EXHIBIT 10.1 -- Employment Agreement with Xxxxxxx X. Xxxxxxx
AGREEMENT
AGREEMENT, effective as of May 20,1998, between Community Bank Shares
of Indiana, Inc., an Indiana corporation (the "Corporation" or the "Employer"),
and Xxxxxxx X. Xxxxxxx (the "Executive").
WITNESSETH
WHEREAS, in order to induce the Executive to continue to serve as the
President and Chief Executive Officer of the Corporation, the Employer and the
Executive desire to enter into this Agreement to specify the terms of the
Executive's employment;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the
meanings set forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employer or any subsidiary
thereof during the most recent three taxable years preceding the Date of
Termination, as reflected in the annual W-2 Wage and Tax Statement provided to
the Executive.
(b) Base Salary. "Base Salary" shall have the meaning set forth in
Section 3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause'9 shall
mean termination because of 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 this Agreement.
(d) Change in Control of the Corporation. (A) "Change in Control of the
Corporation" shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
("Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; and (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Corporation cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
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(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.
(g) Disability. Termination by the Employer of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long4erm disability plan maintained by the Employer or any
subsidiary or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) IRS. IRS shall mean the Internal Revenue Service.
(i) Notice of Termination. Any purported termination of the Executive's
employment by the Employer for any reason, including without limitation for
Cause, Disability or Retirement, or by the Executive for any reason, shall be
communicated by written "Notice of Termination" to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a dated notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, (iii) specifies a Date of Termination,. which shall be not less
than thirty (30) nor more than ninety (90) days after such Notice of Termination
is given, except in the case of the Employer's termination of Executive's
employment for Cause, which shall be effective immediately; and (iv) is given in
the manner specified in Section 11 hereof.
(j) Retirement. Termination by the Employer of the Executive's
employment based on "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employer's retirement policies, including early
retirement, generally applicable to their salaried employees.
2. Term of Employment.
(a) The Employer hereby employs the Executive as President and Chief
Executive Officer and Executive hereby accepts said employment and agrees to
render such services to the Employer on the terms and conditions set forth in
this Agreement. The initial term of employment under this Agreement shall be for
three years, commencing on the date of this Agreement and shall extend each year
for an additional year on the date that is six months prior to the expiration
date for the remaining term of this Agreement unless either party shall notify
the other of its intention to stop such extensions. If the Board of Directors or
the Executive elects not to extend the term, it shall give written notice of
such decision to the other party not less than thirty (30) days prior to any
such annual extension date. If any party gives timely notice that the term will
not be extended as of any annual extension date, then this Agreement shall
terminate at the conclusion of its remaining term. References herein to the term
of this Agreement shall refer both to the initial term and successive terms.
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(b) During the term of this Agreement, the Executive shall perform such
executive services for the Employer as may be consistent with his titles and
from time to time assigned to him by the Employer's Board of Directors.
3. Compensation and Benefits.
(a) The employer shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $150,000 per year
("Base Salary"), which may be increased from time to time in such amounts as may
be determined by the Board of Directors of the Employer. In addition to his Base
Salary, the Executive shall be entitled to receive during the term of this
Agreement such bonus payments as may be determined by the Board of Directors of
the Employer.
(b) During the term of the Agreement, Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employer, to the extent commensurate with his then duties and responsibilities,
as fixed by the Board of Directors of the Employer. The Employer shall not make
any changes in such plans, benefits or privileges which would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executive officers of the Employer. 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. Notwithstanding the foregoing, nothing
contained in this Agreement shall require the Executive to participate in any
tax qualified or non-qualified benefit plan of the Employer.
(c) During the term of this Agreement, Executive shall be entitled to
paid annual vacation in accordance with the policies as established from time to
time by the Board of Directors of the Employer.
(d) During the term of this Agreement and continuing after the
expiration of its term, the Employer shall provide continued participation in
the Corporation's group health insurance plan for the Executive and his spouse,
at no cost to the Executive or his spouse, until such time as each shall qualify
for coverage under Medicare (Subchapter XVIII, Health Insurance for Aged and
Disabled of the Federal Social Security Act) or a successor program or system,
if any; provided, however, the Employer shall have no obligation to continue to
provide such benefit if the Executive is terminated for Cause as defined in
Section 1(c) hereof. In the event that the Executive's and/or his spouse's
participation in such health insurance plan is prohibited by the terms of such
plan or by the Employer for legal or other bona fide reasons, or during such
period the plan is discontinued or the benefits thereunder are materially
reduced, the Employer shall arrange to provide the Executive and his spouse with
benefits substantially similar to those which the Executive and his spouse would
have received under the plan or the Corporation shall pay, or reimburse the
Executive, for the cost of the premiums necessary to obtain comparable coverage
under a similar plan for the remainder of such period.
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4. Expenses. The Employer shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employer, including,
but not by way of limitation, and traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Employer. If
such expenses are paid in the first instance by Executive, the Employer shall
reimburse the Executive therefor.
