EXHIBIT 10.2
EMPLOYMENT AGREEMENT BETWEEN CFBANK AND XXXXXXX X. X'XXXXXXX
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made effective as of October 22, 2004 by
and between RESERVE MORTGAGE SERVICES, INC. ("Reserve"), a wholly-owned
subsidiary of CFBank (the "Bank"), the Bank and XXXXXXX X. X'XXXXXXX (the
"Executive").
WHEREAS, The Bank and Reserve wish to be assured of the services of the
Executive for the period provided in this Agreement following its acquisition by
the Bank, a wholly-owned subsidiary of Central Federal Corporation ("GCFC"); and
WHEREAS, the Executive is willing to serve in the employ of Reserve for
said period; and
WHEREAS, the Executive is willing to provide services to the Bank and
Reserve as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree, as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of Executive's employment hereunder, the Executive
agrees to serve as President and Chief Executive Officer of Reserve. The
Executive shall render such administrative and management services to Reserve,
as are customarily performed by persons in a similar executive capacity for a
mortgage banking company, and to the Bank as may be assigned to him, from time
to time, by the Chairman of the Bank, to whom he shall report. The Executive
shall render such services at the current home office location of the Bank or
Reserve or such other location within thirty miles of either location unless the
Executive otherwise consents to a different location.
2. TERM.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of thirty-six (36) full calendar months thereafter (the "Term").
The Term may be extended at the discretion of Reserve upon a comprehensive
performance evaluation by Reserve's Board of Directors (the "Board") or a
committee thereof.
(b) During the period of Executive's employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods provided
in accordance with policies of the Bank, and reasonable leaves of absence
provided in accordance with policies of the Bank, Executive shall devote
substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including activities and services
related to the operation and management of the Bank and Reserve. The Executive
may serve, or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which, in the
judgment of the Board, will not present any conflict of interest with GCFC or
its subsidiaries (the "Subsidiaries"), or materially affect the performance of
Executive's duties pursuant to this Agreement.
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3. COMPENSATION AND REIMBURSEMENT.
(a) The Executive shall be entitled to a salary from Reserve in the
amount of $100,000 per year ("Base Salary"). Base Salary shall include any
amounts of compensation deferred by Executive under any tax-qualified retirement
or welfare plan or any other deferred compensation plan maintained by GCFC and
its Subsidiaries. Such Base Salary shall be payable in accordance with the
normal payroll practices of the Bank. The Board may increase Executive's Base
Salary at anytime in its sole discretion, subject to an annual performance
review, but may not decrease the Base Salary unless it is part of a company wide
compensation adjustment applicable to all senior executives of the Bank in a
proportionate manner. Any increase in Base Salary shall become the "Base Salary"
for purposes of this Agreement.
(b) The Executive shall be entitled to participate in those benefit
plans, arrangements and perquisites available to all other senior executives of
the Bank, including any stock option plan of the Bank or GCFC, on the same terms
and conditions applicable to such executives. Without limiting the generality of
the foregoing provisions of this Subsection (b), Executive shall be entitled to
participate in or receive benefits under any employee benefit plains including,
but not limited to, retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Nothing paid to the Executive under any such plan or arrangement will be deemed
to be in lieu of other compensation to which the Executive is entitled under
this Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3 and other compensation provided for by paragraph (b) of this Section
3, Reserve shall pay or reimburse Executive for all reasonable travel and other
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.
(d) Executive shall also receive incentive compensation equal to 50% of
pre-tax earnings, applied to Reserve as standalone corporation, in excess of
$300,000 per fiscal year, but in no event in excess of $400,000 per year
("Incentive Compensation"). The calculation of pre-tax earnings shall be made in
accordance with generally accepted accounting principles in the United States
("GAAP"), provided that the same shall be adjusted to eliminate all corporate
overhead and other expenses to Reserve by the Bank or GCFC. For purposes of
determining the pre-tax earnings of Reserve, there shall be included the revenue
that would have been recognized by Reserve (i) on loans originated by Reserve
and sold to the Bank rather than being sold to the customary purchasers of loans
originated by Reserve and (ii) on residential mortgage loans originated by the
Bank. The amount of such foregone revenue shall be determined in a manner
mutually agreed upon by Executive and the Chairman of the Bank. The calculation
shall be prorated for any partial year.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION; TERMINATION UPON
DISABILITY OR DEATH.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean the termination by Reserve of Executive's full-time
employment hereunder for any reason, other than termination governed by Sections
4(c) or 5 hereof or for a Termination for Cause as defined in Section 7 hereof;
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(b) Upon the occurrence of an Event of Termination on the Date of
Termination, as defined in Section 8(b), Reserve shall be obligated to pay
Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a sum equal to the sum of: (i)
$600,000; and (ii) all benefits, including health insurance in accordance with
Section 3(b) that would have been provided to Executive for the remaining Term
of this Agreement had an Event of Termination not occurred. Such benefits shall
be eliminated in the event the Executive obtains other employment following
termination of employment. In the event of the Executive's Termination for Cause
or his voluntary resignation, however, other than under Section 5(b)(ii) of this
Agreement, he shall be entitled to receive his Base Salary through the Date of
Termination as specified in the Notice of Termination under Section 8(a) and no
other benefits or payments under this Agreement.
(c) In the event Executive is unable to perform his duties under this
Agreement on a full-time basis for a period of six (6) consecutive months by
reason of illness or other physical or mental disability (as defined in the
Bank's human resources policy), Reserve may terminate this Agreement, provided
that Reserve shall continue to be obligated to pay the Executive his Base Salary
for one year after such termination, and provided further that any amounts
actually paid to Executive pursuant to any disability insurance or other similar
such program which the Reserve or the Bank has provided or may provide on behalf
of its employees or pursuant to any xxxxxxx'x or social security disability
program shall reduce the compensation to be paid to the Executive pursuant to
this paragraph.
(d) In the event of the Executive's voluntary termination, other than
under Section 5(b)(ii) of this Agreement, no payment of any type shall be made
to the Executive under this Agreement for the period through the Date of
Termination unless the Executive shall comply with his obligations under Section
2.03 of the Stock Purchase Agreement, dated June 10, 2004, by and among GCFC,
CFBank, RJO Financial Services, Inc., and the Executive.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of GCFC or the
Bank shall mean an event of a nature that; (i) would be required to be reported
in response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
0000 (xxx "Xxxxxxxx Xxx"); or (ii) results in a change in control of GCFC or the
Bank within the meaning of the Home Owners' Loan Act, as amended, or the Rules
and Regulations promulgated by the Office of Thrift Supervision (or its
predecessor agency), as in effect on the date hereof (provided, that in applying
the definition of change in control as set forth under the rules and regulations
of the OTS, the Board shall substitute its judgment for that of the OTS).
(b) If a Change in Control of GCFC or the Bank has occurred pursuant to
Section 5(a) Executive shall be entitled to the benefits provided in paragraphs
(c) of this Section 5 only upon his subsequent termination of employment at any
time during the Term of this Agreement due to (i) Executive's dismissal, or (ii)
Executive's voluntary resignation following any demotion, loss of title, office
or significant authority or responsibility, reduction in the annual compensation
or material reduction in benefits or relocation of his principal place of
employment by more than 50 miles from its location immediately prior to the
Change in Control, unless such termination is because of his death or
Termination for Cause (as defined herein).
(c) Upon the Executive's entitlement to benefits pursuant to Section
5(b), Reserve shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to the greater of (i) $600,000;
or (ii) an amount equal to the sum of (A) three (3) times the Executive's Base
Salary and (B) an amount equal to the Incentive Compensation paid or earned from
the date of this Agreement in accordance with
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Section 3(d) hereof divided by the number of full months completed prior to the
occurrence of the event described in Section 5(b) and multiplied by thirty-six
(36). Payment to the Executive will be made on a monthly basis in approximately
equal installments during the remaining Term of the Agreement. Such payments
shall not be reduced in the event Executive obtains other employment following
termination of employment. In addition to the foregoing sum, the Executive shall
continue to receive for thirty-six (36) months, all benefits, including health
insurance in accordance with Section 3(b) that would have been provided to
Executive had the event described in Section (b) of this Section 5 not occurred.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding the provisions of Section 5, in the event that
(i) the aggregate payments or benefits to be made or afforded to
Executive, which are deemed to be parachute payments as defined in
Section 280G of the Internal Revenue Code of 1936, as amended (the
"Code") or any successor thereof, (the "Termination Benefits") would
be deemed to include an "excess parachute payment" under Section
280G of the Code; and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar ($1.00)
less than an amount equal to three (3) times Executive's "base
amount," as determined in accordance with said Section 280G and the
Non-Triggering Amount less the product of the marginal rate of any
applicable state and federal income tax and the Non Triggering
Amount would be greater than the aggregate value of the Termination
Benefits (without such reduction) minus (i) the amount of tax
required to be paid by the Executive thereon by Section 4999 of the
Code and further minus (ii) the product of the Termination Benefits
and the marginal rate of any applicable state and federal income
tax,
then the Termination Benefits shall be reduced to the Non-Triggering Amount. The
allocation of the reduction required thereby among the Termination Benefits
shall be determined by the Executive.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" or "Terminated for Cause" shall mean
termination because the Executive's failure to perform stated duties,
incompetence, willful misconduct, breach of fiduciary duty involving person
profit, personal dishonesty, willful violation of any law, rule, regulation
(other than traffic violations or similar offenses), final cease and desist
order or material breach of any provision of this Agreement. The Executive shall
not be deemed to have been Terminated for Cause unless and until there shall
have been delivered to him a Notice of Termination stating that the Executive
was guilty of conduct justifying Termination for Cause and specifying the
particulars thereof in detail. The Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
During the period beginning on the date of the Notice of Termination for Cause
pursuant to Section 8 hereof through the Date of Termination, stock options and
related limited rights granted to Executive under any stock option plan shall
not be exercisable unless vested and any unvested awards granted to Executive
under any stock benefit plan of GCFC or its Subsidiaries shall not vest. At the
Date of Termination, such stock options and related limited rights and such
unvested awards shall become null and void and shall not be exercisable by or
delivered to Executive at any time subsequent to such Date of Termination for
Cause.
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8. NOTICE.
(a) Any purported termination by Reserve or the Bank or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes off this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 10 for twelve (12) full
calendar months after the earlier of the expiration of this Agreement or
termination of Executive's employment with Reserve. Executive shall, upon
reasonable notice, furnish such information and assistance to Reserve or its
successor as may reasonably be required by Reserve in connection with any
litigation in which it or any of its subsidiaries or affiliates or may become a
party.
