Document:

Unassociated Document

    EXHIBIT
      10.12

     

    

     

    ACKNOWLEDGMENT
      AND RELEASE AGREEMENT

     

    This
      Acknowledgment and Release Agreement (the “Acknowledgment and Release”) is
      entered into as of June 23, 2006, by and among Charles Alessi (“Executive”),
      Peoples Savings Bank (the “Bank”) and Farnsworth Bancorp, Inc. (the “Company”)
      and Sterling Bank (“Sterling”).

     

    WHEREAS,
      the
      Bank
      and the Company have entered into separate Employment Agreements with Executive,
      effective as of October 17, 2005 (the “Employment Agreements”), which provide
      Executive with a certain severance benefits in the event of Executive’s
      termination of employment following a change in control of the Bank or the
      Company; and

     

    WHEREAS,
      the
      Company entered into an Agreement and Plan of Merger by and among the Company,
      Sterling and Sterling Banks, Inc., dated as of June 23, 2006 (the “Merger
      Agreement”), pursuant to which the Company shall merge with and into Sterling
      Banks, Inc. (the “Merger”) and the Bank will merge with and into Sterling, and
      thereafter the separate corporate existence of the Company and the Bank shall
      cease; and

     

    WHEREAS,
      this
      Acknowledgment and Release is required under Section 6.3(e) of the Merger
      Agreement; and

     

    WHEREAS,
      Section
      9(a) of the Employment Agreements provide that Executive shall be eligible
      to
      receive severance payments, if, within twenty-four (24) months following a
      change in control of the Bank or the Company, Executive’s employment is
      involuntarily terminated; and

     

    WHEREAS,
      in
      connection with the Merger, Executive’s employment shall be terminated by the
      Bank as of and immediately prior to the effective date of the Merger (the
“Effective Time”), thereby entitling Executive to receive the payments set forth
      herein; and

     

    WHEREAS,
      pursuant
      to section 6.3(e) of the Merger Agreement, the Bank and Sterling have agreed
      to
      make the payments set forth herein in exchange for the termination of the
      Employment Agreements as of the Effective Time and the execution of this
      Acknowledgment and Release.

     

    NOW
      THEREFORE, in
      consideration of the foregoing and other good and valuable consideration the
      receipt and sufficiency of which is hereby acknowledged, it is agreed as
      follows:

     

    	1.  	
            Acknowledgement
              of Severance Payment.
              The Executive shall receive a lump sum payment of [$334,478] (subject
              to
              recalculation if the Merger closes in 2007), less the present value
              of any
              benefits paid or payable by the Company and the Bank that are contingent
              on a “change of control” as defined under Section 280G of the Internal
              Revenue Code of 1986, as amended and the regulations thereunder (“Code”)
              (the total amount due under the Employment Agreements),
              

          

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

     

    
      subject
        to applicable withholding taxes (the “Payment”) in full satisfaction of the cash
        severance benefit payable under Section 9(a) of the Employment Agreements.
        Such
        amount shall equal the product of 2.999 times the Executive’s “base amount” as
        defined in Code Section 280G, but reduced in such a manner and to such extent
        that this payment shall not be an “excess parachute payment” under Code Section
        280G and shall not be subject to the excise taxes described in Code Section
        4999(a).

    

     

    Notwithstanding
      the foregoing, the Payment will be paid by Sterling or the Bank to the Executive
      as of the Effective Time or as soon as permissible thereafter such that there
      will not be the imposition of additional taxes and penalties levied against
      the
      Executive under Code Section 409A resulting from the timing of such
      Payment.

     

    If
      the
      Executive is deemed to be a “Specified Employee” under Code Section 409A, such
      payment must be withheld until the required time period provided for in the
      regulations promulgated under Code Section 409A.

     

    Under
      Code Section 409A, a “Separation from Service” may be required to receive the
      Payment.

