Document:

exa10222012ltip.htm

  

  

  

EXHIBIT A 10.22

 

 

 

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION

 

PERFORMANCE SHARE INCENTIVE PLAN

 

2012-2014

 

 

 

 

 

  

  

  

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION

 

PERFORMANCE SHARE INCENTIVE PLAN

 

TABLE OF CONTENTS

 

 

	  	  	
Section

	
ARTICLE I

	
- PURPOSE

 

	  
	
ARTICLE II

	
- DEFINITIONS

 

	  
	  	
"Account"

"Award"

"Board"

"Change in Control"

"Code"

	
2.1

2.2

2.3

2.4

2.5

 

	  	
"Committee"

"Common Stock" or "Stock"

"Comparison Group"

"Component"

"Dividend Equivalent"

"Effective Date"

 

	
2.6

2.7

2.8

2.9

2.10

2.11

	  	
"Employer"

"Exchange Act"

"Fair Market Value"

"Operational Measures"

"Participant"

"Performance Cycle"

 

"PeRS"

"Plan"

"Pro Rata Portion"

"Stock Unit "

"Target PeRS "

 

"Termination of Employment"

"Total Shareholder Return"

	
2.12

2.13

2.14

2.15

2.16

2.17

 

2.18

2.19

2.20

2.21

2.22

 

2.23

2.24

 

(i)

  

  

  

	  	  	
  Section

	
 ARTICLE III

	
- DETERMINATION OF PERFORMANCE SHARES

 

Designation of PeRS and Related Terms

Adjustment of and Changes in Stock

	
 

 

3.1

3.2

 

	
ARTICLE IV

	
- PAYMENT OF GRANTS

 

Performance Awards

Accounts

Payment of Account 

	
 

 

4.1

4.2

4.3

 

	
ARTICLE V

 

	
- TERMINATION OF EMPLOYMENT

 

Termination Prior to Completion of Performance Cycle

Change in Control 

	
 

 

5.1

5.2

 

	
ARTICLE VI

	
- ADMINISTRATION

 

Committee

Amendment and Termination

	
 

 

6.1

6.2

 

	
 ARTICLE VII

	
- GENERAL PROVISIONS

 

Payments to Minors and Incompetents

No Contract

Use of Masculine and Feminine; Singular and Plural

Non-Alienation of Benefits

Income Tax Withholding

 

Continuation of Plan

Governing Law

Captions

Severability

	
 

 

7.1

7.2

7.3

7.4

7.5

 

7.6

7.7

7.8

7.9

 

(ii)

  

  

  

ARTICLE I

 

PURPOSE

 

Effective January 1, 2012, Central Vermont Public Service Corporation (the "Employer") has established The Central Vermont Public Service Corporation Performance Share Plan (the "Plan") in order to strengthen the ability of the Employer to attract and retain talented executives and to promote the long-term growth and profitability of the Employer by linking a significant element of executives’ compensation opportunity to the performance of the Employer in meeting key operational and shareholder return goals over an extended period of time.

 

  

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ARTICLE II

 

DEFINITIONS

 

 

	
2.1

	
"Account" means the bookkeeping account established for the Participant under Section 4.2.

 

	
2.2

	
"Award" means any payment or settlement in respect of a grant of Common Stock or cash or any combination thereof in accordance with Section 4.1.

 

	
2.3

	
"Board" means the Board of Directors of Central Vermont Public Service Corporation.

 

	
2.4

	
"Change in Control" shall have the same meaning as the term defined in the standard form Change in Control Agreement approved by the Employer’s Board of Directors and awarded from time to time.

 

	
2.5

	
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and pertinent regulations issued thereunder. Reference to any section of the Code shall include any successor provision thereto.

 

	
2.6

	
"Committee" means the Compensation Committee appointed by the Board to administer this Plan. The Committee shall be comprised of at least 3 members who qualify as “non-employee directors” within the meaning of Rule 16B-3 promulgated under the Exchange Act.

 

	
2.7

	
"Common Stock" or "Stock" means the common stock of the Employer.

 

	
2.8

	
"Comparison Group" means the peer group of companies designated by the Committee as the Comparison Group relative to a given Performance Cycle, as described in Section 3.1(c)

 

  

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2.9

	
“Component” means the part of the plan related to specific measures.  There are two plan components – one related to relative Total Shareholder Return performance and the second related to meeting key Operational Measure performance.

 

	
 2.10

	
"Dividend Equivalent" means credits in respect of each PeRS (as defined in section 2.18) or other Stock Unit representing an amount equal to the dividends or distributions declared and paid on a share of Common Stock.