10. NON-COMPETITION AND NONDISCLOSURE.
(a) Upon the occurrence of a Termination for Cause (as defined in
Section 7 hereof) or the Executive's voluntary resignation (other than under
Section 5(b)(ii) hereof), Executive agrees not to compete with Reserve or its
Subsidiaries for a period of one (1) year following such Date of Termination in
any city, town or county in which Reserve or the Bank maintains an office or has
filed an application for regulatory approval to establish an office and any
county adjacent to such city, town or, county, determined as of the Date of
Termination, except as agreed to by GCFC. The Executive agrees that during such
period and within said cities, towns and counties, the Executive shall not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of GCFC or its Subsidiaries. The parties hereto, recognizing
that irreparable injury will result to GCFC or its subsidiaries, its business
and property in the event of the Executive's breach of this Subsection 10(a),
agree that in the event of any such breach by the Executive, GCFC or its
subsidiaries will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive or his
partners, agents, servants, employees and all persons acting for or under the
direction of Executive. Executive represents and admits that in the event of the
termination of his employment pursuant to Section 7 hereof, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than GCFC or its
Subsidiaries, and that the enforcement of a remedy by way of injunction will not
prevent Executive from earning a livelihood. Nothing herein will be construed,
as prohibiting GCFC or its Subsidiaries from pursuing any other remedies
available to GCFC or its Subsidiaries for such breach or threatened breach,
including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of GCFC and its
Subsidiaries, as it may exist from time to time, is a valuable, special and
unique asset of the business of GCFC and its Subsidiaries. Executive will not,
during or after the term of his employment, disclose any knowledge of the past,
present, planned or considered business activities of GCFC and its Subsidiaries
to any person, firm, corporation, or other entity for any reason or purpose
whatsoever unless expressly authorized by the Board or required by law.
Notwithstanding the
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foregoing, Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of GCFC or the Subsidiaries. In
the event of a breach or threatened breach by the Executive of the provisions of
this Section, Reserve will be entitled to an injunction restraining Executive
from disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of Reserve or the Subsidiaries or from
rendering any services to any person, firm, corporation, or other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting Reserve from pursuing
any other remedies available to Reserve for such breach or threatened breach,
including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid in cash
or by check from the general funds of Reserve.
(b) In the event that Reserve is dissolved or liquidated, the Bank shall
assume the obligations of Reserve under this Agreement.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the parties hereto
and supersedes any prior employment agreement between Reserve and Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and Reserve and their respective successors, heirs and
assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not
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held so invalid, and each such other provision and part thereof shall to the
full extent consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Ohio and by
the laws of the United States to the extent controlling without regard to the
principles of conflicts of law of this state, unless otherwise specified herein.
18. ARBITRATION.
Notwithstanding any right to enforcement under Section 10(a), any dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from the location of Reserve's home office, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that Executive shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
19. REQUIRED REGULATORY PROVISIONS
(a) Reserve may terminate the Executive's employment at any time subject
to his rights to receive payments under Section 4 hereof. Executive shall not
have the right to receive compensation or other benefits for any period after
Termination for Cause as defined in Section 7 hereinabove.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Reserve's affairs by a
notice served under Section 8(e)(3) (12 USC Section 1818(e)(3)) or 8(g) (12 USC
Section 1818(g)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, Reserve's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, Reserve may in its discretion (i) pay the Executive all or part of
the compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of Reserve's affairs by an order issued under
Section 8(e) (12 USC Section 1818(e)) or 8(g) (12 USC Section 1818(g)) of The
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
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Recovery and Enforcement Act of 1989, all obligations of Reserve under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC Section
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Reserve under this Agreement shall terminate as of the date of default, but
this paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of Reserve under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of Reserve (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 ("FDIC")enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 USC Section 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Director at the time the Director approves a supervisory
merger to resolve problems related to the operation of the Bank or when the Bank
is determined by the Director to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by such action.
(f) Notwithstanding anything herein contained to the contrary, any
payments to the Executive by Reserve, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the
regulations promulgated thereunder in 12 C.F.R. Part 359.
10. SUCCESSOR TO RESERVE.
Reserve and the Bank shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of Reserve or the Bank, expressly and
unconditionally to assume and agree to perform Reserve's obligations under this
Agreement, in the same manner and to the same extent that Reserve would be
required to perform if no such succession or assignment had taken place.
IN WITNESS WHEREOF, Reserve and the Executive have executed Agreement on
date first above written
RESERVE MORTGAGE SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Xxxxx X. Xxxxxx
Chairman of the Board
CFBANK
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
Chairman and Chief Executive Officer
EXECUTIVE
/s/ Xxxxxxx X. X'Xxxxxxx
------------------------------------
Xxxxxxx X. X'Xxxxxxx
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