| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On November 27, 2023 (the “Effective Date”), CNB Financial Corporation (the “Corporation”) and CNB Bank (the “Bank”) entered into a new executive employment agreement (the “Employment Agreement”) with Michael D. Peduzzi (“Mr. Peduzzi”), who currently serves as President and Chief Executive Officer of the Corporation and the Bank. This new Employment Agreement supersedes his prior agreement with the Corporation and the Bank that was entered into on October 22, 2021.
The initial term of the Employment Agreement commences on the Effective Date and continues until December 31, 2024. Thereafter, the Employment Agreement automatically renews for successive thirty-six-month periods unless and until terminated in accordance with the terms of the Employment Agreement, including automatic termination as of December 31, 2030 (representing the end of the calendar year in which Mr. Peduzzi attains the Bank’s mandatory retirement age for the President and Chief Executive Officer (that is, age 65)).
Pursuant to the Employment Agreement, Mr. Peduzzi is entitled to a base salary not less than $623,000 and is eligible to receive stock, stock rights and bonuses as may from time to time be awarded by the Board of Directors of the Corporation (the “Board”). Mr. Peduzzi is also entitled to participate in certain benefits, including insurances, paid time off, retirement plans and similar benefits, made available to other similarly situated executive-level employees of the Corporation and/or the Bank. Further, during Mr. Peduzzi’s employment, the Corporation or the Bank will maintain a Supplemental Executive Retirement Plan (“SERP”) arrangement with Mr. Peduzzi, pursuant to which Mr. Peduzzi will be eligible receive 20 annual payments of at least $120,000 if Mr. Peduzzi retires after the age of 62, subject to the terms and conditions set forth in a separate SERP arrangement entered into between the Corporation and Mr. Peduzzi, established effective January 1, 2022, as amended on October 1, 2023. A copy of Mr. Peduzzi’s SERP was filed as Exhibit 10.13 to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 as in incorporated herein by reference. A copy of the amendment to Mr. Peduzzi’s SERP was filed as Exhibits 10.6 and 10.7 to the Corporation’s Current Report on Form 8-K filed on October 2, 2023 and is incorporated herein by reference.
The Employment Agreement includes (i) non-competition restrictions and non-solicitation restrictions during Mr. Peduzzi’s employment and for 24 months thereafter, (ii) confidentiality and non-disclosure restrictions, and (iii) non-disparagement restrictions.
In the event his employment is terminated without “cause,” regardless of whether such termination is in connection with a “change of control,” or he voluntarily terminates his employment for “good reason” under certain specific circumstances within 12 months following a “change of control” (as such terms are defined in the Employment Agreement), Mr. Peduzzi will be entitled to receive a lump sum cash severance payment equal to (i) 2.5 times his base salary for the year in which his employment ends (or, if his termination is for “good reason” as a result of a material reduction in his base salary, then his base salary in effective as of immediately prior to such reduction), plus (ii) 2.5 times the average incentive bonus paid over the preceding three-year period. In addition, in such case, the Corporation or the Bank will provide Mr. Peduzzi and his family continued medical, dental, and vision coverage for a period of up to 6 months following the date of his termination of employment that is no less favorable than such coverage that was provided to him and his family immediately prior to such termination of employment.
Cash and benefits payable to Mr. Peduzzi pursuant to the Employment Agreement following a change of control, together with payments under other benefit plans, could constitute “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended, resulting in the imposition of a 20% excise tax on the recipient and the denial of the deduction for such excess amounts to the Corporation or the Bank. If amounts payable to Mr. Peduzzi would be excess parachute payments, then his severance benefits will be reduced to that amount that would result in no portion being an excess parachute payment, unless payment of the full severance amount would result in Mr. Peduzzi receiving an amount greater than the reduced amount on an after-tax basis. The Employment Agreement does not provide for tax indemnity for any such potential excise taxes that may be due by Mr. Peduzzi.
The Employment Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The description of the Employment Agreement herein is a summary of the material terms, does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.1.
