EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into this
12th day of August, 1999, by and between Xxxxxx Xxxx Corp., an Ohio
corporation (the "Employer"), and Xxxxxx X. Xxxxxxxx, an individual (the
"Employee");
WITNESSETH:
WHEREAS, the Employee is currently employed as the President and Chief
Executive Officer of the Employer, of Xxxxxx, Xxxx & Co., Inc., and of Xxxxxx
Xxxx Asset Management Co., (the latter two companies being wholly-owned
subsidiaries of the Employer);
WHEREAS, the Employer and United Community Financial Corp., an
Ohio corporation ("UCFC"), have entered into an Agreement and Plan of
Merger dated April 15, 1999 (the "Merger Agreement"), pursuant to which
UCFC will acquire all of the stock of the Employer;
WHEREAS, the Employer and UCFC desire to be ensured of Employee's
continued active participation in the business of Employer and its
subsidiaries; and
WHEREAS, in order to induce Employee to remain in the employ of
Employer and in consideration of Employee agreeing to remain in the
employ of Employer, the parties desire to specify the terms of such
employment;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Employer and the Employee hereby agree
as follows:
1. EMPLOYMENT AND TERM.
(a) TERM. Upon the terms and subject to the conditions
of this Agreement, the Employer hereby employs the Employee and the
Employee hereby accepts employment, as the President and Chief Executive
Officer of the Employer, of Xxxxxx, Xxxx & Co., Inc., and of Xxxxxx Xxxx
Asset Management Co. The term of this Agreement shall commence on August
12, 1999, and shall end on August 11, 2002, unless extended by the
Employer, with the consent of the Employee, as provided in subsection
(b) of this Section 1 (together with such extensions, the "Term").
(b) EXTENSION. On or before each anniversary of the
date of this Agreement, the board of directors of the Employer (the
"Board") shall review this Agreement and, upon approval by the Board,
shall extend the Term of this Agreement for a one-year period beyond the
then effective expiration date. Any such extension shall be subject to
the written consent of the Employee. The Board shall document its
reasons for extending the Term of this Agreement in the minutes of the
meeting at which such action is taken.
2. DUTIES OF THE EMPLOYEE.
(a) GENERAL DUTIES AND RESPONSIBILITIES. The Employee
shall serve as the President
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and Chief Executive Officer of the Employer, of Xxxxxx, Xxxx & Co.,
Inc., and of Xxxxxx Xxxx Asset Management Co. Subject to the direction
of the Board, the Employee shall perform all duties and shall have all
powers which are commonly incident to the offices of President and Chief
Executive Officer or which, consistent therewith, are delegated to him
by the Board. Such duties may include, but shall not be limited to,
developing policies and strategic growth and business plans and
objectives, directing and coordinating corporate programs, supervising
and evaluating senior management members.
(b) DEVOTION OF ENTIRE TIME TO THE BUSINESS OF THE
EMPLOYER. The Employee shall devote his entire productive time, ability
and attention during normal business hours throughout the Term to the
faithful performance of his duties under this Agreement. The Employee
shall not directly or indirectly render any services of a business,
commercial or professional nature to any person or organization other
than the Employer, UCFC, or any subsidiary of the Employer or UCFC
without the prior written consent of the Board; provided, however, that
the Employee shall not be precluded from (i) vacations and other leave
time in accordance with Section 3(f) below, (ii) reasonable
participation in community, civic, charitable or similar organizations,
(iii) reasonable participation in industry-related activities,
including, but not limited to, attending state and national trade
association or Young Presidents' Organization meetings and serving as an
officer, director or trustee of a state or national trade association or
the Young Presidents' Organization, (iv) serving as an officer or
director of the Employer, UCFC or any subsidiary of the Employer or UCFC
and receiving a salary, director's fees or other compensation or
benefits, as appropriate, or (v) pursuing personal investments which do
not interfere or conflict with the performance of the Employee's duties
to the Employer and UCFC.
(c) REPORTING OBLIGATIONS. The Employee shall report
directly to the Board.
3. COMPENSATION.
(a) ANNUAL SALARY. The Employee shall receive an annual
salary of not less then $200,000, payable in equal installments not less
often than monthly.
(b) ANNUAL REVIEW. On or before August 12th of each
year, commencing in 2000, the salary of the Employee shall be reviewed
by the Board and shall be set at an amount not less than $200,000, based
upon the Employee's individual performance and such other factors as the
Board may deem appropriate (the "Annual Review"). The results of the
Annual Review shall be reflected in the minutes of the Board.