 

	
 2.11

	
"Effective Date" means January 1, 2012, the effective date of this Plan for the Performance Cycle January 1, 2012 through December 31, 2014.

 

	
 2.12

	
"Employer" means Central Vermont Public Service Corporation, its subsidiaries and affiliates, and its successor or successors.

 

	
 2.13

	
"Exchange Act" means the Securities Exchange Act of 1934, as amended and in effect from time to time, including all rules and regulations promulgated thereunder.

 

	
 2.14

	
"Fair Market Value" means the average of the high and low quoted selling price for a share of Common Stock of the Company on the applicable date as quoted on the New York Stock Exchange (“NYSE”) in the Eastern Edition of the Wall Street Journal or in a similarly readily available public source on such date.  If such date shall not be a business day, then the preceding day which shall be a business day, or if no sale takes place, then the average of the bid and asked prices on such date.

 

	
2.15

	
“Operational Measures” means the specific measures of operational performance chosen for a three-year performance cycle. (See Exhibit B.)

 

	
2.16

	
"Participant" means an executive officer of the Employer who is selected by the Board to participate in this Plan.

 

	
2.17

	
"Performance Cycle" means the period over which PeRS designated in respect of the Performance Cycle potentially may be earned. The Performance Cycle is the three year period extending from January 1 of the initial year through December 31 of the third year in the Performance Cycle, which in this case is January 1, 2012 through December 31, 2014.

 

  

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2.18

	
"PeRS" means Stock Units which are potentially earnable by a Participant hereunder upon achievement of specific levels of performance for the two plan components as shown in Exhibit A and B.  The term is an acronym for “performance-based restricted Stock Units”.

 

	
2.19

	
"Plan" means the Central Vermont Public Service Corporation Performance Share Incentive Plan, as set forth herein, as may be amended from time to time. Shares for this plan were approved by shareholders on May 6, 2008 as the Omnibus Stock Plan (Amended and Restated 2002 Long-Term Incentive Plan) and any subsequent replacement plans.

 

	
  

	
2.20     "Pro Rata Portion" means a portion of shares which is determined by multiplying a predetermined number of PeRS by the ratio of months in the thirty-six month performance cycle within which the executive was an employee of the Company and a Participant with respect to that cycle.  

 

	
2.21

	
"Stock Unit" is a bookkeeping unit which represents a right to receive one share of Common Stock upon settlement, together with a right to accrual of additional Stock Units as a result of Dividend Equivalents, subject to the terms and conditions of this Plan. Stock Units are arbitrary accounting measures created and used solely for purposes of this Plan, and do not represent ownership rights in the Employer, shares of Common Stock, or any asset of the Employer.

 

	
2.22

	
"Target PeRS" means a number of PeRS designated as a target number that may be earned by a Participant in respect to the Performance Cycle plus the number of PeRS resulting directly or indirectly from Dividend Equivalents on the originally designated number of Target PeRS.

 

  

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2.23

	
"Termination of Employment" means the Participant’s termination of employment with the Employer.

 

	
2.24

	
"Total Shareholder Return" (TSR) means the amount, expressed as a percentage, of market price appreciation or depreciation of a share of common stock plus dividends on a share of Common Stock or on the common stock of a company in the Comparison Group (in both cases excluding extraordinary dividends), assuming dividend reinvestment at the dividend payment date, for the Performance Cycle.

 

  

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ARTICLE III

 

	
DETERMINATION OF PERFORMANCE SHARES

 

	
3.1

	
Designation of PeRS and Related Terms

 

	
  

	
(a)

	
Designation of PeRS. Not later than 90 days after the beginning of the Performance Cycle, the Committee shall: (i) select employees to participate in the Performance Cycle; (ii) designate, for each such employee Participant, the Target PeRS number such Participant shall have the opportunity to earn in such Performance Cycle related to TSR performance component of the plan;  (iii) designate, for each such employee Participant, the Target PeRS number such Participant shall have the opportunity to earn in such Performance cycle  related to Operational Measure performance; (iv) specify the duration of the Performance Cycle; (v) specify a table (Exhibit A), grid or formula that sets forth the amount of PeRS that will be earned in the first component of the Plan corresponding to the percentile rank of the Company’s average TSR for the three years ending on the last day of the Performance Cycle as compared to the unweighted average TSR of the Comparison Group for the three years ending on the last day of the Performance Cycle; and (vi) specify a table (Exhibit B) grid or formula that sets forth the amount of PeRS that will be earned corresponding to the Company’s performance based on the key operational measure(s) component of the plan. The Committee may, in its discretion, reduce or eliminate the amount of payment with respect to an Award of PeRS to a Participant, notwithstanding the achievement of a specified performance condition.

