MANAGEMENT CONTINUITY AGREEMENT
Exhibit 10.7
This Management Continuity Agreement (“Agreement”) is entered into this 21st day
of February, 2005 between Monarch Community Bancorp, Inc., a Maryland corporation (the “Company”),
and Xxxxx X. Xxxxxxxxx, Xx. (“Executive”).
WITNESSETH:
WHEREAS, the Executive is currently employed by the Company’s affiliate, Monarch Community
Bank (the “Bank”), as its Internal Auditor; and
WHEREAS, the Company desires to provide certain security to Executive in connection with a
change in control of the Company or the Bank;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and
other good and valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. Definition of Change in Control; Change in Control Period
1.1 Change in Control. For purpose of this Agreement, a “Change in Control” of the Company
shall be deemed to have occurred upon:
(A) any third person, including a “group” as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, shall become the beneficial owner of shares of the Company
with respect to which 25% or more of the total number of votes for the election of the Board
maybe cast;
(B) there occurs a change in control of the Bank within the meaning of the Home Owners
Loan Act of 1933 or 12 C.F.R. Part 574;
(C) as a result of, or in connection with, any merger or other business combination,
sale of assets or contested election, wherein the persons who were directors of the Company
before such transaction or event cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company; or
(D) the Company transfers substantially all of its assets to another corporation or
entity which is not an affiliate of the Company.
Notwithstanding the foregoing, a Change of Control will not be deemed to have occurred:
(A) solely because more than 25% of the combined voting power of the then outstanding
voting securities of the Company are acquired by (1) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of the Bank or
the Company, or (2) in the event of a merger or similar transaction involving the Company or
the Bank occurs and immediately following such transaction, persons who were shareholders of
the Company immediately prior to such transaction remain shareholders of the Company or other
party to the transaction in the same proportion as their previous ownership of stock; or
(B) if Executive agrees in writing that the transaction or event in question does not
constitute a Change of Control for the purposes of this Agreement.
1.2 Change in Control Period. The Change-in-Control Period shall mean the period commencing
on the date of a Change in Control and ending on the twelve (12) month anniversary of the date
thereof.
Section 2. Obligations of the Company upon Termination.
2.1 Other than for Cause, Death, Disability or Retirement. If, during the Change-in-Control
Period, Executive’s employment is terminated by the Company or the Bank other than for Cause (as
hereinafter defined), Death, Disability (as hereinafter defined), or Retirement (as hereinafter
defined) or if Executive terminates (his/her) employment for Good Reason (as hereinafter defined),
Executive shall receive:
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(A) (his/her) annual base salary for a period of twelve (12) months following the date
of termination in an amount not less than (his/her) base salary in effect immediately prior
to the Change in Control; plus
(B) Executive and Executive’s family shall continue to be provided, at the expense of
the Company, continuing health care coverage under health care programs in effect immediately
prior to the Change of Control (or health care programs substantially similar thereto) for a
period of twelve (12) months after the date of termination, provided that, to the extent
Executive paid a portion of the premium for such benefit while employed, Executive shall
continue to pay such portion during the period of continuation hereunder and provided
further, that if such benefit is subject to the health care continuation rules of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) then any period of
continuation hereunder shall be credited against the continuation rights under COBRA and
Executive will be required to complete all COBRA election and other forms.
2.2 Cause; Death; Disability; Retirement. If Executive’s employment is terminated by reason
of Death, Disability or Retirement during the Change-in-Control Period, this Agreement shall
terminate without further obligation to Executive or (his/her) legal representatives other than the
obligation to pay to Executive (his/her) annual base salary through the date of termination and to
provide Executive any other benefits which have accrued prior to the date of termination.
2.3 Cause. If Executive’s employment shall be terminated for Cause during the
Change-in-Control Period, this Agreement shall terminate without further obligations to Executive.
Section 3. Definitions.
3.1 Cause. For purposes of this Agreement, Cause shall mean termination due to Executive’s
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or to follow one or more specific written
directives of the Board, reasonable in nature and scope, 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 (which is not cured within thirty (30) days
after its occurrence and notice to Executive). Any determination of “Cause” as defined by this
Section 4.1 shall be determined by a majority vote of the Board of Directors of the Company or the
Bank.
3.2 Disability. “Disability” shall have the meaning as such term has under the Company’s
Long-Term Disability Plan.
3.3. Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of
any of the following events which have not been consented to in advance by Executive in writing:
(A) if Executive would be required to move (his/her) personal residence or perform
(his/her) principal executive functions more than twenty-five (25) miles from Executive’s
primary office as of the date immediately prior to the Change of Control;
(B) if the Company should fail to maintain Executive’s base salary or fail to maintain
employee benefit plans or arrangements generally comparable to those in place as of the date
immediately prior to the Change in Control, except to the extent that such reduction in
employee benefit plans is part of an overall adjustment in benefits for all employees of the
Company or the Bank; or
(C) if Executive would be assigned substantial duties and responsibilities other than
those normally associated with the position referenced in the preambles to this Agreement.
The preceding events shall only provide the basis for “Good Reason” if Executive provides notice of
such events within one hundred twenty (120) days of their occurrence in the manner required by
Section 5.1 of this Agreement.
3.4 Retirement. For purpose of this Agreement, termination of Executive’s employment based on
“Retirement” shall mean voluntary termination in accordance with the Company’s retirement policy,
including early retirement, generally applicable to the Company’s salaried employees or in
accordance with any retirement arrangement established with Executive’s consent.
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Section 4. Excise and Other Tax Ramifications.
