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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 20, 1998, by and between Citizens
Bancshares, Inc. (the "Corporation"), which will have its principal office in
Bowling Green, Ohio, and Xxxxx X. Francisco (the "Employee").
WHEREAS, Mid Am, Inc. and Citizens Bancshares, Inc. have
entered into an Amended and Restated Agreement and Plan of Merger, dated
August 5, 1998 (the "Merger Agreement"), which provides for the merger of Mid
Am, Inc. into Citizens Bancshares, Inc. (the "Merger");
WHEREAS, in connection with the Merger the parties wish to
ensure continuity in management and leadership of the combined organization and
to minimize the departure or distraction of management in the event of a change
in control, and therefore desire to enter into this Employment Agreement;
WHEREAS, the Board of Directors of the Corporation (the
"Board") and the Board of Directors of Mid Am, Inc. have approved and authorized
the Corporation's entry into this Agreement with the Employee;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Corporation and the Employee agree as follows:
1. Effective Time. The provisions of this Agreement shall
take effect as of the Effective Time of the Merger as defined in the Merger
Agreement ("Effective Time"), provided Employee is employed by Mid Am, Inc.
immediately prior to the Effective Time. As of the Effective Time the prior
Change in Control Agreement between Employee and Mid Am, Inc. shall terminate
and become null and void.
2. Employment. The Employee is employed as Chairman of the
Board and Chief Executive Officer of the Corporation. As Chairman of the Board
and Chief Executive Officer the Employee shall render executive, policy and
other management services to the Corporation of the type customarily performed
by persons serving in a similar executive officer capacity, subject to the
powers by law vested in the Board and in the Corporation's stockholders. The
Employee shall report to the Board of Directors of the Corporation, and shall
perform such other related duties as the Board of Directors of the Corporation
may from
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time to time reasonably direct or request. The Employee shall be a full time
employee of the Corporation. Notwithstanding the foregoing, on the fifth
anniversary of the Effective Time, Employee shall relinquish his position as
Chief Executive Officer but continue in his role as the Chairman of the Board of
Directors of the Corporation, unless otherwise determined by a majority of the
entire Board. During the Term, the Corporation shall nominate the Employee for
election to the Board at each election of directors at which his term thereon
would otherwise expire, unless a majority of the entire Board determines
otherwise.
The Employee shall perform his duties and responsibilities
under this Agreement faithfully, diligently and to the best of the Employee's
ability, and in compliance with all applicable laws in all material respects
and the Corporation's Sixth Restated Articles of Incorporation and Code of
Regulations, as they may be amended from time to time.
3. Term. The initial term of employment under this Agreement
shall be for a period of five (5) years commencing on the Effective Time (the
"Term"). This Agreement shall be automatically extended for one (1) additional
year on the third anniversary date of the Effective Time and if so renewed, for
an additional one year renewal term, annually on each succeeding anniversary
date of the Effective Time (the "Renewal Date"), unless either party gives
notice to the other at least three (3) months in advance of the Renewal Date
that it does not intend to renew the Agreement. References herein to the Term
shall refer both to such initial term and such successive renewal terms. The
Term shall end upon the termination of the Employee's employment under this
Agreement.
4. Compensation. (a) Base Salary. The Corporation agrees to
pay the Employee during the Term an annual base salary ("Base Salary") of
$600,000. The Base Salary shall be reviewed at least annually during the Term by
the Board, and the Employee shall receive such increases in Base Salary, if any,
as the Personnel and Compensation Committee of the Board or any successor
thereto (the "Committee") in its absolute discretion may determine, together
with such performance or merit increases, if any, as the Committee in its
absolute discretion may determine. If Employee's Base Salary is increased by the
Company, such increased Base Salary shall then constitute the Base Salary for
all purposes
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of the Agreement. Employee's Base Salary shall not be reduced during the Term.
Participation with respect to discretionary bonuses, retirement and other
employee benefit plans and fringe benefits shall not reduce the Base Salary
payable to the Employee under this Section 4. The Base Salary shall be payable
to the Employee in equal installments in conformity with the Corporation's
normal payroll periods. Upon Employee ceasing to perform the functions of Chief
Executive Officer and continuing in the role of Chairman, he shall receive
salary and bonus equalling 83% of the salary and bonus of Employee's successor
as Chief Executive Officer.