 

	
  

	
(b)

	
New Participants.  The provisions of 3.1(a) notwithstanding, at any time during the Performance Cycle, the Committee may select a new employee or a newly promoted employee who was not currently participating in the Performance Cycle to participate in the Performance Cycle and designate, for any such employee Participant, the number of PeRS or additional PeRS such Participant shall have the opportunity to earn in such Performance Cycle; provided, however, that such designation must be effective at least six months before the stated end date of the

 

  

- 6 -

  

 

	 	
 

	
Performance Cycle. In determining the number of Target PeRS to be designated under this paragraph (b), the Committee may take into account the portion of the Performance Cycle already elapsed, the performance achieved during such elapsed portion of the Performance Cycle, and such other considerations as the Committee may deem relevant. The Committee shall also determine whether any calculation of the Pro Rata Portion for such Participant shall be adjusted to include or exclude periods prior to the Participant’s employment in the numerator or denominator used in calculating such amount.

 

	
  

	
(c)

	
Comparison Group. The Comparison Group for the Performance Cycle shall be designated by the Committee, provided that, if the Committee does not designate a new Comparison Group for any Performance Cycle, the Comparison Group shall be that most recently designated by the Committee.

 

The Comparison Group for each Performance Cycle for the TSR Component of the Plan is developed including all publically traded utilities as defined by SIC Codes 4911 – Electric Services, and 4931 – Electric Services and Other Service Combinations.  In the event a merger, acquisition, or other extraordinary corporate event affects a company included in the Comparison Group, and if as a result in the Committee’s judgment such event causes TSR for such company not to be comparable with periods prior to the event or otherwise necessitates a change or adjustment to ensure continued comparability, the Committee shall make such adjustments in order to maintain the comparability of results of the Comparison Group.

 

	
  

	
(d)

	
Determination of Number of Earned PeRS. Not later than March 15 after the end of each Performance Cycle, the Committee shall determine the extent to which the performance goals for the earning of PeRS were achieved during such Performance Cycle and the number of PeRS (or, the “Award”) earned by each Participant with respect to each component for the Performance Cycle (see Exhibit A and Exhibit B). The Committee shall make written determinations that the performance goals and any other material terms relating to the earning of PeRS were in fact satisfied.

 

  

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3.2

	
Adjustment of and Changes in Stock. In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spinoff, combination or exchange of shares or other similar corporate transaction, or any distributions to common shareholders other than regular cash dividends, the Committee may make such substitution or adjustment, if any, as it deems to be equitable, as to the number or kind of shares of Common Stock, PeRS, and/or other securities issued, reserved or granted for any purpose under this Plan.

 

  

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ARTICLE IV

 

	
PAYMENT OF GRANTS

 

	
4.1

	
Performance Awards.  Subject to the applicable provisions of Article III, each Participant shall be entitled to receive an Award of Common Stock in an amount equal to the aggregate Fair Market Value of the PeRS earned in respect of the Performance Cycle. Participants shall be immediately vested in such Award as of the date it is granted.

 

	
4.2

	
Accounts.  The Committee shall maintain a bookkeeping Account for each Participant reflecting the number of PeRS credited to the Participant hereunder including dividend equivalents. The Account may include subaccounts or other designations as the Committee may deem appropriate.

 

	
4.3

	
Payment of Account. Payment of an Account may be made in shares of Common Stock, in cash equal to the Fair Market Value of the shares on the date as of which payment is made, or in any combination of Common Stock and cash, and at such time or times as the Committee, in its discretion, shall determine.  The intent is to grant the payment in shares of Common Stock subject to sections 3.2 and 7.5 of this Plan.  Payment shall be made on or before March 15th immediately following the conclusion of the Performance Cycle.

 

	 	
The Committee may permit (subject to such conditions as the Committee may from time to time establish in order to provide for matters such as the effective deferral of taxation) a Participant to elect to defer receipt of all or any portion of any payment of shares of Common Stock that would otherwise be due to such Participant in payment or settlement of any Award under the Plan.  An eligible participant may elect to defer the award through the Deferred Compensation Plan for Officers and Directors of Central Vermont Public Service Corporation.   Any deferred amount will be invested in phantom “company stock”.

