Exhibit 10(5)
EMPLOYMENT AGREEMENT
This Agreement, made and dated as of December ___, 2001, by and between
The Michigan City Savings and Loan Association, an Indiana stock savings
association ("Employer"), and Xxxxxx X. Xxxxx, a resident of Xxxxxx County,
Indiana ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by Employer as its Treasurer and has made
valuable contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum compensation
from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee on
behalf of Employer on an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt by any person to obtain
control of Employer or City Savings Financial Corporation (the "Holding
Company"), the Indiana corporation which owns all of the issued and outstanding
capital stock of Employer;
WHEREAS, Employer recognizes that when faced with a proposal for a change
of control of Employer or the Holding Company, Employee will have a significant
role in helping the Boards of Directors assess the options and advising the
Boards of Directors on what is in the best interests of Employer, the Holding
Company, and its shareholders, and it is necessary for Employee to be able to
provide this advice and counsel without being influenced by the uncertainties of
his own situation;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual covenants
and undertakings herein contained and the continued employment of Employee by
Employer as its Treasurer, Employer and Employee, each intending to be legally
bound, covenant and agree as follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's Treasurer, and Employee
accepts such employment.
2. Employee agrees to serve as Employer's Treasurer and to perform such
duties in that office as may reasonably be assigned to him by Employer's Board
of Directors; provided, however, that such duties shall be performed in or from
the offices of Employer currently located at Michigan City, Indiana, and shall
be of the same character as those previously performed by Employee and generally
associated with the office held by Employee. Employee shall not be required to
be absent from the location of the principal executive offices of Employer on
travel status or otherwise more than 45 days in any calendar year. Employer
shall not, without the written consent of Employee, relocate or transfer
Employee to a location more than 30 miles from Employer's primary office.
Employee shall render services to Employer as Treasurer in substantially the
same manner and to substantially the same extent as Employee rendered his
services to Employer before the date hereof. While employed by Employer,
Employee shall devote substantially all his business time and efforts to
Employer's business during regular business hours and shall not engage in any
other related business. Employer shall nominate the Employee to successive terms
as a member of Employer's Board of Directors and shall use its best efforts to
elect and re-elect Employee as a member of such Board.
3. The term of this Agreement shall begin on the date of completion of the
conversion of Employer from mutual to stock form (the "Effective Date") and
shall end on the date which is three years following such date subject to
earlier termination as provided herein. Beginning on the first anniversary of
the Effective Date, and on each anniversary thereafter, the term of this
Agreement shall be extended for a period of one year in addition to the
then-remaining term provided that (1) Employer has not given notice tot he
Employee in writing at least 90 days prior to such anniversary that the term of
this Agreement shall not be extended farther, and (2) prior to such anniversary,
the Board of Directors of Employer explicitly reviews and approves the extension
(such term, including any extension thereof shall herein be referred to as the
"Term").
4. Employee shall receive an annual salary of ("Base Compensation") payable
at regular intervals in accordance with Employer's normal payroll practices now
or hereafter in effect. Employer may consider and declare from time to time
increases in the salary it pays Employee and thereby increases in his Base
Compensation. Prior to a Change of Control, Employer may also declare decreases
in the salary it pays Employee if the operating results of Employer are
significantly less favorable than those for the fiscal year ending June 30,
2001, and Employer makes similar decreases in the salary it pays to other
executive officers of Employer. After a Change in Control, Employer shall
consider and declare salary increases based upon the following standards:
Inflation;
Adjustments to the salaries of other senior management personnel; and
Past performance of Employee and the contribution which Employee makes to
the business and profits of Employer during the Term.
Any and all increases or decreases in Employee's salary pursuant to this section
shall cause the level of Base Compensation to be increased or decreased by the
amount of each such increase or decrease for purposes of this Agreement. The
increased or decreased level of Base Compensation as provided in this section
shall become the level of Base Compensation for the remainder of the Term of
this Agreement until there is a further increase or decrease in Base
Compensation as provided herein.
5. So long as Employee is employed by Employer pursuant to this Agreement,
he shall be included as a participant in all present and future employee
benefit, retirement, and compensation plans generally available to employees of
Employer, consistent with his Base Compensation and his position as Treasurer of
Employer, including, without limitation, Employer's or the Holding Company's
401(k) plan, Stock Option Plan, Recognition and Retention Plan and Trust,
Employee Stock Ownership Plan, and hospitalization, disability and group life
insurance plans, each of which Employer agrees to continue in effect on terms no
less favorable than those currently in effect as of the date hereof (as
permitted by law) during the Term of this Agreement unless prior to a Change of
Control the operating results of Employer are significantly less favorable than
those for the fiscal year ending June 30, 2001, and unless (either before or
after a Change of Control) changes in the accounting, legal, or tax treatment of
such plans would adversely affect Employer's operating results or financial
condition in a material way, and the Board of Directors of Employer or the
Holding Company concludes that modifications to such plans need to be made to
avoid such adverse effects.
6. So long as Employee is employed by Employer pursuant to this Agreement,
Employee shall receive reimbursement from Employer for all reasonable business
expenses incurred in the course of his employment by Employer, upon submission
to Employer of written vouchers and statements for reimbursement. Employee shall
attend, upon the prior approval of Employer's Board of Directors, those
professional meetings, conventions, and/or similar functions that he deems
appropriate and useful for purposes of keeping abreast of current developments
in the industry and/or promoting the interests of Employer. So long as Employee
is employed by Employer pursuant to the terms of this Agreement, Employer shall
continue in effect vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in effect on the
date hereof. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall be entitled to office space and working conditions no
less favorable than were in effect for him on the date hereof.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in subsections 9(A), 9(B), 9(C) and
9(D) hereof, Employee's employment by Employer may be terminated prior to the
expiration of the Term of this Agreement as follows:
(A) Employer, by action of its Board of Directors and upon written
notice to Employee, may terminate Employee's employment with
Employer immediately for cause. For purposes of this subsection
7(A), "cause" shall be defined as (i) personal dishonesty, (ii)
incompetence, (iii) willful misconduct, (iv) breach of fiduciary
duty involving personal profit, (v) intentional failure to
perform stated duties, (vi) willful violation of any law, rule,
or regulation (other than traffic violations or similar offenses)
or final cease-and-desist order, or (vii) any material breach of
any provision of this Agreement.
(B) Employer, by action of its Board of Directors may terminate
Employee's employment with Employer without cause at any time;
provided, however, that the "date of termination" for purposes of
determining benefits payable to Employee under subsection 8(B)
hereof shall be the date which is 60 days after Employee receives
written notice of such termination.
(C) Employee, by written notice to Employer, may terminate his
employment with Employer immediately for cause. For purposes of
this subsection 7(C), "cause" shall be defined as (i) any action
by Employer's Board of Directors to remove the Employee as
Treasurer of Employer, except where the Employer's Board of
Directors properly acts to remove Employee from such office for
"cause" as defined in subsection 7(A) hereof, (ii) any action by
Employer's Board of Directors to materially limit, increase, or
modify Employee's duties and/or authority as Treasurer of
Employer, (iii) any failure of Employer to obtain the assumption
of the obligation to perform this Agreement by any successor or
the reaffirmation of such obligation by Employer, as contemplated
in section 20 hereof; or (iv) any material breach by Employer of
a term, condition or covenant of this Agreement.
(D) Employee, upon sixty (60) days written notice to Employer, may
terminate his employment with Employer without cause.
(E) Employee's employment with Employer shall terminate in the event
of Employee's death or disability. For purposes hereof,
"disability" shall be defined as Employee's inability by reason
of illness or other physical or mental incapacity to perform the
duties required by his employment for any consecutive One Hundred
Eighty (180) day period, provided that notice of any termination
by Employer because of Employee's "disability" shall have been
given to Employee prior to the full resumption by him of the
performance of such duties.
8. In the event of termination of Employee's employment with Employer
pursuant to section 7 hereof, compensation shall continue to be paid by Employer
to Employee as follows:
(A) In the event of termination pursuant to subsection 7(A) or 7(D),
compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and compensation
plans and other perquisites as provided in sections 5 and 6
hereof, through the date of termination specified in the notice
of termination. Any benefits payable under insurance, health,
retirement and bonus plans as a result of Employee's
participation in such plans through such date shall be paid when
due under those plans. The date of termination specified in any
notice of termination pursuant to subsection 7(A) shall be no
later than the last business day of the month in which such
notice is provided to Employee.
