EMPLOYMENT AGREEMENT (As Amended and Restated February 8, 2006)
EXHIBIT 10.1
EMPLOYMENT
AGREEMENT
(As Amended and Restated February 8, 2006)
(As Amended and Restated February 8, 2006)
This Employment Agreement (“Agreement”), which was entered into as of June 15, 2004,
by and between Royal American Bank (“Bank”) and Royal American Corporation (collectively, the
“Employer”) and Xxx Xxxxx (the “Employee”), is hereby amended and restated in its entirety.
Introduction
WHEREAS, the Employer desires to continue to employ the Employee, and the Employee
desires to continue to be employed by the Employer; and
WHEREAS, the Employer recognizes and desires to reward the unique contributions the Employee
has made to the Employer’s business, including the career risks and sacrifices undertaken to
create the enterprise and the outstanding leadership over more than ten (10) years resulting in
steady growth and profitability, and increased value to the shareholders; and
WHEREAS, the Employer has entered into that certain Agreement and Plan of Merger between
Midwest Banc Holdings, Inc. (“Company”) and Employer, dated February 8, 2006 (the “Merger
Agreement”); and
WHEREAS, immediately following the Closing (as defined in the Merger Agreement), the
“Employer” shall become the Company; and
WHEREAS, this amendment and restatement of the Agreement shall become effective immediately
prior to, and all changes contained herein shall be strictly contingent upon, the Closing (the
“Effective Time”).
NOW, THEREFORE, the Employer and Employee enter into this Agreement for the Employee’s
continued employment upon the terms and subject to the conditions of employment set forth herein.
Terms and Conditions
1. Employment
Term. The term of the Employee’s employment under this Agreement
shall commence on the date of this Agreement and end on November 1, 2010 (the “Term”). The
Agreement is subject to earlier termination by either party, provided such party provides three (3)
years notice of such party’s intent to terminate the Agreement. Such notice shall be in writing and
otherwise comply with the terms of Section 9 of the Agreement. In the event such notice is given by
either party, Employee shall continue to receive compensation and benefits as provided in Sections
3 and 4 of the Agreement for three (3) years, provided the Employee continues to work and perform
his duties to the satisfaction of the Employer. The Employee shall have a one-time option at the
end of the Term to either (i) terminate his employment and receive a lump sum payment equal to his
Base Salary as determined by the Employer’s Organization Committee and approved by the Board of
Directors for the last
calendar year in which he worked full-time, and Employer-paid health insurance coverage, to be no
less comprehensive than the health insurance coverage provided to all other employees, for the
Employee and his spouse (if the Employee is married at the end of the Term) until such time as the
Employee and his spouse reach age sixty-five (65) or such later date as necessary for Medicare
eligibility; or (ii) continue his employment on an at-will basis unless and until the parties
desire to negotiate a new employment agreement.
2. Duties and Responsibilities. The Employer agrees to continue to employ the
Employee as Chairman of the Board and Chief Executive Officer; provided, however, that as
of Closing, the Employee shall serve as the President and Chief Operating Officer of the
Company’s subsidiary, Royal American Bank and as Executive Vice President of Company,
and the Employee agrees to serve in such roles and to perform the services and functions relating
to such positions or otherwise reasonably incident to such positions. The Employee shall be
subject to the direction and supervision of the Board of Directors of the Employer, and following
the Closing, the Chief Executive of the Employer. The Employee shall devote his best efforts and
his full time and attention to the performance of his duties, subject to absences due to vacations
or temporary illness in accordance with the Employer’s general policies, and except that the
Employee may participate in governmental, educational or charitable activities or serve as a
director of one or more other companies so long as the Board of Directors of the Employer
determines that such activities do not interfere with the business of the Employer or the
performance of Employee’s duties under this Agreement. The employment relationship between the
parties shall be governed by the general employment policies, practices and rules of the Employer,
including without limitation the Employer’s handbook, except that when the express terms of this
Agreement differ from or are in conflict with the Employer’s general employment policies, practices
or rules, this Agreement shall control. Notwithstanding the foregoing, the Employee may at any
time request to work a reduced number of hours subject to the approval of the Board of Directors.
