EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of June 16,
2003 ("Effective Date") between Franklin Bank, N.A. ("Bank") and Xxxxx Xxxxxxx
("Xxxxxxx").
RECITALS
Bank wishes to employ Xxxxxxx as its Executive Vice President of
Lending and Xxxxxxx wishes to accept such employment under the terms and
conditions set forth in this Agreement.
IT IS AGREED as follows:
1. EMPLOYMENT. Bank hereby employs Xxxxxxx as its Executive Vice
President of Lending. Xxxxxxx accepts such employment.
2. TERM. The term of employment under this Agreement shall commence on
the Effective Date and shall continue, unless otherwise terminated earlier under
Section 12, until the day before the first anniversary of the Effective Date,
i.e., June 15, 2004 (the "Term"), provided that on the day before each yearly
anniversary of the Effective Date, the Term shall be automatically extended for
successive additional one (1) year periods unless at least ninety (90) days
prior to such anniversary date, either Bank or Xxxxxxx furnishes the other with
written notice that the Term not be so extended.
3. DUTIES. Xxxxxxx shall devote his full-time efforts to the proper and
faithful performance of all duties customarily discharged by an Executive Vice
President of Lending for a financial institution, including without limitation
(a) supervision of Bank's lending and credit operations, (b) recruitment,
training and management of Bank lending personnel, (c) formulation and
implementation of lending policies or guidelines, (d) service in the capacity as
the Bank's Chief Lending Officer and (e) any additional duties assigned to him
from time to time by the President and CEO of Bank and/or the Board of Directors
of Bank. Xxxxxxx shall report directly to the President and CEO of Bank. Xxxxxxx
agrees to use his best efforts and comply with all fiduciary and professional
standards in the performance of his duties hereunder. Xxxxxxx shall provide
services to Franklin Bancorp and of any subsidiary or affiliate of Bank or
Franklin Bancorp without additional compensation and benefits beyond those set
forth in this Agreement, and any compensation and benefits provided to Xxxxxxx
for such services shall be a credit with regard to amounts due from Bank under
this Agreement. Xxxxxxx represents that his employment under this Agreement will
not conflict with or result in the breach of any agreement to which Xxxxxxx is
bound.
4. BASE SALARY. Xxxxxxx shall be paid a base salary of One Hundred
Sixty Thousand Dollars ($160,000.00) per annum for the Term payable, less
applicable withholding, in equal monthly payments or more frequently in
accordance with Bank's regular practice. Salary for a portion of any period will
be prorated. Upon extension of the Term, Xxxxxxx'x base salary will be set
following review each year during the Term (as extended) by the Compensation
Committee of Bank; provided, however, that Xxxxxxx'x base salary shall not be
reduced from the base salary immediately previously in effect.
1
5. ANNUAL CASH BONUS. On or before March 31st following each calendar
year (except for calendar year 2003), Xxxxxxx will be eligible to receive an
annual performance bonus based upon Bank's achieving (i) targeted financial
results for the prior year, taking into consideration the earnings set forth in
the annual budget approved by Bank's Board of Directors each year and/or (ii)
such other goals and objectives as mutually determined each year during the Term
by Bank and Xxxxxxx. The amount of the annual cash bonus earned and payable for
any year shall be up to forty percent (40%) of Xxxxxxx'x base salary for such
year and based on a formula established by the Compensation Committee for all
key executive officers of Bank. Xxxxxxx will be eligible for a bonus for
calendar year 2003 based on mutually agreed upon performance goals that shall be
determined within thirty (30) days after the Effective Date, as well as other
specific and agreed upon accomplishments, provided that such bonus shall not
exceed Fifty Thousand Dollars ($50,000.00) nor be less than Twenty-Five Thousand
Dollars ($25,000.00). If Xxxxxxx'x employment ends before or upon expiration of
the Term, he shall not be eligible for a bonus covering the approximate five and
one-half (5 1/2) months of the then current calendar year.
6. LONG TERM INCENTIVE COMPENSATION. Bank anticipates the development
of a long-term incentive compensation plan which shall provide Xxxxxxx with the
opportunity to earn awards under an equity and/or cash based system upon
achievement of long-term objectives. It is expected that such plan shall be
developed and implemented no later than the 2004 annual meeting of shareholders.
