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EXHIBIT 10.4
SEVERANCE AND RELEASE AGREEMENT
This Severance and Release Agreement (the "Agreement") is made as of
March 1, 1999, by and between CFS Bancorp, Inc. (the "Company"), Citizens
Financial Services, FSB (the "Bank") (the Company and the Bank are sometimes
collectively referred to herein as the "Employers") and Xxxxxx X. Xxxx (the
"Executive").
WITNESSETH
WHEREAS, the Executive previously was employed as Senior Executive Vice
President of the Employers pursuant to the provisions of the employment
agreement dated July 24, 1998 between the Employers and the Executive (the
"Employment Agreement") (any capitalized terms included in this Agreement which
are not defined herein shall have the same meaning as set forth in the
Employment Agreement);
WHEREAS, the Employers and the Executive previously have agreed that
the Executive's employment would be terminated as of October 1, 1998 for other
than Cause, Disability, Retirement or the Executive's death pursuant to Section
5(c) of the Employment Agreement; and
WHEREAS, the Employers and the Executive wish to enter into this
Agreement in order to satisfy all of the Employers' obligations under the
Employment Agreement in consideration for the covenants, payments and other
benefits specified in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
1. Termination of Employment. The Employment Agreement shall be deemed
to have been terminated effective as of October 1, 1998 (the "Termination
Date"). On and after the Termination Date, none of the provisions of the
Employment Agreement shall be effective, and all of the rights and
responsibilities of each of the Employers and Executive with respect to the
Employment Agreement shall be superseded by those that are provided in this
Agreement.
2. Payments and Benefits to the Executive. In consideration of the
covenants and the other terms and conditions of this Agreement for the benefit
of the Employers, subject to the provision of Section 8 hereof, the Employers
agree and covenant to provide the following to the Executive:
A. The Employers agree to pay to the Executive an aggregate of
$317,958.98 in severance payments (the "Severance Payments"),
such amount to be paid in substantially equal monthly
payments in such manner and at such time as
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Executive's salary would have been paid to Executive if he
had continued to be employed through December 31, 1999.
Executive acknowledges that he has previously received
$82,493.20 of such Severance Payments. During the period that
the Executive is receiving the Severance Payments, he shall
not be entitled to receive any fees for his services as a
director or advisory director of the Employers.
B. Executive will be entitled to participate in the Employers'
employee stock ownership plan (the "ESOP") for the ESOP plan
years ended December 31, 1998 and 1999.
C. Executive will be entitled to participate in a supplemental
executive retirement plan (which will entitle Executive to
cash payments equal to the difference between the benefits
actually received under the ESOP and the amount of benefits
that would have been received based upon the amount of
"compensation" (as defined in the ESOP) received from the
Employers (which amounted to $107,246.60 for 1998) absent the
limitations imposed by Section 415 of the Internal Revenue
Code of 1986 without regard to any additional tax liability
incurred by Executive as a result thereof (the "Differential
Amount")) with respect to the ESOP (referred to hereinafter
as the "ESOP SERP") for the ESOP plan year ended December 31,
1998 or, if such ESOP SERP is not established by the
Employers for the plan year ended December 31, 1998, the
Employers will otherwise provide Executive with an amount
equal to the Differential Amount.
D. Executive will be entitled to participate in the Employers'
defined benefit pension plan (the "Pension Plan") for the
Pension Plan years ended December 31, 1998 and 1999 to the
extent benefits are not being accrued for Executive for such
plan years in the defined benefit pension plan established
previously by SuburbFed Financial Corp. or its wholly owned
subsidiary, Suburban Federal Bank, a Federal Savings Bank
("Suburban Federal") (collectively "SuburbFed").
E. Executive will be entitled to participate in Employers'
401(k) defined contribution plan (the "401(k) Plan") for the
401(k) Plan's plan years ended December 31, 1998 and 1999 and
the Employers shall make contributions to the 401(k) Plan on
his behalf (provided that such matching contributions for any
year will be subject to the provisions of the 401(k) Plan and
will not exceed 3.0% of the taxable income paid to the
Executive by the Employers for such year) to the extent that
Executive is not afforded benefits under the 401(k) plan of
SuburbFed for such plan years.
