EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and is hereby effective
as of this 27th day of January , 1997, by and between FIRST FEDERAL SAVINGS BANK
OF THE MIDWEST, Fifth and Xxxx Xxxxxxx, Xxxxx Xxxx, Xxxx 00000 (hereinafter
referred to as the "Bank") and J. Xxxxx Xxxxx (the "Employee").
WHEREAS, the Employee will serve as Executive Vice President and Trust
Officer of the Bank; and
WHEREAS, the Board of Directors of the Bank recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of the Holding Company and/or the Bank may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key management
personnel to the detriment of the Bank, the Holding Company and its
stockholders; and
WHEREAS, the Board of Directors of the Bank believes it is in the best
interests of the Bank to enter into this Agreement with the Employee in order to
assure continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to his assigned duties
without distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of the Holding Company, although no
such change is now contemplated; and
WHEREAS, the Board of Directors of the Bank has approved and authorized
the execution of this Agreement with the Employee to take effect as stated in
Section 4 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, it is AGREED as
follows:
1. Employment. The Employee will be employed as Executive Vice
President and Trust Officer of the Bank. As such, Employee shall render
administrative and management services as are customarily performed by persons
situated in similar executive capacities, and shall have other powers and duties
as may from time to time be prescribed by the Board, provided that such duties
are consistent with the Employee's position. The Employee shall continue to
devote his best efforts and substantially all his business time and attention to
the business and affairs of the Bank and its subsidiaries and affiliated
companies.
2. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the
term of this Agreement a salary established by the Board of Directors. The
salary hereunder shall be at least equal to $140,000.00 per year commencing on
the first date of employment with the Bank. The salary provided for herein shall
be payable not less frequently than biweekly in accordance with the practices of
the Bank, provided, however, that no such salary is required to be paid by the
terms of this Agreement in respect of any month or portion thereof subsequent to
the termination of this Agreement and provided further, that the amount of such
salary shall be reviewed by the Board of Directors not less often than annually
and may be increased (but not decreased) from time to time in such amounts as
the Board of Directors in its discretion may decide, subject to the customary
withholding tax and other employee taxes as required with respect to
compensation paid by a corporation to an employee.
(b) Discretionary Bonuses. The Employee shall be entitled to
participate in an equitable manner with all other executive officers of the Bank
in discretionary bonuses as authorized and declared by the Board of Directors of
the Bank to its executive employees. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such bonuses when and as declared by the Board of Directors.
(c) Expenses. During the term of his employment hereunder, the
Employee shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by him (in accordance with policies and procedures at least as
favorable to the Employee as those presently applicable to the senior executive
officers of the Bank) in performing services hereunder, provided that the
Employee properly accounts therefor in accordance with Bank policy.
3. Benefits.
(a) Participation in Retirement and Employee Benefit Plans.
The Employee shall be entitled while employed hereunder to participate in, and
receive benefits under, all plans relating to stock options, stock purchases,
pension, thrift, profit-sharing, group life insurance, medical coverage,
education, cash or stock bonuses, and other retirement or employee benefits or
combinations thereof, that are now or hereafter maintained for the benefit of
the Bank's executive employees or for its employees generally.
(b) Fringe Benefits. The Employee shall be eligible while
employed hereunder to participate in, and receive benefits under, any other
fringe benefits which are or may become applicable to the Bank's executive
employees or to its employees generally.
4. Term. The term of employment under this Agreement shall be the
period commencing on March 25, 1997, or such other date as agreed to by the
parties of this Agreement, through September 19, 1999, subject to earlier
termination as provided herein. Beginning on September 20, 1997, and on each
September 20 thereafter, the term of employment under this Agreement shall be
extended for a period of one year unless either the Bank or the Employee gives
contrary written notice to the other not less than 90 days in advance of the
date on which the term of employment under this Agreement would otherwise be
extended, provided that such term will not be automatically extended unless,
prior thereto, such extension is approved by the Board of Directors following
the Board's review of a formal performance evaluation of the Employee performed
by the disinterested members of the Board of Directors of the Bank and reflected
in the minutes of the Board of Directors. Reference herein to the term of
employment under this Agreement shall refer to both such initial term and such
extended terms.