(B) In the event of termination pursuant to subsection 7(B) or 7(C),
compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and compensation
plans and other perquisites as provided in sections 5 and 6
hereof, through the date of termination specified in the notice
of termination. Any benefits payable under insurance, health,
retirement and bonus plans as a result of Employee's
participation in such plans through such date shall be paid when
due under those plans. In addition, Employee shall be entitled to
continue to receive from Employer his Base Compensation at the
rates in effect at the time of termination (1) for three
additional l2-month periods if the termination follows a Change
of Control or (2) for the remaining Term of the Agreement if the
termination does not follow a Change of Control. In addition,
during such periods, Employer will maintain in full force and
effect for the continued benefit of Employee each employee
welfare benefit plan and each employee pension benefit plan (as
such terms are defined in the Employee Retirement Income Security
Act of 1974, as amended) in which Employee was entitled to
participate immediately prior to the date of his termination,
unless an essentially equivalent and no less favorable benefit is
provided by a subsequent employer of Employee. If the terms of
any employee welfare benefit plan or employee pension benefit
plan of Employer do not permit continued participation by
Employee, Employer will arrange to provide to Employee a benefit
substantially similar to, and no less favorable than, the benefit
he was entitled to receive under such plan at the end of the
period of coverage. For purposes of this Agreement, a "Change of
Control" shall mean an acquisition of "control" of the Holding
Company or of Employer within the meaning of 12 C.F.R.ss.574.4(a)
(other than a change of control resulting from a trustee or other
fiduciary holding shares of Common Stock under an employee
benefit plan of the Holding Company or any of its subsidiaries).
Notwithstanding anything to the contrary in the foregoing, any
benefits payable under this subsection 8(B) shall be subject to
the limitations on severance benefits set forth in Regulatory
Bulletin 27a of the Office of Thrift Supervision, as in effect on
the Effective Date.
(C) In the event of termination pursuant to subsection 7(E),
compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and compensation
plans and other perquisites as provided in sections 5 and 6
hereof, (i) in the event of Employee's death, through the date of
death, or (ii) in the event of Employee's disability, through the
date of proper notice of disability as required by subsection
7(E). Any benefits payable under insurance, health, retirement
and bonus plans as a result of Employer's participation in such
plans through such date shall be paid when due under those plans.
(D) Employer will permit Employee or his personal representative(s)
or heirs, during a period of three months following Employee's
termination of employment by Employer for the reasons set forth
in subsections 7(B) or (C), if such termination follows a Change
of Control, to require Employer, upon written request, to
purchase all outstanding stock options previously granted to
Employee under any Holding Company stock option plan then in
effect whether or not such options are then exercisable at a cash
purchase price equal to the amount by which the aggregate "fair
market value" of the shares subject to such options exceeds the
aggregate option price for such shares. For purposes of this
Agreement, the term "fair market value" shall mean the higher of
(1) the average of the highest asked prices for Holding Company
shares in the over-the-counter market as reported on the NASDAQ
system if the shares are traded on such system for the 30
business days preceding such termination, or (2) the average per
share price actually paid for the most highly priced 1% of the
Holding Company shares acquired in connection with the Change of
Control of the Holding Company by any person or group acquiring
such control.
9. In order to induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) While Employee is employed by Employer and for a period of three
years after termination of such employment for reasons other than
those set forth in subsections 7(B) or (C) of this Agreement,
Employee shall not divulge or furnish any trade secrets (as
defined in IND. CODE ss. 24-2-3-2) of Employer or any
confidential information acquired by him while employed by
Employer concerning the policies, plans, procedures or customers
of Employer to any person, firm or corporation, other than
Employer or upon its written request, or use any such trade
secret or confidential information directly or indirectly for
Employee's own benefit or for the benefit of any person, firm or
corporation other than Employer, since such trade secrets and
confidential information are confidential and shall at all times
remain the property of Employer.
(B) For a period of three years after termination of Employee's
employment by Employer for reasons other than those set forth in
subsections 7(B) or (C) of this Agreement, Employee shall not
directly or indirectly provide banking or bank-related services
to or solicit the banking or bank-related business of any
customer of Employer at the time of such provision of services or
solicitation which Employee served either alone or with others
while employed by Employer in any city, town, borough, township,
village or other place in which Employee performed services for
Employer while employed by it, or assist any actual or potential
competitor of Employer to provide banking or bank-related
services to or solicit any such customer's banking or
bank-related business in any such place.
(C) While Employee is employed by Employer and for a period of one
year after termination of Employee's employment by Employer for
reasons other than those set forth in subsections 7(B) or (C) of
this Agreement, Employee shall not, directly or indirectly, as
principal, agent, or trustee, or through the agency of any
corporation, partnership, trade association, agent or agency,
engage in any banking or bank-related business which competes
with the business of Employer as conducted during Employee's
employment by Employer within a radius of twenty-five (25) miles
of Employer's main office.
(D) If Employee's employment by Employer is terminated for reasons
other than those set forth in subsections 7(B) or (C) of this
Agreement, Employee will turn over immediately thereafter to
Employer all business correspondence, letters, papers, reports,
customers' lists, financial statements, credit reports or other
confidential information or documents of Employer or its
affiliates in the possession or control of Employee, all of which
writings are and will continue to be the sole and exclusive
property of Employer or its affiliates.