(c) BONUS PAYMENT. During the Term, the Employee shall
be entitled to receive a bonus, payable not less often than annually,
equal to the sum of the following components: (1) 2% of the first
$500,000 of the Employer's operating profit; (2) 6% of the next $250,000
of the Employer's operating profit; (3) 8% of the next $250,000 of the
Employer's operating profit; (4) 10% of the next $250,000 of the
Employer's operating profit; (5) 12% of the next $250,000 of the
Employer's operating profit; (6) 8% of the next $500,000 of the
Employer's operating profit; and (7) 10% of any amount of the Employer's
operating profit over $2.0 million.
For purposes of this provision, the term "operating
profit" shall mean the sum of the profits or losses of each of the
Employer's subsidiaries, less the amount of bonuses paid to members of
the Municipal Department of Xxxxxx, Xxxx & Co., Inc., the Capital
Markets Group of Xxxxxx, Wick & Co., Inc. and the administrative and
operations department of the Employer.
(d) COMMISSIONS. The Employee shall be entitled to any
and all commissions and
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fees earned on client accounts in accordance with the formally established
commission and fee programs of the Employer or its applicable subsidiary.
(e) EMPLOYEE BENEFIT PROGRAMS. During the Term, the
Employee shall be entitled to participate in all formally established
employee benefit, bonus, pension, insurance and profit sharing plans and
similar programs that are maintained by the Employer from time to time
and all employee benefit plans or programs hereafter adopted in writing
by the Board for which senior management personnel of the Employer are
eligible (collectively, "Benefit Plans"), in accordance with the terms
and conditions of such Benefit Plans. Notwithstanding any statement to
the contrary contained elsewhere in this Agreement, the Employer may at
any time discontinue or terminate any Benefit Plan now existing or
hereafter adopted, to the extent permitted by the terms of such Benefit
Plan, and shall not be required to compensate the Employee for such
discontinuance or termination to the extent such discontinuance or
termination pertains to all employees of the Employer who are eligible
participants at the time.
(f) VACATION AND SICK LEAVE. The Employee shall be
entitled, without loss of pay, to be absent voluntarily from the
performance of his duties under this Agreement, in accordance with the
policies periodically established by the Board for senior management
officials of the Employer. The Employee shall be entitled to annual sick
leave as established by the Board for senior management officials of the
Employer.
(g) EXPENSES. The Employer shall pay or reimburse the
Employee in the amount of $666.67 per month for all reasonable
entertainment expenses incurred by the Employee, and shall pay all of
Employee's reasonable travel and miscellaneous expenses incurred in
connection with the performance of his duties under this Agreement.
4. TERMINATION OF EMPLOYMENT.
(a) GENERAL. The employment of the Employee shall
terminate at any time during the Term (i) at the option of the Employer,
upon the delivery by the Employer of written notice of termination to
the Employee, or (ii) at the option of the Employee, upon delivery by
the Employee of written notice of termination to the Employer if the
present capacity or circumstances in which the Employee is employed are
materially adversely changed (including, but not limited to, a material
reduction in responsibilities or authority or the assignment of duties
or responsibilities substantially inconsistent with those normally
associated with the Employee's position described in Section 2(a) of
this Agreement, change of title or removal as a director of UCFC, the
Employer or any subsidiary of the Employer, the requirement that the
Employee regularly perform his principal executive functions more than
thirty-five (35) miles from his primary office as of the date of this
Agreement or the Employee's benefits provided under this Agreement are
reduced, unless the benefit reductions are part of a company-wide
reduction). The following subsections (A), (B) and (C) of this Section
4(a) shall govern the obligations of the Employer to the Employee upon
the occurrence of the events described in such subparagraphs:
(A) TERMINATION FOR CAUSE. In the event that the
Employer terminates the employment of the Employee during the Term
because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure or refusal to perform the duties and
responsibilities assigned in this Agreement, willful violation of any
law, rule or regulation (other than traffic violations or other minor
offenses), or final cease-and-desist order or material breach of any
provision of this Agreement ("Cause"), the Employee shall not receive,
and shall have no right to receive, any compensation or other benefits
for any period after such
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termination.
(B) TERMINATION IN CONNECTION WITH CHANGE OF CONTROL.
In the event that the employment of the Employee is terminated by the
Employer in connection with a Change of Control (hereinafter defined)
for any reason other than Cause or is terminated by the Employee as
provided in Section 4(a)(ii) above, then the following shall occur:
(I) The Employer shall promptly pay to the
Employee or to his beneficiaries, dependents or estate an amount equal
to the product of 2.99 multiplied by the Employee's "base amount" as
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder ("Section 280G");
(II) The Employee shall continue to be covered at
the Employer's expense under all health, life and disability plans of
the Employer, as described in Section 3(c) of this Agreement, in which
the Employee was a participant prior to the effective date of the
termination of his employment as if the Employee were still employed
under this Agreement until the earlier of the expiration of the Term or
the date on which the Employee is included in another employer's benefit
plans as a full-time employee; and
(III) The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall any amounts received
from other employment or otherwise by the Employee offset in any manner
the obligations of the Employer hereunder, except as specifically stated
in subparagraph (II) above.
