EXHIBIT 10(h)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement"), is made and entered into as
of this 31st day of July, 1997, by and between PINNACLE FINANCIAL SERVICES,
INC., a Michigan corporation ("Pinnacle"), PINNACLE BANK, a Michigan banking
corporation ("Pinnacle Bank") and XXXXX X. XXXXXXXX (the "Executive").
WITNESSETH:
WHEREAS, Pinnacle has entered into (i) an Agreement and Plan of Merger
dated as of November 14, 1996, as amended by First Amendment to Agreement and
Plan of Merger dated as of February 27, 1997 (the "IFC Merger Agreement"),
with Indiana Federal Corporation, a Delaware corporation ("IFC"), pursuant to
which IFC is to be merged with and into Pinnacle (the "IFC Merger"), and the
wholly-owned subsidiary of IFC, Indiana Federal Bank for Savings, a Federal
Savings Bank ("IndFed Bank"), is to be merged and consolidated into the
wholly-owned subsidiary of Pinnacle, Pinnacle Bank, and (ii) an Agreement and
Plan of Merger dated as of March 1, 1997, (the "CB Merger Agreement"), with
CB Bancorp, Inc., a Delaware corporation ("CB"), pursuant to which CB is to
be merged with and into Pinnacle (the "CB Merger"), and the wholly-owned
subsidiary of CB, Community Bank, a Federal Savings Bank ("CB Bank"), is to
be merged and consolidated into Pinnacle Bank; and
WHEREAS, Executive is currently serving as an executive of Pinnacle
and/or Pinnacle Bank and is a party to an Employment Severance Compensation
Agreement dated April 18, 1995, as amended by the amended and restated
Employment Severance Compensation Agreement dated April 30, 1996 (the
"Employment Agreement"), with Pinnacle and Pinnacle Bank, pursuant to which
the Executive is entitled to certain benefits, including, among other things,
certain benefits following a change in control affecting Pinnacle and/or
Pinnacle Bank; and
WHEREAS, upon both of the mergers contemplated under the IFC Merger
Agreement and the CB Merger Agreement becoming effective, Pinnacle, as the
survivor of the mergers with IFC and CB, and Pinnacle Bank, as the survivor
of the mergers and consolidations with IndFed Bank and CB Bank, desire to
continue the employment of the Executive with Pinnacle and/or Pinnacle Bank,
but on terms provided herein, which are different than and would supersede
the
terms provided in the Employment Agreement; and
WHEREAS, Executive is willing to be employed with Pinnacle and/or
Pinnacle Bank following the effectiveness of both of the mergers contemplated
by the IFC Merger Agreement and the CB Merger Agreement on terms provided
herein, and to cancel and terminate the Employment Agreement as herein
provided;
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements of the parties provided herein, the parties do
hereby agree as follows:
5. CERTAIN DEFINITIONS.
(a) The term "Change in Control" means (i) any "person", as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than Pinnacle, Pinnacle Bank,
any of their affiliates, any person (as hereinabove defined) acting on behalf
of Pinnacle and/or Pinnacle Bank as underwriter pursuant to an offering who
is temporarily holding securities in connection with such offering, any
trustees or other fiduciary holding securities under an employee benefit plan
of Pinnacle and/or Pinnacle Bank, or any corporation owned, directly or
indirectly, by the stockholders of Pinnacle in substantially the same
proportions as their ownership of stock of Pinnacle), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Pinnacle and/or Pinnacle Bank
representing 25% or more of the combined voting power of Pinnacle's and/or
Pinnacle Bank's then outstanding securities; (ii) individuals who are members
of the Board of Pinnacle and/or Pinnacle Bank (the "Incumbent Board") upon
the consummation of both the IFC Merger and the CB Merger (the "Commencement
Date") cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the Commencement
Date whose election was approved by a vote of at least a majority of the
directors comprising the Incumbent Board or whose nomination for election by
stockholders was approved by the nominating committee serving under an
Incumbent Board, shall be considered a member of the Incumbent Board; (iii)
the stockholders of Pinnacle and/or Pinnacle Bank approve a merger or
consolidation of Pinnacle and/or Pinnacle Bank with any other corporation,
other than (1) a merger or consolidation which would result in the voting
securities of Pinnacle outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of Pinnacle or such surviving entity
outstanding immediately after such merger or consolidation, or (2) a merger
or consolidation effected to implement a recapitalization of Pinnacle (or
similar transaction) in which no person (as hereinabove defined) acquires
more than 25% of the combined voting power of Pinnacle's then outstanding
securities; or (iv) the stockholders of Pinnacle and/or Pinnacle Bank approve
a plan of complete liquidation of Pinnacle and/or Pinnacle Bank or an
agreement for the sale or disposition by Pinnacle of all or substantially all
of the assets of Pinnacle and/or Pinnacle Bank (or any transaction having a
similar effect). Notwithstanding the foregoing or anything to the contrary,
neither the IFC Merger nor the CB Merger shall constitute a "Change in
Control" for purposes of this Agreement.