     

    In
      accordance with Code Section 409A, a “separation from service” shall be deemed
      to have occurred where a former employee is providing services to a former
      employer in a capacity other than as an employee and the former employee is
      providing such services at an annual rate that is less than 50 percent of the
      services rendered, on average, during the immediately preceding three full
      calendar years of employment (or if employed less than three years, such lesser
      period) and the annual remuneration for such services is less than 50 percent
      of
      the annual remuneration earned during the final three full calendar years of
      employment (or if less, such lesser period). The annual rate of providing
      services is determined based upon the measurement used to determine the
      employee’s base compensation (for example, amounts of time required to earn
      salary, hourly wages, or payments for specific projects).

     

    Upon
      the
      Effective Time, at no unreimbursed expense to the Bank, the Executive and his
      dependents covered under any medical, dental, eye-care, prescription drugs
      or
      medical reimbursement or other similar plans sponsored by the Bank as of the
      date hereof shall be eligible to continue to participate in all medical, dental,
      eye-care, prescription drugs or medical reimbursement or other similar plans
      sponsored by the Bank or Sterling, as the successor to the Bank, at the
      Executive’s expense for a period of 36 months, on the same terms and conditions
      as if the Executive was an employee of the Bank or Sterling following the
      Effective Time. This provision shall survive the Merger.

     

    	2.  	
            Consulting
              Agreement.
              The Executive shall enter into a Consulting Agreement with Sterling
              simultaneously with this Agreement whereby the Executive shall be retained
              as a consultant to Sterling for a period of three years from the Effective
              

          

     

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    	 	Time during which time certain restrictions shall
            apply
            to the Executive with respect to competition, non-solicitation of clients
            and non-solicitation of employees (collectively, the “Post-Termination
            Obligations”), all as described in the Consulting Agreement. The Executive
            shall receive remuneration in support of the Post Termination Obligations,
            as described in the Consulting Agreement.

    	 	 

    	3.  	
            Release
              and Waiver.
              Executive hereby agrees that the Payment will be in full satisfaction
              of
              all obligations of the Bank, the Company and Sterling to Executive
              under
              the Employment Agreements. Executive, the Bank, the Company and Sterling
              hereby expressly understand and acknowledge that such Payment shall
              not
              affect or reduce Executive’s right to receive (i) his salary through the
              date of termination in accordance with Section 3(a) of the Employment
              Agreement; (ii) any bonus earned for the 2006 calendar year in the
              amount
              disclosed to the Company in connection with the merger negotiations;
              (iii)
              continued eligibility to participate in the health insurance coverage
              under applicable state and federal group health care continuation coverage
              laws (e.g., Code section 4980B(f)) following Executive’s date of
              termination of employment with the Bank; (iv) any benefit vested in
              Executive under any tax-qualified or non-tax qualified employee benefit
              plan of the Bank; and (v) any benefit attributable to Executive under
              a
              stock option plan of the Company (i.e. the 1999 Stock Option Plan and
              2002
              Stock Option Plan).

          

     

    	4.  	
            General
              Provisions.

          

     

    	(a)  	
            Heirs,
              Successors and Assigns.
              The terms of this Acknowledgment and Release shall be binding upon
              the
              parties hereto and their respective heirs, successors and assigns,
              including but not limited to the Bank, the Company, and
              Sterling.

          

     

    	(b)  	
            Final
              Agreement.
              This Acknowledgment and Release represents the entire understanding
              of the
              parties with respect to the subject matter hereof and supersedes all
              prior
              understandings, written or oral. The terms of this Acknowledgment and
              Release may be changed, modified or discharged only by an instrument
              in
              writing signed by the parties hereto.

          

     

    	(c)  	
            Governing
              Law.
              This Acknowledgment and Release shall be construed, enforced and
              interpreted in accordance with and governed by the laws of the State
              of
              New Jersey, without reference to its principles of conflicts of
              law.

          

     

    	(d)  	
            Counterparts.
              This Acknowledgment and Release may be executed in one or more
              counterparts, each of which counterpart, when so executed and delivered,
              shall be deemed an original and all of which counterparts, taken together,
              shall constitute but one and the same
              agreement.