5. Vacations. The Employee shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation of
not less than three weeks per year;
(b) the timing of vacations shall be scheduled in a reasonable
manner by the Employee; and
(c) solely at the Employee's request, the Board of Directors
shall be entitled to grant to the Employee a leave or leaves of absence with or
without pay at such time or times and upon such terms and conditions as the
Board, in its discretion, may determine.
6. Termination of Employment; Death.
(a) The Board of Directors may terminate the Employee's
employment at any time, but any termination by the Bank's Board of Directors,
other than termination for cause, shall not prejudice the Employee's right to
compensation or other benefits under the Agreement. If the employment of the
Employee is involuntarily terminated, other than for "cause" as provided in this
Section 6(a) or pursuant to any of Sections 6(d) through 6(g), or by reason of
death or disability as provided in Sections 6(c) or 7, the Employee shall be
entitled to receive, (i) his then applicable salary for the then-remaining term
of the Agreement as calculated in accordance with Section 4 hereof, payable in
such manner and at such times as such salary would have been payable to the
Employee under Section 2 had he remained in the employ of the Bank, and (ii)
health insurance benefits as maintained by the Bank for the benefit of its
senior executive employees or its employees generally over the then-remaining
term of the Agreement as calculated in accordance with Section 4 hereof.
The terms "termination" or "involuntarily terminated" in this Agreement
shall refer to the termination of the employment of Employee without his express
written consent. The Employee shall be considered to be involuntarily terminated
(1) if the employment of the Employee is involuntarily terminated for any reason
other than for "cause" as provided in this Section 6(a), pursuant to any of
Sections 6(d) through 6(g) or by reason of death or disability as provided in
Sections 6(c) and 7; or (2) there occurs a material diminution of or
interference with the Employee's duties, responsibilities and benefits as
Executive Vice President and Trust Officer of the Bank. By way of example and
not by way of limitation, any of the following actions, if unreasonable or
materially adverse to the Employee, shall constitute such diminution or
interference unless consented to in writing by the Employee: (i) a change in the
principal workplace of the Employee to a location more than fifty (50) miles
from the Bank's main office; (ii) a material demotion of the Employee, a
reduction in the number or seniority of other Bank personnel reporting to the
Employee, or a reduction in the frequency with which, or in the nature of the
matters with respect to which, such personnel are to report to the Employee,
other than as part of a Bank or Holding Company-wide reduction in staff; or
(iii) a reduction or adverse change in the salary, perquisites, benefits,
contingent benefits or vacation time which had theretofore been provided to the
Employee, other than as part of an overall program applied uniformly and with
equitable effect to all members of the senior management of the Bank or the
Holding Company.
In case of termination of the Employee's employment for cause, the Bank
shall pay the Employee his salary through the date of termination, and the Bank
shall have no further obligation to the Employee under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. For purposes of this Agreement, termination
for "cause" shall include termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of a 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. Notwithstanding the foregoing, the Employee shall
not be deemed to have been terminated for cause unless and until there shall
have been delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the disinterested members of the
Board of Directors of the Bank at a meeting of the Board called and held for
such purpose (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee's counsel, to be heard before the Board),
stating that in the good faith opinion of the Board the Employee was guilty of
conduct constituting "cause" as set forth above and specifying the particulars
thereof in detail.
(b) The Employee's employment may be voluntarily terminated by
the Employee at any time upon 90 days written notice to the Bank or upon such
shorter period as may be agreed upon between the Employee and the Board of
Directors of the Bank. In the event of such voluntary termination, the Bank
shall be obligated to continue to pay the Employee his salary only through the
date of termination, at the time such payments are due, and the Bank shall have
no further obligation to the Employee under this Agreement.
(c) In the event of the death of the Employee during the term
of employment under this Agreement and prior to any termination hereunder, the
Employee's estate, or such person as the Employee may have previously designated
in writing, shall be entitled to receive from the Bank the salary of the
Employee through the last day of the calendar month in which his death shall
have occurred, and the term of employment under this Agreement shall end on such
last day of the month.
(d) If the Employee is suspended from office and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e) (3) or (g) (1) of the Federal Deposit
Insurance Act ("FDIA"), 12 U.S.C. ss. 1818(e)(3); (g)(1), the Bank's 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 Bank
may in its discretion (i) pay the Employee 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 the obligations which were suspended.
