Exhibit 10(17)
SPECIAL TERMINATION AGREEMENT
THIS SPECIAL TERMINATION AGREEMENT ("Agreement") is made and entered
into as of this ____day of ______________, 1996, by and between Madison First
Federal Savings and Loan Association, a federally chartered savings and loan
association (which, together with any successor thereto which executes and
delivers the assumption agreement provided for in Section 11(a) hereof or
which otherwise becomes bound by the terms and provisions of this Agreement by
operation of law, is hereinafter referred to as the "Bank"), and Xxxx Xxxxx
Deveary, whose residence address is _______________________ (the "Employee").
WHEREAS, the Employee is currently serving as a Vice President and
Treasurer of the Bank; and
WHEREAS, the Bank has adopted a plan of conversion whereby the Bank
will convert to capital stock form as the subsidiary of River Valley Bancorp, an
Indiana corporation (the "Holding Company") (the "Conversion"); and
WHEREAS, the Board of Directors of the Bank recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of the Holding Company may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Bank, the Holding Company and its shareholders; and
WHEREAS, the Board of Directors of the Bank believes it is in the best
interests of the Bank to enter into this Agreement with the Employee in order to
assure continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to his assigned duties
without distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of the Holding Company, although no
such change is now contemplated; and
WHEREAS, the Board of Directors of the Bank has approved and authorized
the execution of this Agreement with the Employee to take effect as stated in
Section 1 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, it is agreed as
follows:
1. TERM OF AGREEMENT. The term of this Agreement shall be deemed to have
commenced as of the date the Bank converts from mutual to stock form (the
"Effective Date") and shall continue until February 1, 1998. Commencing on
February 1, 1998, and continuing at each anniversary date thereafter, the Board
of Directors shall review this Agreement and, in its discretion, may authorize
extension thereof for an additional one-year period.
2. PAYMENTS TO THE EMPLOYEE UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a change in control of the Bank or the
Holding Company (as herein defined) during the term of the Employee's
employment, followed at any time during the term of this Agreement by the
involuntary termination of the Employee's employment, other than for cause, as
defined in Section 2(d) hereof, the provisions of Section 3 shall apply.
(b) A "change in control" of the Bank or the Holding Company shall
be deemed to have occurred if:
(i) as a result of, or in connection with, any initial public
offering, tender offer or exchange offer, merger or other business
combination, sale of assets or contested election, any combination of
the foregoing transactions, or any similar transaction, the persons who
were non-employee directors of the Bank or the Holding Company before
such transaction cease to constitute a majority of the Board of
Directors of the Bank or the Holding Company or any successor thereof;
(ii) the Bank or the Holding Company transfers substantially
all of its assets to another corporation which is not a wholly-owned
subsidiary of the Bank or the Holding Company;
(iii) the Bank or the Holding Company sells substantially all
of the assets of a subsidiary or affiliate which, at the time of such
sale, is the principal employer of the Employee; or
(iv) the Bank or the Holding Company is merged or consolidated
with another corporation and, as a result of the merger or
consolidation, less than fifty-one percent (51%) of the outstanding
voting securities of the surviving or resulting corporation is owned in
the aggregate by the former shareholders of the Bank or of the Holding
Company.
(c) The Employee's employment under this Agreement may be terminated at
any time by the Board of Directors of the Bank. The terms "involuntary
termination" or "involuntarily terminated" in this Agreement shall refer to the
termination of the employment of Employee without his express written consent.
In addition, a material diminution of or interference with the Employee's
duties, responsibilities and benefits shall be deemed and shall constitute an
involuntary termination of employment to the same extent as express notice of
such involuntary termination. By way of example and not by way of limitation,
any of the following actions, if unreasonable and materially adverse to the
Employee, shall constitute such diminution or interference unless consented to
in writing by the Employee: (1) the requirement that the Employee perform his
principal executive functions more than thirty-five (35) miles from his primary
office as of the date of the change in control; (2) a material reduction in the
Employee's salary, perquisites, contingent
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benefits or vacation time as in effect on the date of the change in control as
the same may be changed by mutual agreement from time to time, unless part of an
institution-wide reduction; (3) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position as referenced in this Agreement; or (4) a material diminution or
reduction in the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Bank.
(d) The Employee shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon termination for cause. For purposes
of this Agreement, termination for "cause" shall include termination because of,
in the good faith determination of the Board of Directors of the Bank, the
Employee's personal dishonesty, incompetence, willful misconduct, breach of a
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than a law,
rule or regulation relating to traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to the
Employee a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of the
Bank at a meeting of the Board called and held for such purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), such meeting and the
opportunity to be heard to be held prior to, or as soon as reasonably
practicable following, termination, but in no event later than 60 days following
such termination, finding that in the good faith opinion of the Board the
Employee was guilty of conduct constituting "cause" as set forth above and
specifying the particulars thereof in detail. If, following such meeting, the
Employee is reinstated, he shall be entitled to receive back pay for the period
following termination and continuing through reinstatement.
(e) If the Employee's employment is involuntarily terminated by the
Bank, with or without cause, at any time after a date which is 18 months
following the Conversion, and upon 90 days written notice to the Employee prior
to the public announcement of a change in control of the Bank or the Holding
Company, whether consummated or merely proposed at the time of such public
announcement, the Employee shall not have any right, by virtue of such
involuntary termination, to receive termination benefits under this Agreement.
3. TERMINATION BENEFITS.
(a) If (i) at any time during a period which begins on the Effective
Date and ends 18 months thereafter, there is an involuntary termination of the
Employee's employment, other than for cause, whether or not such termination
occurs during the term of this Agreement or (ii) during the term of this
Agreement there is a change in control, and within 12 months following such
change in control there is an involuntary termination of the Employee's
employment, other than for cause, whether or not such termination occurs during
the term of this Agreement, the Bank shall, in either case, pay to the Employee
in
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a lump sum in cash within 25 business days after the date of severance of
employment an amount equal to 100 percent of the Employee's "base amount" of
compensation, as defined in Section 280G(b)(3) of the Internal Revenue Code of
1986, as amended ("Code"). At the discretion of the Employee, upon an election
pursuant to Section 3(c) hereof, such payment may be made, on a pro rata basis,
semi-monthly during the twelve (12) months following the Employee's termination.
(b) If (i) at any time during a period which begins on the Effective
Date and ends 18 months thereafter, there is an involuntary termination of the
Employee's employment, other than for cause, whether or not such termination
occurs during the term of this Agreement or (ii) during the term of this
Agreement there is a change in control, and within 12 months following such
change in control there is an involuntary termination of the Employee's
employment, other than for cause, whether or not such termination occurs during
the term of this Agreement, the Bank shall, in either case, cause to be
continued life, health and disability coverage substantially identical to the
coverage maintained by the Bank for the Employee prior to his severance. Subject
to applicable federal and state laws, such coverage shall cease upon the earlier
of the Employee's obtaining similar coverage by another employer or twelve (12)
months from the date of the Employee's termination. In the event the Employee
obtains new employment and receives less coverage for life, health or
disability, the Bank shall provide coverage substantially identical to the
coverage maintained by the Bank for the Employee prior to termination for a
period of twelve (12) months.
(c) On an annual basis the Employee shall elect whether, in the event
amounts are payable under Sections 3(a) hereof, such amounts shall be paid in a
lump sum or on a pro rata basis. Such election shall be irrevocable for the year
for which such election is made.
4. CERTAIN REDUCTION OF PAYMENTS BY THE BANK.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Bank to or
for the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible (in whole or part) by the Bank for Federal
income tax purposes because of Section 280G of the Code, then the aggregate
present value of amounts payable or distributable to or for the benefit of the
Employee pursuant to this Agreement (such amounts payable or distributable
pursuant to this Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount,
not less than zero, expressed in present value which maximizes the aggregate
present value of Agreement Payments without causing any Payment to be
nondeductible by the Bank because of Section 28OG of the Code. For purposes of
this Section 4, present value shall be determined in accordance with Section
28OG(d)(4) of the Code.
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(b) All determinations required to be made under this Section 4 shall
be made by the Bank's independent auditors, or at the election of such auditors
by such other firm or individuals of recognized expertise as such auditors may
select (such auditors or, if applicable, such other firm or individual, are
hereinafter referred to as the "Advisory Firm"). The Advisory Firm shall within
ten business days of the date of termination of the Employee's employment by the
Bank or the Holding Company resulting in benefit payments hereunder (the "Date
of Termination"), or at such earlier time as is requested by the Bank, provide
to both the Bank and the Employee an opinion (and detailed supporting
calculations) that the Bank has substantial authority to deduct for federal
income tax purposes the full amount of the Agreement Payments and that the
Employee has substantial authority not to report on his federal income tax
return any excise tax imposed by Section 4999 of the Code with respect to the
Agreement Payments. Any such determination and opinion by the Advisory Firm
shall be binding upon the Bank and the Employee. The Employee shall determine
which and how much, if any, of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section 4, provided that, if
the Employee does not make such determination within ten business days of the
receipt of the calculations made by the Advisory Firm, the Bank shall elect
which and how much, if any, of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section 4 and shall notify the
Employee promptly of such election. Within five business days of the earlier of
(i) the Bank's receipt of the Employee's determination pursuant to the
immediately preceding sentence of this Agreement or (ii) the Bank's election in
lieu of such determination, the Bank shall pay to or distribute to or for the
benefit of the Employee such amounts as are then due the Employee under this
Agreement. The Bank and the Employee shall cooperate fully with the Advisory
Firm, including without limitation providing to the Advisory Firm all
information and materials reasonably requested by it, in connection with the
making of the determinations required under this Section 4.
