COVEST BANCSHARES, INC.
EMPLOYMENT AGREEMENT
This AGREEMENT, is made effective as of January 20, 1999 ("Effective
Date"), by and between CoVest Bancshares, Inc., a Delaware corporation (the
"Company") and Xxxxx X. Xxxxxxx ("Executive").
WHEREAS, the Company desires to employ Executive as the President and Chief
Executive Officer of the Company and its subsidiary, CoVest Banc, National
Association (the "Bank"); and
WHEREAS, the Executive is willing to commit himself to serving the Company
and the Bank on the terms and conditions herein provided;
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.
(a) Executive shall be employed as President and Chief Executive Officer
of the Company and of the Bank effective as of the date hereof for the Period of
Employment as defined hereafter. The Executive shall report to the Board of
Directors of the Company. The Executive's duties and responsibilities shall
consist of such duties and responsibilities as may from time to time be assigned
to the Executive by such Boards of Directors, which duties and responsibilities
shall be duties customary for a President and Chief Executive Officer of the
Company or Bank.
(b) No later than the first regularly scheduled meeting of their
respective Board of Directors after the Effective Date, the Company and Bank
shall cause Executive to be elected to the Board of Directors of the Company and
the Bank. Thereafter, the Company shall cause Executive to be nominated as a
director of the Company and shall elect him as a director of the Bank annually
while he is employed under this Agreement. Executive shall be entitled to
compensation in connection with his service as a director of the Company and
Bank on the same basis as compensation paid to non-employee directors,
including, but not limited to, participation as an eligible director under the
CoVest Bancshares, Inc. Director Retirement Plan.
2. PERIOD OF EMPLOYMENT. The period of the Executive's employment under
this Agreement (the "Period of Employment") shall commence upon the Effective
Date hereof and shall continue for a period of twenty-four (24) full calendar
months thereafter,
subject to extension as provided herein or to earlier termination as provided in
Paragraph 4 below. The Period of Employment shall be automatically extended for
twelve (12) additional months on each anniversary date of the Effective Date
unless, no later than such anniversary date, either the Board of the Company or
a duly authorized committee thereof (the "Board") on behalf of the Company, or
the Executive gives written notice to the other, that the Period of Employment
shall not be so extended; provided, however, that in no event shall the Period
of Employment extend beyond the date Executive attains age 65. Notwithstanding
anything in this Agreement to the contrary, if at any time during the Period of
Employment there is a Change of Control (as defined in Paragraph 4), the Period
of Employment shall automatically extend to a date which is the first to occur
of (a) the date which is thirty-six (36) months from the date of the Change in
Control, and (b) the date Executive attains age 65.
3. COMPENSATION AND REIMBURSEMENT.
(a) SALARY. During the Period of Employment, the Bank shall pay the
Executive the compensation specified in this Agreement for the services
performed hereunder. The Bank shall pay the Executive as compensation a base
salary ("Base Salary") of $200,000 per year. The Base Salary shall be subject
to review by the Board and may be increased (but not decreased), whereupon such
increased amount shall become the Base Salary hereunder.
(b) BONUSES. The Executive shall be eligible for consideration in 1999
and subsequent years for annual incentive bonuses of up to 50% of Base Salary as
the Board may determine based upon performance criteria to be established by the
Board in consultation with Executive.
(c) OPTIONS. The Company shall grant to Executive an option to purchase
100,000 shares of Company common stock. Such option shall be granted under the
Company's 1992 Stock Option and Incentive Plan (the "Incentive Plan"), shall
provide for an exercise price per share equal to the fair market value on the
Effective Date, shall vest at a rate of 25,000 shares on the Effective Date and
25,000 shares on each of the first three anniversary dates of the Effective
Date, shall be designated an incentive stock option to the maximum extent
possible taking into account the exercise price and vesting schedule, and shall
have such other terms and conditions applicable to incentive and non-qualified
options granted under such plan. The incentive option and non-qualified option
shall be evidenced by the Option Agreements attached hereto as Appendix A-1 and
Appendix A-2, respectively.
(d) VACATION; EXPENSE REIMBURSEMENT. During the Period of Employment, the
Executive shall be entitled to a paid vacation, periods of absence occasioned by
illness and reasonable leaves of absence, and to expense reimbursement in
accordance with Company policies.