3. Compensation. As compensation for his services under the terms of this
Agreement, the Employee shall receive from the Employer an annual base salary of no less
than $275,000 per year (which shall be adjusted to $300,000 per year
as of the Effective Time)
to be determined and subject to periodic review by the Organization Committee and approved
by the Board of Directors payable in equal semi-monthly installments (hereinafter, “Base
Salary”). The Employee may also receive a bonus based on a bonus structure and
performance measures determined by the Organization Committee and Board of Directors;
provided, however, that as of the Effective Time, Employee shall be eligible for a maximum
bonus equal of to 70% of Base Salary, subject to performance measures the same as applicable
to the Chief Executive Officer of the Company. In the event the Board of Directors approves a
request by the Employee to reduce his hours as contemplated above, the Employee’s annual
salary may be reduced on a pro rata basis or as mutually agreed by the parties.
4. Fringe Benefits. The Employer shall furnish to the Employee such perquisites
and benefit programs which are currently furnished to executives of the Employer, for his
business use, as set forth in Schedule A, including life insurance, health and medical
insurance and retirement and savings plans and other perquisites and programs, as such plans,
perquisites
2
and programs may be amended from time to time. The Employer will pay for or reimburse the Employee
for reasonable dues and membership expenses in the Fiddlesticks Country Club (except for equity)
and Inverness Country Club, and all reasonable business expenses incurred at said Clubs. In
addition, the Employer will provide the Employee with an Infinity Q45 or comparable model
automobile. All expenses to be paid or reimbursed by the Employer will be subject to the
appropriate justification by the Employee and approval by the Employer.
5. Termination of Employment.
A. Termination Employer. In the event that the Employee’s employment is
terminated by the Employer prior to November 1, 2010, unless such termination by the
Employer is for Due Cause (as defined herein), the Employee shall continue receive the
compensation and benefits as provided in Sections 3 and 4 of the Agreement for three
(3) years, provided the Employee continues to work and perform his duties to the
satisfaction of the Employer. All other rights and benefits that the Employee may have
under any benefit plans or programs of the Employer shall be determined in accordance
with the terms and conditions of such plans or programs based upon the date of the
Employee’s actual termination of employment with the Employer.
B. For Due Cause. Nothing herein shall prevent the Employer from
terminating, without prior notice, the Employee for “Due Cause” (as hereinafter
defined), in which event the Employer shall have no obligation to make any payment to
the Employee under this Agreement other than an amount equal to his Base Salary on a
prorated basis to the date of termination. All other rights and benefits that the
Employee may have under any benefit plans or programs of the Employer shall be
determined in accordance with the terms and conditions of such plans or programs
based upon the date of the Employee’s actual termination of employment with the
Employer. For purposes of this Agreement, “Due Cause” means, based upon the good
faith determination of the Employer’s Board of Directors, (i) an act of dishonesty by
the Employee which is injurious to the Employer, (ii) a breach of the Employee’s
fiduciary duties as an officer or director of the Employer or (iii) a violation of law
or a breach of Sections 7 or 8 of this Agreement which is injurious to the Employer.
C. Disability. In the event the Employee suffers from a “Disability” (as
hereinafter defined), the Employee’s employment with Employer shall terminate on the
date on which the Disability occurs, but the Employee shall continue to receive the
Base Salary for a period of ninety (90) days from the date of termination and Employer-
paid health insurance coverage as described in Section 1 above for the Employee and
his spouse (if the Employee is married on the date of termination) until the Employee
and his spouse reach age sixty-five (65) or such later age as necessary for Medicare
eligibility. All other rights and benefits that the Employee may have under any
benefit plans or programs of the Employer shall be determined in accordance with the terms
and conditions of such plans or programs based upon the date of the Employee’s actual
termination of employment with the Employer. For purposes of this Agreement,
“Disability” shall mean the inability or incapacity (by reason of a
medically
3
determinable physical or mental impairment) of the Employee to perform the duties and
responsibilities related to the job or position with the Employer described in Section 2 of
this Agreement for a period that lasts, or that can reasonably be expected to last, more
than 180 days. Such inability or incapacity shall be documented to the reasonable
satisfaction of the Employer by appropriate correspondence from registered physicians
reasonably satisfactory to the Employer, and the Employee agrees to submit to an examination
by the Employer’s physicians for the purpose of making such determination.