7. STOCK OPTIONS.
(a) Franklin Bancorp shall (a) on the Effective Date grant to Xxxxxxx
an option to purchase 1,500 shares of Franklin Bancorp common stock
pursuant to the existing terms and conditions of the Key Executive
Stock Option Plan, as amended from time to time (the "Plan") and
(b) as soon as practicable conditionally grant to Xxxxxxx an option
to purchase 5,000 shares of Franklin Bankcorp common stock pursuant
to the amended and restated terms and conditions of the proposed
Amended and Restated Key Executive Stock Option Plan, such
conditional grant expressly subject to and conditioned upon the
approval by Franklin Bancorp's shareholders, in their discretion,
at their annual meeting in June 2003 to make available additional
shares for the Board of Directors to grant in such fashion;
provided, however, exercisability of all such options shall
terminate in accordance with the Plan but in no event later than
ninety (90) days after any termination of employment, except as
modified by Section 12(c) below. The options shall vest as set
forth in the Plan, as modified by Section 11, below.
(b) During the Term of his employment, Xxxxxxx shall be entitled to
fully participate in any future stock option plans, stock purchase
plans, restricted stock plans or other similar plans which may be
adopted by Bank or Franklin Bancorp in the future. The level of
such participation shall be determined by the Compensation
Committee of Bank.
2
8. TEMPORARY HOUSING COSTS. Bank shall pay or reimburse Xxxxxxx for
all costs of temporary housing in the Oakland County area for up to ninety (90)
days, not to exceed Two Thousand Dollars ($2,000.00) per month.
9. BENEFITS.
(a) During the Term, Xxxxxxx may participate in all Bank sponsored
retirement plans, 401(k) plans, life insurance plans, medical
insurance plans, disability insurance plans, employee stock
ownership plans and such other benefit plans generally available
from time to time to other executive employees of Bank or Franklin
Bancorp for which he qualifies under the terms of the plans.
Xxxxxxx'x participation in and benefits under any benefit plan
shall be on the terms and subject to the conditions specified in
such plan.
(b) Xxxxxxx will receive four (4) weeks of paid vacation in each
calendar year, prorated for periods less than one (1) year.
(c) If Xxxxxxx elects to become a member of a country club mutually
agreed upon between the Bank and Xxxxxxx, then Bank will pay for
usual and customary monthly dues of such country club.
10. REIMBURSEMENT OF EXPENSES. Bank will reimburse Xxxxxxx for the
reasonable and necessary expenses incurred by him in the performance of his
duties under this Agreement in accordance with Bank's policies in effect from
time to time.
11. SEPARATION FROM EMPLOYMENT DUE TO CHANGE IN CONTROL. In the event
of a Qualifying Event pursuant to a Change in Control (as those terms are
defined below), Bank will pay to Xxxxxxx an amount equal to (a) one (1.0) times
Xxxxxxx'x Cash Compensation for the year, if such Qualifying Event occurs during
the first twelve (12) months of Xxxxxxx'x employment with Bank or (b) one and
one-half (1.5) times the average of Xxxxxxx'x previous three (3) years (or fewer
years, if employment is less than three (3) full years) of Cash Compensation if
such Qualifying Event occurs after Xxxxxxx'x first twelve (12) months of
employment with Bank; provided, however, that Bank shall not be obligated to pay
any portion of this amount if it would constitute an "excess parachute payment"
as defined in Section 280G of the Internal Revenue Code or such successor
provisions. In the event of a Qualifying Event pursuant to a Change in Control,
Xxxxxxx will thereupon be considered one hundred percent (100%) vested with
respect to any unexercised options, warrants and restricted stock grants. As a
condition to the payment by Bank under this Section 11, Xxxxxxx must first
execute and deliver to Bank, in a form prepared by Bank substantially identical
to Exhibit A, a release of all claims against Bank, Franklin Bancorp and other
appropriate parties, excluding Bank's performance under this Section 11 and of
Xxxxxxx'x vested rights under Bank sponsored retirement plans, 401(k) plans and
stock ownership plans.
For purposes of this Section 11, "Cash Compensation" means the total of
Xxxxxxx'x base salary (Section 4) and any annual cash bonus paid (Section 5),
only.