(e) If the Employee is removed from office and/or permanently
prohibited from participating in the conduce of the Bank's affairs by an order
issued under Section 8(e) (4) or (g)(1) of the FDIA, 12 U.S.C. ss. 1818(e)(4);
(g)(1), all obligations of the Bank under this Agreement shall terminate, as of
the effective date of the order, but vested rights of the parties shall not be
affected.
(f) If the Bank becomes 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 this provision shall
not affect any vested rights of the parties.
(g) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision ("OTS") or his or her designee at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank 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 or her designee at the time the Director of the OTS
or his or her designee approves a supervisory merger to resolve problems related
to operation of the Bank or when the Bank is determined by the Director of the
OTS to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however, shall not
be affected by any such action.
(h) In the event the Bank purports to terminate the Employee
for cause, but it is determined by a court of competent jurisdiction or by an
arbitrator pursuant to Section 17 that cause did not exist for such termination,
or if in any event it is determined by any such court or arbitrator that the
Bank has failed to make timely payment of any amounts owed to the Employee under
this Agreement, the Employee shall be entitled to reimbursement for all
reasonable costs, including attorneys' fees, incurred in challenging such
termination or collecting such amounts. Such reimbursement shall be in addition
to all rights to which the Employee is otherwise entitled under this Agreement.
7. Disability. If during the term of employment hereunder the Employee
shall become disabled or incapacitated to the extent that he is unable to
perform the duties of the Executive Vice President and Trust Officer, he shall
be entitled to receive disability benefits of the type provided for other
executive employees of the Bank.
8. Change in Control.
(a) Involuntary Termination. If the Employee's employment is
involuntarily terminated (other than for cause or pursuant to any of Sections
6(c) through 6(g) or Section 7 of this Agreement) in connection with or within
12 months after a change in control which occurs at any time during the term of
employment under this Agreement, in addition to any payments under Section 6(a)
of this Agreement, the Bank shall pay to the Employee in a lump sum in cash
within 25 business days after the Date of Termination (as hereinafter defined)
of employment an amount equal to 299% of the Employee's "base amount" of
compensation as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) Definitions. For purposes of Section 8, 9 and 11 of this
Agreement, "Date of Termination" means the earlier of (i) the date upon which
the Bank gives notice to the Employee of the termination of his employment with
the Bank, or (ii) the date upon which the Employee ceases to serve as an
Employee of the Bank; and "change in control" is defined solely as any
acquisition of control (other than by a trustee or other fiduciary holding
securities under an employee benefit plan of the Holding Company or a subsidiary
of the Holding Company), as defined in 12 C.F.R. ss. 574.4, or any successor
regulation, of the Bank or Holding Company which would require the filing of an
application for acquisition of control or notice of change in control in a
manner as set forth in 12 C.F.R. ss. 574.3, or any successor regulation.
9. Certain Reduction of Payments by the Bank.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Bank to or for the benefit of the Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible (in whole or part) by the
Bank for Federal income tax purposes because of Section 280G of the Code, then
the aggregate present value of amounts payable or distributable to or for the
benefit of the Employee pursuant to this Agreement (such amounts payable or
distributable pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced to the Reduced Amount. The "Reduced
Amount" shall be an amount, not less than zero, expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by the Bank because of Section 280G of the Code. For
purposes of this Section 9, present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section
9 shall be made by the Bank's independent auditors, or at the election of such
auditors by such other firm or individuals of recognized expertise as such
auditors may select (such auditors or, if applicable, such other firm or
individual, are hereinafter referred to as the "Advisory Firm"). The Advisory
Firm shall within ten business days of the Date of Termination, or at such
earlier time as is requested by the Bank, provide to both the Bank and the
Employee an opinion (and detailed supporting calculations) that the Bank has
substantial authority to deduct for federal income tax purposes the full amount
of the Agreement Payments and that the Employee has substantial authority not to
report on his federal income tax return any excise tax imposed by Section 4999
of the Code with respect to the Agreement Payments. Any such determination and
opinion by the Advisory Firm shall be binding upon the Bank and the Employee.
The Employee shall determine which and how much, if any, of the Agreement
Payments shall be eliminated or reduced consistent with the requirements of this
Section 9, provided that, if the Employee does not make such determination
within ten business days of the receipt of the calculations made by the Advisory
Firm, the Bank shall elect which and how much, if any, of the Agreement Payments
shall be eliminated or reduced consistent with the requirements of this Section
9 and shall notify the Employee promptly of such election. Within five business
days of the earlier of (i) the Bank's receipt of the Employee's determination
pursuant to the immediately preceding sentence of this Agreement or (ii) the
Bank's election in lieu of such determination, the Bank shall pay to or
distribute to or for the benefit of the Employee such amounts as are then due
the Employee under this Agreement. The Bank and the Employee shall cooperate
fully with the Advisory Firm, including without limitation providing to the
Advisory Firm all information and materials reasonably requested by it, in
connection with the making of the determinations required under this Section 9.
(c) As a result of uncertainty in application of Section 280G
of the Code at the time of the initial determination by the Advisory Firm
hereunder, it is possible that Agreement Payments will have been made by the
Bank which should not have been made ("Overpayment") or that additional
Agreement Payments will not have been made by the Bank which should have been
made ("Underpayment"), in each case, consistent with the calculations required
to be made hereunder. In the event that the Advisory Firm, based upon the
assertion by the Internal Revenue Service against the Employee of a deficiency
which the Advisory Firm believes has a high probability of success determines
that an Overpayment has been made, any such Overpayment paid or distributed by
the Bank to or for the benefit of Employee shall be treated for all purposes as
a loan ab initio which the Employee shall repay to the Bank together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that no such loan shall be deemed to have been made
and no amount shall be payable by the Employee to the Bank if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Employee is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Advisory Firm, based upon
controlling preceding or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Bank to or for the benefit of the Employee together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) The total of payments to the Employee in the event of
involuntary termination of employment under Section 6(a) and Section 8(a) shall
not exceed three times his average annual compensation from the Bank over the
five most recent taxable years (or, if employed by the Bank for a shorter
period, over the period of his employment by the Bank).
(e) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.
10. Non-competition.
(a) Upon the expiration of the term of the Employee's
employment hereunder or in the event the Employee's employment hereunder
terminates prior thereto for any reason whatsoever, the Employee shall not, for
a period of one (1) year after the occurrence of such event, for himself, or as
the agent of, on behalf of, or in conjunction with, any person or entity,
solicit or attempt to solicit, whether directly or indirectly: (i) any employee
of the Bank to terminate such employee's employment relationship with the Bank;
or (ii) any savings and loan, banking or similar business from any person of
entity that is or was a client, employee, or customer of the Bank and had dealt
with the Employee or any other employee of the Bank under the supervision of the
Employee.
(b) In the event Employee voluntarily resigns pursuant to
Section 6(b) of this Agreement, or in the event the Employee's employment
hereunder is terminated for cause, the Employee shall not, for a period of one
(1) year from the date of termination, directly or indirectly, own, manage,
operate or control, or participate in the ownership, management, operation or
control of, or be employed by or connected in any manner with, any financial
institution having an office located within fifty (50) miles of any office of
the Bank as of the date of termination.
(c) The provisions of subsections (a) and (b) hereof shall not
prevent the Employee from purchasing, solely for investment, not more than five
percent (5%) of any financial institution's stock or other securities which are
traded on any national or regional securities exchange or are actively traded in
the over-the-counter market and registered under Section 12(g) of the Securities
Exchange Act of 1934.
(d) The provisions of this Section shall survive the
termination of the Employee's employment hereunder whether by expiration of the
term
thereof or otherwise.
11. No Assignments.
(a) This Agreement is personal to each of the parties hereto,
and neither party may assign or delegate any of its rights or obligations
hereunder without first obtaining the written consent of the other party;
provided, however, that the Bank will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Bank in the same amount and on the same terms as the compensation
pursuant to Section 8(a) hereof. For purposes of implementing the provisions of
this Section 11(a), the date on which any such succession becomes effective
shall be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to the Employee hereunder if the Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee or if there is no such designee, to the Employee's
estate.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the Bank at its
main office to the attention of the Board of Directors (with a copy to the
Secretary of the Bank), and in the case of the Employee, to him at his home
address most recently provided to the Bank, or to such other address as either
party may have furnished to the other in writing in accordance herewith.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. Paragraph Headings. The paragraph headings used in this Agreement
are included solely for convenience and shall not affect, or be used in
connection with, the interpretation of this Agreement.
15. 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.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Iowa.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
FIRST FEDERAL SAVINGS BANK OF THE MIDWEST
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, President
and Chief Executive Officer
EMPLOYEE
By: /s/ J. Xxxxx Xxxxx
------------------
J. Xxxxx Xxxxx