D. Death. In the event of the death of the Employee, the Employee’s
employment with the Employer shall terminate on the date of death. The estate or
named beneficiary of the Employee shall continue to receive the Base Salary for a
period of ninety (90) from the date of termination. If the Employee is married at the
date of termination, the Employee’s spouse shall receive Employer-paid health
insurance coverage to be determined by the Employer until the spouse remarries or
reaches age sixty-five (65) or such later age as necessary for Medicare eligibility.
All other rights and benefits that the Employee (or his estate or named beneficiary) may
have under any benefit plans or programs of the Employer shall be determined in
accordance with the terms and conditions of such plans or programs based upon the
date of the Employee’s actual termination of employment with the Employer on the date
of death.
E. Termination by Employee. In the event that the Employee resigns from
or otherwise terminates his employment hereunder prior to November 1, 2010 without
giving the notice required in Section 1, the Employer shall have no obligation to make
any payment to the Employee under this Agreement other than an amount equal to his
Base Salary on a prorated basis to the date of termination of employment. All other
rights and benefits that the Employee may have under any benefit plans or programs of
the Employer shall be determined in accordance with the terms and conditions of such
plans or programs based upon the date of the Employee’s actual termination of
employment with the Employer.
6. Change in Control. For purposes of this Agreement, “Change in Control” shall mean
(i) the acquisition by any person or entity of a beneficial interest, direct or indirect, in
securities representing 25% or more of the Employer’s common stock in an eighteen-month period;
(ii) the reorganization, merger or consolidation of the Employer with another entity as a result
of which the current stockholders of the Employer after such merger or consolidation own less than
51% of the voting power in the surviving entity or of the Employer, or (iii) the liquidation or
dissolution of Employer or the sale of all or substantially all of the Employer’s assets;
provided, however, that the parties acknowledge and agree that the consummation of the
transactions contemplated by the Merger Agreement will not be deemed a “Change in Control” under
this Agreement. For purposes of this Agreement, “Good Reason” shall mean, without the Employee’s
express written consent, the occurrence of any of the following: (v) a significant adverse change
in the nature or scope of Employee’s position, duties or responsibilities as in effect immediately
after the Effective Time; (w) a relocation of
4
Employee’s principal office to an office that is more than thirty-five (35) highway miles from
Employee’s principal office immediately prior to the Effective
Time, unless such relocation does
not increase the actual distance required for Employee to commute from his home to the new place of
business by more than ten (10) miles; or (x) a reduction of the Employee’s annual salary to a rate
which is less than the Employee’s annual salary rate as of the Effective Time; (y) a breach of this
Agreement by the Employer; or (z) providing Employee incentive compensation opportunities which are
materially less favorable to Employee than the opportunities provided to Employee as of immediately
after the Effective Time (it being understood that incentive compensation is based upon performance
and that there are no minimum guaranteed amounts of actual incentive compensation). If following a
Change in Control of the Employer, the Employee is terminated by the Employer, or a related
employer, for reasons other than Cause, death or Disability, or the Employee voluntarily terminates
employment for “Good Reason” (as defined above), the Employer shall, without regard to the notice
period described in Section 1 above, receive the following:
A. A monthly payment equal to one twelfth (1/12) of the Employee’s
average total annual compensation for the last three (3) years
of full-time employment.
The Employee shall receive such monthly payments for a period of thirty-five (35)
months commencing the month his employment is terminated.
B. Employer-paid health insurance coverage as described in Section 1 above
for the Employee and his spouse (if the employee is married on the date of termination)
until the Employee and his spouse reach age sixty-five (65) or such later age as
necessary for Medicare eligibility.
In the event the Employee’s employment is terminated due to a Change in Control, receipt of the
payments and benefits in this Section is conditioned upon the Employee’s compliance with the
restrictive covenants contained in the following Sections 7 or 8.
7. Non-Competition;
Non-Solicitation.
A.
Termination by Employee. In the event the Employee terminates his
employment prior to November 1, 2010 without notice, or opts to take a lump sum payment at
the end of the Term as provided in Section 1, the Employee covenants that during his
employment and for a period of three (3) years thereafter, he shall not (i) directly or
indirectly participate or engage in management or operational aspects of, or acquire a
financial interest in, any bank or financial institution within fifty (50) miles of any
then-existing facility of the Employer; (ii) directly or indirectly, on behalf of any
business other than the Employer, engage or assist in offering employment to or encourage
the departure of an employee of the Employer; or (iii) disparage the Employer publicly or
to any person or entity with which the Employer has a present or prospective business
relationship. The time period for the covenants contained herein shall not begin or
continue to run for any period during which the Employee is in breach of any of the
covenants set forth herein.