          

     

    	5.  	
            Upon
              payment to Executive of the amount set forth in Section I hereof, neither
              the Bank, the Company, nor Sterling shall have any further obligation
              to
              Executive under the Employment Agreements, other than with respect
              to the
              payments and other benefits described
              herein.

          

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    	6.  	
            Any
              term or provision of this Acknowledgment and Release which is held
              to be
              invalid or unenforceable shall be ineffective to the extent of such
              invalidity or unenforceability without rendering invalid or unenforceable
              the remaining terms and provisions of this Acknowledgment and
              Release.

          

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have signed this Acknowledgment and Release.

     

     

      
        	
                 

                EXECUTIVE

                 

                 

                 

                __Charles
                  Alessi_________________________

                Charles
                  Alessi

              	
                 

                 

                 

                 

                 

                ______06/23/06_______________

                Date

              
	
                 

                 

                PEOPLES
                  SAVINGS BANK

                 

                 

                 

                ____/s/
                  Gary N. Pelehaty____________________

                By:
                  Gary N. Pelehaty, President

              	
                 

                 

                 

                 

                 

                 

                _____06/23/06________________

                Date

              
	
                 

                 

                FARNSWORTH
                  BANCORP, INC.

                 

                 

                 

                _______/s/
                  Gary N. Pelehaty______________

                By:
                  Gary N. Pelehaty, President

              	
                 

                 

                 

                 

                 

                 

                ____06/23/06________________

                Date

              
	
                 

                 

                STERLING
                  BANK

                 

                 

                 

                _______/s/
                  Robert H. King______________

                By:
                  Robert H. King, President

              	
                 

                 

                 

                 

                 

                 

                ____06/23/06_____________

                Date

              

      

    

    

     

    4Unassociated Document

    EXHIBIT
      10.13

     

    

     

    Consulting
      and Non-Competition Agreement

     

    This
      Consulting and Non-Competition Agreement (“Agreement”) is entered into this
      23rd
      day of
      June, 2006 by and between Sterling Bank (the “Company”) with its place of
      business headquartered at Mount Laurel, New Jersey and Gary N. Pelehaty
      (“Consultant”).

     

    WHEREAS,
      the
      Company, Sterling Banks, Inc. and Farnsworth Bancorp, Inc. (“Farnsworth”) have
      entered into a Plan of Merger, and as a condition of such merger, the Company
      requires Consultant to enter into this Consulting and Non-Competition Agreement
      to protect the Company’s interests in the transition following the Merger
      closing; and

     

    WHEREAS,
      Consultant
      has previously served Peoples Savings Bank (the “Bank”) and Farnsworth as a
      senior officer; and

     

    WHEREAS,
      the
      Company recognizes the specialized knowledge and expertise of the Consultant
      related to the business affairs of Peoples Savings Bank (the “Bank”) the Bank
      and the financial industry, and that upon acquisition of the Bank by the Company
      (“Merger”), the Company wishes to enter into a consulting and non-competition
      relationship with Consultant; and

     

    WHEREAS,
      Consultant
      and the Company desire to enter into such a relationship upon the terms and
      conditions hereinafter contained;

     

    NOW,
      THEREFORE, in
      consideration of the covenants and terms contained in this Agreement as set
      forth herein and of the mutual benefits accruing to Company and to Consultant
      from the consulting relationship to be established between the parties by the
      terms of this Agreement, Company and Consultant agree as follows:

     

    1.  Consulting
      Relationship

     

    Company
      hereby retains Consultant, and Consultant hereby agrees to be retained by
      Company, as an independent contractor, and not as an employee, with such duties
      and responsibilities to be effective as of the effective time of the Merger
      (the
“Effective Time”).

     

    2.  Consulting
      Service

     

    Consultant
      agrees that during the Term (as defined in Section 5) of this
      Agreement:

     

    	A.  	
            Consultant
              will devote his best efforts to such position as an independent contractor
              and will perform such duties and execute the policies of the Company,
              as
              the Company’s President and Consultant may mutually agree upon from time
              to time, and that as an independent contractor, Consultant shall not
              be an
              officer or employee of the Company and shall not be subject to the
              direct
              control or supervision of the President of the Company with respect
              to the
              time spent, research undertaken, or procedures followed in the performance
              of consulting services rendered
              hereunder.