(e) BENEFIT PLANS. Except as set forth below, the Executive shall be
eligible to participate in or receive benefits under any benefit plans and
arrangements of the Company and Bank in which executive officers of the Company
and the Bank are generally entitled to participate including, but not limited
to, the profit sharing/401(k) plan, health-and-accident plans, medical coverage,
disability or any other benefit plans or arrangements, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements applicable to executive officers of the Company and the Bank
generally. Notwithstanding the foregoing, in the event of (i) the termination of
Executive's employment with the Company and Bank (other than by the Company for
Cause (as defined in Section 4(d) below)) after the fifth anniversary of the
Effective Date, or (ii) the termination of the Executive's employment with the
Company and Bank under circumstances constituting an Event of Termination (as
defined in Paragraph 4(b) below), Executive shall be entitled to maintain COBRA
continuation coverage from the Date of Termination (as defined in Paragraph 4(i)
below) until the earlier of the date Executive first becomes eligible for
Medicare, or the date the Executive obtains coverage under another employer's
plan; provided, that if an Event of Termination has occurred, the Company shall
waive the premium for such COBRA coverage. Nothing paid to the Executive under
any such plan or arrangement shall be deemed to be in lieu of other compensation
to which the Executive is entitled under this Agreement.
(f) RELOCATION. In order to perform his duties and responsibilities
hereunder, the Executive shall establish a residence reasonably proximate to Des
Plaines, Illinois. The Company shall reimburse Executive in an amount not to
exceed $10,000 for reasonable costs incurred by Executive on account of personal
travel and the shipment of the Executive's household goods and personal effects
in connection with establishing a residence in the Des Plaines, Illinois area.
For an initial period of relocation (not to exceed four months), the Company
will reimburse Executive for the cost of temporary accommodations in the Des
Plaines, Illinois area, in an amount not to exceed $2,000 per month.
(g) LEGAL FEE REIMBURSEMENT. The Company shall reimburse Executive for
all reasonable legal fees incurred by Executive in the negotiation of this
Employment Agreement.
4. TERMINATION; NOTICE.
(a) TERMINATION. The Company may terminate the Executive's employment
with the Company and the Bank (and the Period of Employment) at any time, with
or without Cause. The Executive may terminate his employment with the Company
and Bank at any time for any reason.
(b) EVENT OF TERMINATION. As used in this Agreement, an "Event of
Termination" shall mean:
(i) the termination by the Company and the Bank of the Executive's
full-time employment hereunder for any reason other than for Cause, death or
Disability, or
(ii) the voluntary termination by the Executive of employment with
the Company and the Bank within sixty (60) days of a Constructive Discharge; or
(iii) the voluntary termination by the Executive of employment with
the Company and the Bank within one (1) year after the date of a Change in
Control.
(c) SEVERANCE BENEFITS. Following the occurrence of an Event of
Termination and only so long as the Executive complies with his obligations
under the Non-Competition Agreement described in Paragraph 6 below, the Bank
shall continue to pay to the Executive, or, in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay, the Base Salary described in Paragraph 3(a) above and to continue
the medical insurance benefits otherwise provided hereunder for the remainder of
the Period of Employment, on the same basis as if Executive's employment
continued hereunder.
(d) CAUSE. The term "for Cause" shall mean termination by the Company
because (i) a material violation by the executive of any applicable material
law or regulation respecting the business of the Company and its affiliates;
(ii) the Executive's being found guilty of a felony, an act of dishonesty in
connection with the performance of his duties as an officer of the Company or an
affiliate of the Company; or which disqualifies the Executive from serving as an
officer of the Company or an affiliate of the Company; or (iii) the willful or
negligent failure of the Executive to perform his duties hereunder in any
material respect. The Executive shall be entitled to at least thirty days'
prior written notice of the Company's intention to terminate his employment for
Cause, specifying the grounds for such termination, a reasonable opportunity to
cure any conduct or act, if curable, alleged as grounds for such termination,
and a reasonable opportunity to present to the Board of Directors of the Company
his position regarding any dispute relating to the existence of Cause for such
termination. In determining willfulness, no act or failure to act on the
Executive's part shall be considered "willful" unless done or omitted to be done
by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company or Bank.
(e) DISABILITY. The term "Disability" shall mean Executive's inability,
as a result of physical or mental incapacity, substantially to perform his
duties hereunder for a period of six (6) months. In the event that it is
reasonably determined that Executive has suffered a Disability, the Company
shall be entitled to terminate his employment. Executive shall be entitled to
compensation and benefits provided for under this Agreement for any period
during the term of this Agreement prior to the establishment of a Disability
during which Executive is unable to work due to a physical or mental disability,
provided that if Executive receives disability income benefits while employed
hereunder, the Company's obligation to pay him salary shall be reduced
accordingly. Notwithstanding anything contained herein to the contrary,
following a period in which executive is unable substantially to perform his
duties hereunder, until the date specified in a notice of termination relating
to a Disability, the Executive shall be entitled to return to the performance of
his duties hereunder, in which event no Disability shall be deemed to have
occurred. In addition to such disability income benefits,
if any, as are paid to executive under a disability benefit plan of the Company
following termination of his employment, the Company shall for a period of one
year following such termination of employment, pay to Executive such amount as,
when aggregated with such disability income benefits, will provide to him the
same after tax income as he would have received if he had remained employed at
the same rate of salary as was payable when his employment was terminated.
(f) CONSTRUCTIVE DISCHARGE. The term "Constructive Discharge" shall mean
the occurrence, other than in connection with a termination by the Company, of
any one of the following events without the Executive's consent:
(i) The Executive is removed from the position of President and
Chief Executive Officer of the Company or the Bank, other than as a result
of the Executive's election or appointment to positions of equal or
superior scope and responsibility; or
(ii) The Executive shall fail to be vested by the Company Employer
with the powers, authority and support services of such position and such
failure has not been remedied by the Company within thirty (30) days after
receipt of written notice of such failure from Executive, or
(iii) The Company shall fail to pay the compensation and benefits
required by Paragraph 3 hereof and such failure has not been remedied by
the Company within thirty (30) days after receipt of written notice of such
failure from Executive; or
(iv) The Company changes the primary employment location of the
Executive to a place that is more than thirty-five (35) miles from
Company's principal office as of the Effective Date, or
(v) The Executive is not elected as a director of the Company or the
Bank at an annual meeting of shareholders of the Company or the Bank,
respectively.
(g) CHANGE IN CONTROL. For purposes of this Agreement, the term "Change
in Control" shall mean the following:
(i) The consummation of the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 0000 Xxx) of twenty-five
percent (25%) or more of the combined voting power of the then outstanding
voting securities; or
(ii) The individuals who, as of the date hereof, are members of the
Board of Directors of the Company cease for any reason to constitute a
majority of such Board members, unless the election, or nomination for
election by the stockholders, of any new director was approved by a vote of
a majority of the Board, and such new director shall, for purposes of this
Agreement, be considered as a member of the Board; or
(iii) Approval by the stockholders of: (A) a merger or
consolidation if the stockholders of the Company immediately before
such merger or consolidation do not, as a result of such merger or
consolidation, own, directly or indirectly, more than sixty-seven
percent (67%) of the combined voting power of the then outstanding
voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership
of the combined voting power of the voting securities of the Company
outstanding immediately before such merger or consolidation; or (B) a
complete liquidation or dissolution or an agreement for the sale or
other disposition of all or substantially all of the assets of the
entity.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because twenty-five percent (25%) or more of the combined voting power of
the then outstanding securities is acquired by: (1) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
for employees of the entity; or (2) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the stockholders in the
same proportion as their ownership of stock immediately prior to such
acquisition.
(h) GROSS-UP PAYMENT. In the event it shall be determined that any payment
or distribution of any type to or for the benefit of the Executive by the
Company, any of its affiliates, or any person who acquires ownership or
effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning of Section 280G of the Code, and the
regulations thereunder) or any affiliate of such person, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments"), is subject to the excise tax imposed by
Section 4999 of the Code or any similar successor provision or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon
the Total Payments (not including any Gross-Up Payment). All determinations as
to whether any of the Total Payments are "parachute payments" (within the
meaning of Section 280G of the Code), whether a Gross-Up Payment is required,
the amount of such Gross-Up Payment and any amounts relevant to the foregoing
sentence shall be made by an independent accounting firm selected by the
Company, which may be the accounting firm then regularly retained by the Company
(the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations, regarding the
amount of any Gross-Up Payment and any other relevant matter, both to the
Company and the Executive, within five (5) days of a Date of Termination, if
applicable, or such earlier time as is requested by the Company or the Executive
(if the Executive reasonably believes that any of the Total Payments may be
subject to the Excise Tax). Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that the Company should have
made Gross-Up Payments ("Underpayment"), or that Gross-Up Payments will have
been made by the Company which should not have been made ("Overpayments"). In
either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of the Underpayment,
the amount of such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive. In the case of an Overpayment, the Executive
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company,
and otherwise reasonably cooperate with the Company to correct such Overpayment
and to repay such amounts to the Company.