5
B. Termination for Due Cause. In the event the Employer terminates the
Employee’s employment for Due Cause, the Employee covenants that during his
employment and for a period of one (1) year thereafter, he shall not (i) directly or
indirectly participate or engage in management or operational aspects of, or acquire a
financial interest in, any bank or financial institution; (ii) directly or indirectly, on
behalf of any business other than the Employer, engage or assist in offering
employment to or encourage the departure of an employee of the Employer;
(iii) directly or indirectly solicit or assist in the solicitation of any customer of the
Employer for the purpose of providing banking or financial services from any business
other than Employer or (iv) disparage the Employer publicly or to any person or entity
with which the Employer has a present or prospective business relationship. The time
period for the covenants contained herein shall not begin or continue to run for any
period during which the Employee is in breach of any of the covenants set forth herein.
C. Change in Control. In the event the Employee’s employment terminates
due to a Change in Control, the Employee covenants that during his employment and
for a period of thirty-five (35) months thereafter, he shall not (i) directly or indirectly
participate or engage in management or operational aspects of, or acquire a financial
interest in, any bank or financial institution; (ii) directly or indirectly, on behalf of any
business other than the Employer, engage or assist in offering employment to or
encourage the departure of an employee of the Employer; (iii) directly or indirectly
solicit or assist in the solicitation of any customer of the Employer for the purpose of
providing banking or financial services from any business other than Employer or
(iv) disparage the Employer publicly or to any person or entity with which the
Employer has a present or prospective business relationship. The time period for the
Covenants contained herein shall not begin or continue to run for any period during
which the Employee is an breach of any of the covenants set forth herein.
8. Confidential information. The Employee further covenants that during his
employment and thereafter, the Employee shall not use or disclose (except in the performance
of his duties hereunder) any trade secrets or other confidential information of the Employer,
except to the extent required by order of a court or governmental agency to the extent that such
disclosure is made under seal or with sufficient notice to the Employer so as to allow the
Employer to seek a protective order. Notwithstanding anything in this Agreement to the
contrary, if the Employee violates any of the provisions of this Section 8 or the preceding
Section 7, in addition to all appropriate legal and equitable remedies, the Employer shall have
no further payment obligations under this Agreement.
9. Notices. All notices, requests, demands and other communications given under
or by reason of this Agreement shall be in writing and shall be deemed given when delivered in
person or mailed by certified mail (return receipt requested), postage prepaid, addressed as
follows (or to such other address as a party may specify by notice pursuant to this provision):
6
| A. | If to the Employer, addressed to it at: | |||
| Royal American Corporation | ||||
| Board of Directors | ||||
| 0000 Xxxx Xxxxxxxx Xxxxxxx | ||||
| Xxxxxxxxx, Xxxxxxxx 00000-0000 | ||||
| and | ||||
| Royal American Bank | ||||
| Board of Directors | ||||
| 0000 Xxxx Xxxxxxxx Xxxxxxx | ||||
| Xxxxxxxxx, Xxxxxxxx 00000-0000 | ||||
| B. | If to the Employee, addressed to him at: | |||
| X. X. Xxxxx | ||||
| 000 Xxxxxxxx Xx. | ||||
| Xxxxxxxxx, XX 00000 | ||||
| JJ. Xxxxx | ||||
| c/o Xx. Xxxxxxx X. Xxxxxx | ||||
| Adducci, Dorf, Xxxxxx, Xxxxxxxx & Xxxxxxxxxxx, P.C. | ||||
| 000 X. Xxxxxxxx Xxx., Xxxxx 00 | ||||
| Xxxxxxx, XX 00000 |
10. Survival of Provisions. The provisions of Sections 7 or 8 of this Agreement
shall survive the termination of the Employee’s employment with the Employer and the
expiration or termination of this Agreement.
11. Controlling Law. The execution, validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws of the State of
Illinois.
12. Entire
Agreement; Amendments; Waivers. This Agreement contains the entire
agreement between the Employee and the Employer relating to the matters contained herein
and supercedes all prior agreements and understandings, oral or written, between the
Employee and the Employer with respect to the subject matter hereof unless otherwise
expressly provided herein. This Agreement may be amended, modified or supplemented, but
only in writing signed by each of the parties hereto. Any terms of this Agreement may be
waived only with the written consent of the party sought to be bound, and the waiver by either
party to this Agreement of a breach of any provision of the Agreement by the other party shall
not operate or be construed as a waiver by such party of any subsequent breach by such other
party.
