Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 1st day of
January, 2000, by and among First Defiance Financial Corp. ("First Defiance"),
an Ohio corporation and savings and loan holding company, First Federal Savings
Bank of the Midwest ("First Federal"), a federally chartered savings bank, both
of which are located in Defiance, Ohio, and Xxxxx X. Xxxxx (the "Executive").
First Defiance and First Federal are referred to jointly herein as the
"Companies."
W I T N E S S E T H:
WHEREAS, the Companies desire to retain the Executive's services as the
Executive Vice President of First Defiance and the President and Chief Operating
Officer of First Federal; and
WHEREAS, in order to induce the Executive to enter into and remain in the
employ of the Companies and in consideration of the Executive's agreeing to
enter into and remain in the employ of the Companies, the parties desire to
specify the terms of such 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) Annual Compensation. The Executive's "Annual Compensation" for purposes
of this Agreement shall mean the average annual Compensation paid to the
Executive by the Companies during the five most recent taxable years ending
prior to the Date of Termination, or such fewer number of years as the Executive
shall have been employed by the Companies prior to the Date of Termination.
(b) Base Salary. "Base Salary" shall have the meaning set forth in Section
3(a) hereof.
(c) Bonus. "Bonus" shall have the meaning set forth in Section 3(a) hereof.
(d) Cause. "Cause" shall mean 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.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the Executive's
action or omission was in the best interest of the Companies.
(e) Change in Control of First Defiance. "Change in Control of First
Defiance" shall mean a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor thereto, whether or not First Defiance is registered
under the Exchange Act; provided that, without limitation, such a change in
control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner"(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of First Defiance representing 25% or more of the
combined voting power of the then outstanding securities of First Defiance; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of First Defiance
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by shareholders, 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.
(f) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) Compensation. "Compensation" shall have the meaning set forth in
Section 3(a) hereof.
(h) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by the Companies for any reason, the date
on which a Notice of Termination is given or such later date as may be specified
by the Companies in such Notice, or (ii) if the Executive's employment is
terminated by the Executive, the date of termination shall be a date not less
than 30 days from the date the Notice of Termination is delivered by the
Executive to the Companies, unless the Companies, in their sole discretion,
designate an earlier date.
(i) Disability. "Disability" shall mean any physical or mental impairment
which qualifies the Executive for disability benefits under the applicable
long-term disability plan maintained by the Companies or any subsidiary or, if
no such plan applies, which would qualify the Executive for disability benefits
under the federal Social Security System.
(j) Good Reason. "Good Reason" shall mean:
(i) The occurrence of any of the following events, without the Executive's
express written consent: (A) the assignment by the Companies to the Executive of
any duties which, in the Executive's good faith determination, are materially
inconsistent with the Executive's positions, duties, responsibilities and status
with the Companies immediately prior to such assignment or, in the event of a
Change in Control, immediately prior to such a Change in Control of First
Defiance; (B) in the Executive's good faith determination, a material change in
the Executive's reporting responsibilities, titles or offices as an employee and
as in effect immediately prior to such change or, in the event of a Change in
Control, immediately prior to
2
such a Change in Control of First Defiance; or (C) any removal of the Executive
from or any failure to re-elect the Executive to the offices of Executive Vice
President of First Defiance and President and Chief Operating Officer of First
Federal, except in connection with Cause, Disability, Retirement or the
Executive's death;
(ii) Without the Executive's express written consent, a reduction by the
Companies in the Executive's Base Salary, as the same may be increased from time
to time, or fringe benefits;
(iii) The principal executive office of the Companies is relocated outside
of the Defiance, Ohio area or, without the Executive's express written consent,
the Companies require the Executive to be based anywhere other than an area in
which the Companies' principal executive office is located, except for required
travel on business of the Companies to an extent substantially consistent with
the Executive's present business travel obligations;
(iv) Without the Executive's express written consent, the Companies fail to
provide the Executive with the same fringe benefits that were provided to the
Executive immediately prior to a Change in Control of First Defiance, or with a
package of fringe benefits (including paid vacations) that, though one or more
of such benefits may vary from those in effect immediately prior to such Change
in Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole;
(v) Any purported termination of the Executive's employment for Cause,
Disability or Retirement which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph (1) below; or
(vi) The failure by First Defiance to obtain the assumption of and
agreement to perform this Agreement by any successor as contemplated in Section
9 hereof.