 

  

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The shares of Common Stock which may be issued under the Plan may be authorized and unissued shares or issued shares which have been reacquired by the Employer.  No fractional share of the Common Stock shall be issued under the Plan.  Awards of fractional shares of the Common Stock, if any, shall be settled in cash.

 

  

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ARTICLE V

 

	
TERMINATION OF EMPLOYMENT

 

	
5.1

	
Termination Prior to Completion of Performance Cycle.

 

	
  

	
(a)

	
Termination of Employment. Upon a Participant’s termination of employment with the Employer prior to completion of the Performance Cycle all unearned PeRS relating to such Performance Cycle shall cease to be earnable and shall be cancelled, and Participant shall have no further rights or opportunities hereunder unless the Committee deems appropriate.

 

	
  

	
(b)

	
Disability, Death, or Retirement. If Termination of Employment is due to the death or the Permanent and Total Disability (as defined as any disability that would qualify as permanent and total disability under any long term disability policy sponsored by the Company) or Retirement (as defined under the provisions of The Pension Plan of Central Vermont Public Service Corporation and Its Subsidiaries, i.e., the “Pension Plan”) of the Participant, the Participant or his beneficiary (as designated for purposes of the Pension Plan) shall be deemed to have earned and shall be entitled to receive settlement of the Pro Rata Portion of the PeRS at target relating to the Performance Cycles in effect at the date of termination, at the time and to the extent such PeRS would otherwise have been earned and settled, in accordance with Article IV if the individual had not terminated until after the close of the Performance Cycles.

 

If the Participant has timely filed an irrevocable election to defer settlement of PeRS following a termination of employment, such earned PeRS shall be settled in accordance with such deferral election.

 

 

	
5.2

	
Change in Control.  Upon a Change in Control, Section 5.1(a) shall cease to apply and each Participant shall be 100% vested in the PeRS at target performance relating to the Performance Cycles in effect as of the Change in Control.   Accordingly, if for example

 

  

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the Change in Control results in Executive’s Termination of Employment prior to the completion of a Performance Cycle, Executive will be deemed to have earned and shall be entitled to receive, in accordance with the applicable provisions of the Plan including Section 4.3 hereof concerning the timing for payment, the Pro Rata Portion of the PeRS at target performance relating to Performance Cycles in effect as of the Change in Control.

 

  

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ARTICLE VI

 

ADMINISTRATION

 

 

	
6.1

	
Committee. This Plan shall be administered by the Board through the Compensation Committee. The Committee shall have full discretion to interpret and administer the Plan and its decision in any matter involving the interpretation and application of this Plan shall be final and binding on all parties.  The Committee may delegate to one or more of its members or to any Officer or Officers of the Company such administrative duties under the Plan as the Committee may deem advisable.

 

	
6.2

	
Amendment and Termination. The Compensation Committee reserves the right to amend, modify, suspend or terminate this Plan in whole or in part at any time by action of the Board. However, no such amendment may alter the maximum number of shares without shareholder approval.

 

  

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ARTICLE VII

 

	
GENERAL PROVISIONS

 

 

	
7.1

	
Payments to Minors and Incompetents.  If any Participant, spouse or beneficiary entitled to receive any benefits hereunder is a minor or is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, they will be paid to such person or institution as the Committee may designate or to the duly appointed guardian. Such payment shall, to the extent made, be deemed a complete discharge of any such payment under the Plan.

 

	
7.2

	
No Contract.  This Plan shall not be deemed a contract of employment with any Participant, nor shall any provision hereof affect the right of the Employer to terminate a Participant's employment.

 

	
7.3

	
Use of Masculine and Feminine; Singular and Plural.  Wher­ever used in this Plan, the masculine gender will include the feminine gender and the singular will include the plural, unless the context indicates otherwise.

 

	
7.4

	
Non-Alienation of Benefits.  No amount payable to, or held under the Plan for the account of, any Participant, spouse or beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to so anticipate, alienate, sell, trans­fer, assign, pledge, encumber, or charge the same shall be void; nor shall any amount payable to, or held under the Plan for the account of, any Participant be in any manner liable for such Participant's debts, contracts, liabilities, engage­ments, or torts, or be subject to any legal process to levy upon or attach.