(c) As a result of uncertainty in application of Section 280G of the
Code at the time of the initial determination by the Advisory Firm hereunder, it
is possible that Agreement Payments will have been made by the Bank which should
not have been made ("Overpayment") or that additional Agreement Payments will
not have been made by the Bank which should have been made ("Underpayment"), in
each case, consistent with the calculations required to be made hereunder. In
the event that the Advisory Firm, based upon the assertion by the Internal
Revenue Service against the Employee of a deficiency which the Advisory Firm
believes has a high probability of success determines that an Overpayment has
been made, any such Overpayment paid or distributed by the Bank to or for the
benefit of Employee shall be treated for all purposes as a loan ab initio which
the Employee shall repay to the Bank together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and no amount shall be
payable by the Employee to the Bank if and to the extent such deemed loan and
payment would not either reduce the amount on which the Employee is subject to
tax under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Advisory Firm, based upon
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controlling preceding or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Bank to or for the benefit of the Employee together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
5. REQUIRED REGULATORY PROVISIONS.
(a) The Bank may terminate the Employee's employment at any time, but
any termination by the Bank, other than a termination for cause, shall not
prejudice the Employee's right to compensation or other benefits under this
Agreement. The Employee shall not have the right to receive compensation or
other benefits for any period after a termination for cause as defined in
Section 2(d) hereinabove.
(b) If the Employee 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 Federal Deposit Insurance Act, 12 U.S. C. ss.
1818 (e)(3) and (g)(1), the Bank'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, the Bank may in its discretion (i)
pay the 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 the obligations which were suspended.
(c) If the Employee is removed from office and/or permanently
prohibited from participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12
U.S.C. ss. 1818(e)(4) or (g)(1), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected.
(d) If the Bank 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 (d) shall not affect any
vested rights of the parties.
(e) All obligations under this Agreement may 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 (the "Director"), or his or her designee, at the time the Federal
Deposit Insurance Corporation enters into an agreement to provide assistance to
or on behalf of the Bank under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act, 12 U.S.C. ss. 1823(c), or (ii) by the Director,
or his or her designee, at the time the Director 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 to be in an unsafe or unsound
condition. Any rights of the parties that have already vested, however, shall
not be affected by any such action.
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6. REINSTATEMENT OF BENEFITS UNDER SECTION 3. In the event the Employee is
suspended and/or temporarily prohibited from participating in the conduct of the
Bank's affairs by a notice described in Section 5(b) hereof (the "Notice")
during the term of this Agreement and a change in control occurs, the Bank will
assume its obligation to pay and the Employee will be entitled to receive all of
the termination benefits provided for under Section 3 of this Agreement upon the
Bank's receipt of a dismissal of charges in the Notice.
7. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS. This Agreement
contains the entire understanding between the parties hereto and supersedes any
prior agreement between the Bank and the Employee.
8. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments 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 or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
the Employee, the Bank and their respective successors and assigns.
9. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any 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 such 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 that
specifically waived.
10. NO MITIGATION. Except as expressly provided herein, the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned by the Employee as the result of employment by another
employer, by retirement benefits after the date of termination or otherwise.
11. NO ASSIGNMENTS.
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(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Bank will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Bank in the same amount and on the same terms as the compensation
pursuant to Section 3 hereof. For purposes of implementing the provisions of
this Section 11(a), the date on which any such succession becomes effective
shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder shall inure
to the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amounts would still
be payable to the Employee hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Employee's devisee, legatee or other designee
or if there is no such designee, to the Employee's estate.
12. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Bank shall be directed to the attention of the Board of Directors
of the Bank with a copy to the Secretary of the Bank), or to such other address
as either party may have furnished to the other in writing in accordance
herewith.
13. AMENDMENTS. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
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16. GOVERNING LAW. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Indiana.
17. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered an the arbitrator's award in any court having jurisdiction.
18. REIMBURSEMENT. In the event the Bank purports to terminate the Employee
for cause, but it is determined by a court of competent jurisdiction or by an
arbitrator pursuant to Section 17 that cause did not exist for such termination,
or if in any event it is determined by any such court or arbitrator that the
Bank has failed to make timely payment of any amounts owed to the Employee under
this Agreement, the Employee shall be entitled to reimbursement for all
reasonable costs, including attorneys' fees, incurred in challenging such
termination or collecting such amounts. Such reimbursement shall be in addition
to all rights to which the Employee is otherwise entitled under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ATTEST: Madison First Federal Savings and Loan
Association
By:
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Secretary
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Xxxx Xxxxx Deveary
The undersigned, River Valley Bancorp, sole shareholder of Bank, agrees
that if it shall be determined for any reason that any obligation on the part of
Bank to continue to make any payments due under this Agreement to Employee is
unenforceable for any reason, River Valley Bancorp agrees to honor the terms of
this Agreement and continue to make any such payments due hereunder to Employee
or to satisfy any such obligation pursuant to the terms of this Agreement, as
though it were the Bank hereunder.
RIVER VALLEY BANCORP
By:
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Xxxxx X. Xxxxx, President and
Chief Executive Officer
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