(k) IRS. IRS shall mean the Internal Revenue Service.
(l) Notice of Termination. "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 the Executive's employment under
the provision so indicated, (iii) specifies a Date of Termination, and (iv) is
given in the manner specified in Section 10 hereof.
(m) Retirement. "Retirement" shall mean voluntary termination by the
Employee in accordance with the Companies' retirement policies, including early
retirement, generally applicable to their salaried employees.
2. Term of Employment.
3
(a) The Companies hereby employ the Executive, and the Executive hereby
accepts employment with the Companies and agrees to render services to the
Companies on the terms and conditions set forth in this Agreement. The term of
employment under this Agreement shall commence on January 1, 2000 and shall
terminate on December 31, 2002, unless extended by the Companies' Boards of
Directors in the manner provided below, or unless sooner terminated by the
Companies or the Executive pursuant to Section 5 of this Agreement.
(b) At a meeting of the Companies' Boards of Directors prior to the first
anniversary of the date of this Agreement and each anniversary thereafter, the
Board of Directors of the Companies shall consider and review a one-year
extension of the term under this Agreement, and (with appropriate corporate
documentation thereof, and after taking into account all relevant factors
including the Executive's performance hereunder and the merits of a three-year
agreement) the term shall be extended, unless either the Board of Directors does
not approve such extension and provides written notice to the Executive of such
event or the Executive gives written notice to the Companies of the Executive's
election not to extend the term, in each case, with such written notice to be
given not less than thirty (30) days prior to any such anniversary date.
References herein to the term of this Agreement shall refer both to the initial
term and successive terms.
(c) During the term of this Agreement, the Executive shall perform such
executive services for the Companies as may be consistent with his titles and
from time to time assigned to him by the Companies' Boards of Directors;
provided, however, that the Executive shall not be precluded from (i) vacations
and other leave time in accordance with Section 3(c) below, (ii) reasonable
participation in community, civic, charitable, or similar organizations, (iii)
reasonable participation in industry-related activities, or (iv) pursuing
personal investments which do not interfere or conflict with the performance of
Executive's duties to the Companies.
3. Compensation and Benefits.
(a) The Companies shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base annual salary of $120,000
(the "Base Salary"), which may be increased from time to time in such amounts as
may be determined by the Companies' Boards of Directors and may not be decreased
without the Executive's express written consent. In addition to the Base Salary,
the Executive shall be entitled to receive each year during the term of this
Agreement a bonus based on targets set forth from time to time in the Companies'
incentive bonus program (the "Bonus"). The Executive's Base Salary and Bonus are
referred to herein as his "Compensation".
(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, deferred compensation, profit sharing, stock option, management
recognition, employee stock ownership, or other plans, benefits and privileges
given to employees and executives of the Companies, to the extent commensurate
with his then duties and responsibilities, as fixed by the Board of Directors of
the Companies including but not limited to the following: (i) the Companies
shall pay membership dues for the Executive for membership in the Rotary Club
4
and the Xxxxxxxxxx Country Club; (ii) the Companies shall provide Executive with
use of an automobile (the terms and conditions for the Executive's use and
possession of the automobile and the quality of the automobile provided for the
Executive's use shall be consistent with, or not less favorable than, the past
practice of the Companies); and (iii) First Federal shall provide a cellular
telephone for use by the Executive in the performance of the Executive's duties
under this Agreement. The Companies 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 Companies and does not result in a
proportionately greater adverse change in the rights of or benefits to Executive
as compared with any other executive officer of the Companies. 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.
(c) During the term of this Agreement, Executive shall be entitled to paid
annual vacation in accordance with the policies established from time to time by
the Boards of Directors of the Companies, which shall in no event be less than
four weeks per annum. Executive shall not be entitled to receive any additional
compensation from the Companies for failure to take a vacation, nor shall
Executive be able to accumulate unused vacation time from one year to the next,
except to the extent authorized by the Boards of Directors of the Companies.
4. Expenses. The Companies shall reimburse Executive or otherwise provide
for or pay for all reasonable expenses incurred by Executive in furtherance or
in connection with the business of the Companies, including, but not by way of
limitation, 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 Boards of Directors of the Companies. If such expenses are
paid in the first instance by Executive, the Companies shall reimburse the
Executive therefor.
5. Termination.
(a) The Companies 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.