 

	
7.5

	
Income Tax Withholding. As a condition to the delivery of any Shares, the Committee may require that the Participant, at the time of such payment of shares, pay to the Company an amount to satisfy any applicable tax withholding obligation or such greater amount of withholding as the Committee shall determine from time to time, or the Committee may take such other action as it may deem necessary to satisfy any such

 

  

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withholding obligations.  The Committee, in its sole discretion, may permit or require Participant to satisfy all or a part of the tax withholding obligations incident to the payment of shares by having the Company withhold a portion of the Shares that would otherwise be issuable to the Participant.  Such Shares shall be valued based on their Fair Market Value on the date the tax withholding is required to be made.  Any such Share withholding with respect to a Participant subject to Section 16(a) of the Exchange Act shall be subject to such limitations as the Committee may impose to comply with the requirements of Section 16 of the Exchange Act.

 

	
7.6

	
Continuation of Plan. In the event of a Change in Control, this Plan shall remain in full force and effect as an obligation of the Employer or its successors in interest.

 

	
7.7

	
Governing Law.  The provisions of the Plan shall be interpreted, con­strued, and admin­istered in accordance with the referenced provisions of the Code and with the laws of the State of Vermont.

 

	
7.8

	
Captions.  The captions contained in the Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge, or describe the scope or intent of the Plan nor in any way affect the construction of any provision of the Plan.

 

	
7.9

	
Severability. If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

 

  

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IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by its duly authorized officer as of the 1st day of March, 2012.

 

CENTRAL VERMONT PUBLIC

SERVICE CORPORATION

 

 

 

   By: /s/ Lawrence J. Reilly       

 

Title: President & CEO

 

Attest:

 

By: /s/ Jamie Falco           

 

 

  

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Exhibit A

PeRS Earned for Total Shareholder Return Performance Component

for 2012-2014 Performance Cycle

 

 

	
Three Year Total 

Shareholder Return - 

Employer Percentile Rank 

vs. Comparison Group

	  	
 

 

Multiple of

Target PeRS Earned

	  	  	  
	
75th percentile or higher

 

50th percentile

 

30th percentile

 

Below 30th percentile

	  	
1.5

 

1.0

 

0.3

 

0.0

	  	  	  

 

The multiple of Target PeRS earned between each of the respective percentiles specified above shall be determined by linear interpolation.

 

 

  

- 17 -

  

Exhibit B

2012-2014 Cycle Operational Measure

 

  

- 18 -exhibit10-1_030212.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the "Agreement") is made and entered into this 29th day of February, 2012, by and between First Mid-Illinois Bancshares, Inc. ("the Company"), a corporation with its principal place of business located in Mattoon, Illinois, and Eric S. McRae (“Manager”).

 

In consideration of the promises and mutual covenants and agreements contained herein, the parties hereto acknowledge and agree as follows:

 

ARTICLE ONE

 

TERM AND NATURE OF AGREEMENT

 

1.01           Term of Agreement.  The term of this Agreement shall commence as of February 29, 2012 and shall continue until February 28, 2015.  Thereafter, unless Manager’s employment with the Company has been previously terminated, Manager shall continue his employment with the Company on an at will basis and, except as provided in Articles Five, Six and Seven, this Agreement shall terminate unless extended by mutual written agreement.

 

1.02           Employment.  The Company agrees to employ Manager and Manager accepts such employment by the Company on the terms and conditions herein set forth. The duties of Manager shall be determined by the Company’s Chief Executive Officer and shall adhere to the policies and procedures of the Company and shall follow the supervision and direction of the Chief Executive Officer or his designee in the performance of such duties.  During the term of his employment, Manager agrees to devote his full working time, attention and energies to the diligent and satisfactory performance of his duties hereunder.  Manager shall not, while he is employed by the Company, engage in any activity which would (a) interfere with, or have an adverse effect on, the reputation, goodwill or any business relationship of the Company or any of its subsidiaries; (b) result in economic harm to the Company or any of its subsidiaries; or (c) result in a breach of Section Six of the Agreement.

 

ARTICLE TWO

 

COMPENSATION AND BENEFITS

 

While Manager is employed with the Company during the term of this Agreement, the Company shall provide Manager with the following compensation and benefits:

 

2.01           Base Salary.  The Company shall pay Manager an annual base salary of $205,000 per fiscal year, payable in accordance with the Company’s customary payroll practices for management employees.  The Chief Executive Officer or his designee may review and adjust Manager's base salary from year to year; provided, however, that during the term of Manager's employment, the Company shall not decrease Manager's base salary.

