Exhibit 10(4)
EMPLOYMENT AGREEMENT
This Agreement, made and dated as of December ___, 2001, by and between The
Michigan City Savings and Loan Association, an Indiana stock savings association
("Employer"), and Xxxxxx X. Xxxxxxx, a resident of XxXxxxx County, Indiana
("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by Employer as its President and has made
valuable contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum compensation
from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee on
behalf of Employer on an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt by any person to obtain
control of Employer or City Savings Financial Corporation (the "Holding
Company"), the Indiana corporation which owns all of the issued and outstanding
capital stock of Employer;
WHEREAS, Employer recognizes that when faced with a proposal for a change
of control of Employer or the Holding Company, Employee will have a significant
role in helping the Boards of Directors assess the options and advising the
Boards of Directors on what is in the best interests of Employer, the Holding
Company, and its shareholders, and it is necessary for Employee to be able to
provide this advice and counsel without being influenced by the uncertainties of
his own situation;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW THEREFORE, in consideration of these premises, the mutual covenants and
undertakings herein contained and the continued employment of Employee by
Employer as its President, Employer and Employee, each intending to be legally
bound, covenant and agree as follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's President, and Employee
accepts such employment.
2. Employee agrees to serve as Employer's President and to perform such
duties in that office as may reasonably be assigned to him by Employer's Board
of Directors; provided, however, that such duties shall be primarily performed
in or from the principal offices of Employer currently located at Michigan City,
Indiana, or such substitute or replacement location for the Employer's principal
offices, wherever located; and provided further that such duties shall be of the
same general nature and character as those previously performed by Employee and
generally associated with the office of President of a stock savings association
of a size similar to that of Employer. Employee shall not be required to be
absent from the location of the principal executive offices of Employer on
travel status or otherwise more than 45 days in any calendar year. Employer
shall not, without the written consent of Employee, relocate or transfer
Employee to a location more than 30 miles from Employer's current offices.
Employee shall render services to Employer as President in substantially the
same manner and to substantially the same extent as Employee rendered his
services to Employer before the date hereof. While employed with Employer,
Employee shall devote substantially all his business time and efforts to
Employer's business during regular business hours and shall not engage in any
other related business. Employer shall nominate the Employee to successive terms
as a member of Employer's Board of Directors and shall use its best efforts to
elect and re-elect Employee as a member of such Board. However, securing
Employee a membership on Employer's Board of Directors shall not be an
obligation of Employer under this Agreement.
3. The term of this Agreement shall begin on the date of completion of the
conversion of Employer from mutual to stock form (the "Effective Date") and
shall end on the date which is three years following such date, subject to
earlier termination as provided herein (the "Term"); provided that (1) prior to
such anniversary, the Board of Directors of Employer explicitly reviews and
approves the extension and (2) Employer has not given to Employee in writing and
Employee has not given to Employer in writing any notice of termination or any
notice of non-extension, then the Term of this Agreement may be extended as
follows:
a) on the first anniversary date of the Effective Date (provided the
prerequisites described above are met), the Term of this Agreement
shall be extended for a period of one year (in addition to the
then-remaining term); and,
b) on the second anniversary date of the Effective Date (provided the
prerequisites described above are met), the Term of this Agreement
shall be extended for a period of one additional year (in addition to
the then-remaining term as extended by subparagraph a) above); and,
c) on the fifth anniversary date of the Effective Date (provided the
prerequisites described above are met), the Term of this Agreement
shall be extended for one year.
-2-
4. Employee shall receive an annual salary of ______________________ ("Base
Compensation") payable at regular intervals in accordance with Employer's normal
payroll practices now or hereafter in effect. Employer may consider and declare
from time to time increases in the salary it pays Employee and thereby increases
in his Base Compensation. Prior to a Change of Control, Employer may also
declare decreases in the salary it pays Employee if the operating results of
Employer are less favorable than those for the fiscal year ending June 30, 2001,
and Employer makes similar decreases in the salary it pays to other executive
officers of Employer. After a Change in Control, Employer shall consider and
declare salary increases based upon the following standards:
Inflation;
Adjustments to the salaries of other senior management personnel; and
Past performance of Employee and the contribution which Employee makes
to the business and profits of Employer during the Term.