3
For purposes of this Section 11, "Change in Control" means the
occurrence of any of the following:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a trustee or other fiduciary under
an employee benefit plan established or maintained by Bank or
Franklin Bancorp, is or becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Franklin Bancorp representing more
than thirty percent (30%) of the combined voting power of Franklin
Bancorp's then outstanding securities; provided, however, that such
acquisition of more than thirty percent (30%) of the combined
voting power of Franklin Bancorp's outstanding securities will not
constitute a Change in Control if the excess is acquired in
violation of law and the acquirer by court order, settlement or
otherwise disposes or is required to dispose of all securities
acquired in violation of law; or
(b) upon the purchase of Franklin Bancorp's Common stock pursuant to a
tender or exchange offer at the point which results in the sale of
more than thirty percent (30%) of the combined voting power of
Franklin Bancorp's then outstanding securities (other than a tender
or exchange offer initiated by Franklin Bancorp or a trustee or
other fiduciary under an employee benefit plan established or
maintained by Bank or Franklin Bancorp); or
(c) upon consummation and closing of a transaction resulting in (i) a
merger or consolidation of Franklin Bancorp with or into another
institution, other than a merger or consolidation which would
result in the voting securities of Franklin Bancorp outstanding
immediately prior thereto continuing to represent (either by
remaining or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined
voting power of the voting securities of Franklin Bancorp or such
surviving entity outstanding immediately after such merger or
consolidation); or (ii) a sale, exchange, lease, mortgage, pledge,
transfer, or other disposition (in one transaction or a series of
related transactions) of all or substantially all of the assets of
Franklin Bancorp which shall include, without limitation, the sale
of assets or earning power aggregating more than fifty percent
(50%) of the assets or earning power of Franklin Bancorp on a
consolidated basis; or (iii) any liquidation or dissolution of
Franklin Bancorp; or (iv) any reorganization, reverse stock split,
or recapitalization of Franklin Bancorp which would result in a
Change in Control.
For purposes of this Section 11, "Qualifying Event" means one of the
following events which occurs during the period commencing one hundred eighty
(180) days prior to the date of a Change in Control and ending on the first
anniversary of a Change in Control:
(a) the termination of Xxxxxxx'x employment by Bank without Cause
(as defined in Section 12(e));
4
(b) resignation from employment by Xxxxxxx as the result of his removal
from the position of Executive Vice President of Lending of Bank or
the material and substantial reduction of his duties in such
positions or the relocation of Xxxxxxx from Bank's current
headquarters in Southfield to a location at least fifty (50) miles
away; or
(c) resignation from employment by Xxxxxxx due to the reduction of
Xxxxxxx'x then current base salary or elimination of (i)
eligibility for an annual cash bonus, (ii) eligibility for long
term incentive compensation or (iii) any existing benefits as
described in Section 9.
12. TERMINATION OF EMPLOYMENT.
(a) Xxxxxxx'x employment under this Agreement may be terminated at any
time by President and CEO and/or the Board of Directors of Bank
(and by the Board of Directors of Franklin Bancorp and of any
subsidiary or affiliated organization for employment with those
entities), with or without Cause (as defined below). Xxxxxxx'x
employment is "at-will."
(b) Xxxxxxx'x employment under this Agreement shall terminate upon
expiration of the Term without extension as described in Section 2.
(c) Xxxxxxx'x employment under this Agreement shall terminate upon his
retirement, resignation or death. Xxxxxxx shall furnish sixty (60)
days' advance written notice to Bank of his intent to resign or
retire unless pursuant to a Change in Control under Section 11. If
Xxxxxxx resigns or retires within the first year of employment with
Bank other than in connection with a Change in Control and fails to
provide such advance written notice, (i) he shall repay to Bank,
and he authorizes Bank to set off against any compensation and
other monies due him, the temporary housing cost payments made by
Bank under Section 8 and (ii) all unexercised stock options granted
pursuant to Section 7 shall immediately be deemed forfeited.
(d) Xxxxxxx'x employment under this Agreement shall terminate upon
thirty (30) days written notice by Bank to Xxxxxxx of a termination
due to Disability, provided such notice is delivered during the
period of Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of Xxxxxxx, due to
injury, illness, disease or bodily or mental infirmity to engage in
the performance of his material duties of employment with Bank as
contemplated by Section 3 herein for (i) any period of ninety (90)
consecutive days or (ii) a period of one hundred fifty days (150)
in any consecutive twelve (12) months, provided that interim
returns to work of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a determination of
consecutive absent days if the reason for absence before and after
the interim return are the same. Benefits to which Xxxxxxx is
entitled under any disability policy or plan provided by Bank
5
shall reduce the base salary paid to Xxxxxxx during any period of
Disability on a dollar-for-dollar basis.