 

2.02           Incentive Compensation Plan.  Manager shall continue to participate in the First Mid-Illinois Bancshares, Inc. Incentive Compensation Plan in accordance with the terms and conditions of such Plan.  Pursuant to the Plan, Manager shall have an opportunity to receive incentive compensation with a target value of up to a maximum of 35% of Manager's annual base salary.  The Chief Executive Office or his designee may review and adjust the maximum percentage from year to year, provided, however, that during the term of manager’s employment, the Company shall not decrease this percentage.  The incentive compensation payable for a particular fiscal year will be based upon the attainment of the performance goals in effect under the Plan for such year and will be paid in accordance with the terms of the Plan and at the sole discretion of the Board.

 

  

  

  

2.03           Deferred Compensation Plan.  Manager shall be eligible to participate in the First Mid-Illinois Bancshares, Inc. Deferred Compensation Plan in accordance with the terms and conditions of such Plan.

 

2.04           Vacation.  Manager shall be entitled to three weeks of paid vacation each year during the term of this Agreement.

 

2.05           Other Benefits.  Manager shall be eligible (to the extent he qualifies) to participate in any other retirement, health, accident and disability insurance, or similar employee benefit plans as may be maintained from time to time by the Company for its other management employees subject to and on a consistent basis with the terms, conditions and overall administration of such plans.

 

2.06           Business Expenses.  Manager shall be entitled to reimbursement by the Company for all reasonable expenses actually and necessarily incurred by him on its behalf in the course of his employment hereunder and in accordance with expense reimbursement plans and policies of the Company from time to time in effect for management employees.

 

2.07           Withholding.  All salary, incentive compensation and other benefits provided to Manager pursuant to this Agreement shall be subject to withholding for federal, state or local taxes, amounts withheld under applicable employee benefit plans, policies or programs, and any other amounts that may be required to be withheld by law, judicial order or otherwise or by agreement with, or consent of, Manager.

 

ARTICLE THREE

 

DEATH OF MANAGER

 

This Agreement shall terminate prior to the end of the term described in Section 1.01 upon Manager’s termination of employment with the Company due to his death.  Upon Manager’s termination due to death, the Company shall pay Manager’s estate the amount of Manager’s base salary plus his accrued but unused vacation time earned through the date of such death and any incentive compensation earned for the preceding fiscal year that is not yet paid as of the date of such death.

 

  

  

  

ARTICLE FOUR

 

TERMINATION OF EMPLOYMENT

 

Manager’s employment with the Company may be terminated by Manager or by the Company at any time for any reason.  Upon Manager’s termination of employment prior to the end of the term of the Agreement, the Company shall pay Manager as follows:

 

4.01           Termination by the Company Prior to a Change in Control for Other than Cause.  If the Company terminates Manager’s employment prior to a Change in Control for any reason other than Cause, the Company shall pay Manager the following:

 

(a)           An amount equal to Manager’s monthly base salary in effect at the time of such termination of employment for a period of 12 months thereafter.  Such amount shall be paid to Manager periodically in accordance with the Company’s customary payroll practices for management employees.

 

(b)           The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

 

(c)           Continued coverage for Manager and/or Manager’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Manager’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the period beginning on the date of such termination and ending at the end of the period described in Section 4.01(a), Manager shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, Manager shall be charged for such coverage in accordance with the provisions of COBRA.

 

For purposes of this Agreement, “Cause” shall mean Manager’s (i) conviction in a court of law of (or entering a plea of guilty or no contest to) any crime or offense involving fraud, dishonesty or breach of trust or involving a felony; (ii) performance of any act which, if known to the customers, clients, stockholders or regulators of the Company, would materially and adversely impact the business of the Company; (iii) act or omission that causes a regulatory body with jurisdiction over the Company to demand, request, or recommend that Manager be suspended or removed from any position in which Manager serves with the Company; (iv) substantial nonperformance of any of his obligations under this Agreement; (v) material misappropriation of or intentional material damage to the property or business of the Company or any affiliate; or (vi) breach of Article Five or Six of this Agreement.

 

4.02           Termination Following a Change in Control.

 

(a)           Notwithstanding Section 4.01, if, following a Change in Control, and prior to the end of the term of this Agreement, Manager’s employment is terminated by the Company (or any successor thereto) for any reason other than Cause, or Manager terminates his employment for Good Reason, the Company (or any successor thereto) shall pay Manager the following:

 

  

  

  

(i)           An amount equal to Manager’s monthly base salary in effect at the time of such termination for a period of 12 months thereafter.  Such amount shall be paid in accordance with the Company’s customary payroll practices for management employees.

 

(ii)           An amount equal to the incentive compensation earned by or paid to Manager for the fiscal year immediately preceding the year in which Manager’s termination of employment occurs.  Such amount shall be paid to Manager in a lump sum as soon as practicable after the date of his termination.