          

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    During
      the Term of the Agreement, Consultant agrees to consult with the Company, as
      requested by the Company’s President, on matters related to the business affairs
      and operations of the Company as they pertain to the former operations of the
      Bank, strategic planning and product development, merger and acquisition
      analysis, and business development opportunities that may be available to the
      Company based upon the Bank’s established reputation and stature in its market
      area.

     

    	B.  	
            Consultant
              shall exercise a reasonable degree of skill, prudence and care in
              performing the services referred to in Section 2.A.
              above;

          

     

    	C.  	
            Except
              as may be limited by Section 6 hereinafter, Consultant may be an employee,
              officer or director of other companies or entities and may provide
              consulting services for other companies or organizations; provided
              that
              such activities do not conflict with the services and activity that
              the
              Consultant is rendering to the Company or any of its subsidiaries or
              the
              services or activities of the Company and its
              subsidiaries;

          

     

    	D.  	
            Consultant
              shall be available to render services to Company under this Agreement
              as
              requested by the President of the Company commencing on the first date
              of
              the initial Term of this Agreement as contained in Section 5 herein.
              Consultant will agree to provide consulting services to the Company
              during
              the one year period after the Effective Time as follows: (i) up to
              35
              hours per week for the 90-day period after the Effective Time, and
              (ii) up
              to 5 hours per week during the balance of the year after the Effective
              Time. Consultant shall not be obligated to render any services under
              this
              Agreement during such period when he is unable to do so due to illness,
              disability or injury, subject to the terms of Section 5(b)
              hereof;

          

     

    	E.  	
            Consultant
              shall be available for service hereunder upon receipt of not less than
              five (5) business days’ written notice from Company; and
              

          

     

    	F.  	
            Consultant
              shall not enter into agreements or make commitments on behalf of the
              Company without prior written consent or approval of the Company or
              its
              senior management.

          

     

    3.  Compensation

     

    	A.  	
            Company
              agrees to pay Consultant for his services performed under this Agreement
              and for his commitments and agreements as contained herein, including
              Section 6 herein, a payment of $208,000 upon the Merger and $8,666.67
              per
              month for an additional twenty-four (24 months), payable no less than
              monthly beginning on the one year anniversary of the Merger Effective
              Time. The Company acknowledges that compliance by the Consultant with
              Section 6, herein, is an essential component of this Agreement, and
              that
              such compliance is necessary for the Company to obtain the full value
              of
              its investment in the Merger. The parties agree that Consultant shall
              not
              be entitled to participate in or receive benefits under any Company
              programs maintained for its employees. The Consultant will receive
              remuneration for services as a director of the Company for such time
              that
              he may be serving in such capacity commensurate with the remuneration
              received by other outside directors of the Company. Remuneration received
              as an outside director shall not be in lieu of or reduce any remuneration
              otherwise due under this Agreement.

          

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    	B.  	
            The
              Company hereby agrees to reimburse the Consultant for all reasonable
              expenses incurred by the Consultant on behalf of and with the consent
              of
              the Company, provided that the Consultant shall furnish appropriate
              documentation of such expenses and receives prior approval of such
              expenses.

          

     

    4.  Other
      Conditions

     

    Consultant
      shall have no authority over any employee or officer of Company, nor shall
      Company be required in any manner to implement any plans or suggestions
      Consultant may provide.

     

    5.  Term
      and Termination

     

    The
      term
      of this Agreement shall begin on the date of termination of employment of the
      Consultant as an employee of the Bank upon the closing date of the Merger
      between the Company and the Bank and shall continue for a period of 36 calendar
      months thereafter (“Term”), unless extended or terminated in accordance with the
      provisions set forth below.

