SALARY CONTINUATION AGREEMENT

 

Exhibit 10.6

 

NEW PEOPLES BANK, INC.

SALARY CONTINUATION AGREEMENT

 

THIS AGREEMENT is adopted this 18^th day of December, 2002, by and between NEW PEOPLES BANK, INC., a state chartered commercial bank located in Honaker, Virginia (the “Company”), and FRANK SEXTON, JR. (the “Executive”).

 

INTRODUCTION

 

To encourage the Executive to remain an employee of the Company, the Company is willing to provide salary continuation benefits to the Executive. The Company will pay the benefits from its general assets.

 

AGREEMENT

 

The Company and the Executive agree as follows:

 

Article 1

Definitions

 

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

 

1.1 “Change of Control” means the transfer of shares of the Company’s voting common stock such that one entity or one person acquires (or is deemed to acquire when applying Section 318 of the Code) more than 50 percent of the Company’s outstanding voting common stock, followed by the Executive’s Termination of Employment for reasons other than death, Disability or retirement.

 

1.2 “BOLI Investments” means the funds invested, including interest earned, with various insurance companies providing Bank-Owned Life Insurance on key personnel.

 

1.3 “Default by Insurance Company” means that the company fails to receive the principal, or interest earned, on the Bank-Owned Life Insurance policy.

 

1.4 “Code” means the Internal Revenue Code of 1986, as amended.

 

1.5 “Disability” means the Executive’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the

 

Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Company of the carrier’s or Social Security Administration’s determination upon the request of the Company.

 

1.6 “Early Termination” means the Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change of Control.

 

1.7 “Early Termination Date” means the month, day and year in which Early Termination occurs.

 

1.8 “Effective Date” means November 1, 2001.

 

1.9 “Normal Retirement Age” means the Executive’s 65^th birthday.

 

1.10 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Employment.

 

1.11 “PlanYear” means a twelve-month period commencing on November 1st and ending on October 31st of each year. The initial Plan Year shall commence on the effective date of this Agreement.

 

1.12 “Termination for Cause” See Article 5.

 

1.13 “Termination of Employment” means that the Executive ceases to be employed by the Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company.

 

1.14 “Voluntary Termination of Employment” means that following a Change of Control, the Executive, prior to Normal Retirement Age, has terminated employment with the Company for reasons other than Termination for Cause, Disability or Involuntary Termination of Employment.

 

1.15 “Involuntary Termination of Employment” means that following a Change of Control, the Executive, prior to Normal Retirement Age, has (i) been notified in writing that employment with the Company is terminated for reasons other than an approved leave of absence, Termination for Cause, Disability or Voluntary Termination of Employment, or (ii) undergone Constructive Termination of Employment.

 

1.16 “Constructive Termination of Employment” means that following a Change of Control, the Executive, prior to Normal Retirement Age, has experienced any of the following:

 

(a) Without the Executive’s express written consent, the assignment to the

 

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Executive of any duties or responsibilities inconsistent with the Executive’s positions, or a change in the Executive’s reporting responsibilities, titles or offices, or any removal of the Executive from or any failure to re-elect the Executive to any of such positions, except in connection with the termination of the Executive’s employment for Cause, Disability, retirement, or as a result of the Executive’s death;

 

(b) A reduction by the Company in the Executive’s base salary;

 

(c) Without the Executive’s express written consent, the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any benefit plans, or the failure by the Company to provide the Employee with the number of paid vacation days to which he or she is then entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect on the date hereof;

 

(d) Any failure of the Company to obtain the assumption of, or the agreement to perform, this Agreement by any successor as contemplated in Section 8.4 hereof; or

 

(e) The Company requiring the Employee to be based anywhere other than the Honaker, Virginia area except for required travel on the Company business to an extent substantially consistent with the Executive’s present business travel obligations or, in the event the Executive consents to any relocation, the failure by the Company to pay (or reimburse the Executive) for all reasonable moving expenses incurred by the Executive relating to a change of the Executive’s principal residence in connection with such relocation and to indemnify the Executive against any loss realized on the sale of the Executive’s principal residence in connection with any such change of residence.

 

Article 2

Lifetime Benefits

 

2.1 Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Company shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement.

 

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $38,812 (Thirty Eight Thousand Eight Hundred Twelve Dollars). The Company’s Board of Directors, in its sole discretion, may increase the annual benefit under this Section 2.1.1; however, any increase shall require the recalculation of Schedule A.

 

2.1.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments commencing with the month following the Executive’s Normal Retirement Date. The annual benefit shall be paid to the Executive for a period of 15 years.

 

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2.1.3 Benefit Increases. Commencing on the first anniversary of the first benefit payment, and continuing on each subsequent anniversary, the Company’s Board of Directors, at its sole discretion, may increase the benefit.

 

2.2 Early Termination Benefit. Upon Early Termination, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement.

 

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Early Termination Annual Benefit set forth on Schedule A for the Plan Year ending immediately prior to the Early Termination Date. This benefit is determined by vesting the Executive in 100 percent of the Accrual Balance set forth on Schedule A. Any increase in the annual benefit under Section 2.1.1 shall require the recalculation of this benefit on Schedule A. This benefit is determined by calculating a 15-year fixed annuity from the Accrual Balance, crediting interest on the unpaid balance at an annual rate of 7.5 percent, compounded monthly.

 

2.2.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments commencing with the month following Termination of Employment. The annual benefit shall be paid to the Executive for a period of 15 years.

 

2.2.3 Benefit Increases. Benefit payments may be increased as provided in Section 2.1.3.

 

2.3 Disability Benefit. If the Executive terminates employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.

 

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Disability Annual Benefit set forth on Schedule A for the Plan Year ending immediately prior to the date in which the Termination of Employment occurs. This benefit is determined by vesting the Executive in the Normal Retirement Benefit described in Section 2.1.1.

 

2.3.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments commencing with the month following Normal Retirement Age. The annual benefit shall be paid to the Executive for a period of 15 years.

 

2.3.3 Benefit Increases. Benefit payments may be increased as provided in Section 2.1.3.