 

(iii)           The base salary and accrued but unused paid vacation time earned through the date of termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

 

(iv)           Continued coverage for Manager and/or Manager’s family under the Company’s health plan pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974 (“COBRA”) and for such purpose the date of Manager’s termination of employment shall be considered the date of the “qualifying event” as such term is defined by COBRA.  During the period beginning on the date of such termination and ending at the end of the period described in Section 4.02(a)(i) above, Manager shall be charged for such coverage in the amount that he would have paid for such coverage had he remained employed by the Company, and for the duration of the COBRA period, Manager shall be charged for such coverage in accordance with the provisions of COBRA.

 

(b)           For purposes of this Agreement:

 

(i)           “Change in Control” shall have the meaning as set forth in the First Mid-Illinois Bancshares, Inc. 2007 Stock Incentive Plan (or successor stock incentive plan maintained by the Company).

 

(ii)           “Good Reason” shall be deemed to exist if, without Manager’s written consent:  (A) there is a material diminution in Manager’s position, authority or responsibility; (B) there is a material reduction in Employee’s total compensation (including benefits and annual and long-term incentive opportunity) from then-current levels; (C) there is a relocation of Manager’s primary place of employment of at least 30 miles; or (D) the Company materially breaches this Agreement.

 

A termination of Manager’s employment by Manager shall not be deemed to be for Good Reason unless (x) Manager gives notice to the Company of the existence of the event or condition constituting Good Reason within 30 days after such event or condition initially occurs or exists, (y) the Company fails to cure such event or condition within 30 days after receiving such notice, and (z) Manager’s termination occurs not later than 90 days after such event or condition initially occurs or exists (or, if earlier, the last of the term of this Agreement).

 

4.03           Other Termination of Employment.  If, prior to the end of the term of this Agreement, the Company terminates Manager’s employment for Cause, or if Manager terminates his employment for any reason other than as described in Section 4.02 above, the Company shall pay Manager the base salary and accrued but unused paid vacation time earned through the date of such termination and any incentive compensation earned for the preceding fiscal year that is not yet paid.

 

  

  

  

4.04           Key Employee Status.  If at the time of such termination of employment Manager is a “Key Employee” as defined in Section 416(i) of the Internal Revenue Code (without reference to paragraph 5 thereof), and the amounts payable to Manager pursuant to Article Four are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not commence until six months following Manager’s termination of employment, with the first payment to include the payments that otherwise would have been made during such six-month period.

 

ARTICLE FIVE

 

CONFIDENTIAL INFORMATION

 

5.01           Non-Disclosure of Confidential Information. During his employment with the Company, and after his termination of such employment with the Company, Manager shall not, in any form or manner, directly or indirectly, use, divulge, disclose or communicate to any person, entity, firm, corporation or any other third party, any Confidential Information, except as required in the performance of Manager’s duties hereunder, as required by law or as necessary in conjunction with legal proceedings.

 

5.02           Definition of Confidential Information.  For the purposes of this Agreement, the term "Confidential Information" shall mean any and all information either developed by Manager during his employment with the Company and used by the Company or its affiliates or developed by or for the Company or its affiliates of which Manager gained knowledge by reason of his employment with the Company that is not readily available in or known to the general public or the industry in which the Company or any affiliate is or becomes engaged.  Such Confidential Information shall include, but shall not be limited to, any technical or non-technical data, formulae, compilations, programs, devices, methods, techniques, procedures, manuals, financial data, business plans, lists of actual or potential customers, lists of employees and any information regarding the Company's or any affiliate’s products, marketing or database.  The Company and Manager acknowledge and agree that such Confidential Information is extremely valuable to the Company and may constitute trade secret information under applicable law.  In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Manager or by other misappropriation of the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for the purposes of this Agreement, but Manager shall continue to be bound by the terms of this Agreement as to all other Confidential Information.

 

5.03           Delivery upon Termination.  Upon termination of Manager's employment with the Company for any reason, Manager shall promptly deliver to the Company all correspondence, files, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, and any other documents or data concerning the Company's or any affiliate’s customers, database, business plan, marketing strategies, processes or other materials which contain Confidential Information, together with all other property of the Company or any affiliate in Manager's possession, custody or control.

 

  

  

  

ARTICLE SIX

 

NON-COMPETE AND NON-SOLICITATION COVENANTS

 

6.01           Covenant Not to Compete.  During the term of this Agreement and for a period of one year following the termination of Manager's employment for any reason, Manager shall not, on behalf of himself or on behalf of another person, corporation, partnership, trust or other entity, within 50 miles of Manager’s primary place of employment.