Any and all increases or decreases in Employee's salary pursuant to this
section shall cause the level of Base Compensation to be increased or decreased
by the amount of each such increase or decrease for purposes of this Agreement.
The increased or decreased level of Base Compensation as provided in this
section shall become the level of Base Compensation for the remainder of the
Term of this Agreement until there is a further increase or decrease in Base
Compensation as provided herein.
5. So long as Employee is employed by Employer pursuant to this Agreement,
he shall be included as a participant in all present and future employee
benefit, retirement, and compensation plans generally available to executive
employees of Employer, consistent with his Base Compensation and his position as
President of Employer, including, without limitation, Employer's or the Holding
Company's 401(k) plan, Stock Option Plan, Recognition and Retention Plan and
Trust, Employee Stock Ownership Plan, hospitalization, and group life insurance
plans, each of which Employer agrees to continue in effect on terms no less
favorable than those currently in effect as of the date hereof (as permitted by
law) during the Term of this Agreement unless prior to a Change of Control the
operating results of Employer are less favorable than those for the fiscal year
ending June 30, 2001. Notwithstanding anything contained herein to the contrary,
if the Employer's Board of Directors determines that (either before or after a
Change of Control) the accounting, legal, or tax treatment of such plans would
adversely affect Employer' s operating results or financial condition in a
material way, and the Board of Directors of Employer or the Holding Company
concludes that modifications to such plans need to be made to avoid such adverse
effects, then the Board of Directors may amend, alter or revoke such plans,
including Employee's plans, proportionately.
6. So long as Employee is employed by Employer pursuant to this Agreement,
Employee shall receive reimbursement from Employer for all reasonable business
expenses incurred in the course of his employment by Employer, upon submission
to Employer of written vouchers, statements, bills, receipts or other
documentation as required by Employer's policy regarding reimbursement by
executive employees or, in the absence of such policy, as reasonably requested
-3-
by the Employer's Board of Directors. Employee shall attend, upon the prior
approval of Employer's Board of Directors, those professional meetings,
conventions, and/or similar functions that he deems appropriate and useful for
purposes of keeping abreast of current developments in the industry and/or
promoting the interests of Employer. So long as Employee is employed by Employer
pursuant to the terms of this Agreement, Employer shall continue in effect
vacation policies applicable to Employee no less favorable from his point of
view than those written vacation policies in effect on the date hereof. So long
as Employee is employed by Employer pursuant to this Agreement, Employee shall
be entitled to office space and working conditions no less favorable than were
in effect for him on the date hereof.
7. Subject to the respective continuing obligations of the parties,
including, but not limited to, those set forth in subsections 9(A), 9(B), 9(C)
and 9(D) hereof, Employee's employment by Employer may be terminated prior to
the expiration of the Term of this Agreement as follows:
(A) Employer, by action of its Board of Directors and upon written notice
to Employee, may terminate Employee's employment with Employer
immediately for cause. For purposes of this subsection 7(A), "cause"
shall be defined as (i) personal dishonesty, (ii) incompetence, (iii)
material misconduct, (iv) breach of fiduciary duty involving personal
profit, (v) failure to perform duties required by his employment or
failure to perform duties of his position, (vi) willful violation of
any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, (vii) violation of any
rule, prescription or requirement set out in Employer's Personnel
Policy, if said Personnel Policy provides for termination of
employment, or (viii) any material breach of any provision of this
Agreement. The date of termination specified in such notice shall be
no later than the last day of the month in which such notice is
provided to Employee.
(B) Employer, by action of its Board of Directors, may terminate
Employee's employment with Employer without cause at any time;
provided, however, that the "date of termination" for purposes of
determining benefits payable to Employee under subsection 8(B) hereof
shall be the date which is 60 days after Employee receives written
notice of such termination.
(C) Employee, by written notice to Employer, may terminate his employment
with Employer immediately for cause. For purposes of this subsection
7(C), "cause" shall be defined as (i) any action by Employer's Board
of Directors to remove the Employee as President of Employer, except
where the Employer's Board of Directors properly acts to remove
Employee from such office for "cause" as defined in subsection 7(A)
hereof, (ii) any action by Employer's Board of Directors to materially
limit, increase, or modify Employee's duties and/or authority as
President of Employer, (iii) any failure of Employer to obtain the
assumption of the obligation to perform this Agreement by any
successor or the reaffirmation of such obligation by Employer, as
contemplated in section 19 hereof; or (iv) any material breach by
-4-
Employer of a term, condition or covenant of this Agreement. The
written notice shall specify a date of termination no later than the
last day of the month in which such notice is provided to Employer.