(b) Bonus. Except as provided in the last sentence
of Section 4(a) above during the Term, the Employee shall be eligible to receive
an annual performance bonus (in an amount no greater than 100% of the Base
Salary for the year with respect to which such performance is measured)
consistent with the Corporation's management incentive program, as approved by
the Committee and shall have an annual target bonus under such program equal to
at least 40% of such Base Salary.
5. Withholding Obligation. The Corporation shall have the
ability to withhold from the compensation otherwise due to the Employee under
this Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or other amounts required to be withheld from
compensation from time to time under the Internal Revenue Code of 1986, as
amended (the "Code"), or under any state or municipal laws or regulations.
6. Fringe Benefits.
(a) Vacations and Leave. During the Term, the Employee
shall be entitled to annual paid vacation of four (4) weeks per year or such
longer period as the Committee may approve. The Employee shall schedule the
timing of paid vacations in a reasonable manner. The Employee shall also be
entitled to such other leave, with or without compensation, as shall be mutually
agreed upon by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit
Plans. During the Term, the Employee shall be entitled to participate, on a
basis no less favorable
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than any other senior executive officer of the Corporation, in benefit plans of
the Corporation or its subsidiaries relating to stock options, stock
appreciation, stock purchases, pension, thrift, deferred compensation, profit
sharing, group life insurance, medical coverage, education or other retirement
or employee benefits that the Corporation may adopt for the benefit of its
executive employees.
(c) Other Benefits. During the Term, the Employee shall
be entitled to participate in any other fringe benefits which are or may become
applicable to the Corporation's executive employees, including the use of an
automobile, a reasonable expense account, the payment of reasonable expenses for
attending annual and periodic meetings of trade or business associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Employee under this Agreement, on a basis no less
favorable than any other senior executive officer of the Corporation.
7. Termination of Employment. The Employee's employment
hereunder and the Term may be terminated under the circumstances set forth in
paragraphs (a) through (e) below:
(a) Death. The Employee's employment hereunder shall
terminate upon his death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such notice is filed, to his estate, in
substantially equal monthly installments, from the date of his death for a
period of two years, an annual amount equal to the Employee's Base Salary as of
his date of death.
b) Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from his duties hereunder on a full-time basis for the entire period of
six (6) consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur one month before, or after the end of such
six (6) month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Corporation may terminate the Employee's
employment hereunder for "Disability." In that instance, he shall be entitled to
receive for two years, an
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annual amount equal to the Employee's Base Salary as of his date of disability
in addition to disability benefits of the type currently provided to him, or, if
more favorable to the Employee, benefits of the type provided for other
executive employees in similar positions with the Corporation.
(c) Cause. The Corporation may terminate the Employee's
employment hereunder for Cause or without Cause. Termination for Cause shall
mean termination because of (i) the willful and continued failure by the
Employee to substantially perform his duties to the detriment of the Corporation
(other than any such failure resulting from his incapacity due to physical or
mental illness), after a written demand for substantial performance is delivered
to the Employee by the Board which specifically identifies the manner in which
the Board believes the Employee has not substantially performed his duties to
the detriment of the Corporation, or (ii) the willful engaging by the Employee
in gross misconduct materially and demonstrably injurious to the Corporation.
For purposes of this paragraph (c), no act or failure to act by the Employee
shall be considered "willful" unless done or omitted to be done by the Employee
in bad faith and without reasonable belief that the Employee's action or
omission was in the best interests of the Corporation or its affiliates. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, shall be conclusively presumed to be done, or omitted to
be done, by the Employee in good faith and in the best interests of the
Corporation. Cause shall not exist unless and until the Corporation has
delivered to the Employee a copy of a resolution duly adopted by two-thirds
(2/3) of the entire Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Employee and an opportunity for the
Employee, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board the Employee was guilty of conduct set forth
in clause (i) or (ii) has occurred and specifying the particulars thereof in
detail. Following a Change in Control, the Corporation must notify the Employee
of any event constituting Cause within ninety (90) days following the
Corporation's knowledge of its existence or such event shall not constitute
Cause under this Agreement.