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F. Executive's participation in the ESOP, the Pension Plan and
the 401(k) Plan (collectively, the "Plans") shall, in all
cases, be subject to the provisions of the Plans, provided,
however, that for the purposes of determining the amount of
Executive's benefits thereunder, if any, the Severance
Payments to be made pursuant to the provisions of Section 2.A
hereof shall be deemed to be salary payments and provided
that the Executive shall receive credit for his years of
service with SuburbFed for eligibility and vesting purposes
(but not for purposes of benefit accrual).
G. Employers will pay Executive's membership dues at the
Flossmoor Country Club through the period ending December 31,
1999.
H. Executive will continue to participate, on the same basis as
the Employer's executive officers, in all life, health,
disability and accident plans that provide benefits to any of
the executive officers of the Employers through December 31,
1999. After such date, the Executive shall receive the same
post-retirement health insurance benefits on the same basis
as are being afforded to other retired executive officers of
the Employers as of such date. The Employers shall provide to
the Executive a written description of their policy regarding
post-retirement health insurance benefits as of the date
hereof and shall promptly provide to the Executive a
reasonably detailed written description of any change to such
policy which is effective on or before December 31, 1999. The
Employers undertake to use their best efforts to provide
Executive with notice of any anticipated change in its post-
retirement health insurance policy sufficiently in advance of
such change to permit Executive to apply for alternative or
additional coverage if desired.
I. In the event that subsequent hereto Executive is determined
by Employers to be unable to participate in the various
benefit plans described in Sections 2.B through 2.H hereof,
Employers and Executive shall negotiate in good faith a
mutually acceptable cash settlement representing the present
value of such benefit(s).
J. Subject to the receipt of applicable shareholder approval at
a meeting expected to occur not later than August 31, 1999,
the Company shall grant Executive a ten year non-qualified
stock option to purchase 26,000 shares of the common stock of
CFS (the "CFS Options") at the fair market value thereof on
the date of grant, which shall be the date that options are
granted to the other directors and executive officers of the
Company (but in no event later than three months from the
date hereof). The number of shares underlying such stock
option and the exercise price thereof shall be subject to
adjustment to reflect any special dividend, stock dividend,
stock split, recapitalization, merger or similar transaction
to the extent provided for under
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the terms of the stock option plan pursuant to which the CFS
Options are granted. The CFS Options shall vest over a period
of not more than five years from the date of grant. The
Employers will use their best efforts to ensure that (i) the
Executive shall become vested in the 26,000 CFS Options on
the applicable vesting dates (regardless of whether the
Executive serves on the board of directors on any such
vesting date) and (ii) that such options shall remain
exercisable for a period of at least five years following the
grant date. In order to accomplish the objectives of the
immediately preceding sentence, the Employers agree that, if
appropriate, they will appoint the Executive to an advisory
board to one or more of the Employers or a subsidiary
thereof. In the event the Executive is appointed to an
advisory board, he shall not be required to attend more than
one meeting per quarter and shall be paid fees for attendance
in accordance with Employers' policies, provided that
Executive is no longer receiving Severance Payments pursuant
to the terms hereof.
K. Within 30 days of the date hereof, Employers shall transfer
to Executive title to the 1997 Buick Le Sabre automobile
currently provided to the Executive.
L. Employers shall use their best efforts to preserve
Executive's rights to exercise certain options (the
"SuburbFed Options") to acquire the common stock of the
Company that were granted by SuburbFed and which were assumed
by the Company pursuant to the terms of Section 2.7 of the
Agreement and Plan of Merger dated December 27, 1997, among
the Employers and SuburbFed (the "Merger Agreement"), to the
extent permitted by the SuburbFed plans under which such
SuburbFed Options were issued, until the earlier of (i) the
date such options expire or (ii) the date all of the options
granted pursuant to Section 2.J above are vested; provided
however, nothing shall require Employers to amend the terms
of any of the plans pursuant to which such SuburbFed Options
were issued to permit exercise of such options until the
expiration of the periods set forth in this Section 2.X.
X. Nothing in this Agreement shall affect Executive's rights to
indemnification as provided in Section 5.9 of the Merger
Agreement.
3. Release of Employers and Related Parties.
A. In consideration of the covenants and the other terms and
conditions of this Agreement and release for the benefit of
Executive, Executive agrees and covenants, on behalf of
himself, his heirs and personal representatives, to release
completely and forever discharge the Employers from any and
all charges, claims and actions relating to Employers'
performance under the Employment Agreement or otherwise
arising out of Executive's employment
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by, or the termination of his employment with, the Employers
for all periods of time up to and including 12:00 p.m.,
September 30, 1998. Executive has not brought any such
charges, claims or actions against Employers before signing
this Agreement, and Executive covenants not bring any such
charges, claims or actions against the Employers in the
future, other than charges, claims or actions relating to the
Employers' obligations under this Agreement. If Executive
violates the provisions of this Section 3.A. by filing or
bringing any such charges, claims or actions (other than
charges, claims or actions relating to Employers' obligations
under this Agreement) in a court of competent jurisdiction
contrary to this Section 3.A, in addition to any other rights
and remedies the Employers may have, Executive agrees to pay
all actual and direct costs of the Employers in defending
against such charges, claims or actions brought by the
Executive or on his behalf, including reasonable attorney's
fees. As referred to in this Section 3.A (as well as for
purposes of Section 3.B below), the term "Employers"
includes, in addition to the Company and the Bank, the
subsidiaries and affiliates of each of them, their respective
successors and assigns, and all of their respective past and
present directors, officers, representatives, shareholders,
agents, employees, and their respective heirs and personal
representatives or any of them.
B. Executive hereby specifically and unconditionally releases
the Employers from any and all claims which the Employee may
have against any of them and which arose on or before the
date of this Agreement under the Age Discrimination in
Employment Act (the "ADEA"), including, but not limited to,
any claim attributable to the Employers' solicitation of the
Employee's consent to the terms of this Agreement, and
further acknowledges and represents that:
i. Executive waives the Executive's claims under ADEA
knowingly and voluntarily in exchange for the
commitments made herein by the Employers, and that
certain of the benefits provided thereby constitute
consideration of value to which the Executive would
not otherwise have been entitled;
ii. the Executive consulted an attorney in connection
with this Agreement;
iii. the Executive has been given a period of 21 days
within which to consider the terms hereof;
iv. the Executive may revoke the waiver of ADEA claims
set forth in this Section 3.B for a period of seven
(7) days following the execution of this Agreement
and the Employee's
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waiver of ADEA claims hereunder shall not become
effective until the revocation period has expired;
v. if the Executive revokes the waiver of ADEA claims
in accordance with subsection 4 above, the
Executive shall cease to receive the payments and
benefits specified in Section 2 hereof, but such
revocation shall not be effective with respect to
the remainder of this Agreement and the
consideration received by the Employee prior to the
revocation shall be valid and adequate
consideration with respect to the remainder of this
Agreement; and
vi. this Agreement complies in all respects with
Section 7(f) of ADEA, the waiver provisions of the
Older Worker Benefit Protection Act.
4. Confidentiality. Executive agrees that he will, to the extent
permitted by law, keep the terms and conditions of this Agreement confidential,
and that all discussions and announcements that the Executive has with
employees, shareholders, and any and all other persons or parties shall be
wholly consistent with the terms of the mutually agreed upon press release which
is attached hereto as Exhibit A. Executive shall support the current management
of the Employers in efficiently and effectively integrating the operations,
employees, and officers of the former SuburbFed and its affiliates within the
Employers. Executive shall refrain, to the extent permitted by law, from taking
or assisting others in taking any actions which could reasonably be expected to
diminish the perceived market value of the Employers or undermine the efforts of
the Employers' management to manage Employers' operations.
5. Certain Actions. Executive hereby agrees and covenants that from the
date of this Agreement until December 31, 1999:
A. Executive shall not directly or indirectly solicit or
encourage any person who is an associate or affiliate of
Executive to solicit proxies or consents in opposition to any
proposal submitted by the Company's Board of Directors to a
vote of the Company's shareholders.
B. Except as may be required by his fiduciary duties as a
director or advisory director of the Company or any of its
subsidiaries, the Executive shall not, nor shall he encourage
any person who is an associate or affiliate of Executive to
(i) join with or assist any person or entity, directly or
indirectly, in opposing, or make any statement in opposition
to, any proposal submitted by the Company's management to a
vote of the Company's shareholders, or (ii) join with or
assist any person or entity, directory or indirectly, in
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supporting or endorsing, or make any statement in favor of,
any proposal submitted to a vote of the Company's
shareholders that is opposed by Company's Board of Directors.
C. Except as may be required by his fiduciary duties as a
director or advisory director of the Company or any of its
subsidiaries, the Executive shall not contact employees of
the Employers regarding the business or operations of
Employers, provided, however, that nothing in this Agreement
shall affect Executive's ability to (i) contact employees of
the Employers with respect to issues regarding his personal
deposit or loan accounts maintained at the Bank or (ii)
converse with any of Messrs. Xxxxxx X. Xxxxxx, Xxxxx X.