If Employee's employment by Employer is terminated during the Term of this
Agreement for reasons set forth in subsections 7(B) or (C) of this Agreement,
Employee shall have no obligations to Employer with respect to trade secrets,
confidential information or noncompetition under this section 9.
10. Any termination of Employee's employment with Employer as contemplated
by section 7 hereof, except in the circumstances of Employee's death, shall be
communicated by written "Notice of Termination" by the terminating party to the
other party hereto. Any "Notice of Termination" pursuant to subsections 7(A),
7(C) or 7(E) shall indicate the specific provisions of this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination.
11. If Employee is suspended and/or temporarily prohibited from
participating in the conduct of Employer'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) or (g)(1)), Employer'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, Employer shall (i) pay 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 its obligations
which were suspended.
12. If Employee is removed and/or permanently prohibited from participating
in the conduct of Employer'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 Employer under this Agreement shall terminate as of
the effective date of the order, but vested rights of the parties to the
Agreement shall not be affected.
13. If Employer 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 shall not affect any vested rights of
Employer or Employee.
14. All obligations under this Agreement shall be terminated except to the
extent determined that the continuation of the Agreement is necessary for the
continued operation of Employer: (i) by the Director of the Office of Thrift
Supervision or his or her designee (the "Director"), at the time the Federal
Deposit Insurance Corporation enters into an agreement to provide assistance to
or on behalf of Employer under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act; or (ii) by the Director at the time the Director
approves a supervisory merger to resolve problems related to operation of
Employer or when Employer is determined by the Director to be in an unsafe and
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
15. Anything in this Agreement to the contrary notwithstanding, in the
event that the Employer's independent public accountants determine that any
payment by the Employer to or for the benefit of the Employee, whether paid or
payable pursuant to the terms of this Agreement, would be non-deductible by the
Employer for federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount payable to or for
the benefit of the Employee pursuant to this Agreement shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this section 15, the "Reduced
Amount" shall be the amount which maximizes the amount payable without causing
the payment to be non-deductible by the Employer because of Section 280G of the
Code. Any payments made to Employee pursuant to this Agreement or otherwise, are
subject to and conditional upon their compliance with 12 U.S.C. ss.1828(k) and
any regulations promulgated thereunder, to the extent applicable to such
parties.
16. If a dispute arises regarding the termination of Employee pursuant to
section 7 hereof or as to the interpretation or enforcement of this Agreement
and Employee obtains a final judgment in his favor in a court of competent
jurisdiction or his claim is settled by Employer prior to the rendering of a
judgment by such a court, all reasonable legal fees and expenses incurred by
Employee in contesting or disputing any such termination or seeking to obtain or
enforce any right or benefit provided for in this Agreement or otherwise
pursuing his claim shall be paid by Employer, to the extent permitted by law.
17. Should Employee die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Employee's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Employee's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
18. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employee: Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxxx
XxXxxxx, Xxxxxxx 00000
If to Employer: Michigan City Savings and Loan Association
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxx 00000-0000
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
19. The validity, interpretation, and performance of this Agreement shall
be governed by the laws of the State of Indiana, except as otherwise required by
mandatory operation of federal law.
20. Employer shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of Employer, by agreement in form and substance satisfactory
to Employee to expressly assume and agree to perform this Agreement in the same
manner and same extent that Employer would be required to perform it if no such
succession had taken place. Failure of Employer to obtain such agreement prior
to the effectiveness of any such succession shall be a material intentional
breach of this Agreement and shall entitle Employee to terminate his employment
with Employer pursuant to subsection 7(C) hereof. As used in this Agreement,
"Employer" shall mean Employer as hereinbefore defined and any successor to its
business or assets as aforesaid.
21. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Employee and Employer. No waiver by either party hereto at any time of any
breach by the 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 dissimilar provisions or conditions at the same or any prior
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
22. The invalidity or unenforceability of any provisions 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.
23. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
24. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in section 17 and section 20 above.
Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in section 17 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
and delivered as of the day and year first above set forth.
MICHIGAN CITY SAVINGS AND
LOAN ASSOCIATION
By:
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Xxxxxx X. Xxxxxxx, President
"Employer"
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Xxxxxx X. Xxxxx
"Employee"
The undersigned, City Savings Financial Corporation, sole shareholder of
Employer, agrees that if it shall be determined for any reason that any
obligations on the part of Employer to continue to make any payments due under
this Agreement to Employee is unenforceable for any reason, City Savings
Financial Corporation agrees to honor the terms of this Agreement and continue
to make any such payments due hereunder to Employee pursuant to the terms of
this Agreement.
CITY SAVINGS FINANCIAL CORPORATION
By:
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Xxxxxx X. Xxxxxxx, President