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(d) Good Reason. The Employee may terminate his
employment hereunder with or without Good Reason; provided, however, that the
Employee agrees not to terminate his employment hereunder (other than for Good
Reason or for Retirement) during the ninety-day period following a Change in
Control. Except as provided in Section 8(b) hereof following a Change in
Control, for purposes of this Agreement "Good Reason" shall mean any (i) removal
of the Employee from, or failure to re-appoint the Employee to, his position as
Chairman and Chief Executive Officer prior to the fifth anniversary of the
Effective Time, except in connection with termination of the Employee for Cause,
(ii) failure to reappoint Employee to the position of Chairman of the Board at
such time as he is no longer Chief Executive Officer and has not reached age 65
with annual cash compensation at least equal to 83% of the salary and bonus of
his successor as Chief Executive Officer, (iii) failure by the Corporation to
comply with Section 2, 4 or 6 hereof in any material respect, (iv) the
Corporation gives notice that it does not intend to renew the Agreement pursuant
to Section 3 above; or (v) any requirement of the Corporation that the Employee
be based anywhere more than thirty (30) miles from the office where the Employee
is located at the Effective Time. For purposes of this Section 7(d), "Good
Reason" shall not exist under clause (iii) of the preceding sentence until after
Employee has given the Company notice of the applicable event within 90 days of
such event and which is not remedied within 30 days after receipt of written
notice from Employee specifically delineating such claimed event and setting
forth Employee's intention to terminate employment if not remedied; provided,
that if the specified event cannot reasonably be remedied within such 30-day
period and the Company commences reasonable steps within such 30-day period to
remedy such event and diligently continues such steps thereafter until a remedy
is effected, such event shall not constitute "Good Reason" provided that such
event is remedied within 60 days after receipt of such written notice. The
Employee's right to terminate employment for Good Reason shall not be affected
by the Employee's incapacity due to mental or physical illness and the
Employee's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any event or condition constituting Good Reason.
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(e) Retirement. For purposes of this Agreement,
"Retirement" shall mean termination of the Employee's employment by either the
Employee (other than for Good Reason) or the Corporation (other than for Cause)
on or after the Employee's normal (i.e., not early) retirement age under the
terms of the Corporation's pension plan (or, any other tax-qualified plan, if no
pension plan exists); provided, that, following a Change in Control such normal
retirement age may not be reduced for purposes of this Agreement without the
consent of the Employee.
(f) Date of Termination. For purposes of this
Agreement, "Date of Termination" means (1) the effective date on which the
Employee's employment by the Corporation terminates as specified in a Notice of
Termination by the Corporation or the Employee, as the case may be, or (2) if
the Employee's employment terminates by reason of death, the date of death of
the Employee. Notwithstanding the previous sentence, (i) if the Employee's
employment is terminated for Disability (as defined in Section 7(b)), then such
Date of Termination shall be no earlier than thirty (30) days following the date
on which a Notice of Termination is received, and (ii) if the Employee's
employment is terminated by the Corporation other than for Cause, then such Date
of Termination shall be no earlier than sixty (60) days following the date on
which a Notice of Termination is received.
(g) Payment Upon Termination. Upon any termination of
employment hereunder, the Corporation shall pay the Employee, within ten (10)
days following his Date of Termination, a lump sum cash amount equal to the sum
of (i) the Employee's unpaid Base Salary through the Date of Termination, (ii)
any bonus payments which have become payable (other than deferred amounts), to
the extent not theretofore paid, (iii) any vacation pay owed with respect to
accrued, but unused, vacation, and (iv) any other benefit payments due to the
Employee.
(h) Termination Without Cause or For Good Reason. In
addition to the payments set forth in Section 7(g) hereof, in the event that the
Employee's employment with the Corporation terminates either (1) prior to a
Change in Control, if any, or (2) following the two-year period immediately
subsequent to a Change in Control (including
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as a result of non-renewal of the Term by the Corporation during such two-year
period), in each case as a result of (i) a termination by the Employee for Good
Reason, or (ii) a termination by the Corporation without Cause (other than for
Retirement or Disability), then the Corporation shall pay to the Employee, in
one lump sum within thirty days following the Date of Termination, his unpaid
prorated Base Salary and unpaid prorated annual bonus based on the assumption
that Employee would receive his targeted annual bonus for the year of
termination, plus an amount equal to the greater of (x) the sum of Employee's
then annual Base Salary plus targeted annual bonus (hereinafter the Employee's
"Annual Cash Compensation") multiplied by the number of whole and partial years
remaining in the Term as it existed immediately preceding Employee's termination
and (y) if Employee held the position of Chief Executive Officer immediately
preceding his Termination, three (3) times Annual Cash Compensation, otherwise
two (2) times Annual Cash Compensation, payable within thirty days of the Date
of Termination. In addition, all stock options granted to the Employee after the
Effective Time shall vest and become immediately exercisable in full. In
addition, the Corporation shall continue to provide, for the remainder of the
Term as it existed immediately prior to Date of Termination, or if longer, for
three years, the Employee (and the Employee's dependents if applicable) with the
same level of medical, dental, accident, disability and life insurance benefits
upon substantially the same terms and conditions (including cost of coverage to
the Employee); provided, that, if the Employee cannot continue to participate in
the Corporation's plans providing such benefits, the Corporation shall otherwise
provide such benefits on the same after-tax basis as if continued participation
had been permitted. Notwithstanding the foregoing, in the event the Employee
becomes reemployed with another employer and becomes eligible to receive welfare
benefits from such employer, the welfare benefits described herein shall be
secondary to such benefits during the period of the Employee's eligibility, but
only to the extent that the Corporation reimburses the Employee for any
increased cost and provides any additional benefits necessary to give the
Employee the benefits hereunder.
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8. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of
this Agreement, a "Change in Control" shall be deemed to have taken place if at
anytime following the Effective Time:
(i) individuals who constitute the Board immediately after the
Effective Time (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent
thereto whose election or nomination for election was approved
by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of
the proxy statement of the Corporation in which such person is
named as a nominee for director, without written objection to
such nomination) shall be an Incumbent Director; provided,
however, that no individual initially elected or nominated as
a director of the Corporation as a result of an actual or
threatened election contest with respect to directors or as a
result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than
the Board shall be deemed to be an Incumbent Director; (ii)
any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities
eligible to vote for the election of the Board (the
"Corporation Voting Securities"); provided, however, that the
event described in this paragraph (ii) shall not be deemed to
be a Change in Control by virtue of any of the following
acquisitions: (A) by the Corporation or any Subsidiary, (B) by
any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or
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any Subsidiary, or (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities. (iii)
the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving
the Corporation or any of its Subsidiaries that requires the
approval of the Corporation's stockholders, whether for such
transaction or the issuance of securities in the transaction
(a "Business Combination"), unless immediately following such
Business Combination: (A) more than 60% of the total voting
power of (x) the corporation resulting from such Business
Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by
Corporation Voting Securities that were outstanding
immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such
Corporation Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting
power of such Corporation Voting Securities among the holders
thereof immediately prior to the Business Combination, (B) no
person (other than any employee benefit plan (or related
trust) sponsored or maintained by the Surviving Corporation or
the Parent Corporation), is or becomes the beneficial owner,
directly or indirectly, of 25% or more of the total voting
power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least 50%
of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the
Business Combination were
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Incumbent Directors at the time of the Board's approval of the
execution of the initial agreement providing for such Business
Combination; or (iv) the stockholders of the Corporation
approve a plan of complete liquidation or dissolution of the
Corporation or a sale of all or substantially all of the
Corporation's assets or deposits.
Notwithstanding the foregoing, a Change in Control of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 25% of the Corporation Voting Securities as a
result of the acquisition of Corporation Voting Securities by the Corporation
which reduces the number of Corporation Voting Securities outstanding; provided,
that if after such acquisition by the Corporation such person becomes the
beneficial owner of additional Corporation Voting Securities that increases the
percentage of outstanding Corporation Voting Securities beneficially owned by
such person, a Change in Control of the Corporation shall then occur.
(b) Good Reason. During the two-year period
following a Change in Control, "Good Reason" shall mean, without the Employee's
express written consent, the occurrence of any of the following events:
(1) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in
any material and adverse respect with the Employee's duties and
responsibilities with the Corporation immediately prior to such Change
in Control (including any diminution of such duties or
responsibilities), removal of Employee from, or failure to reappoint
the Employee to, his position as Chairman and Chief Executive Officer
prior to the fifth anniversary of the Effective Time, or removal of
Employee from, or failure to reappoint the Employee to, his position as
Chairman with annual cash compensation at least equal to 83% of the
salary and bonus of his successor as Chief Executive Officer at such
time as he is no longer Chief Executive Officer and has not reached age
65;
(2) a reduction by the Corporation in the
Employee's rate of annual Base Salary or annual target bonus opportunity
(including any adverse change
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in the formula for such annual bonus target) as in effect immediately
prior to such Change in Control or as the same may be increased from
time to time thereafter;
(3) any requirement of the Corporation that the
Employee (i) be based anywhere more than thirty (30) miles from the
office where the Employee is located at the time of the Change in
Control or (ii) travel on the Corporation's business to an extent
substantially greater than the travel obligations of the Employee
immediately prior to such Change in Control;
(4) the failure of the Corporation to (i) continue
in effect any employee benefit plan, compensation plan, welfare
benefit plan or material fringe benefit plan in which the Employee is
participating immediately prior to such Change in Control, or the
taking of any action by the Corporation which would adversely affect
the Employee's participation in or reduce the Employee's benefits
under any such plan, unless the Employee is permitted to participate
in other plans providing the Employee with substantially equivalent
aggregate benefits (at substantially comparable cost with respect to
welfare benefit plans), or (ii) provide the Employee with paid
vacation in accordance with the most favorable plans, policies,
programs and practices of the Corporation and its affiliated companies
as in effect for the Employee immediately prior to such Change in
Control; or
(5) any refusal by the Company to continue to
permit Executive to engage in activities not directly related to the
business of the Company which Executive was permitted to engage in
prior to the Change in Control;
(6) any purported termination of Executive's
employment which is not effectuated pursuant to Section 11(b) (and
which will not constitute a termination hereunder); or
(7) the failure of the Corporation to obtain the
assumption agreement from any successor as contemplated in Section
12(a) hereof.
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Notwithstanding anything herein to the contrary,
termination of employment by Executive for any reason during the 30-day
period commencing one (1) year after the date of a Change in Control
shall constitute Good Reason.
Any event or condition described in Section 8(b)(1) through
(7) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
third party who had indicated an intention or taken steps reasonably calculated
to effect a Change in Control, shall constitute Good Reason following a Change
in Control for purposes of this Agreement (as if a Change in Control had
occurred immediately prior to the occurrence of such event or condition)
notwithstanding that it occurred prior to the Change in Control. An isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Corporation promptly after receipt of notice thereof given by the
Employee shall not constitute Good Reason. The Employee's right to terminate
employment for Good Reason shall not be affected by the Employee's incapacity
due to mental or physical illness and the Employee's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any event or
condition constituting Good Reason.
(c) In addition to the payments set forth in Section
7(g) above, in the event the Employee's employment with the Corporation
terminates within two (2) years following a Change in Control either (i) by the
Corporation without Cause (other than for Retirement or Disability) or (ii) by
the Employee for Good Reason, then the Corporation shall (1) pay to the
Employee, within ten (10) days following the Employee's Date of Termination, a
lump sum cash amount equal to the greater of (A) the amount of the payment that
would be owed to the Employee under Section 7(h) herein (as if Section 7(h) were
triggered), and (B) three (3) times the sum of (i) the highest annual rate of
Base Salary of the Employee during the 3-year period immediately preceding the
Employee's Date of Termination and (ii) the highest annual bonus earned by
Employee in respect of the three (3) fiscal years of the Corporation immediately
preceding the year in which the Employee's Date of Termination occurs (or if the
Employee has not been employed by the Corporation for such three-fiscal-
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year period, the greater of (x) the highest target annual bonus (without regard
to any reduction that would give rise to Good Reason) for the year in which the
Employee's Date of Termination occurs and (y) the amount otherwise determined
under this clause (ii) without regard to this parenthetical) and (2) continue to
provide, for a period of the longer of three (3) years and the remaining period
of the Term as it existed immediately before the Date of Termination, the
Employee (and the Employee's dependents if applicable) with the same level of
medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including cost of coverage to the
Employee) as existed immediately prior to the Employee's Date of Termination
(or, if more favorable to the Employee, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if the Employee cannot continue to participate in the Corporation's plans
providing such benefits, the Corporation shall otherwise provide such benefits
on the same after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event the Employee becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of the Employee's eligibility, but only to the extent
that the Corporation reimburses the Employee for any increased cost and provides
any additional benefits necessary to give the Employee the benefits hereunder.