(D) Employee, upon sixty (60) days written notice to Employer, may
terminate his employment with Employer without cause. The notice shall
specify a date of termination no later than 60 days after the date
said notice is provided to Employer.
(E) Employee's employment with Employer shall terminate in the event of
Employee's death or disability. For purposes hereof, "disability"
shall be defined as Employee's inability by reason of illness or other
physical or mental incapacity to perform the duties required by his
employment for any consecutive One Hundred Twenty (120) day period. At
the end of said one hundred twenty day period, Employer may provide
Employee with written notice of termination and said notice may
specify any date of termination on or after said 120 day period as
Employer shall determine, provided that notice of any termination by
Employer because of Employee's "disability" shall have been given to
Employee prior to the full resumption by him of the performance of
such duties.
8. In the event of termination of Employee's employment with Employer
pursuant to section 7 hereof, compensation shall continue to be paid by Employer
to Employee as follows:
(A) In the event of termination pursuant to subsection 7(A) or 7(D),
compensation provided for herein (including Base Compensation) shall
continue to be paid, and Employee shall continue to participate in the
employee benefit, retirement, and compensation plans and other
perquisites as provided in sections 5 and 6 hereof, through the date
of termination specified in the notice of termination. Any benefits
payable under insurance, health, retirement and bonus plans as a
result of Employee's participation in such plans through such date
shall be paid when due under those plans. The date of termination
specified in any notice of termination pursuant to subsection 7(A)
shall be no later than the last business day of the month in which
such notice is provided to Employee. The date of termination specified
in any notice of termination pursuant to subsection 7(D) shall be no
later that 60 days after the date of said notice.
(B) In the event of termination pursuant to subsection 7(B) or 7(C),
compensation provided for herein (including Base Compensation) shall
continue to be paid, and Employee shall continue to participate in the
employee benefit, retirement, and compensation plans and other
perquisites as provided in sections 5 and 6 hereof, through the date
of termination specified in the notice of termination. Any benefits
payable under insurance, health, retirement and bonus plans as a
result of Employee's participation in such plans through such date
shall be paid when due under those plans. In addition, Employee shall
be entitled to continue to receive from Employer
-5-
his Base Compensation at the rates in effect at the time of
termination: (1) for three additional 12-month periods if the
termination occurs within 24 months after a Change of Control; or, (2)
for a maximum of one (1) year after the date of termination, or the
remaining Term of the Agreement if this is less than one (1) year, if
the termination does not follow a Change of Control. In addition,
during such periods, Employer will maintain in full force and effect
for the continued benefit of Employee each employee welfare benefit
plan and each employee pension benefit plan (as such terms are defined
in the Employee Retirement Income Security Act of 1974, as amended) in
which Employee was entitled to participate immediately prior to the
date of his termination, unless an essentially equivalent and no less
favorable benefit is provided by a subsequent employer of Employee. If
the terms of any employee welfare benefit plan or employee pension
benefit plan of Employer do not permit continued participation by
Employee, Employer will arrange to provide to Employee a benefit
substantially similar to, and no less favorable than, the benefit he
was entitled to receive under such plan at the end of the period of
coverage. For purposes of this Agreement, a "Change of Control" shall
mean an acquisition of "control" of the Holding Company or of Employer
within the meaning of 12 C.F.R. ss. 574.4(a) (other than a change of
control resulting from a trustee or other fiduciary holding shares of
Common Stock under an employee benefit plan of the Holding Company or
any of its subsidiaries). Notwithstanding anything to the contrary in
the foregoing, any benefits payable under this subsection 8(B) shall
be subject to the limitations on severance benefits set forth in
Regulatory Bulletin 27a of the Office of Thrift Supervision, as in
effect on the Effective Date.