4.1 Reduction in Excess Parachute Payments Tax Ramifications. In the event it shall be
determined that any payment made hereunder or pursuant to any other plan following a Change in
Control (whether paid or payable pursuant to the terms of this Agreement) would be subject to the
excise tax imposed in Section 4999 of the Internal Revenue Code of 1986 (the “Code”), then payments
pursuant to this Agreement or payments under any other agreement or plan that are treated as being
contingent upon a change in control under Section 280G of the Code shall be reduced to the maximum
amount that may be paid to Executive or for (his/her) benefit without any such payment constituting
an “parachute payment,” as defined by Section 280G of the Code. The determination of the maximum
amount payable to Executive or for (his/her) benefit shall be made by an accounting firm mutually
acceptable to Executive and the Company, and unless Executive directs otherwise, payments that are
considered to be partially contingent upon a change in control shall be the last payments to be
reduced.
4.2 Section 162(m). Should payments be precluded from deduction by the Company under Section
162(m) of the Code, the Company may defer until the first day of the tax year following the year in
which determination is made that payments will be non-deductible under 162(m) (the “Determination
Year”) only those amounts necessary to maintain the tax deductibility of compensation paid to
Executive in the Determination Year.
Section 5. Administration of the Agreement.
5.1 Notice of Termination. Any termination by the Company or by Executive shall be
communicated by a written notice to the other party hereto and shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon by the party, shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for termination
of Executive’s employment under the provision indicated and the date of termination.
5.2 Date of Termination. The date of termination shall mean:
(A) if Executive’s employment is terminated by the Executive for Good Reason, the date
of the receipt of the notice contemplated by Section 5.1 hereof;
(B) if Executive’s employment is terminated by the Company or the Bank other than for
Death, Disability or Retirement, the date of termination shall be the date on which the
Company or the Bank notifies Executive of the termination; and
(C) if Executive’s employment is terminated by reason of Death, Disability or
Retirement, the date of termination shall be the date of Executive’s Death, Disability or
Retirement, as the case may be.
Section 6. Arbitration.
(A) In the event of dispute under this Agreement, the parties agree pursuant to MCLA
600.5001; XXX 00X.0000, et seq., to binding arbitration in accordance with
the rules of the American Arbitration Association (“AAA”) in effect at the time a demand for
arbitration of the dispute is made, with the place of arbitration being Coldwater, Michigan.
The prevailing party in any such arbitration shall be entitled to recover from the other
party all expenses for attorneys, fees and costs incurred by the prevailing party in
conjunction with the arbitration proceedings. The decision and award of the arbitrator made
under the AAA rules shall be exclusive, final and binding on all parties, their heirs,
representatives, affiliates, successors and assigns. It is further agreed that any
arbitration award may be certified to the Branch County Circuit Court which shall render a
judgment upon the award made pursuant to said arbitration;
(B) Limited civil discovery shall be permitted for the production of documents and the
taking of depositions, provided, however, that no party is permitted to take the deposition
of more than three witnesses except by agreement of the other party or upon order of the
arbitrator pursuant to the motion of a party. Subject to the foregoing limitations,
discovery shall be conducted in accordance with the Michigan Court Rules with any enforcement
issues resolved by the arbitrator;
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(C) The arbitration and all proceedings, discovery and any award of the arbitrator, are
confidential. Neither the parties nor the arbitrator shall disclose any information gained
during the course of the arbitration or any person or entity who is not a party to the
arbitration unless permitted by law. Attendance at the arbitration shall be limited to the
parties, counsel and those called as witnesses; and
(D) Executive and the Company acknowledge that each has had the opportunity to consult
with counsel of choice before signing this agreement, and Executive and the Company each
hereby knowingly and voluntarily, without coercion, WAIVES ALL RIGHTS TO TRIAL BY JURY or all
disputes between them and instead agrees to binding arbitration.
Section 7. Successors and Assigns. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company which shall acquire, directly or indirectly,
by merger, consolidation, purchase or otherwise, all or substantially all of the assets of the
Company. Since the Executive’s services are the unique and personal skills of Executive, Executive
shall be precluded from assigning or delegating his rights or duties hereunder without first
obtaining the written consent of the Company.
Section 8. Amendments. No amendments or additions to this Agreement shall be binding upon the
parties hereto unless made in writing and signed by both parties, except as herein otherwise
specifically provided.
Section 9. Applicable Law. This Agreement shall be governed by all respects whether as to
validity, construction, capacity, performance or otherwise, by the laws of the State of Michigan,
except to the extent that Federal law shall be deemed to apply.
Section 10. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.
Section 11. Notice. For 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 United States registered mail, return receipt requested, postage prepaid,
provided that all notices to the Company be addressed to:
Corporate Secretary
Monarch Community Bancorp, Inc.
000 Xxxxx Xxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Monarch Community Bancorp, Inc.
000 Xxxxx Xxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
and if to Executive:
Xxxxx X. Xxxxxxxxx, Xx.
000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
Section 12. No Mitigation. Executive shall not be required to mitigate the amount of any payment
provided in this Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation earned by
Executive or benefits (including retirement benefits) provided to Executive as the result of
employment by another employer after the Change in Control.
Section 13. Termination of Agreement. The Agreement shall continue until, and terminate, one (1)
year from the date hereof; provided, however, that the Agreement shall be renewed automatically for
subsequent one (1) year periods unless the Board of Directors of the Company, by resolution duly
adopted at least three (3) months prior to the end of the first one (1) year period or of any
subsequent one (1) year period, indicates that the Agreement shall not be renewed. Further, if a
Change in Control occurs during the term of the Agreement, the Agreement shall continue until the
Company shall have fully performed all of its obligations hereunder.
| MONARCH COMMUNITY BANCORP, INC. | EXECUTIVE | |||||||
By: |
||||||||
| Xxxxxx X. Xxxxxx | Xxxxx X. Xxxxxxxxx, Xx. | |||||||
Its:
|
President and Chief Executive Officer | Internal Auditor | ||||||
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