In addition, all stock options granted to the Employee after the Effective Time
shall vest and become immediately exercisable in full.
(d) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the benefit of the Employee
(whether paid or payable, distributed or distributable or accelerated or subject
to acceleration pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
8(d)) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred
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by the Employee with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes imposed upon the Gross-Up Payment and any interest or
penalties imposed with respect to such taxes, the Employee retains an amount of
the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the
Payments and (y) the product of any deductions disallowed because of the
inclusion of the Gross-Up Payment in the Employee's adjusted gross income and
the highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made. For purposes of determining
the amount of the Gross-Up Payment, the Employee shall be deemed to (A) pay
federal income taxes at the highest marginal rates of federal income taxation
for the calendar year in which the Gross-Up Payment is to be made, (B) pay
applicable state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes and (C) have otherwise allowable deductions for
federal income tax purposes at least equal to those which could be disallowed
because of the inclusion of the Gross-Up Payment in the Employee's adjusted
gross income. The payment of a Gross-Up Payment under this Section 8(d) shall in
no event be conditioned upon the Employee's termination of employment or the
receipt of severance benefits under this Agreement.
(e) Subject to the provisions of Section 8(d), all
determinations required to be made under this Section 8(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the public accounting firm that is retained by the Corporation as of the
date immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and the
Employee within fifteen (15) business days of the receipt of notice from the
Corporation or the Employee that there has been a Payment, or such earlier time
as is
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requested by the Corporation (collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Employee may appoint
another nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Corporation and the Corporation shall enter into any
agreement requested by the Accounting Firm in connection with the performance of
its services hereunder. The Gross-Up Payment under this Section 8(e) with
respect to any Payment shall be made no later than thirty (30) days following
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Employee, it shall furnish the Employee with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Corporation and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment") or
Gross-Up Payments are made by the Corporation which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(d)(2)(B) of the Code) shall be promptly
paid by the Corporation to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(d)(2) of the Code) shall be
promptly paid by the Employee to or for the benefit of the Corporation. The
Employee shall cooperate, to the extent his expenses are reimbursed by the
Corporation, with any reasonable
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requests by the Corporation in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax.
9. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if, during the
Term, and either prior to or more than two years following a Change in Control,
he voluntarily terminates his employment with the Corporation under
circumstances which do not constitute Good Reason (unless such termination is
approved by the Board) or his employment is terminated by the Corporation for
Cause, he shall not without the consent of the Board, for a period of one (1)
year following such Date of Termination:
(1) engage or be interested, whether alone or
together with or on behalf or through any other person, firm,
association, trust, venture, or corporation, whether as sole
proprietor, partner, shareholder (unless his interest as a shareholder
qualifies under clause (4)(i) or (4)(ii) below), agent, officer,
director, employee, adviser, consultant, trustee, beneficiary or
otherwise, in any business principally and directly engaged in the
operation of a business that is competitive with any business in which
the Corporation is engaged; which business operates in a geographic
area in which, at the time of such termination of employment, the
Corporation is conducting substantial business or plans to conduct
substantial business (a "competing business");
(2) assist others in conducting any competing
business;
(3) directly or indirectly recruit or induce or
hire any person who is an employee of the Corporation or any of its
subsidiaries, or solicit any of the Corporation's customers, clients or
providers; or
(4) own any capital stock or any other securities
of, or have any other direct or indirect interest in, any entity which
owns or operates a competing business, other than the ownership of (i)
less than five percent (5%) of any such entity whose stock is listed on
a national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of the
Employee or (ii) any limited partnership interest of less than 5 % in
such an entity.