 

(a)           Directly or indirectly own, manage, operate, control, participate in the ownership, management, operation or control of, be connected with or have any financial interest in, or serve as an officer, employee, advisor, consultant, agent or otherwise to any person, firm, partnership, corporation, trust or other entity which owns or operates a business similar to that of the Company or its affiliates.

 

(b)           Solicit for sale, represent, and/or sell Competing Products to any person or entity who or which was the Company’s customer or client during the last year of Manager's employment. "Competing Products," for purposes of this Agreement, means products or services which are similar to, compete with, or can be used for the same purposes as products or services sold or offered for sale by the Company or any affiliate or which were in development by the Company or any affiliate within the last year of Manager's employment.

 

6.02           Covenant Not to Solicit.  For a period of one year following the termination of Manager’s employment for any reason, Manager shall not:

 

(a)           Attempt in any manner to solicit from any client or customer business of the type performed by the Company or any affiliate or persuade any client or customer of the Company or any affiliate to cease to do such business or to reduce the amount of such business which any such client or customer has customarily done or contemplates doing with the Company or any affiliate, whether or not the relationship between the Company or affiliate and such client or customer was originally established in whole or in part through Manager’s efforts.

 

(b)           Render any services of the type rendered by the Company or any affiliate for any client or customer of the Company.

 

(c)           Solicit or encourage, or assist any other person to solicit or encourage, any employees, agents or representatives of the Company or an affiliate to terminate or alter their relationship with the Company or any affiliate.

 

(d)           Do or cause to be done, directly or indirectly, any acts which may impair the relationship between the Company or any affiliate with their respective clients, customers or employees.

 

  

  

  

ARTICLE SEVEN

 

REMEDIES

 

Manager acknowledges that compliance with the provisions of Articles Five and Six herein is necessary to protect the business, goodwill and proprietary information of the Company and that a breach of these covenants will irreparably and continually damage the Company for which money damages may be inadequate.  Consequently, Manager agrees that, in the event that he breaches or threatens to breach any of these provisions, the Company shall be entitled to both (a) a temporary, preliminary or permanent injunction in order to prevent the continuation of such harm; and (b) money damages insofar as they can be determined.  In addition, the Company will cease payment of all compensation and benefits under Articles Three and Four hereof.  In the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable restriction upon  Manager or are otherwise invalid, for whatsoever cause, then the court so holding shall reduce, and is so authorized to reduce, the territory to which it pertains and/or the period of time in which it operates, or the scope of activity to which it pertains or effect any other change to the extent necessary to render any of the restrictions of this Agreement enforceable.

 

ARTICLE EIGHT

 

MISCELLANEOUS

 

8.01           Successors and Assignability.

 

(a)           No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

(b)           No rights or obligations of Manager under this Agreement may be assigned or transferred by Manager other than his rights to payments or benefits hereunder which may be transferred only by will or the laws of descent and distribution.

 

8.02           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may not be modified except in writing by the parties hereto.  Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to Manager's employment by the Company shall be of no further force or effect from and after the date hereof.

 

8.03           Severability.  If any phrase, clause or provision of this Agreement is deemed invalid or unenforceable, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect.  If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous or unduly restrictive, it shall not be stricken in its entirety and held totally void and unenforceable, but shall be deemed rewritten and shall remain effective to the maximum extent permissible within reasonable bounds.

 

8.04           Controlling Law and Jurisdiction.  This Agreement shall be governed by and interpreted and construed according to the laws of the State of Illinois.  The parties hereby consent to the jurisdiction of the state and federal courts in the State of Illinois in the event that any disputes arise under this Agreement.

 

  

  

  

8.05           Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day after delivery to an overnight courier service; (c) on the day of transmission if sent via facsimile to the facsimile number given below; or (d) on the third day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

 

If to Manager:                   Eric S. McRae

                                                            266 Cobb

                Decatur, IL 62522

 

If to the Company:           First Mid-Illinois Bancshares, Inc.

                1515 Charleston Avenue

                Mattoon, Illinois  61938

                Facsimile: 217-258-0485

                Attention: Chairman and Chief Executive Officer

 

 

Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	  	
FIRST MID-ILLINOIS BANCSHARES, INC.

      

By:              /s/ William S. Rowland

Title:           Chairman of the Board

 

	  	
MANAGER:

                       /s/ Eric S. McRae

                       Eric S. McRae

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