(e) Bank shall have the right to terminate Xxxxxxx'x employment for
Cause. For purposes of this Agreement, "Cause" shall consist of any
of the following:
(i) Xxxxxxx'x willful misrepresentation, fraud, willful
dishonesty or willful breach of a fiduciary duty which
is intended to result, or does result, in his or any
person's or entity's enrichment at the expense of Bank;
(ii) willful misconduct; provided, however, that conduct by
Xxxxxxx in good faith and/or ordinary negligence shall
not be considered "Cause;"
(iii) failure to perform Xxxxxxx'x duties or failure to
follow any written policy or directive of the Board of
Directors of Bank or Franklin Bancorp, any of which is
not remedied by Xxxxxxx after receipt by him of a
written notice from Bank's President and CEO and/or the
Board of Directors of Bank or Franklin Bancorp
specifying the required action and the time period
within which the action must be taken, which period
shall not be less than three (3) days;
(iv) willful violation of any law, rule or regulation
relating to the operation of Bank or any of its
subsidiaries or affiliates;
(v) the order of any court or supervising governmental
agency with jurisdiction over the affairs of Bank or
any subsidiary or affiliate;
(vi) Xxxxxxx'x willful violation of any provision of this
Agreement, including without limitation violation of
Sections 13, 14, 15 or 16;
(vii) Xxxxxxx'x conviction or no contest plea to a felony or
crime involving moral turpitude;
(viii) abuse of illegal drugs or other controlled substances
or habitual intoxication; or
(ix) willful violation by Xxxxxxx of Bank's published
business conduct guidelines, code of ethics, conflict
of interest or other similar policies.
(f) If Xxxxxxx'x employment terminates for Cause or for any reason
other than as set forth in Section 12(g), Bank shall be obligated
only to continue to pay Xxxxxxx'x salary and, to the extent earned,
accrued and unpaid, annual cash bonus and long term incentive
compensation and furnish the then existing benefits under Section 9
up to the date of termination (except as otherwise set forth in
this Agreement).
(g) If Xxxxxxx'x employment is terminated by Bank without Cause under
Section 12(a), in addition to the amounts payable under Section
12(f) and unless the
6
termination is the result of a Qualifying Event due to a Change in
Control under Section 11, Xxxxxxx shall be entitled to receive his
(i) base salary, (ii) a pro rated annual cash bonus for the then
current calendar year calculated as if all targets and goals are
achieved (but no other incentive compensation beyond the date of
termination) and (iii) benefits under Section 9 for the remainder
of the then Term (i.e., in all events a period of less than one (1)
year) at the times and frequency regularly paid. As a condition to
the salary and benefit continuation under this Section 12(g),
Xxxxxxx must first execute and deliver to Bank, in a form prepared
by Bank substantially identical to Exhibit A, a release of all
claims against Bank, Franklin Bancorp and other appropriate
parties, excluding Bank's performance under this Section 12(g) and
of Xxxxxxx'x vested rights under Bank sponsored retirement plans,
401(k) plans and stock ownership plans. Xxxxxxx'x salary shall be
subject to offset for earnings from subsequent employment during
the remainder of the Term and all benefits provided by Bank shall
cease upon subsequent employment of Xxxxxxx. If the termination
without Cause occurs within the one hundred eighty day (180) period
before a Change in Control under Section 11 so as to constitute a
Qualifying Event under such Section, any salary and benefit
continuation to Xxxxxxx under this Section 12(g) shall immediately
cease and Bank shall receive a credit against the payment pursuant
to Section 11 for the salary and prorated annual cash bonus
payments hereunder.
13. CONFIDENTIALITY. During Xxxxxxx'x employment with Bank and at all
times after the termination of such employment, regardless of the reason for
such termination, Xxxxxxx shall hold all Confidential Information relating to
Bank in strict confidence and in trust for Bank and shall not disclose or
otherwise communicate, provide or reveal in any manner whatsoever any of the
Confidential Information to anyone other than Bank without the prior written
consent of Bank. "Confidential Information" includes, without limitation,
financial information, related trade secrets (including, without limitation,
Bank's business plan, methods and/or practices) and other proprietary business
information of Bank which may include, without limitation, market studies,
customer and client lists, referral lists and other items relative to the
business of Bank. "Confidential Information" shall not include information which
is or becomes in the public domain through no action by Xxxxxxx or information
which is generally disclosed by Bank to third parties without restrictions on
such third parties.
14. SOLICITATION OF CUSTOMERS. During his employment with Bank and for
a period after the termination of Xxxxxxx'x employment, regardless of the reason
for the termination, equal to the greater of (a) six (6) months or (b) the
period for which Xxxxxxx receives payment of his base salary under Section 12(g)
for termination by Bank without Cause (the "Non-Solicitation Period"), Xxxxxxx
shall not, whether directly or indirectly, for his own benefit or for the
benefit of any other person or entity, or as a partner, stockholder, member,
manager, officer, director, proprietor, employee, consultant, representative,
agent of any entity other than Bank, solicit, directly or indirectly, any
customer of Bank, or induce any customer of Bank to terminate any association
with Bank, or otherwise attempt to provide services to any customer of Bank.