5. Termination.
(a) The Employer shall have the right, at any time upon prior Notice of
Termination, to terminate the Executive's employment hereunder for any reason,
including without limitation termination for Cause, Disability or Retirement,
and Executive shall have the right, upon prior Notice of Termination, to
terminate his employment hereunder for any reason.
(b) In the event that (i) Executive's employment is terminated by the
Employer for Cause, Disability or Retirement or in the event of the Executive's
death, or (ii) Executive terminates his employment hereunder other than
following a Change in Control of the Corporation or a material breach of this
Agreement by the Employer which has not been cured in accordance with the terms
of this Agreement, Executive shall have no right pursuant to this Agreement to
compensation or other benefits for any period after the applicable Date of
Termination except as provided for pursuant to Section 3(d) hereof.
(c) In the event that Executive's employment is terminated by the
Employer for other than Cause, Disability, Retirement or the Executive's death,
or such employment is terminated by the Executive due to a material breach of
this Agreement by the Employer which has not been cured within fifteen (15) days
after a written notice of non-compliance has been given by the Executive to the
Employer, and as of Executive's Date of Termination no Change in Control of the
Corporation has occurred, no written agreement which contemplates a Change in
Control of the Corporation and which still is in effect has been entered into by
the Employer and no discussions and/or negotiations are being conducted which
relate to the same, then the Employer shall, subject to the provisions of
Section 6 hereof, if applicable:
(A) pay to the Executive, in equal monthly installments
beginning with the first business day of the month following
the Date of Termination, a cash severance amount equal to the
Base Salary which the Executive would have earned over the
remaining term of this Agreement as of his Date of
Termination, and
(B) maintain and provide for a period ending at the earlier of
(i) the expiration of the remaining term of the Executive's
employment which remained immediately prior to the Executive's
Date of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the
Executive is entitled under the terms of such employment to
benefits substantially similar to those described in this
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subparagraph (B)), at no cost to the Executive, the
Executive's continued participation in all group insurance,
life insurance, health and accident and disability plans in
which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that in the event
that the Executive's participation in any plan, program or
arrangement as provided in this subparagraph (B) is prohibited
by the terms of the plan or by the Employer for legal or other
bona fide reasons, or during such period any such plan,
program or arrangement is discontinued or the benefits
thereunder are materially reduced for all employees, the
Employer shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would have
received had his employment continued throughout such period
to the extent such benefits can be provided at a commercially
reasonable cost. In the event such benefits cannot be provided
at a commercially reasonable cost, the Employer shall pay the
Executive that portion of the premiums or other costs of such
plans allocable to the Executive in the year prior to the Date
of Termination for the period set forth in this subparagraph
(B). In no event, however, shall these benefits terminate or
reduce the benefits that the Executive is entitled to pursuant
to Section 3(d) hereof. Nothing provided for in this
subparagraph (B) shall be construed as to provide for
continued participation by the Executive in any stock option
or restricted stock plan or any cash incentive or bonus plan
of the Employer.
6. Change in Control of the Corporation. In the event of a Change in
Control of the Corporation, then the Employer shall, subject to the provisions
of Section 7 hereof, if applicable:
(A) immediately pay to the Executive, in a single lump sum
payment, a cash amount equal to three (3) times the
Executive's Average Annual Compensation as of the date of the
Change in Control of the Corporation, minus one dollar, and
(B) maintain and provide for a period ending at the earlier
of(i) the expiration of thirty-six (36) months from the date a
Change in Control of the Corporation has occurred or (ii) the
date of the Executive's full-time employment by another
employer provided that the Executive is entitled under the
terms of such employment to benefits substantially similar to
those described in this subparagraph (B)), at no cost to the
Executive, the Executive's continued participation in all
group insurance, life insurance, health and accident and
disability plans in which the Executive was entitled to
participate immediately prior to the date of the occurrence of
the Change in Control of the Corporation, provided that in the
event that the Executive's participation in any plan, program
or arrangement as provided in this subparagraph (B) is
prohibited by the terms of the plan or by the Employer for
legal or other bona fide reasons, or during such period any
such plan, program or arrangement is discontinued or the
benefits thereunder are materially reduced for all employees,
the Employer shall arrange to provide the Executive with
benefits substantially similar to those which the Executive
would have received had his employment continued throughout
such period to the extent such benefits can be provided at a
commercially
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reasonable cost. In the event such benefits cannot be provided
at a commercially reasonable cost, the Employer shall pay the
Executive that portion of the premiums or other costs of such
plans allocable to the Executive in the year prior to the Date
of Termination for the period set forth in this subparagraph
(B). In no event, however, shall these benefits terminate or
reduce the benefits that the Executive is entitled to pursuant
to Section 3(d) hereof. Nothing provided for in this
subparagraph (B) shall be construed as to provide for
continued participation by the Executive in any stock option
or restricted stock plan or any cash incentive or bonus plan
of the Employer.