(b) The term "Good Reason" means the occurrence, without the
Executive's express written consent, of a material diminution of or
interference with the Executive's duties, responsibilities or benefits,
including, without limitation, any of the following circumstances unless such
circumstances are fully corrected prior to the Date of Termination specified
in the Notice of Termination given by the Executive in respect thereof:
(1) a requirement that the Executive be principally based at any
location not within 25 miles of St. Xxxxxx, Michigan, or that
he substantially increase his travel on Pinnacle or Pinnacle
Bank business:
(2) a material demotion of the Executive;
(3) a material reduction in the number or seniority of personnel
reporting to the Executive or a material reduction in the
frequency with which, or in the nature of the matters with
respect to which such personnel are to report to the
Executive, other than as part of a company-wide reduction in
staff;
(4) a reduction in the Executive's salary or a material adverse
change in the Executive's perquisites, benefits, contingent
benefits or vacation, other than as part of an overall program
applied uniformly and with equitable effect to all members of
the senior management of Pinnacle or Pinnacle Bank;
(5) a material and extended increase in the required hours of work
or the workload of the Executive; or
(6) the failure of Pinnacle or Pinnacle Bank to obtain a
satisfactory agreement from any successor to assume the
obligations and liabilities under this Agreement, as
contemplated in Section 16 hereof.
(c) The terms "Termination for Cause" or "Cause" in relation to a
termination of employment shall mean termination because of the Executive's
intentional or persistent failure to perform stated duties of a material
nature, personal dishonesty which results in material loss to Pinnacle or
Pinnacle Bank, willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order which
results in material loss to Pinnacle or Pinnacle Bank, or any material breach
of this Agreement. For purposes of this Section, no act, or the failure to
act, on Executive's part shall be "willful" unless done, or omitted to be
done, not in good faith and without reasonable belief that the action or
omission was in the best interest of Pinnacle or Pinnacle Bank.
Notwithstanding the foregoing, 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 which shall include a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the members of
the Board of Pinnacle (excluding the Executive for purposes of said
computation) at a meeting of the Board called and held for that purpose
(after reasonable notice to Executive and an opportunity for him, together
with counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of conduct justifying termination
for Cause and specifying the particulars thereof in detail.
2. DESCRIPTION OF SERVICES.
Following the consummation of both the IFC Merger and the CB Merger,
Executive shall serve as an employee of Pinnacle and/or Pinnacle Bank, in
such capacity as may be mutually agreed by Pinnacle and/or Pinnacle Bank and
Executive. As an employee of Pinnacle and/or Pinnacle Bank, Executive will
provide Pinnacle and its affiliates with the benefit of his special
knowledge, skill, contacts and business experience in the banking, savings
and loan, and financial services industries.
3. AT WILL EMPLOYMENT.
Executive shall be employed as an "at will " employee, and said
employment may be terminated by either Pinnacle and/or Pinnacle Bank or
Executive at any time, whether for "Cause" or any reason whatsoever, subject
to the provisions of Sections 4, 5, 6 and 8 of this Agreement.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION PRIOR TO A CHANGE IN
CONTROL.
Subject to the provisions of Section 6 of this Agreement:
(a) Upon the occurrence of an "Event of Termination Prior to a Change
of Control" (as herein defined), the provisions of this Section shall apply.
As used in Sections 4(a) and (b) of this Agreement, an "Event of Termination
Prior to a Change in Control" shall mean termination of employment service in
all capacities with Pinnacle and Pinnacle Bank, for any reason, which
termination of employment service occurs after the effective date of this
Agreement but prior to the occurrence of a Change in Control, including,
without limitation, the termination by Pinnacle and/or Pinnacle Bank of
Executive's full-time employment hereunder whether for "Cause" or for any
reason whatsoever, the termination by the Executive of his employment for
Good Reason or for any reason whatsoever, or termination upon the retirement,
resignation, death or disability of Executive.
(b) Upon the occurrence of an Event of Termination Prior to a Change in
Control, Pinnacle and/or Pinnacle Bank shall pay Executive, or in the event
of his death or disability, his beneficiary or beneficiaries, or his estate
or legal representatives, as the case may be, (i) the salary of Executive
through the Date of Termination at the rate in effect at the time the Notice
of Termination is given, at the time such payments are due; and (ii) in a
lump sum in cash, within 30 days after the Date of Termination, as severance
pay or liquidated damages, or both, the sum of $287,000.
5. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION UPON OR FOLLOWING A
CHANGE IN CONTROL.
Subject to the provisions of Section 6 of this Agreement:
(a) In the event that Pinnacle and/or Pinnacle Bank shall terminate the
Executive's employment other than Termination for Cause, or the Executive
shall terminate his employment for Good
Reason, or the Executive's employment shall be terminated by retirement,
death or disability, in any said case upon or within 24 months following a
Change in Control, Pinnacle and/or Pinnacle Bank shall (i) pay the Executive
his salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given, at the time such payments are due; and
(ii) pay to the Executive in a lump sum in cash, within 30 days after the
Date of Termination, an amount equal to the greater of:
(A) the lesser of:
(1) 200% of the Executive's total compensation of any and all
types, including salary, bonus, gains on exercise of stock
options and other benefits, paid to or earned by Executive
from Pinnacle, Pinnacle Bank and all of their affiliates
during the fiscal year most recently completed on or prior to
the date of the Change in Control, or
(2) 299% of the Executive's "base amount" as determined under
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), less the aggregate present value of the payments
or benefits, if any, in the nature of compensation for the
benefit of the Executive, arising under any other plans or
arrangements (i.e., not this Agreement) between Pinnacle or
Pinnacle Bank or any of their affiliates and the Executive,
which are contingent upon a Change in Control and which are
not deemed to be "reasonable compensation" under Section 280G
of the Code, or
(B) $287,000.
(b) In the event that Pinnacle and/or Pinnacle Bank shall terminate the
Executive's employment for Cause, or the Executive shall terminate his
employment other than for Good Reason, in any said case upon or at any time
following a Change in Control, or the Executive's employment shall be
terminated for any reason more than 24 months following a Change in Control,
Pinnacle and/or Pinnacle Bank shall pay to Executive , or in the event of his
death or disability, his beneficiary or beneficiaries, or his estate or legal
representatives, as the case may be, (i) the salary of Executive through the
Date of Termination at the rate in effect at the time the Notice of
Termination is given, at the time such
payments are due; and (ii) in a lump sum in cash, within 30 days after the
Date of Termination, as severance pay or liquidated damages, or both, the sum
of $287,000.
6. REGULATORY AND OTHER RESTRICTIONS.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of Pinnacle's and/or Pinnacle Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit
Insurance Act (the "FDIA"), 12 U.S.C. Section 1818(e)(3) and (g)(1), or
Section 37 of the Michigan Banking Code (the "MBC"), M.C.L. Section 487.337,
Pinnacle's and Pinnacle 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, Pinnacle and/or
Pinnacle Bank may in its discretion (i) pay the Executive all or part of
withheld while its obligations under this Agreement were suspended and (ii)
reinstate in whole or in part any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of Pinnacle's and/or Pinnacle Bank's affairs by
an order issue under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. Section
1818(e)(4) and (g)(1), or under Section 37 of the MBC, M.C.L. Section
487.337, all obligations of Pinnacle and Pinnacle Bank under this Agreement
shall terminate as of the effective date of the order, but vested rights of
the contracting parties shall not be affected.