     

    	A.  	
            Termination
              for Cause. The Company may terminate this Agreement at any time for
“Just
              Cause;” provided, that after any such termination, the Consultant shall
              nevertheless be obligated to comply with the provisions of Section
              6
              hereof for the balance of the Term and the Company shall nevertheless
              remain obligated to comply with the provisions of Section 3(A) hereof
              for
              the balance of the Term. Termination for “Just Cause” shall be defined as
              termination because of the Consultant’s personal dishonesty, willful
              misconduct (including willful breach of a material term of this agreement
              and failure to cure such breach within 30 days after written notice
              thereof from the Company), breach of fiduciary duty involving personal
              profit, or willful violation of any law, rule or regulation related
              to the
              business or operations of the Company or its
              subsidiaries.

          

     

    	B.  	
            Disability
              or Breach of Contract. In the event of a breach of this Agreement by
              the
              Company or termination of service due to Consultant’s permanent
              disability, all amounts due and payable for the remaining term of the
              Agreement shall be paid to Consultant or his beneficiary, as the case
              may
              be.

          

     

    6.  Non-Competition
      and Confidential Business

     

    	A.  	
            Consultant,
              during the Term of the Agreement, will not, without the express written
              consent of Company, directly or indirectly communicate or divulge to,
              or
              use for his own benefit or for the benefit of any other person, firm,
              association, or corporation, any trade secrets, proprietary data or
              other
              confidential information communicated to or otherwise learned or acquired
              by Consultant from the Company while serving as a Consultant or director
              of the Company, if applicable, or while serving as an officer, director
              or
              employee of the Bank, or Farnsworth Bancorp, Inc. (collectively, the
              “Target”), except that Consultant may disclose such matters to the extent
              that disclosure is (a) requested by the Company or (b) required by
              a court
              or other governmental agency of competent
              jurisdiction.

          

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    	B.  	
            The
              Consultant agrees that during the Term of this Agreement, the Consultant
              will not, directly or indirectly, (i) become a director, officer,
              employee, shareholder, principal, or agent of, or become a consultant
              or
              independent contractor rendering or performing professional services
              associated with providing client/customer services and products for
              the
              benefit of, any insured depository institution, trust company or parent
              holding company of any such institution or company which has an office
              within 25 miles of Farnsworth’s headquarters office located at 789
              Farnsworth Avenue, Bordentown, New Jersey 08505, or any other entity
              whose
              business in the aforesaid area materially competes with the depository,
              lending or other business activities of the Company (in each case,
              a
              “Competitor”); provided, however, that this provision shall not prohibit
              the Consultant from owning bonds, non-voting preferred stock or up
              to five
              percent (5%) of the outstanding common stock of any such entity if
              such
              common stock is publicly traded, (ii) solicit or induce, or cause others
              to solicit or induce, any employee of the Company or any of its
              subsidiaries to leave the employment of such entities; or (iii) solicit
              (whether by mail, telephone, personal meeting or any other means,
              excluding general solicitations of the public that are not based in
              whole
              or in part on any list of customers of the Company) any customer of
              the
              Company to transact business with any other entity, whether or not
              a
              Competitor, or to reduce or refrain from doing any business with the
              Company or its subsidiaries, or interfere with or damage (or attempt
              to
              interfere with or damage) any relationship between the Company and
              any
              such customers.

          

     

    	C.  	
            Unless
              prior written consent is obtained from the Company, during the Term
              of
              this Agreement, the Consultant hereby agrees that he shall not, on
              his own
              behalf or on behalf of others, employ, solicit, or induce, or attempt
              to
              employ, solicit or induce, any employee of the Company for employment
              with
              any Competitor, nor will Consultant directly or indirectly, on his
              behalf
              or for others, seek to influence any Company employee to leave the
              employ
              of the Company or any Company subsidiary.

          

     

    	D.  	
            During
              the Term of the Agreement, Consultant will not make any public statements
              regarding the Company without the prior consent of the Company, and
              the
              Consultant shall not make any statements that disparage the Company
              or its
              business practices.