7. Limitation of Benefits under Certain Circumstances. If the payments
and benefits pursuant to Section 6 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the
Employer, would constitute a "parachute payment" under Section 280G of the Code,
the payments and benefits pursuant to Section 6 hereof shall be reduced, in the
manner determined by the Executive, by the amount, if any, which is the minimum
necessary to result in no portion of the payments and benefits under Section 6
being non-deductible to the Employer pursuant to Section 280G of the Code and
subject to the excise tax imposed under Section 4999 of the Code. The
determination of any reduction in the payments and benefits to be made pursuant
to Section 6 shall be based upon the opinion of independent tax counsel selected
by the Employers' independent public accountants and paid by the Employer. Such
counsel shall be reasonably acceptable to the Employer and the Executive; shall
promptly prepare the foregoing opinion, but in no event later than thirty (30)
days from the Date of Termination; and may use such actuaries as such counsel
deems necessary or advisable for the purpose. In the event that the Employer
and/or the Executive do not agree with the opinion of such counsel, (i) the
Employer shall pay to the Executive the maximum amount of payments and benefits
pursuant to Section 5, as selected by the Executive, which such opinion
indicates that there is a high probability do not result in any of such payments
and benefits being non-deductible to the Employer and subject to the imposition
of the excise tax imposed under Section 4999 of the Code and (ii) the Employer
may request, and Executive shall have the right to demand that the Employer
request, a ruling from the IRS as to whether the disputed payments and benefits
pursuant to Section 6 hereof have such consequences. Any such request for a
ruling from the IRS shall be promptly prepared and filed by the Employer, but in
no event later than thirty (30) days from the date of the opinion of counsel
referred to above, and shall be subject to Executive's approval prior to filing,
which shall not be unreasonably withheld. The Employer and Executive agree to be
bound by any ruling received from the IRS and to make appropriate payments to
each other to reflect any such rulings, together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained
herein shall result in a reduction of any payments or benefits to which the
Executive may be entitled upon termination of employment under any circumstances
other than as specified in this Section 7, or a reduction in the payments and
benefits specified in Section 6 below zero.
8. Mitigation; Covenant Not To Compete; Exclusivity of Benefits.
(a) The Executive shall not be required to mitigate the amount of any
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 after the Date of
Termination or otherwise.
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(b) The Executive hereby agrees that, following the termination of his
employment under this Agreement for any reason, other than following a Change in
Control of the Corporation, he will not, for a period of time equal to what
would have been the then remaining term of this Agreement absent his termination
of employment, directly or indirectly and in any way, whether as principal or as
director, officer, employee, consultant, agent, partner or stockholder to
another entity (other than by the ownership of a passive investment interest of
not more than 5% in a company with publicly traded equity securities), (i) own,
manage, operate, control, be employed by, participate in, or be connected in any
manner with the ownership, management, operation or control of any business
located within 50 miles of any of the branch offices of the Corporation's
subsidiary banks that are in existence during the term of this Agreement and
prior to a Change in Control of the Corporation that competes with any business
of the Employer; (ii) interfere with, solicit on behalf of another or attempt to
entice away from the Employer any project, loan, arrangement, agreement,
financing or customer of the Employer or any contract, agreement or arrangement
that the Employer is actively negotiating with any other party, or any
prospective business opportunity that the Employer has identified; or (iii) for
himself or another, hire, attempt to hire, or assist in or facilitate in any way
the hiring of any employee of the Employer.
(c) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employer pursuant to employee benefit plans
of the Employer or otherwise.
9. Withholding. All payments required to be made by the Employer
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employer may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
10. Assignability. The Employer may assign this Agreement and their
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Employer may hereafter merge or
consolidate or to which the Employer may transfer all or substantially all of
their assets, if in any such case said corporation, bank or other entity shall
by operation of law or expressly in writing assume all obligations of the
Employer hereunder as fully as if it had been originally made a party hereto,
but may not otherwise assign this Agreement or their rights and obligations
hereunder. The Executive may not assign or transfer this Agreement or any rights
or obligations hereunder.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
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To the Employer: C. Xxxxxx Xxxxx
Chairman of the Board of Directors
Community Bank Shares of Indiana, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxxxx 00000
To the Executive: Xxxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
12. Amendment; Waiver. No provisions of this Agreement may be modified,
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 Employer to sign on
their behalf. No waiver by any party hereto at any time of any breach by any
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
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of Indiana.
14. Nature of Obligations. Nothing contained herein shall create or
require the Employer 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 Employer hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employer.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section l8~) of the Federal Deposit Insurance Act (12 U.S.C. ss.1828(k))
and any regulations promulgated thereunder.
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IN WITNESS WHEREOF, this Agreement has been executed on March 16th,
1999 and is effective as of May 20, 1998.
Attest: Community Bank Shares
of Indiana, Inc.
/s/ M. Xxxxx Xxxxxx By: /s/ C. Xxxxxx Xxxxx
-------------------------- -------------------------
M. Xxxxx Xxxxxx, Secretary C. Xxxxxx Xxxxx, Chairman
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxx
