EMPLOYMENT AGREEMENT
EXHIBIT
10.1
THIS
EMPLOYMENT AGREEMENT, made and entered into as of September 16, 2008, by and
between NorStates Bank (hereinafter called the “Bank”),
and Xxxxx Xxxxxxxxxx (hereinafter called the “Employee”).
WHEREAS,
the Bank is a wholly-owned subsidiary of Northern States Financial Corporation,
a Delaware corporation (“Holding
Company”);
WHEREAS,
the Bank desires to employ Employee as President and Chief Operating Officer of
the Bank;
WHEREAS,
Employee’s experience and knowledge are considered to be necessary to the future
success of the Bank and the Holding Company;
WHEREAS,
it is in the best interests of the Bank to secure such involvement and continued
commitment by Employee.
NOW
THEREFORE, in consideration of the mutual promises herein contained, the parties
agree as follows:
1. Employment
and Term.
(a) Employment. The
Bank shall employ Employee as the President and Chief Operating Officer of the
Bank, and the Employee shall so serve for the term set forth in this
Paragraph.
(b) Term. The
initial term of employment under this Agreement shall be a period commencing on
September 16, 2008 (the
“Effective
Date”) and ending on December 31, 2010, subject to earlier
termination as provided herein. Thereafter, the term of this
Agreement shall automatically be extended for successive one (1) year terms
beginning on January 1, 2011 and each successive year thereafter, subject
to earlier termination as provided herein, provided that neither party has
provided written notice to the other party prior to the close of business on
November 1 of the applicable year of its intent not to extend the term of
this Agreement for another year.
2. Duties
and Responsibilities. Employee shall be employed as the
President and Chief Operating Officer of the Bank. Employee shall
render such administrative and management services to the Bank as are
customarily performed by persons situated in a similar executive capacity and
shall promote the business of the Bank. Employee’s other duties shall
be such as the Chief Executive Officer or the Board of Directors may from to
time to time reasonably direct, including normal duties as an officer of the
Bank, consistent with his title and basic duties and authority.
3. Salary.
(a) Base
Salary. For services performed by the Employee for the Bank
pursuant to this Agreement during the period of employment as provided in
Paragraph 1 hereof,
the Bank
shall pay the Employee a base salary at the rate of $240,000.00 per year,
payable in substantially equal installments in accordance with the Bank’s
regular payroll practices. The Employee’s base salary (with any
increases under subparagraph (b), below) shall not be subject to reduction
without the Employee’s written consent. Any compensation which may be
paid to the Employee under any additional compensation or incentive plan of the
Bank or the Holding Company or which may be otherwise authorized from time to
time by the Boards of Directors of the Bank or the Holding Company (or an
appropriate committee thereof) shall be in addition to the base salary to which
the Employee shall be entitled under this Agreement.
(b) Board
Review of Base Salary. Employee’s base salary shall be subject
to review from time to time, and the Bank may (but it is not required to)
increase the base salary as the Board of Directors of the Bank (or a duly
authorized committee thereof), in its discretion, may determine.
4. Bonuses. For
each fiscal year during the term of employment, the Employee shall be eligible
to receive a target bonus equal to 10% of his Base Salary, and a profit sharing
bonus equal to 5% of his Base Salary, with the actual amount of the bonuses
determined from time to time by the Board of Directors of the Bank, in good
faith, in its sole discretion.
5. Equity
Incentive Compensation. During the term of employment
hereunder the Employee shall be eligible to participate in any equity-based
incentive compensation plan or program that may be adopted by the Bank or the
Holding Company, when so authorized by the Board of Directors.
6. Other
Benefits. In addition to the compensation described in
Paragraphs 3, 4 and 5, above, the Employee shall also be entitled to the
following:
(a) Participation
in Benefit Plans. The Employee shall be entitled to
participate in employee benefit plans, programs and arrangements of the Bank or
the Holding Company to the extent the Employee is eligible for participation
under the terms of such plans, programs and arrangements.
(b) Vacation. The
Employee shall be entitled to four weeks of paid vacation.
(c) Employee
Perquisites. The Bank shall furnish Employee with such
perquisites which may from time to time be provided by the Bank which are
suitable to the Employee’s position and adequate for the performance of his
duties hereunder and reasonable in the circumstances. Among other
perquisites, the Bank shall provide Employee with an automobile allowance of
$12,000.00 per year.
(d) Expense
Reimbursement. The Bank shall reimburse Employee’s reasonable
expenses incurred in performing services hereunder, which are incurred and
accounted for in accordance with the Bank’s regular policies and procedures
applicable thereto.
(e) Club
Membership. The Bank shall pay for Employee’s monthly dues and
assessments at the Xxxx Flora Country Club in Waukegan, Illinois.
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7. Non-Solicitation. Employee
acknowledges that the Bank and its subsidiaries and affiliates by the nature of
their business have a legitimate and protectable interest in their clients,
customers and employees with whom they have established significant
relationships as a result of a substantial investment of time and
money. Employee agrees that during the period of his employment with
the Bank and for a period of twelve (12) months after termination of his
employment for Just Cause or by Employee without Good Reason, he will not
(except in his capacity as an employee of the Bank) directly or indirectly, for
his own account, or as an agent, employee, director, owner, partner, or
consultant of any corporation, firm, partnership, joint venture, syndicate, sole
proprietorship or other entity:
(a) solicit
for any reason any client or customer of the Bank or any of its subsidiaries or
affiliates; or
(b) solicit
any employee or agent of the Bank or any of its subsidiaries or affiliates to
terminate his or her relationship with the Bank or any of its subsidiaries or
affiliates.
8. Termination
and Termination Pay. Employee’s employment under this
Agreement may be terminated upon the following occurrences:
(a) By
the death of Employee during the term of this Agreement, in which event
Employee’s estate shall be entitled to receive all compensation due Employee
through the last day of employment in which his death shall have
occurred.
(b) At
any time by a decision of the Chief Executive Officer or the Board of Directors
of the Bank for conduct not constituting Just Cause or by Employee, upon
sixty (60) calendar days prior written notice to the Employee or the Bank,
as the case may be. In the event of such termination by the Chief
Executive Officer or the Board of Directors without Just Cause or by the
Employee for Good Reason, the Bank (i) shall pay Employee a gross amount
equal to one year of his Base Salary plus his target annual bonus, with such
amount payable in substantially equal payments for twelve (12) months after
termination in accordance with the Bank’s regular payroll practices; and
(ii) shall cause to be continued the medical, dental, life and disability
coverage (with continued life and disability coverages subject to the provisions
of the Bank’s insurance contracts) substantially identical to the terms and
coverage maintained by the Bank for Employee prior to severance for
twelve (12) months after termination. Other benefits as
indicated in Paragraph 6(b), (c) and (d) shall terminate immediately. In
the event of termination of this Agreement by Employee without Good Reason,
compensation and benefits will be terminated upon the proposed date of the
employment termination or as may otherwise be determined by the Chief Executive
Officer or the Board of Directors of the Bank.
(c) The
Bank reserves the right to terminate this Agreement at any time for Just
Cause. Termination for “Just Cause” shall mean termination for
conduct materially injurious to the Bank including Employee’s personal
dishonesty, incompetence, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses), willful misconduct, breach
of a fiduciary duty, intentional failure to perform stated duties, willful
violation of any administrative action issued by the Federal Deposit Insurance
Corporation (or any other regulatory agency having jurisdiction over Employee or
the Bank), or material breach of any other provision of this
Agreement. In the event this Agreement is terminated for Just
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Cause,
the Bank shall only be obligated to continue to pay Employee his salary up to
the date of termination. In the case of a termination of this
Agreement for Just Cause, the notice of termination given to Employee by the
Bank shall include a listing of the reasons as to why the Employee was guilty of
conduct constituting Just Cause.
(d) In
the event that a “Change in Control” (as defined below) shall have occurred or
the Board of Directors of the Bank, as appropriate, has determined that a Change
in Control has occurred, Employee shall be entitled to the benefits provided in
Paragraph 9 if Employee’s employment is terminated within twelve (12) months
following such Change in Control (regardless of whether such termination results
from his dismissal or from his resignation at any time during the term of this
Agreement for “Good Reason”). For purposes of this Agreement, “Good
Reason” shall mean any of the following that occurs subsequent to a Change in
Control (or subsequent to the Effective Date of this Agreement in a non-Change
in Control context, as applicable below):
(i) any
significant reduction in the compensation structure of the Employee, and the
assignment to Employee by the Bank of duties inconsistent with Employee’s
position, duties, responsibilities and status with the Bank immediately prior to
a Change in Control, or a change in Employee’s titles or offices as in effect
immediately prior to a Change in Control or any removal of Employee from or any
failure to reelect Employee to any of such positions, except in connection with
the termination of his employment for disability, death or cause, or by Employee
other than for Good Reason;
(ii) Employee’s
relocation directed by the Bank to any place more than twenty-five (25)
miles from the location at which Employee performed his duties immediately prior
to the time of a Change in Control, except for required travel by Employee on
the Bank’s business to an extent substantially consistent with Employee’s
business travel obligations immediately prior to the time of a Change in
Control;
(iii) any
material breach by the Bank of any provision of this Agreement or any other
agreement with Employee; or
(iv) any
failure by the Bank to obtain the assumption of this Agreement by any successor
or assign of the Bank.
9. Change
in Control. For purposes of this Agreement, a “Change in
Control” of the Bank shall mean (i) a reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Holding Company or similar transaction occurs in which the Bank or the Holding
Company is not the resulting entity; or (ii) the acquisition by any
individual or entity (which as of the date of this Agreement does not own 51% of
the common stock of the Holding Company) of 51% or more of the common stock of
the Holding Company.
(a) Upon
a Change in Control, any outstanding stock options that may have been granted to
Employee, and any other awards granted to Employee under any equity based
compensation plan of the Bank or the Holding Company shall become
vested.
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(b) Upon
a termination without Just Cause or for Good Reason at or after a Change in
Control, Employee will receive a lump sum payment equal to the sum of two times
his base salary plus two times his target annual bonus, payable within ten (10)
business days after such termination, and the Bank shall cause to be continued
medical, dental, life and disability coverage (with continued life and
disability coverage subject to the provisions of the Bank’s insurance contracts)
substantially identical to the coverage maintained by the Bank for the Employee
prior to severance for thirty-six (36) months after termination.
(c) If
any payments or benefits constitute “excess parachute payments” (as defined in
Code Section 280G), Employee will be fully grossed up if such payments and
benefits exceed 330% of Employee’s “base amount” (as defined in Code
Section 280G). If such payments and benefits equal 330% or less
of Employee’s base amount, payments will be reduced so that Employee does not
receive any excess parachute payments.
10. Release. Notwithstanding
anything to the contrary contained herein, Employee’s right to receive any and
all separation payments or benefits under Paragraphs 8 or 9 shall be
conditioned on the execution and delivery of a general release by Employee in
favor of the Company, its affiliates and their officers, directors and
employees. Any such payment or benefit shall be deferred until the
expiration of the seven day revocation period prescribed by the Age
Discrimination in Employment Act of 1967, as amended, or any similar revocation
period in effect on the effective date of the termination of Employee’s
employment.
11. Non-Competition. Upon
the termination of employment for any reason, the Employee covenants and agrees
that for a period of twelve (12) months he shall not knowingly, without the
prior written consent of the Bank, in a twenty-five (25) mile radius of the
then-existing branches of the Bank, either alone or in partnership or jointly or
in conjunction with any person or persons, financial institution, firm,
association, syndicate, company or corporation as principal, agent, employee,
officer, director, shareholder, consultant, investor or advisor or in any other
manner whatsoever, carry on or be engaged in the commercial banking or financial
institution business; provided
that
this Paragraph 11 shall not prohibit Employee from (i) owning less than 5%
of the outstanding stock of any class of a retail or commercial financial
institution or corporation controlling a retail or commercial banking
institution which is publicly traded, so long as he has no active participation
in the business or management of such corporation or financial institution,
(ii) retaining shares of a financial institution or corporation controlling
a financial institution currently held by Employee, so long as he has no active
participation in the business or management of such financial institution or
corporation, or (iii) enter into or perform under any consulting agreement
or any other agreement or arrangement to serve in an advisory capacity, subject
to the consent of the Bank.