(C) TERMINATION NOT IN CONNECTION WITH CHANGE OF CONTROL. In the
event that the employment of the Employee is terminated by the Employer
before the expiration of the Term for any reason other than death,
disability, termination for Cause or termination in connection with a
Change of Control, then the following shall occur:
(I) The Employee shall continue to participate in
the retention plan established pursuant to Section 6.10 of the Merger
Agreement;
(II) The Employer shall be obligated to continue to
pay on at least a monthly basis, until the expiration of the Term, to
the Employee, his designated beneficiaries or his estate, the total
compensation in effect at the time of termination pursuant to Section 3
above;
(III) The Employer shall continue to provide to the
Employee, at the Employer's expense, health, life and disability
benefits, as described in Section 3(e) of this Agreement, substantially
equal to those being provided to the Employee at the date of termination
of his employment until the earliest to occur of the expiration of the
Term or the date on which the Employee is included in another employer's
benefit plans as a full-time employee;
(IV) The Employee shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor shall any amounts received from other
employment or otherwise by the Employee offset in any manner the
obligations of the Employer hereunder, except as specifically stated in
subparagraph III above.
(b) DEATH OF THE EMPLOYEE. The Term shall automatically
expire upon the death of the Employee. In such event, the Employee's
estate shall be entitled to receive the compensation due the
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Employee through the last day of the calendar month in which the death
occurred, except as otherwise specified herein.
(c) "GOLDEN PARACHUTE" PROVISION. In the event that any
payments pursuant to this Section 4 would result in the imposition of a
penalty tax pursuant to Section 280G, such payments shall be reduced to
the maximum amount which may be paid under Section 280G without
exceeding such limits.
(d) DEFINITION OF "CHANGE OF CONTROL." A "Change of
Control" shall mean any one of the following events:
(i) the acquisition of ownership or power to vote more than 25% of the
voting stock of the Employer or UCFC;
(ii) the acquisition of the ability to control the election of a majority
of the directors of the Employer or UCFC;
(iii) prior to August 11, 2002, individuals who constitute the Board of
Directors of the Employer or UCFC as of the date of this Agreement cease for
any reason to constitute at least a majority thereof; provided, however, that
any individual whose election or nomination for election as a member of the
Board of Directors of the Employer or UCFC was approved by a vote of at least
two-thirds of the directors then in office shall be considered to have
continued to be a member of the Board of Directors of the Employer or UCFC
and no effect shall be given to changes in the composition of the Board due
to the death, disability, retirement or resignation of any such person; or
(iv) an event that would be required to be reported in response to Item
l(a) of Form 8-K or Item 6(e) of Schedule 14A of Regulation 14A pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor thereto, whether or not any class of securities of UCFC is
registered under the Exchange Act.
Notwithstanding the foregoing, the acquisition by UCFC of thc stock of
the Employer in accordance with the Merger Agreement shall not
constitute a Change of Control.
For purposes of this Agreement, an event shall be
deemed to have occurred "in connection with a Change of Control" if such
event occurs within one year before or after a Change of Control.
(e) TERMINATION BY EMPLOYEE. If the Employee terminates
this Agreement without the written consent of the Employer, other than
pursuant to Section 4(a)(ii) of this Agreement, the Employee hereby
agrees that during the unexpired Term: (i) he will not, and will not
permit any of his affiliates to, alone, together or in association with
others, either as principal, agent, owner, shareholder, officer,
director, partner, lender, investor, independent contractor, consultant
or in any other capacity, engage in, have a financial interest in or be
in any way connected or affiliated with, or render advice or services to
any person that engages in a business that would compete with the
principal business of the Employer or UCFC or any of their subsidiaries
within Mahoning, Trumbull, Columbiana, Portage, Cuyahoga, Xxxxxx or
Xxxxx Counties, Ohio, Xxxxxx or Venango Counties, Pennsylvania; and (ii)
he will not, and will not permit any affiliate, directly or indirectly,
to solicit, divert, take away or interfere with the relationship of the
Employer with any person who is or was a customer, or employee or
supplier of the Employer at any time during the last twenty-four (24)
month period immediately prior to the date of this Agreement.