(b) Executive shall have the right, upon prior Notice of Termination, to
terminate his employment hereunder for any reason. Notwithstanding the
foregoing, if the Executive terminates his employment for any reason other than
Good Reason, the Executive agrees that, for a period of one year following the
termination of the Executive's employment by the Executive, he shall not (i)
either as principal, agent, owner, shareholder or investor of more than 3% of
the stock, officer, director, partner, lender, independent contractor,
consultant or in any other capacity, engage in, have a financial interest in or
be in any way connected or affiliated with, or render advice or services to, any
person or entity that engages in any activity which would compete in any way
with the business operated by the Companies in the counties where they do
business, or (ii) directly or indirectly, solicit, divert, take away or
interfere with,
5
or attempt to solicit, divert, take away or interfere with, the relationship of
the Companies or any of their subsidiaries with any person or entity who is or
was a customer, or employee or supplier of the Companies or any of their
subsidiaries immediately prior to the Date of Termination. Notwithstanding the
foregoing, nothing contained herein shall prevent the Executive, after the
termination of this Agreement by the Executive pursuant to this Section 5(b),
from engaging directly or indirectly in any banking or financial industry
business in a county or counties in which the Companies are doing business if
the only activity conducted in such county or counties is the servicing of
loans.
The parties hereto acknowledge and agree that the duration and area for
which the covenant not to compete and other covenants set forth in this
Agreement are to be effective are fair and reasonable and are reasonably
required for the protection of the Companies. In the event that any court
determines that the time period or the area, or both of them, are unreasonable
as to any covenant and that such covenant is to that extent unenforceable, the
parties hereto agree that the covenant shall remain in full force and effect for
the greatest time period and in the greatest area that would not render it
unenforceable.
(c) In the event that (i) Executive's employment is terminated by the
Companies for Cause, Disability or Retirement or in the event of the Executive's
death, or (ii) Executive terminates his employment hereunder other than for Good
Reason, Executive shall have no right pursuant to this Agreement to compensation
or other benefits for any period after the applicable Date of Termination.
(d) In the event that Executive's employment is terminated by the Companies
for other than Cause, Disability, Retirement or the Executive's death or such
employment is terminated by the Executive (i) due to failure by the Companies to
comply with any material provision of this Agreement, which failure has not been
cured within twenty-five (25) days after a notice of non-compliance has been
given by Executive to the Companies, or (ii) for Good Reason, then the Companies
shall, subject to the provisions of Section 6 hereof, if applicable:
(1) pay to the Executive, at the option of the Executive, in a lump
sum payment or in thirty-six (36) equal monthly installments beginning
with the first business day of the month following the Date of
Termination, an amount equal to 2.99 times the Annual Compensation;
and
(2) maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior
to the Notice 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 subparagraph (2)), at
no cost to the Executive, the Executive's continued participation in
all group insurance, life insurance, health and accident, disability
and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the
Date of Termination (other than retirement plans
6
or stock compensation plans of the Companies), provided that in the
event that the Executive's participation in any plan, program or
arrangement as provided in this subparagraph (2) is barred, or during
such period any such plan, program or arrangement is discontinued or
the benefits thereunder are materially reduced, the Companies shall
arrange to provide the Executive with benefits substantially similar
to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of
Termination.
6. Limitation of Benefits under Certain Circumstances. If the payments and
benefits pursuant to Section 5 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the
Companies, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 5 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 5 being non-deductible to either of the Companies 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 5 shall be based upon the opinion of independent tax counsel
selected by the Companies' independent public accountants and paid by the
Companies. Such counsel shall be reasonably acceptable to the Companies and
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 Companies and/or the Executive do not agree with the opinion of such
counsel, (i) the Companies 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 Companies and subject to
the imposition of the excise tax imposed under Section 4999 of the Code and (ii)
the Companies may request, and Executive shall have the right to demand that the
Companies request, a ruling from the IRS as to whether the disputed payments and
benefits pursuant to Section 5 hereof have such consequences. Any such request
for a ruling from the IRS shall be promptly prepared and filed by the Companies,
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 the Executive's approval
prior to filing, which shall not be unreasonably withheld. The Companies 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 6, or
a reduction in the payments and benefits specified in Section 5 below zero.
7
7. Mitigation; Non-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.
(b) 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 Companies pursuant to employee benefit plans
of the Companies or otherwise.
