Code) at the time of the Executive’s Separation from Service and to the extent such applicable provisions of Section 409A of the Code and the regulations thereunder require a delay of such distributions by a six-month period after the date of such Separation from Service with the Employer, no such distribution shall be made prior to the date that is six months after the date of the Executive’s Separation from Service with the Employer, and (ii) any such delayed payments shall be paid to the Executive in a single lump sum within five (5) business days after the end of the six (6) month delay, without any interest on the delayed payments.

 

3.5.    Death Benefits. In the event the Executive dies prior to the Commencement Date of the Retirement Benefit, the Beneficiary will be entitled to a single lump sum payment, payable within ninety (90) days of the date of death (with the beneficiary having no right to designate the taxable year of the payment) equal to the amount accrued for the Retirement Benefit by the Employer as of the date of death.

 

3.6.    Change in Control Benefit. Upon a Change in Control, the Executive will be 100% vested in the Retirement Benefit as provided for in paragraph 3.1, which benefit shall be payable in accordance with paragraph 3.1.

 

   ARTICLE 4

    BENEFICIARIES

 

4.1.    Beneficiary Designations. The Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the Beneficiary designation under any other benefit plan of the Employer in which the Executive participates.

 

4.2.    Beneficiary Designation; Changes. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. 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. The Executive shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator before the Executive’s death.

 

4.3.    Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received in writing by the Plan Administrator or its designated agent.

 

5

 

 

4.4.    No Beneficiary Designation. If the Executive dies without a valid Beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be distributed to the personal representative of the Executive’s estate on behalf of the estate.

 

4.5.    Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Employer may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person or incapable person. The Employer may require proof of incapacity, minority or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Employer from all liability for the benefit.

 

ARTICLE 5

    GENERAL LIMITATIONS

 

5.1.    Limits on Payments. It is the intention of the parties that none of the payments to which the Executive is entitled under this Agreement will constitute a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC, the payment of which is prohibited. Notwithstanding any other provision of this Agreement to the contrary, any payments due to be made by the Employer for the benefit of the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned on compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder, including the receipt of all required approvals thereof by the Employer’s primary banking regulator and/or the FDIC.

 

In addition, the Employer and its successors retain the legal right to demand the return of any payment made hereunder which constitutes a “golden parachute payment” within the meaning of 12 USC Section 1828(k)(3) or implementing regulations of the FDIC should the Employer or its successors later obtain information indicating that the Executive committed, is substantially responsible for, or has violated, the respective acts or omissions, conditions or offenses outlined under 12 C.F.R. 359.4(a)(4).

 

ARTICLE 6

    CLAIMS AND REVIEW PROCEDURES

 

6.1.    Claims Procedure. A person or Beneficiary (a “claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

 

(a)    Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If the claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after the notice was received by the claimant. All other claims must be made within one hundred eighty (180) days after the date of the event that caused the claim to arise. The claim must state with particularity the determination desired by the claimant.

 

(b)    Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within ninety (90) days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

 

6

 

 

(c)    Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

 

	 	
			(i)

				
			The specific reasons for the denial,

			

 

	 	
			(ii)

				
			A reference to the specific provisions of the Agreement on which the denial is based,

			

 

	 	
			(iii)

				
			A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

			

 

	 	
			(iv)

				
			An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and

			

 

	 	
			(v)

				
			A statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.

			

 

6.2.    Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

 

(a)    Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

 

(b)    Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

 

(c)    Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

 

(d)    Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

 

7

 

 

(e)    Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

 

	 	
			(i)

				
			The specific reasons for the denial,

			

 

	 	
			(ii)

				
			A reference to the specific provisions of the Agreement on which the denial is based,

			

 

	 	
			(iii)

				
			A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and

			

 

	 	
			(iv)

				
			A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

			

 

ARTICLE 7

    MISCELLANEOUS

 

7.1.    Amendments and Termination. Subject to Section 7.13 of this Agreement, (a) this Agreement may be amended solely by a written agreement signed by the Employer and by the Executive, and (b) except as otherwise provided herein, this Agreement may be terminated solely by a written agreement signed by the Employer and by the Executive.

 

7.2.    Binding Effect. This Agreement shall bind the Executive and the Employer and their beneficiaries, survivors, executors, successors, administrators, legal representatives and transferees.

 

7.3.    No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Employer, nor does it interfere with the Employer’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

 

7.4.    Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

7.5.    Tax Withholding. The Employer shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

 

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7.6.    Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to the principles of conflict of laws of such state.

