EMPLOYMENT AGREEMENT
THIS AGREEMENT,
is entered into this 17th day of October 2005
("Effective Date"), by and between
Farnsworth Bancorp,
Inc. (the "Parent")
and
Gary N. Pelehaty (the "Executive").
WITNESSETH
WHEREAS, the Executive
has heretofore
been employed by the
Parent as
the President and Chief Executive Officer and is experienced in all phases of
the business of the Parent; and
WHEREAS, the Parent desires to be ensured of the Executive's
continued
active participation in the business of
the Parent, and that
in the event of a
potential future change in control transaction involving the Parent, the
Executive will remain available to facilitate such
transaction for the
benefit
of the Parent and its stockholders; and
WHEREAS, in order to
induce the Executive
to remain in the
employ of
the Parent and in consideration of the Executive's agreeing to remain in the
employ of the Parent, the parties wish to specify the continuing employment
relationship between the Parent and the
Executive;
NOW THEREFORE,
in consideration of the covenants and the mutual
agreements herein contained, the parties, intending to be legally bound,
do
hereby agree as follows:
1. Employment. The
Parent hereby employs the Executive in the capacity
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of President and Chief Executive Officer. The Executive hereby accepts said
employment and agrees to render such
administrative and
management services
to
the Parent and People Savings Bank ("Bank")
as are currently rendered and as are
customarily performed by persons situated in a
similar executive capacity. The
Executive shall promote the business of the
Parent and the Bank. The Executive's
other duties shall be such as the Board of
Director for the
Parent ("Board of
Directors" or "Board") may from time to
time reasonably direct, including normal
duties as an officer of the Parent.
2. Term of Employment.
The term of employment of Executive under this
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Agreement shall be for the period
commencing on the
Effective Date and
ending
thirty-six (36) months thereafter ("Term").
Additionally, as of the first day of
the calendar quarter (i.e., January 1,
April 1, July 1 or September 1) after the
Effective Date and each subsequent calendar quarter thereafter, the Term of
employment under this Agreement shall be extended for an additional period
beyond the then effective expiration date so that the remaining term of the
Agreement shall be thirty-six (36) months
thereafter unless or
until the Parent
shall deliver written notice ("Notice") to the Executive
that such
Agreement
shall not be extended beyond the then effective
expiration
date. Such Notice
shall include a statement as to the reason for such Board
action to not extend
such Term. References herein to the Term of this
Agreement shall refer both to
the initial term and successive terms.
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3. Compensation, Benefits and Expenses.
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(a) Base Salary.
The Parent shall compensate and pay the
Executive during the Term of this Agreement
a minimum base salary at the rate of
$187,000 per annum, reduced by the amount of any base
salary to be paid by the
Bank to the Executive ("Base Salary"),
payable in cash not
less frequently than
monthly; provided, that the rate of such salary shall
be reviewed by the Board
of Directors not less often than annually,
and the Executive
shall be entitled
to receive increases at such percentages or
in such amounts as determined by the
Board of Directors. The base salary may not
be decreased without the Executive's
express written consent.
(b) Discretionary
Bonus. The Executive shall be entitled
to
participate in an equitable manner with all
other senior management employees of
the Parent in discretionary bonuses that may be authorized and
declared by the
Board of Directors to its senior
management
executives
from time to time.
No
other compensation provided for in this Agreement
shall be deemed a substitute
for the Executive's right to participate in
such discretionary
bonuses when and
as declared by the Board.
(c)
Participation in
Benefit and Retirement Plans. The
Executive shall be entitled to participate in and receive the benefits of
any
plan of the Parent or Bank which may be or may become applicable to senior
management of the Parent or the Bank
relating to pension or other retirement
benefit plans, profit-sharing, stock
options or incentive plans, or other plans,
benefits and privileges given to employees and executives
of the Parent or the
Bank, to the extent commensurate with his
then duties and
responsibilities,
as
fixed by the Board of Directors of the
Parent.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of
any
plan or policy of the Parent which may be or may become
applicable
to senior
management of the Parent or the Bank
relating to life insurance, short and long
term disability, medical, dental, eye-care, prescription drugs or medical
reimbursement plans. Additionally, Executive's dependent family shall be
eligible to participate in medical and
dental insurance
plans sponsored by
the
Savings Bank or Parent with the cost of
such premiums paid by the Parent.
(e) Vacations and Sick Leave. The Executive shall be
entitled
to paid annual vacation leave in accordance with the policies as established
from time to time by the Board of Directors, which shall in no event be less
than [four] weeks per annum. The Executive shall also be entitled to an
annual
sick leave benefit as established by the
Board for senior
management
employees
of the Parent. The Executive shall not be entitled to receive
any additional
compensation from the Parent for failure to
take a vacation or sick leave, nor
shall he be able to accumulate unused vacation or sick leave from one
year to
the next, except to the extent authorized
by the Board of Directors.
(f) Expenses.
The Parent shall
reimburse the Executive or
otherwise provide for or pay for all reasonable expenses incurred by the
Executive in furtherance of, or in
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connection with the business of the Parent, including, but not by way of
limitation, automobile and traveling expenses,
and all reasonable entertainment
expenses, subject to such reasonable
documentation and other limitations as may
be established by the Board of Directors of the
Parent. If such
expenses are
paid in the first instance by the Executive, the Parent shall reimburse the
Executive therefor.
(g) Changes in Benefits. The Parent shall not make any changes
in such plans, benefits or privileges previously
described in Section 3(c), (d)
and (e) which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs
pursuant to a program
applicable to all
executive officers of the Parent and does not result in a proportionately
greater adverse change in the rights of, or
benefits to, the Executive as
compared with any other executive officer of the Parent. Nothing paid to
Executive under any plan or arrangement
presently in effect or made available in
the future shall be deemed to be in lieu of
the salary payable
to Executive
pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
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(a) The Executive
shall devote his full time and attention to
the performance of his employment
under this Agreement.
During the term of
the
Executive's employment under this Agreement,
the Executive shall
not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing
contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to
invest in the capital
stock or other
securities of any business dissimilar from that of the Bank or
Parent, or,
solely as a passive or minority investor,
in any business.
5. Standards. During
the term of this
Agreement, the
Executive shall
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perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable
organizations and as
may be
established from time to time by the Board
of Directors.
6. Termination and Termination Pay. The Executive's employment under
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this Agreement shall be terminated upon any
of the following occurrences:
(a) The death of the Executive during the term of this
Agreement, in which event the Executive's estate shall be entitled to
receive
the compensation due the Executive through
the last day of the calendar month in
which Executive's death shall have
occurred.
(b) The Board of
Directors may terminate the Executive's
employment at any time, but any termination
by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the
Agreement. The
Executive shall have no
right to receive compensation or other
benefits for any period after termination
for Just Cause. The Board may within its
sole discretion, acting in good faith,
terminate the Executive for Just