8. Withholding. All payments required to be made by the Companies hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Companies may reasonably
determine should be withheld pursuant to any applicable law or regulation.
9. Assignability. The Companies may assign this Agreement and their rights
hereunder in whole, but not in part, to any corporation, bank or other entity
with or into which either of the Companies may hereafter merge or consolidate or
to which either of the Companies may transfer all or substantially all of their
respective 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
Companies hereunder as fully as if it had been originally made a party hereto,
but may not otherwise assign this Agreement or its rights hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.
10. 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 address set forth below, or to such other address as either party may
have specified in a prior notice given to the other party in the manner set
forth in this section:
To First Defiance: First Defiance Financial Corp.
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
To First Federal: First Federal Savings Bank of the Midwest
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
To the Executive: Xxxxx X. Xxxxx
000 Xxxxxxx Xx.
Xxxxxxxx, Xxxx 00000
8
11. 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 Boards of Directors of the Companies 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.
12. 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 Ohio.
13. Nature of Obligations. Nothing contained herein shall create or require
the Companies 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 Companies hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Companies.
14. 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.
15. 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.
16. 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.
17. Regulatory Actions. The following provisions shall be applicable to the
parties to the extent that they are required to be included in employment
agreements between a savings association and its employees pursuant to Section
563.39 (b) of the Regulations Applicable to All Savings Associations, 12
C.F.R.ss.563.39(b), or any successor thereto, and shall be controlling in the
event of a conflict with any other provision of this Agreement, including
without limitation Section 5 hereof.
(a) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Companies' affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA")(12 U.S.C.ss.ss.1818 (e)(3) and 1818(g)(1)), the Companies'
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, the Companies may, in their discretion: (i) pay Executive 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.
9
(b) If Executive is removed from office and/or permanently prohibited from
participating in the conduct of the Companies' affairs by an order issued under
Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.ss.ss.1818(e)(4) and
(g)(1)), all obligations of the Companies under this Agreement shall terminate
as of the effective date of the order, but vested rights of Executive and the
Companies as of the date of termination shall not be affected.
(c) If the Companies are in default, as defined in Section 3(x)(1) of the
FDIA (12 U.S.C.ss.1813(x)(1)), all obligations under this Agreement shall
terminate as of the date of default, but vested rights of Executive and the
Companies as of the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated pursuant to 12
C.F.R. ss. 563.39(b)(5) (except to the extent that it is determined that
continuation of the Agreement for the continued operation of the Companies is
necessary): (i) by the Director of the Office of Thrift Supervision ("OTS"), or
his/her designee, at the time the Federal Deposit Insurance Corporation ("FDIC")
or Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of First Federal under the authority contained in Section 13 (c)
of the FDIA (12 U.S.C. ss.1823(c)); or (ii) by the Director of the OTS, or
his/her designee, at the time the Director or his/her designee approves a
supervisory merger to resolve problems related to operation of the Companies or
when the Companies are determined by the Director of the OTS to be in an unsafe
or unsound condition, but vested rights of Executive and the Companies as of the
date of termination shall not be affected.
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payment made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(K) and any regulations promulgated thereunder.
19. Confidentiality. The Executive hereby agrees that he shall at all times
keep and maintain the confidentiality of all confidential information regarding
the companies and any of their subsidiaries. The Executive further agrees that
he shall not, at anytime, either directly or indirectly, use, either directly or
indirectly, any Confidential Information regarding the Companies and any of
their subsidiaries for his benefit or to the benefit of any other person or
entity, or divulge, disclose, reveal or otherwise communicate any confidential
information regarding the Companies and any of their subsidiaries to any person
or entity in any manner whatsoever, except to the extend otherwise required by
law. The obligations of this Paragraph 19 shall survive the termination of the
Executive's employment.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
10
Attest: FIRST DEFIANCE FINANCIAL CORP.
/s/ Xxxx X. Xxxxxxxx By:/s/ Xxxxxxx X. Small
-------------------- -----------------------
Xxxxxxx X. Small, Chairman of
the Board of Directors
Attest: FIRST FEDERAL SAVINGS BANK
OF THE MIDWEST
/s/ Xxxx X. Xxxxxxxx By:/s/ Xxxxxxx X. Small
-------------------- -----------------------
Xxxxxxx X. Small, Chairman of
the Board of Directors
Witness:
/s/ Xxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxx
-------------------- ------------------
Xxxxx X. Xxxxx
11