Xxxxxxx shall prevent such solicitation to the extent he has authority to
prevent same and otherwise shall not interfere with the relationship between
Bank and its customers.
7
15. SOLICITATION OF EMPLOYEES AND OTHERS. During his employment with
Bank and during the Non-Solicitation Period, Xxxxxxx shall not, whether directly
or indirectly, for his own benefit or for the benefit of any other person or
entity, or as a partner, stockholder, member, manager, officer, director,
proprietor, employee, consultant, representative, agent of any entity other than
Bank, solicit, for purposes of employment or association, any employee or agent
of Bank ("Solicited Person"), or induce any Solicited Person to terminate such
employment or association for purposes of becoming employed or associated
elsewhere, or hire or otherwise engage any Solicited Person as an employee or
agent of an entity with whom Xxxxxxx may be affiliated or permit such, or
otherwise interfere with the relationship between Bank and its employees and
agents. For purposes of this Agreement, an employee or agent of Bank shall mean
an individual employed or retained by Bank during the Term and/or who terminates
such association with Bank within a period of six (6) months after the
termination of Xxxxxxx'x employment with Bank.
16. NON-COMPETITION. During his employment with Bank and during the
period in which Xxxxxxx receives payment of his base salary (less any applicable
offsets) pursuant to Section 12(g) for termination by Bank without Cause,
Xxxxxxx shall not, directly or indirectly, as an officer, director, shareholder,
member, partner, joint venturer, employee, independent contractor, consultant,
or in any other capacity:
(a) Engage, own or have any interest in;
(b) Manage, operate, join, participate in, accept employment with,
render advice to, or become interested in or be connected with;
(c) Furnish consultation or advice to; or
(d) Permit his name to be used in connection with;
any person or entity engaged in the business of providing trust or banking
services within Oakland or Xxxxx Counties, Michigan.
17. REMEDIES. In the event of a material breach or threatened material
breach of Section 13, Section 14, Section 15 or Section 16, Bank, in addition to
its other remedies at law or in equity, shall be entitled to injunctive or other
equitable relief in order to enforce or prevent any violations of the
aforementioned Sections. In the event of any such material breach, if applicable
Bank may immediately cease payment of Xxxxxxx'x base salary and the providing to
Xxxxxxx of benefits under Section 12(g) for a termination by Bank without Cause
and/or of the payment as the result of a Qualifying Event incident to a Change
in Control under Section 11.
18. SEVERABILITY AND SAVINGS. Each provision in this Agreement is
separate. If necessary to effectuate the purpose of a particular provision, the
Agreement shall survive the termination of Xxxxxxx'x employment with Bank. If
any provision of this Agreement, in whole or in part, is held to be invalid or
unenforceable, the parties agree that any such provision shall be deemed
modified to make such provision enforceable to the maximum extent permitted by
applicable law. As to any provision held to be invalid or unenforceable, the
remaining provisions of this Agreement shall remain in effect.
8
19. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of Bank and its successors and assigns. This Agreement
shall be binding upon and inure to the benefit of Xxxxxxx, his heirs and
personal representatives. This Agreement is not assignable by Xxxxxxx.
20. MISCELLANEOUS.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed
to in writing and signed by Bank and Xxxxxxx. The waiver or
nonenforcement by Bank of a breach by Xxxxxxx of any provision of
this Agreement shall not be construed as a waiver of any subsequent
breach by Xxxxxxx. This is the parties' entire Agreement relating
to the subject matter hereof and any and all prior agreements,
representations or promises, oral or otherwise, express or implied,
are superseded by and/or merged into this Agreement.
(b) Any notice under this Agreement must be in writing and delivered
personally or by overnight courier, sent by facsimile transmission
or mailed by registered or certified mail to the parties at their
respective addresses.
(c) This Agreement shall be governed by the laws of the State of
Michigan.
(d) Although this Agreement was drafted by Bank, the parties agree that
it accurately reflects the intent and understanding of each party
and should not be construed against Bank for the sole reason that
it was the drafter if there is any dispute over the meaning or
intent of any provisions.
(e) This Agreement may be executed in counterparts, which together
shall constitute one Agreement.
(f) By their signatures below, the parties acknowledge that they have
had sufficient opportunity to read and consider, and that they have
carefully read and considered, each provision of this Agreement and
that they are voluntarily signing this Agreement.
[SIGNATURE PAGE FOLLOWS]
9
The parties have executed this Agreement as of the Effective Date.
WITNESS:
----------------------------------- -----------------------------------
Xxxxx Xxxxxxx
----------------------------------- FRANKLIN BANK, N.A.
By
---------------------------------
Its
--------------------------------
10