(c) If Pinnacle and/or Pinnacle Bank is in default (as defined in
Section 3(x)(1) of the FDIA), or its performance of this Agreement is grounds
for an action under Section 35 of the MBC, M.C.L. Section 487.335, all
obligations under this Agreement shall terminate as of the date of default,
but this provision shall not affect any vested rights of the contracting
parties.
(d) Any payments 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 regulation promulgated thereunder.
(e) The Executive shall not be required to mitigate the amount of any
payment or provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any
compensation earned by the Executive as a result of employment by another
employer, by retirement benefits after the date of termination or otherwise.
This Agreement shall not be construed as providing the Executive any rights
to be retained in the employ of Pinnacle, Pinnacle Bank or any affiliate of
Pinnacle.
7. NOTICE.
(a) Any purported termination by Pinnacle and/or Pinnacle Bank or by
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of 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).
8. POST-TERMINATION OBLIGATIONS.
(a) All payments and benefits to Executive under this Agreement shall
be subject to Executive's compliance with paragraph (b) of this Section 8
during the term of this Agreement and for one (1) full year after the
expiration or termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information
and assistance to Pinnacle and Pinnacle Bank as may reasonably be required by
Pinnacle and/or Pinnacle Bank in connection with any litigation in which it
or any of its subsidiaries or affiliates is, or may become, a party.
9. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of Pinnacle and/or Pinnacle Bank.
10. NO ATTACHMENT; SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL OBLIGATIONS.
(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, on the one hand, and his heirs, beneficiaries and legal
representatives, and Pinnacle and Pinnacle Bank, on the other hand, and their
respective successors and assigns.
(c) The obligations of Pinnacle and Pinnacle Bank hereunder are joint
and several obligations of each of them.
11. MODIFICATION.
This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.
12. 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 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.
13. 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.
14. ARBITRATION.
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 the chief executive offices of
Pinnacle, in accordance with the rules of the American Arbitration
Association then in effect.
15. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by Pinnacle and/or Pinnacle Bank, if Executive is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
16. SUCCESSOR TO PINNACLE AND/OR PINNACLE BANK.
Pinnacle and Pinnacle Bank shall each require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise,
to all or substantially all its business or assets, expressly and
unconditionally to assume and agree to perform its obligations under this
Agreement, in the same manner and to the same extent that it would be
required to perform if no such succession or assignment had taken place.
17. APPLICABLE LAW.
This Agreement shall be governed by the laws of the State of Michigan
applicable to contracts made and wholly to be performed within such state.
18. EFFECTIVENESS AND SUPERSEDED AGREEMENTS.
This Agreement shall be effective upon consummation of both the IFC
Merger and the CB Merger. In the event the IFC Merger Agreement is
terminated, or if the IFC Merger is not consummated for any reason, or the CB
Merger Agreement is terminated, or if the CB Merger is not consummated, this
Agreement shall be null and void and of no effect. Notwithstanding the
foregoing, by executing this Agreement, the Executive acknowledges and agrees
that, in the event both the IFC Merger and the CB Merger are consummated and
this Agreement becomes effective, his Employment Severance Compensation
Agreement with Pinnacle and Pinnacle Bank dated April 18, 1995, as amended by
the amended and restated Employment Severance Compensation Agreement dated
April 30, 1996, shall immediately and automatically be and become superseded,
void and of no effect, without need of any further action; and that, in said
event, he shall have no rights to any payments or other benefits under such
prior agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Pinnacle Financial Services, Inc.
By:
_______________________________
Xxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxx, Chairman
"Executive" and Chief Executive Officer
Pinnacle Bank
By:
Xxxxxx X. Xxxxxx
President