(C) In the event of termination pursuant to subsection 7(E), compensation
provided for herein (including Base Compensation) shall continue to be
paid, and Employee shall continue to participate in the employee
benefit, retirement, and compensation plans and other perquisites as
provided in sections 5 and 6 hereof, (i) in the event of Employee's
death, through the date of death, or (ii) in the event of Employee's
disability, through the termination date as set forth in the notice of
disability as required by subsection 7(E). Any benefits payable under
insurance, health, retirement and bonus plans as a result of
Employer's participation in such plans through such date shall be paid
when due under those plans.
(D) Under circumstances wherein there is both a Change of Control and
Employee's employment is terminated under either subsection 7(B) or
7(C), Employee or his personal representative(s) or heirs, during a
period of three months following Employee's termination of employment
by Employer, may require Employer, upon written request within said
three months, to purchase all outstanding stock options previously
granted to Employee under any Holding Company stock option plan then
in effect whether or not such options are then exercisable at a cash
purchase price equal to the amount by which the aggregate "fair market
value" of the shares subject to such options exceeds the aggregate
option price for such shares. Under all other
-6-
circumstances, Employer shall not be required to purchase Employee's
outstanding stock options. For purposes of this Agreement, the term
"fair market value" shall mean the higher of (1) the average of the
highest asked prices for Holding Company shares in the
over-the-counter market as reported on the NASDAQ system if the shares
are traded on such system for the 30 business days preceding such
termination, or (2) the average per share price actually paid for the
most highly priced 1% of the Holding Company shares acquired in
connection with the Change of Control of the Holding Company by any
person or group acquiring such control.
9. In order to induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) While Employee is employed by Employer and for a period of three years
after termination of such employment for any reason, Employee shall
not divulge or furnish any trade secrets (as defined in IND. CODEss.
24-2-3-2) of Employer or any confidential information acquired by him
while employed by Employer concerning the policies, plans, procedures
or customers of Employer to any person, firm or corporation, other
than Employer or upon its written request, or use any such trade
secret or confidential information directly or indirectly for
Employee's own benefit or for the benefit of any person, firm or
corporation other than Employer, since such trade secrets and
confidential information are confidential and shall at all times
remain the property of Employer.
(B) For a period of two years after termination of Employee's employment
by Employer for reasons other than those set forth in subsections 7(B)
or (C) of this Agreement, Employee shall not directly or indirectly
provide banking or bank-related services to or solicit the banking or
bank-related business of any customer of Employer at the time of such
provision of services or solicitation which Employee served either
alone or with others while employed by Employer in any city, town,
borough, township, village or other place, in which Employee performed
services for Employer while employed by it, or assist any actual or
potential competitor of Employer to provide banking or bank-related
services to or solicit any such customer's banking or bank-related
business in any such place. If Employee's employment by Employer is
terminated for reasons set forth in subsections 7(B) or (C) or during
the Term of this Agreement as a result of a Change of Control,
Employee shall have no obligations to Employer with respect to this
Section 9(B)
(C) While Employee is employed by Employer and for a period of one year
after termination of Employee's employment by Employer for reasons
other than those set forth in subsections 7(B) or (C) of this
Agreement, Employee shall not, directly or indirectly, as principal,
agent, or trustee, or through the agency of any corporation,
partnership, trade association, agent or agency, engage in any banking
or bank- related business which competes with the business of Employer
as conducted during
-7-
Employee's employment by Employer within a radius of twenty-five (25)
miles of Employer's main office. If Employee's employment by Employer
is terminated during the Term of this Agreement for reasons set forth
in subsections 7(B) or (C) of this Agreement or if Employee's
employment by Employer is terminated during the Term of this Agreement
as a result of a Change of Control, Employee shall have no obligations
to Employer with respect to noncompetition under this section 9(C).
(D) If Employee's employment by Employer is terminated for any reason set
forth or not set forth in this Agreement, Employee will turn over
immediately thereafter to Employer all business correspondence,
letters, papers, reports, customers' lists, financial statements,
credit reports or other confidential information or documents of
Employer or its affiliates in the possession or control of Employee,
all of which writings are and will continue to be the sole and
exclusive property of Employer or its affiliates.
10. Any termination of Employee's employment with Employer as contemplated
by section 7 hereof, except in the circumstances of Employee's death, shall be
communicated by written "Notice of Termination" by the terminating party to the
other party hereto. Any "Notice of Termination" pursuant to subsections 7(A),
7(C) or 7(E) shall indicate the specific provisions of this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination.