For proposes of this provision, the term "affiliate" of any
specified person shall mean (i) a person that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, such specified person; (ii) any relative or
spouse of such person, or any relative of such spouse, any one of
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whom has the same home as such person; (iii) any trust or estate in which
such person or any of thc persons specified in (ii) collectively own ten
percent or more of the total beneficial interest or of which any of such
persons serve as trustee, executor or in any similar capacity; or (iv)
any corporation or other organization in which such person or any of the
persons specified in (ii) are the beneficial owners collectively of ten
percent or more of any class of equity securities or ten percent or more
of the equity interest. For the purposes of this definition, "control"
when used with respect to any specified person means the power to direct
the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
relative to the foregoing.
For purposes of this provision, the term "person" refers to an
individual or corporation, partnership, trust, association or other
organization.
This provision shall not apply in the event of the termination
of the employment of the Employee by the Employer prior to the
expiration of the Term or the termination of the employment of the
Employee by the Employee pursuant to Section 4(a)(ii) of this Agreement.
5. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this Agreement shall
preclude the Employer or UCFC from consolidating with, merging into, or
transferring all, or substantially all, of their assets to another
corporation that assumes all of their obligations and undertakings
hereunder. Upon such a consolidation, merger or transfer of assets, and
subject to the provisions pertaining to Change of Control contained
herein, the term "Employer" as used herein, shall mean such other
corporation or entity, and this Agreement shall continue in full force
and effect.
6. CONFIDENTIAL INFORMATION. The Employee acknowledges that during his
employment he will learn and have access to confidential information
regarding the Employer and UCFC and its customers and businesses
("Confidential Information"). The Employee agrees and covenants not to
disclose or use for his own benefit, or the benefit of any other person
or entity, any Confidential Information, unless or until the Employer
and UCFC consent in writing to such disclosure or use or the
Confidential Information is otherwise legally in the public domain. The
Employee shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Employer or UCFC,
their subsidiaries, or affiliates, or to any of the businesses operated
by them, and the Employee confirms that the Confidential Information
constitutes the exclusive property of the Employer or UCFC. The Employee
shall not otherwise knowingly act or conduct himself to the material
detriment of the Employer or UCFC, their subsidiaries, or affiliates or
in a manner which is inimical or contrary to the interests of the
Employer or UCFC.
7. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, his beneficiaries or
legal representatives without the Employer's prior written consent;
provided, however, that nothing in this Section 7 shall preclude the
Employee from designating a beneficiary to receive any benefits payable
hereunder upon his death or the executors, administrators or other legal
representatives of the Employee or his estate from assigning any rights
hereunder to the person or persons entitled thereto.
8. NO ATTACHMENT. Except as required by law, no right to receive payment
under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no
effect.
9. BINDING AGREEMENT. This Agreement shall be binding upon, and inure to
the benefit of, the Employee and the Employer and their respective
permitted successors and assigns.
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10. AMENDMENT OF AGREEMENT. This Agreement may not be modified or
amended, except by an instrument in writing signed by the parties hereto.
11. WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be an estoppel against the enforcement
of any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. No such written waiver shall
be deemed a continuing waiver, unless specifically stated therein, and
each waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for
the future or as to any act other than the act specifically waived.
12. SEVERABILITY. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect the other provisions of
this Agreement not held so invalid, and each such other provision shall,
to the full extent consistent with applicable law, continue in full
force and effect. If this Agreement is held invalid or cannot be
enforced, then any prior Agreement between the Employer (or any
predecessor thereof) and the Employee shall be deemed reinstated to the
full extent permitted by law, as if this Agreement had not been executed.
13. HEADINGS. The headings of the paragraphs herein are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
14. GOVERNING LAW. This Agreement has been executed and delivered in the
State of Ohio and its validity, interpretation, performance, and
enforcement shall be governed by the laws of the State of Ohio.
15. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
employment agreement between the Employer or any predecessor of the
Employer and the Employee.
16. NOTICES. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed delivered if such notice or
communication is in writing and is delivered personally or by facsimile
transmission or is deposited in the United States mail, postage prepaid,
addressed as follows:
If to the Employer:
Xxxxxx Xxxx Corp.
Xxxx Xxxxxx Xxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Attention: Secretary
With a copy to:
United Community Financial Corp.
000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Chairman of the Board
If to the Employee:
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Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxxx 00000
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed by its duly authorized officer, and the Employee has signed this
Agreement, each as of the day and year first above written.
Attest: Xxxxxx Xxxx Corp.
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx Xx.
-------------------- ----------------------------
Its: Secretary
---------------------------
Attest:
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxxx
-------------------- ----------------------
Xxxxxx X. Xxxxxxxx
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