EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 31st day of March 2003,
("Effective Date") by and between Community First Bank (the "Bank") and Xxxxxxx
X. Xxxxx (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
Chairman of the Board, President and Chief Executive Officer and is experienced
in all phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
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Chairman of the Board, President and Chief Executive Officer. The Executive
hereby accepts said employment and agrees to render such administrative and
management services to the Bank and to any to-be-formed parent holding company
("Parent") as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity. The Executive shall promote the
business of the Bank and Parent. The Executive's other duties shall be such as
the Board of Directors for the Bank (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Bank. The Executive's employment shall be for no definite period of time,
and the Executive or the Bank may terminate such employment relationship at any
time for any reason or no reason. The employment at-will relationship remains in
full force and effect regardless of any statements to the contrary made by
company personnel or set forth in any documents other than those explicitly made
to the contrary and signed by the President or the Chairman of the Bank.
2. Term of Agreement. The term of this Agreement shall be for the
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period commencing on the Effective Date and ending March 31, 2006 thereafter
("Term"). Additionally, on, or before, each annual anniversary date from the
Effective Date, the Term of this Agreement shall be extended for up to an
additional period beyond the then effective expiration date upon a determination
and resolution of the Board of Directors that the performance of the Executive
has met the requirements and standards of the Board, and that the Term of such
Agreement shall be extended. References herein to the Term of this Agreement
shall refer both to the initial term and successive terms.
3. Compensation, Benefits and Expenses.
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(a) Base Salary. The Bank shall compensate and pay the Executive
during the Term of this Agreement a minimum base salary at the rate of
$100,000 per annum ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall be entitled
to receive increases at such percentages or in such amounts as determined by the
Board of Directors. The base salary may not be decreased without the Executive's
express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board. The Board has approved a bonus plan which pays the
Executive 7.00% of the Bank's quarterly profits.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
Additionally, Executive's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent with the cost
of such premiums paid by the Bank.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors. The Board has also approved the
payment of $500 a month for a car allowance and a full country club membership.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection
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with the business of the Bank, including, but not by way of limitation,
automobile and traveling expenses, and all reasonable entertainment expenses,
subject to such reasonable documentation and other limitations as may be
established by the Board of Directors of the Bank. If such expenses are paid in
the first instance by the Executive, the Bank shall reimburse the Executive
therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a program applicable to all executive
officers of the Bank and does not result in a proportionately greater adverse
change in the rights of, or benefits to, the Executive as compared with any
other executive officer of the Bank. Nothing paid to Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to Executive pursuant to Section 3(a)
hereof.
4. Loyalty; Noncompetition.
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(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
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perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
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this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
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(b) The Bank may terminate the Executive's employment at any time
with or without Just Cause within its sole discretion. This Agreement shall not
be deemed to give Executive any right to be retained in the employment or
service of the Bank, or to interfere with the right of the Bank to terminate the
employment of the Executive at any time, but any termination by the Bank other
than termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Bank may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Bank without
Just Cause, the Bank shall be obligated to continue to pay the Executive the
salary provided pursuant to Section 3(a) herein, up to the date of termination
of the remaining Term of this Agreement, but in no event for a period of less
than twelve months, and the cost of Executive obtaining all health, life,
disability, and other benefits which the Executive would be eligible to
participate in through such date based upon the benefit levels substantially
equal to those being provided Executive at the date of termination of
employment. The provisions of this Section 6(c) shall survive the expiration of
this Agreement.
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions.
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(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (i) pay the Executive all or
part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank
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under this Agreement shall terminate, as of the effective date of the order, but
the vested rights of the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Executive pursuant to the Agreement, or otherwise, shall be subject to
and conditioned upon compliance with 12 U.S.C. ss.1828(k) and any regulations
promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
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to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 100% of such compensation and benefits for a period of 12 months,
but not exceeding the remaining term of the Agreement, and 65% thereafter for
the remainder of the term of the Agreement. Such benefits noted herein shall be
reduced by any benefits otherwise provided to the Executive during such period
under the provisions of disability insurance coverage in effect for Bank
employees. Thereafter, Executive shall be eligible to receive benefits provided
by the Bank under the provisions of disability insurance coverage in effect for
Bank employees. Upon returning to active full-time employment, the Executive's
full compensation as set forth in this Agreement shall be reinstated as of the
date of commencement of such activities. In the event that the Executive returns
to active employment on other than a full-time basis, then his compensation (as
set forth in Section 3(a) of this Agreement) shall be reduced in proportion to
the time spent in said employment, or as shall otherwise be agreed to by the
parties.
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9. Change in Control.
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(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.999 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum as of the date of such termination of service or in periodic
payments over the next 36 months or the remaining term of this Agreement,
whichever is less, as if Executive's employment had not been terminated, and
such payments shall be in lieu of any other future payments which the Executive
would be otherwise entitled to receive under Section 6 of this Agreement.