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Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or
threatens to breach any of the terms of this Section 9, the Employee
acknowledges that the Corporation's remedy at law would be inadequate and that
the Corporation shall be entitled to an injunction restraining the Employee from
committing or continuing such breach.
10. Payment Obligation Absolute. Except as expressly
provided with respect to continued welfare benefits under Sections 7(h) and
8(c), the Corporation's obligation to pay the Employee the compensation and
other benefits provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Corporation may have
against the Employee. All amounts payable by the Corporation hereunder shall be
paid without notice or demand.
11. Notice.
(a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Employee:
00000 Xxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
If to the Corporation:
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Attention: Secretary
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of
the Employee's Date of Termination by the Corporation or the Employee, as the
case may be, to the other, shall (i) indicate the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee's
or the Corporation's rights hereunder.
12. General Provisions.
(a) No Assignments. This Agreement is personal to
each of the parties hereto. Neither party may assign or delegate any of his or
its rights or obligations hereunder without first obtaining the written consent
of the other party; provided, however, that the Corporation agrees that
concurrently with any merger or sale of assets which would constitute a Change
in Control hereunder, it will cause any successor or transferee unconditionally
to assume, by written instrument delivered to the Employee (or his beneficiary
or estate), all of the obligations of the Corporation hereunder. Failure of the
Corporation to obtain such assumption prior to the effectiveness of any such
merger or sale of assets, shall be a breach of this Agreement and shall
constitute Good Reason hereunder and shall entitle the Employee to compensation
and other benefits from the Corporation in the same amount and on the same terms
as the Employee would be entitled hereunder if the Employee's employment were
terminated following a Change in Control under Section 8(c) hereof. For purposes
of implementing the foregoing, the date on which any such merger or sale of
assets becomes effective shall be deemed the date Good Reason occurs, and shall
be the Date of
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Termination if requested by the Employee. Notwithstanding the foregoing, this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee shall die while any amounts
would be payable to the Employee hereunder had the Employee continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Employee to receive such amounts or, if no person is so appointed, to the
Employee's estate.
(b) Reimbursement of Expenses. If any contest or
dispute shall arise under this Agreement involving termination of Employee's
employment with the Corporation or involving the failure or refusal or any
alleged failure or refusal of the Corporation to perform fully in accordance
with the terms hereof, the Corporation shall xxxx xxxxx Employee, on a current
basis, for all reasonable legal fees and expenses, if any, incurred by Employee
in connection with such contest or dispute (regardless of the result thereof),
together with interest in an amount equal to the prime rate as published in The
Wall Street Journal from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Corporation receives Employee's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Employee's claim is upheld by a court of competent jurisdiction; provided,
however, Employee shall be required to repay any such amounts to the Corporation
to the extent that a court issues a final and non-appealable order setting forth
the determination that the position taken by Employee was frivolous or advanced
by Employee in bad faith.
(c) Entire Agreement; Amendments or Additions; Action
by Board. This Agreement contains the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and supersedes all
prior oral and written agreements, memoranda, understandings and undertakings
between the parties hereto relating to the subject matter hereof. No amendments
or additions to this Agreement shall be binding unless
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in writing and signed by both parties. Except as provided in Section 2, the
prior approval by a two-thirds (2/3) affirmative vote of the full Board shall be
required in order for the Corporation to authorize any amendments or additions
to this Agreement, to give any consents or waivers of provisions of this
Agreement, or to take any other action under this Agreement including any
termination of the employment of the Employee with or without Cause. For
purposes of Board approval with respect hereto, if the Employee is also a
director of the Corporation, he shall abstain from acting on matters pertaining
to this Agreement and shall not be counted as a Board member for purposes of the
two-thirds (2/3) requirement.
(d) Governing Law. This Agreement shall be governed
by the laws of the State of Ohio as to all matters, including, but not limited
to, matters of validity, construction, effect and practice.
(e) Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof.
(f) Section Headings. The section headings used in
this Agreement are included solely for convenience and shall not affect, or be
used in connection with, the interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original and
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CITIZENS BANCSHARES, INC.
By: /s/ XXXXX X. XXXXX
---------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Executive Officer
Employee:
/s/ XXXXX X. FRANCISCO
---------------------------
Xxxxx X. Francisco
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