Xxxxxx or Xxxx X. Xxxxxxxx.
6. Binding Agreement; Termination. This Agreement shall be binding upon
and inure to the benefit of any successor to the Company and the Bank (whether
direct or indirect, by purchase, merger or consolidation, by operation of law,
or otherwise) or any person which acquires all or substantially all of the
assets of the Company or the Bank or any assignee of the Company or the Bank
(collectively "Successor"), and the Company and the Bank will require any
Successor to expressly assume and agree to perform and carry out the obligations
of this Agreement and any instrument executed by the Company and/or the Bank
hereunder in the same manner and to the same extent as the Company and the Bank.
This Agreement shall also be binding on and inure to the benefit of Executive.
This Agreement shall terminate upon the death of Executive and his heirs and
beneficiaries shall have no right to compensation or other benefits hereunder
for any period after the date of Executive's death except as to any payments or
benefits earned pursuant to the terms hereof prior to such date but not received
as of the date of death.
7. Withholding. All payments required to be made by the Employers
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employers may
reasonably determine should be withheld pursuant to any applicable law and
regulation.
8. Mitigation. The Executive shall not be required to mitigate the
amount of any payments or other benefits hereunder by seeking other employment
or otherwise, nor shall the amount of any such benefits be reduced by any
compensation earned by the Executive as a result of employment by another
employer; provided, however, notwithstanding anything to the contrary herein the
benefits provided by Sections 2.B through 2.I shall only be required to be
provided until the earlier to occur of December 31, 1999 or the date of
Executive's full-time employment by another employer (provided Executive is
entitled under the terms of such employment to benefits substantially similar to
those provided by Employers).
9. Representation. Employers and Executive represent that they have
reviewed this Agreement, and that each of them is fully aware of the content of
this Agreement and of its legal effect, and acknowledge that this is a legally
valid and binding obligation of the parties.
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10. Amendment and Waiver. The terms of this Agreement may not be
modified other than in a writing signed by the parties. No term or condition of
this Agreement shall be deemed to have been waived, nor shall there be any
estoppel against 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 for the future or as to any act other than that specifically waived.
11. Legal Fees.
A. Legal fees and expenses up to $5,000 incurred by Executive in
negotiating the terms of this Agreement will be paid for by
Employers provided written documentation providing reasonable
detail with respect to such fees and expenses is provided to
Employers.
B. All reasonable legal fees and costs paid or incurred by
Executive on the one hand or the Employers on the other hand
pursuant to any dispute or question of interpretation
relating to this Agreement shall be paid or reimbursed by the
Employers to the Executive if the Executive is successful on
the merits pursuant to a legal judgment, arbitration or
settlement and shall be paid or reimbursed by the Executive
to the Employers if the Employers are successful on the
merits pursuant to a legal judgment, arbitration or
settlement.
12. Notices. All notices, demands, consents or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given when: (i) personally delivered, or (ii) sent postage prepaid by
registered or certified mail, return receipt requested, such receipt showing
delivery to have been made, or (iii) sent overnight by prepaid receipt courier
addressed as follows:
If to Executive: Xxxxxx X. Xxxx
1014 Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
If to Employers: CFS Bancorp, Inc.
Citizens Financial Services, FSB
000 Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
13. Entire Agreement. This Agreement incorporates the entire
understanding among the parties relating to the subject matter hereof, recites
the sole consideration for the promises exchanged
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and supercedes any prior agreements between the Employers and Executive with
respect to the subject matter hereof, including without limitation, as of the
date hereof, the Employment Agreement. In reaching this Agreement, no party has
relied upon any representation or promise except those set forth herein.
14. Invalid Provisions: If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never compromised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana, except to the extent that
applicable federal law preempts the laws of the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Release as of the day and year first above written.
WITNESSES: CFS BANCORP, INC.
/s/January R. Halls_______ By: /s/Xxxxxx X. Prisby________
Title Chairman____________________
CITIZENS FINANCIAL SERVICES, FSB
/s/January R. Halls_______ By: /s/Xxxxxx X. Prisby_________
Title: Chairman__________________
XXXXXX X. XXXX
/s/January R. Halls______ /s/ Xxxxxx X. Ryan__________________
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