11. If Employee is suspended and/or temporarily prohibited from
participating in the conduct of Employer's affairs by a notice served under
section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12.U.S.C. ss.
1818(e)(3) or (g)(1)), Employer's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, Employer shall (i) pay Employee all
or part of the compensation withheld while its obligations under this Agreement
were suspended and (ii) reinstate (in whole or in part) any of its obligations
which were suspended.
12. If Employee is removed and/or permanently prohibited from participating
in the conduct of Employer's affairs by an order issued under section 8(e)(4) or
(g)(l) of the Federal Deposit Insurance Act (12 U.S.C. ss. 1818 (e)(4) or
(g)(1)), all obligations of Employer under this Agreement shall terminate as of
the effective date of the order, but vested rights of the parties to the
Agreement shall not be affected.
13. If Employer is in default (as defined in section 3(x)(1) of the Federal
Deposit Insurance Act), all obligations under this Agreement shall terminate as
of the date of default, but this provision shall not affect any vested rights of
Employer or Employee.
14. All obligations under this Agreement shall be terminated except to the
extent determined that the continuation of the Agreement is necessary for the
continued operation of Employer: (i) by the Director of the Office of Thrift
Supervision or his or her designee (the
-8-
"Director"), at the time the Federal Deposit Insurance Corporation enters into
an agreement to provide assistance to or on behalf of Employer under the
authority contained in Section 13(c) of the Federal Deposit Insurance Act; or
(ii) by the Director at the time the Director approves a supervisory merger to
resolve problems related to operation of Employer or when Employer is determined
by the Director to be in an unsafe and unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
15. Anything in this Agreement to the contrary notwithstanding, in the
event that the Employer's independent public accountants determine that any
payment by the Employer to or for the benefit of the Employee, whether paid or
payable pursuant to the terms of this Agreement, would be non-deductible by the
Employer for federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount payable to or for
the benefit of the Employee pursuant to this Agreement shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this section 15, the "Reduced
Amount" shall be the amount which maximizes the amount payable without causing
the payment to be non-deductible by the Employer because of Section 280G of the
Code. Any payments made to Employee pursuant to this Agreement or otherwise, are
subject to and conditional upon their compliance with 12 U.S.C. ss. 1828(k) and
any regulations promulgated thereunder, to the extent applicable to such
parties.
16. Should Employee die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Employee's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
17. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee: Xxxxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxx, Xxxx X-0
Xxxxxxxx Xxxx, XX 00000
If to Employer: Michigan City Savings and Loan Association
Attn: Chairman, Board of Directors
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
-9-
18. The validity, interpretation, and performance of this Agreement shall
be governed by the laws of the State of Indiana, except as otherwise required by
mandatory operation of federal law.
19. Employer shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of Employer, by agreement in form and substance satisfactory
to Employee, to expressly assume and agree to perform this Agreement in the same
manner and same extent that Employer would be required to perform it if no such
succession had taken place. Failure of Employer to obtain such agreement prior
to the effectiveness of any such succession shall be a material breach of this
Agreement and shall entitle Employee to terminate his employment with Employer
pursuant to subsection 7(C) hereof. As used in this Agreement, "Employer" shall
mean Employer as hereinbefore defined and any successor to its business or
assets as aforesaid.
20. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Employee and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
21. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity of enforceability of any other provisions of this
Agreement which shall remain in full force and effect.
22. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
23. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in section 16 and section 19 above.
Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in section 16 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
-10-
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
and delivered as of the day and year first above set forth.
MICHIGAN CITY SAVINGS AND LOAN
ASSOCIATION
By:
-------------------------------------
Chairman, Board of Directors
"Employer"
-------------------------------------
Xxxxxx X. Xxxxxxx
"Employee"
-11-
The undersigned, City Savings Financial Corporation, sole shareholder of
Employer, agrees that if it shall be determined for any reason that any
obligations on the part of Employer to continue to make any payments due under
this Agreement to Employee is unenforceable for any reason, City Savings
Financial Corporation agrees to honor the terms of this Agreement and continue
to make any such payments due hereunder to Employee pursuant to this terms of
this Agreement.
CITY SAVINGS FINANCIAL CORPORATION
By:
--------------------------------------
Chairman, Board of Directors
-12-