Additionally, the Executive and his or her dependents shall remain eligible to
participate in the medical and dental insurance programs offered by the Bank to
its employees through the remaining term of the Agreement. Notwithstanding the
foregoing, all sums payable hereunder shall be reduced in such manner and to
such extent so that no such payments made hereunder when aggregated with all
other payments to be made to the Executive by the Bank or the Parent shall be
deemed an "excess parachute payment" in accordance with Section 280G of the Code
and be subject to the excise tax provided at Section 4999(a) of the Code. The
term "Change in Control" shall refer to (i) the control of voting proxies
whether related to stockholders or mutual members by any person, other than the
Board of Directors of the Bank, to direct more than 25% of the outstanding votes
of the Bank, the control of the election of a majority of the Bank's directors,
or the exercise of a controlling influence over the management or policies of
the Bank by any person or by persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder ("the "Exchange Act"), (ii) an event
whereby the OTS, FDIC or any other department, agency or quasi-agency of the
federal government cause or bring about, without the consent of the Bank, a
change in the corporate structure or organization of the Bank; (iii) an event
whereby the OTS, FDIC or any other agency or quasi-agency of the federal
government cause or bring about, without the consent of the Bank, a taxation or
involuntary distribution of retained earnings or proceeds from the sale of
securities to depositors, borrowers, any government agency or organization or
civic or charitable organization; or (iv) a merger or other business combination
between the Bank and another corporate entity whereby the Bank is not the
surviving entity. In the event that the Bank shall convert in the future from
mutual-to-stock form, the term "Change in Control" shall also refer to: (i) the
sale of all, or a material portion, of the assets of the Bank or the Parent;
(ii) the merger or recapitalization of the Bank or the Parent whereby the Bank
or the Parent is not the surviving entity; (iii) a change in control of the Bank
or the Parent, as otherwise defined or determined by the Office of Thrift
Supervision or regulations promulgated by it; or (iv) the acquisition, directly
or indirectly, of the beneficial ownership (within the meaning of that term as
it is used in Section 13(d) of the Exchange Act) of twenty-five percent (25%) or
more of the outstanding voting securities of the Bank or the Parent by any
person, trust, entity or group. The term "person" means an individual other than
the Executive, or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization
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or any other form of entity not specifically listed herein. The provisions of
this Section 9(a) shall survive the expiration of this Agreement occurring after
a Change in Control.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Executive may voluntarily terminate his employment during the term
of this Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Control, and upon the occurrence, or
within 120 days thereafter, of any of the following events, which have not been
consented to in advance by the Executive in writing if: (i) the Executive would
be required to move his personal residence or perform his principal executive
functions more than thirty-five (35) miles from the Executive's primary office
as of the signing of this Agreement; (ii) in the organizational structure of the
Bank, the Executive would be required to report to a person or persons other
than the Board of Directors of the Bank; or (iii) the Bank should fail to
maintain Executive's base compensation in effect as of the date of the Change in
Control and the existing employee benefits plans, including material fringe
benefit, stock option and retirement plans; (iv) the Executive would be assigned
duties and responsibilities other than those normally associated with his
position as referenced at Section 1, herein; (v) if Executive's responsibilities
or authority have in any way been materially diminished or reduced; or (vi) the
Executive would not be reelected to the Board of Directors of the Bank, if the
Executive is then a member of such Board of Directors of the Bank. Upon such
voluntary termination of employment by the Executive in accordance with this
subsection, Executive shall thereupon be entitled to receive the payments
described in Section 9(a) of this Agreement. The provisions of this Section 9(b)
shall survive the expiration of this Agreement occurring after a Change in
Control.
10. Withholding. All payments required to be made by the Bank hereunder
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to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
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(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
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waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any
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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
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Kentucky.
14. Nature of Obligations. Nothing contained herein shall create or
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require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
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reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
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this Agreement, or the breach thereof, shall be settled exclusively by
arbitration in accordance with the rules then in effect of the district office
of the American Arbitration Association ("AAA") nearest to the home office of
the Bank, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof, except to the extent that the parties may otherwise
reach a mutual settlement of such issue. The provisions of this Section 17 shall
survive the expiration of this Agreement.
18. Confidential Information. The Executive acknowledges that during his
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or her employment he or she will learn and have access to confidential
information regarding the Bank and the Parent and its customers and businesses
("Confidential Information"). The Executive agrees and covenants not to disclose
or use for his or her own benefit, or the benefit of any other person or entity,
any such Confidential Information, unless or until the Bank or the Parent
consents to such disclosure or use or such information becomes common knowledge
in the industry or is otherwise legally in the public domain. The Executive
shall not knowingly disclose or reveal to any unauthorized person any
Confidential Information relating to the Bank, the Parent, or any subsidiaries
or affiliates, or to any of the businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of the Bank
and the Parent. The Executive shall not otherwise knowingly act or conduct
himself (a) to the material detriment of the Bank or the Parent, or its
subsidiaries, or affiliates, or (b) in a manner which is inimical or contrary to
the interests of the Bank or the Parent. Executive acknowledges and agrees that
the existence of this Agreement and its terms and conditions constitutes
Confidential Information of the Bank, and the Executive agrees not to disclose
the Agreement or its contents without the prior written consent of the Bank.
Notwithstanding the foregoing, the Bank reserves the right in its sole
discretion to
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make disclosure of this Agreement as it deems necessary or appropriate in
compliance with its regulatory reporting requirements. Notwithstanding anything
herein to the contrary, failure by the Executive to comply with the provisions
of this Section may result in the immediate termination of the Agreement within
the sole discretion of the Bank, disciplinary action against the Executive taken
by the Bank, including but not limited to the termination of employment of the
Executive for breach of the Agreement and the provisions of this Section, and
other remedies that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
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modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first hereinabove written.
Community First Bank
ATTEST: By: /s/Xxxxxxx X. Xxxxxxx
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/s/Xxxxx X. Xxxxx
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Secretary
WITNESS:
/s/Xxxxx X. Xxxxx /s/Xxxxxxx X. Xxxxx
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Executive
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