          

     

    	E.  	
            The
              Consultant and the Company acknowledge and agree that irreparable injury
              will result to the parties in the event of a breach of any of the
              provisions of this Section 6 (the “Designated Provisions”) and that the
              Consultant and the Company will have no adequate remedy at law with
              respect thereto. Accordingly, in the event of a material breach of
              any
              Designated Provision, and in addition to any other legal or equitable
              remedy the Consultant or the Company may have, the Consultant or the
              Company shall be entitled to the entry of a preliminary and a permanent
              injunction (including, without limitation, specific performance by
              a court
              of competent jurisdiction located in any county in the State of New
              Jersey, or elsewhere), to restrain the violation or breach thereof
              by
              either the Consultant or the Company, and the parties shall submit
              to the
              jurisdiction of such court in any such
              action.

          

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

     

    7.  Independent
      Contractor

     

    The
      parties hereto agree and acknowledge that the relationship between Company
      and
      Consultant shall be that of an independent contractor and not that of
      employer-employee, master-servant or principal-agent. Nothing in this Agreement,
      or its implementation, shall be construed to be to the contrary.

     

    8.  The
      Complete Agreement

     

    This
      Agreement, and any attachments or exhibits appended hereto, shall represent
      the
      complete Agreement between Company and Consultant concerning the subject matter
      hereof and supersedes all prior agreements or understandings, written or oral.
      No attempted modification or waiver of any of the provisions hereof shall be
      binding on either party unless made in writing and signed by both Consultant
      and
      Company.

     

    9.  Notices

     

    Any
      notice required or permitted to be given hereunder shall be in writing and
      shall
      be effective three business days after it is properly sent by registered or
      certified mail, if to the Company to the President at the administrative offices
      of the Company, or if to Consultant to the address set forth beneath his
      signature to this Agreement, or to such other address as either party may from
      time to time designate by notice.

     

    10.  Assignability

     

    This
      Agreement may not be assigned by either party without the prior written consent
      of the other party, except that no consent is necessary for the Company to
      assign this Agreement to a corporation succeeding to substantially all the
      assets or business of the Company whether by merger, consolidation, acquisition
      or otherwise. This Agreement shall be binding upon Consultant, his heirs and
      permitted assigns and the Company, its successors and permitted
      assigns.

     

    11.  Severability

     

    Each
      of
      the sections contained in this Agreement shall be enforceable independently
      of
      every other section in this Agreement, and the invalidity or non-enforceability
      of any section shall not invalidate or render non-enforceable any other section
      contained herein. If any section or provision in a section is found invalid
      or
      unenforceable, it is the intent of the parties that a court of competent
      jurisdiction shall reform the section or provisions to produce its nearest
      enforceable economic equivalent.

     

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    12.  Arbitration

     

    Except
      as
      detailed at Section 61 herein, unless otherwise mutually agreed to by the
      Consultant and the Company in writing, any controversy or claim arising out
      of
      or relating to this Agreement or the breach thereof shall be settled exclusively
      by binding arbitration in accordance with the Commercial Arbitration Rules
      of
      the American Arbitration Association, with such arbitration hearing to be held
      at the offices of the American Arbitration Association (“AAA”) nearest to
      Bordentown, New Jersey, and judgment upon the award rendered by the
      arbitrator(s) may be entered in any court having jurisdiction thereof. Either
      the Consultant or the Company may file a request for such arbitration with
      the
      AAA.

     

    13.  Governing
      Law

     

    The
      validity, interpretation, construction and performance of this Agreement shall
      be governed by the laws of the United States where applicable and otherwise
      by
      the substantive laws of the State of New Jersey.

     

    Notwithstanding
      anything herein to the contrary, any payments made to Consultant pursuant to
      the
      Agreement, or otherwise, shall be subject to and conditioned upon compliance
      with 12 USC § 1828(k) and any regulations promulgated thereunder.

     

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

     

    
      	
               

              STERLING
                BANK (“COMPANY”)

               

               

               

              By: ___/S/
                Robert H. King_________________

              ____Robert
                H. King________,
                PRESIDENT

            
	 
	 
	
              Gary
                N. Pelehaty, CONSULTANT

            
	 
	
              Address:

            
	
               

              ______5
                Shadow Lake Lane___

            
	
               

              _____Shamong,
                NJ 08002

            
	 

    

    

     

     

    
      6

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