12. Enforcement. In
the event the Bank shall fail to pay any amounts due to Employee under this
Agreement as they come due, the Bank agrees to pay interest on such amounts at a
rate equal to the prime rate (as from time to time published in The
Wall Street Journal (Midwest Edition)) plus one percent (1%) per annum.
The Bank agrees that Employee and any successor shall be entitled to recover all
costs of enforcing any provision of this Agreement, including reasonable
attorneys’ fees and costs of litigation.
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13. Confidential
Information. Employee shall not at any time during or
following his employment hereunder, directly or indirectly, disclose or use on
his behalf or another’s behalf, publish or communicate, except in the course of
his employment and in the pursuit of the business of the Bank or the Holding
Company or affiliates, any proprietary information or data of the Bank or the
Holding Company or affiliates, which is not generally known in the banking
business and which the Bank and/or the Holding Company may reasonably regard as
confidential and proprietary. Employee recognizes and acknowledges
that all knowledge and information which he has or may acquire in the course of
his employment, such as, but not limited to the business, developments,
procedures, techniques, activities or services of the Bank and/or the Holding
Company or the business affairs and activities of any customer, prospective
customer, individual firm or entity doing business with the Bank and/or the
Holding Company are its sole valuable property, and shall be held by Employee in
confidence and in trust for their sole benefit. All records of every
nature and description which come into Employee’s possession, whether prepared
by him, or otherwise, shall remain the sole property of the Bank and/or the
Holding Company and upon termination of his employment for any reason, said
records shall be left with the Bank and/or the Holding Company as part of its
property. Employee acknowledges that the Bank has no adequate remedy at law and
will be irreparably harmed if Employee breaches or threatens to breach the
provisions of Paragraphs 7, 10 or 14 and, therefore agrees that the Bank shall
be entitled to seek, in any court of competent jurisdiction: (i) injunctive
relief to prevent any breach or threatened breach of any such section,
(ii) specific performance of the terms of each of such sections in addition
to any other legal or equitable remedy the Bank or the Holding Company may have
and (iii) enforcement of any such section in any court of competent
jurisdiction.
14. Notices. Any
notice or other communication required or permitted to be given hereunder shall
be determined to have been duly given to any party (a) upon delivery to the
address of such party specified below if delivered personally or by courier;
(b) upon dispatch if transmitted by telecopy or other means of facsimile,
provided a copy thereof is also sent by regular mail or courier; or
(c) within forty-eight (48) hours after deposit thereof in the U.S. mail,
postage prepaid, for delivery as certified mail, return receipt requested,
addressed, in any case to the party at the following address(es) or telecopy
numbers:
(a) If
to Employee, at the address set forth on the signature
page hereof.
(b) If
to the Bank:
NorStates
Bank
0000 X.
Xxxxx Xxxxxx
Xxxxxxxx,
XX 00000-0000
Attn: Chief
Executive Officer
Telecopy
No.: (000) 000-0000
or to
such other address(es) or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
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15. Indemnification.
(a) Subject
to any applicable restrictions by regulatory agencies, in the event that legal
action is instituted against Employee during or after the term hereof by a third
party (or parties) based on the performance or nonperformance by Employee of his
duties hereunder, the Bank will assume the defense of such action by its
attorneys without prejudice to or waiver by the Bank of its rights and remedies
against Employee. In the event that there is a final judgment entered
against Employee in any such litigation, and the Bank’s Board of Directors
determines that Employee should, in accordance with its charter, By-Laws, or
insurance reimburse such entities, Employee shall be liable to the Bank for all
such costs and expenses paid or incurred by them in the defense of any such
litigation (the “Reimbursement Amount”). The Reimbursement Amount
shall be paid by Employee within thirty (30) days after rendition of the final
judgment. The Bank shall be entitled to set off the reimbursement
amount against all sums which may be owed or payable by the Bank to Employee
hereunder or otherwise. The parties shall cooperate in the defense of
any asserted claim, demand or liability against Employee or the Bank or its
subsidiaries or affiliates. The term “final judgment” as used herein
shall be defined to mean the decision of a court of competent jurisdiction, and
in the event of an appeal, then the decision of the appellate court, after
petition for rehearing has been denied, or the time for filing the same (or the
filing of further appeal) has expired.
(b) The
rights to indemnification under this Paragraph 15 shall be in addition to
any rights which Employee may now or hereafter have under the articles or
by-laws of the Bank or any of its affiliates or subsidiaries, under any
insurance contract maintained by the Bank or any of its affiliates or
subsidiaries, or any agreement between Employee and the Bank or any of its
affiliates or subsidiaries.
16. Entire
Understanding. This Agreement constitutes the entire
understanding between the parties relating to Employee’s employment hereunder
and supersedes and cancels all prior written and oral understandings and
agreements with respect to such matters.
17. Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of the Employee and the successors and
assigns of the Bank. This Agreement shall be binding upon any
successor of the Bank in accordance with the operation of law, and such
successor shall be deemed the “Bank” for purposes of this
Agreement.
18. Execution
in Counterparts. This Agreement may be executed by the parties
hereto in two (2) or more counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one
counterpart.
19. Jurisdiction
and Governing Law. Except as provided in Paragraph 11,
jurisdiction over disputes with regard to this Agreement shall be exclusively in
the state and federal courts located in the State of Illinois, and this
Agreement shall be construed and interpreted in accordance with and governed by
the laws of the State of Illinois, without regard to the choice of laws
provisions of such laws.
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20. Severability. If
any provision of this Agreement shall be adjudged by any court of competent
jurisdiction to be invalid or unenforceable for any reason, such judgment shall
not affect, impair or invalidate the remainder of this
Agreement. Furthermore, if the scope of any restriction or
requirement contained in this Agreement is too broad to permit enforcement of
such restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Employee consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
21. Waiver. The
waiver of any party hereto of a breach of any provision of this Agreement by any
other party shall not operate or be construed as a waiver of any subsequent
breach.
22. Amendment. No
change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto.
23. Construction. The
language used in this Agreement will be deemed to be the language chosen by the
Bank and Employee to express their mutual intent and no rule of strict
construction shall be applied against any person. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and the pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine or neuter. The headings of the Paragraphs of this Agreement
are for reference purposes only and do not define or limit, and shall not be
used to interpret or construe the contents of this Agreement. This
Agreement is entered into in good faith by all the parties.
24. Code
Section 409A.
(a) The
parties acknowledge that Section 409A of the Code imposes excise taxes and
other penalties (“409A Penalties”) on deferred compensation that does not meet
certain requirements. The parties intend that 409A Penalties shall
not apply to any payment or the provision of any benefit hereunder, and
accordingly, the provisions of this Agreement shall be construed consistent with
that intention. This Section 24 shall apply to any payment or
benefit to which 409A Penalties would apply, notwithstanding that intention. If
such 409A Penalties could be avoided by delaying the payment or postponing the
provision of the benefit, such payment or provision of the benefit shall be
delayed or postponed until such time as it may be made or provided without
Section 409A Penalties. If delay or postponement of a payment or
the provision of a benefit would not avoid the imposition of 409A Penalties, the
parties agree to cooperate diligently to revise the Agreement in order to
preserve insofar as possible the payment or benefit free from 409A Penalties
without materially changing the economic value of this Agreement to either
party.
(b) If
at the time of Employee’s “separation from service” (as that term is or may be
defined in Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986,
as amended, from the Company: (a) Employee is a “specified employee”
as that term is or may be, defined under Section 409A(a)(2)(B) of the Code;
and (b) a payment provided for under this Agreement is required to be treated as
deferred compensation under Section 409A of the Code, then no such
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payment
may be made before the date which is six (6) months after the date of separation
from service.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
|
NORSTATES
BANK
|
|||
| /s/Xxxx Xxxxxx | |||
| By: | Xxxx Xxxxxx | ||
| Title: | Chairman
of the Board and Chief Executive Officer |
||
| Address: |
EMPLOYEE
|
|||
| 0000 X. Xxxxxxxx Xxxxxx | /s/Xxxxx Xxxxxxxxxx | |||
|
Xxxxxxxxx Xxxxxxx,
XX 00000
|
By:
|
Xxxxx Xxxxxxxxxx | ||
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