 

7.7.    Unfunded Arrangement. The Executive and the Executive’s Beneficiary are general unsecured creditors of the Employer for the payment of benefits under this Agreement. The benefits represent the mere promise by the Employer 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, annuity contract or other asset purchased by Employer to fund its obligations under this Agreement shall be a general asset of the Employer to which the Executive and Beneficiary have no preferred or secured claim.

 

7.8.    Severability. If any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision, and the remainder of such provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law.

 

7.9.    Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

 

7.10.    Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Employer at the time of the delivery of such notice, and properly addressed to the Employer if addressed to the Board of Directors, at 2400 3rd Avenue, Suite 150, Seattle, Washington 98121.

 

7.11.    Entire Agreement. This Agreement constitutes the entire agreement between the Employer and the Executive concerning the subject matter hereof. All prior agreements between the Employer and the Executive with respect to the matters agreed to herein, including the Prior Agreement, are hereby superseded and shall have no force or effect. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

 

7.12.    Payment of Legal Fees. In the event litigation ensues between the parties concerning the enforcement of the obligations of the parties under this Agreement, the Employer shall pay all costs and expenses in connection with such litigation until such time as a final determination (excluding any appeals) is made with respect to the litigation. If the Employer prevails on the substantive merits of each material claim in dispute in such litigation, the Employer shall be entitled to receive from the Executive all reasonable costs and expenses, including without limitation attorneys’ fees, incurred by the Employer on behalf of the Executive in connection with such litigation, and the Executive shall pay such costs and expenses to the Employer promptly upon demand by the Employer.

 

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7.13.    Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations. The Employer is entering into this Agreement on the assumption that certain existing tax laws, rules and regulations will continue in effect in their current form. If that assumption materially changes and the change has a material detrimental effect on this Agreement, then the Employer reserves the right to terminate or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld.

 

ARTICLE 8

    ADMINISTRATION OF AGREEMENT

 

8.1.    Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Board of Directors of the Employer or such committee or person(s) as the Board of Directors of the Employer shall appoint. The Plan Administrator shall have the sole and absolute discretion and authority to interpret and enforce all appropriate rules and regulations for the administration of this Agreement and the rights of the Executive under this Agreement, to decide or resolve any and all questions or disputes arising under this Agreement, including benefits payable under this Agreement and all other interpretations of this Agreement, as may arise in connection with the Agreement.

 

8.2.    Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Employer.

 

8.3.    Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. Without limiting the foregoing, it is acknowledged that the value of the benefits payable hereunder may be difficult to determine in the event the Employer does not actually maintain the Annuity Contract as contemplated hereunder; therefore, in such event, the Employer shall have the right to make any reasonable assumptions in determining the benefits payable hereunder and any such determination made in good faith shall be binding on the Executive.

 

8.4.    Indemnity of Plan Administrator. The Plan Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement, unless such action or omission is attributable to the willful misconduct of the Plan Administrator or any of its members. The Employer shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

 

8.5.    Employer Information. To enable the Plan Administrator to perform its functions, the Employer shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death or Separation from Service of the Executive and such other pertinent information as the Plan Administrator may reasonably require.

 

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IN WITNESS WHEREOF, the Executive and a duly authorized Officer of the Employer have signed this Agreement as of the date first written above.

 

 

	
			THE EXECUTIVE:

				 	
			SOUND COMMUNITY BANK

			
	 	 	 
	 	 	 
	
			/s/Laura Lee Stewart

				
			By:

				/s/Tyler Myers
	
			Laura Lee Stewart

				 	
			Tyler Myers, Chairman of the Board

			

 

 

 

 

 

 

 

 

11

 

 

BENEFICIARY DESIGNATION

 

SOUND COMMUNITY BANK

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT

 

 

I, Laura Lee Stewart, designate the following as Beneficiary of any death benefits under this Supplemental Executive Retirement Plan Agreement

 

Primary: The Estate of Laura Lee Stewart                                                               

 

Contingent:          None                                                                        

 

Note: To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

 

I understand that I may change these Beneficiary designations by filing a new written designation with the Employer. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

 

	 	
			Signature:

				 
	 	 	 
	 	
			Date:

				 	 

 

          Accepted by the Employer this ____ day of _____________ 202_.

 

	 	
			By:

				 
	 	 	 
	 	
			Print Name:

				
			Tyler Myers

			
	 	 	 
	 	
			Title:

				
			Chairman of the Board

			

 

 

 

 

 

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