13. Reformation and Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such a manner
as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties. If
such modification is not possible, such provision shall be severed from this Agreement, and in
7
either case the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
14. Assignments. The Employer may assign this Agreement to any affiliate of the
Employer or any person or entity succeeding to all or substantially all of the business interests
of the Employer by merger or otherwise and the Employee understands and agrees that this
Agreement will be assigned or transferred to the Company in connection with the
consummation of the transactions contemplated by the Merger Agreement. The rights and
obligations of the Employee under this Agreement are personal to him, and no such rights,
benefits or obligations shall be subject to voluntary or involuntary alienation, assignment or
transfer, except as otherwise expressly contemplated in this Agreement.
15. Effect of Agreement. Subject to the provisions of Section 14 of the Agreement
with respect to assignments, this Agreement shall be binding upon the Employee and his heirs,
executors, administrators, legal representatives and assigns and upon the Employer and its
respective successors and assigns, except as otherwise expressly contemplated in this
Agreement.
16. Injunctive
Relief; Attorneys’ Fees. The Employee understands and agrees that
monetary damages may not be an adequate remedy for the breach of this Agreement, including
but not limited to the covenants in Sections 7 or 8, and that the Employer has the right to seek
equitable relief including injunction and specific performance and any other appropriate
equitable or legal relief for the enforcement of his obligations hereunder.
17. Exercise of Rights and Remedies. The rights and remedies in this Agreement
shall not be exclusive, but are intended to be cumulative with all other rights and remedies of
the Employer, whether under this Agreement, any other agreement, law or otherwise. No
delay of or omission in the exercise of any right, power or remedy accruing to any party as a
result of any breach or default by any other party under this Agreement shall impair any such
right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later.
18. Execution. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all which together shall constitute but one and the
same instrument.
19. Failure to Close. The parties agree that this amendment and restatement of the
Agreement shall become effective as of the Effective Time (as defined in the recitals hereto);
provided, however, that if the Merger Agreement is terminated, this amendment and
restatement of the Agreement shall also automatically and simultaneously terminate and the
Agreement shall remain in full force and effect absent such amendment and restatement.
20. Internal Revenue Code Section 409A. Notwithstanding anything contained
herein to the contrary, if at the time of a termination of employment, (i) Employee is a
“specified employee” as defined in Internal Revenue Code Section 409A, and the regulations
and guidance thereunder in effect at the time of such termination (“409A”), and, (ii) any of the
8
payments or benefits provided hereunder may constitute “deferred compensation” under 409A, then,
and only to the extent required by such provisions, the date of payment of such payments or
benefits otherwise provided shall be delayed for a period of up to six (6) months following the
date of termination.
IN WITNESS WHEREOF, the Employee and the Employer have executed this Agreement effective as of
the date first above written.
| Employer: | Employee: | |||
| ROYAL AMERICAN CORPORATION | ||||
By: |
/s/ Xxxx Xxxx Xxxxxx | /s/ X.X. Xxxxx | ||
| Xxx Xxxxx | ||||
Its:
|
Executive Vice President | |||
| ROYAL AMERICAN BANK | ||||
By: |
/s/ Xxxx Xxxx Xxxxxx | |||
Its: |
Executive Vice President | |||
9
SCHEDULE A
Inverness Golf Club
| - | Annual dues, assessments and business-related expenses |
Fiddlesticks Country Club
| - | Annual dues, assessments and business-related expenses |
Private Health Club Membership
Company Car
| - | Infinity G45, or comparable model |
“Inside Director” Compensation authorized by the board
| - | currently 100 shares of stock (pursuant to the applicable director compensation program as may be in effect from time to time) |
Stock Appreciation Rights (SARs) Awards under the Royal American Corporation Long Term Stock
Appreciation Rights Executive Compensation Plan (as may be in
existence from time to time)
Annual Contribution to the “Choice Plan” (Successor Plan to the Split Dollar Life Insurance
Benefit) (as may be in existence from time to time)
Group Term Life Insurance
Health Insurance
Long Term Disability Insurance
401k/Profit Sharing