(i) NOTICE OF TERMINATION. Any termination by the Company or by Executive
shall be communicated by Notice of Termination to the other party hereto and the
termination shall become effective as of the "Date of Termination" with respect
thereto. 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 detail the facts and circumstances
claimed to provide a basis for the termination. The "Date of Termination" shall
be
(i) thirty (30) days after the Notice of Termination is given if
the Notice of Termination is given by the Company without Cause or due to
Disability, or by the Executive in the absence of a Constructive Discharge;
or
(ii) the date the Notice of Termination is given if the
termination is by the Company for Cause; or
(iii) thirty (30) days after the Notice of Termination is given if
the Notice of Termination is given in connection with a Constructive
Discharge.
(j) EFFECT ON DIRECTORSHIPS. Any termination of the Executive's
employment with the Company and Bank for any reason shall, except to the extent
otherwise agreed to by the Board, constitute Executive's resignation as a
director of the Company and Bank, and from all fiduciary and other positions
with the Company, Bank or any affiliates or employee benefit plans thereof,
effective as of the Date of Termination.
5. INDEMNIFICATION.
(a) The Company shall provide the Executive (including his heirs,
personal representatives, executors and administrators) for the term of this
Agreement with coverage under any directors' and officer's liability insurance
policy which the Company may maintain.
(b) In addition to such insurance coverage, the Company shall hold
harmless and indemnify the Executive (and his heirs, executors and
administrators) to the fullest extent permitted under applicable law against all
expenses and liabilities reasonably incurred by his in connection with or
arising out of any action, suit or proceeding in which he may be involved by
reason of his having been an officer of the Company or an affiliate of the
Company (whether or not he continues to be an officer at the time of incurring
such expenses or liabilities), such expenses and liabilities to include, but not
be limited to, judgments, court costs and attorneys' fees and the cost of
reasonable settlements.
(c) In the event the Executive becomes a party, or is threatened to
be made a party, to any action, suit or proceeding for which the Company has
agreed to provide insurance coverage or indemnification under this Paragraph 5,
the Company shall, to the full extent permitted under applicable law, advance
all expenses (including reasonable attorneys' fees), judgements, fines and
amounts paid in settlement (collectively "Expenses") incurred by the Executive
in connection with the investigation, defense, settlement, or appeal of any
threatened, pending or completed action, suit or proceeding, subject to receipt
by the Company of a written undertaking from the Executive: (i) to reimburse
the Company for all Expenses actually paid by the Company to or on behalf of the
Executive in the event it shall be ultimately determined that the Executive is
not entitled to indemnification by the Company for such Expenses; and (ii) to
assign to the Company all rights of the Executive to indemnification, under any
policy of directors' and officers' liability insurance or otherwise, to the
extent of the amount of Expenses actually paid by the Company to or on behalf of
the Executive.
6. POST-EMPLOYMENT RESTRICTIVE COVENANTS. The Executive's activities
during his employment and following the termination of his employment for any
reason shall be subject to the Agreement Regarding Post-Employment Restrictive
Covenants (the "Non-Competition Agreement") attached hereto as Appendix B.
7. EFFECT ON PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the parties hereto and supersedes any prior written or
oral understandings and agreements between Executive and the Company.
8. MODIFICATION AND WAIVER. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. 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.
9. TAX WITHHOLDING. The Company or Bank may withhold from any amounts
payable to the Executive under this Agreement to satisfy all applicable Federal,
State, local or other withholding taxes. In the event the Company or Bank fails
to withhold such sums for any reason, it may require the Executive to promptly
remit to it sufficient cash to satisfy all applicable income and employment
withholding taxes.
10. ARBITRATION. Except as expressly set forth elsewhere in this
Agreement or the Non-Competition Agreement, it is mutually agreed between the
parties that arbitration shall be the sole and exclusive remedy to redress any
dispute, claim or controversy (hereinafter referred to as "grievance") involving
the interpretation of this Agreement or the terms or conditions of this
Agreement or the terms, conditions or termination of the Executive's employment
with the Company or Bank. It is the intention of the parties that the
arbitration award shall be final and binding and that a judgment on the award
may be entered in any court of competent jurisdiction and enforcement may be had
according to its terms. Arbitration shall be initiated by one party filing a
written demand on the other party. Any demand for arbitration by the Executive
shall be made within 20 days after receipt of the Notice of Termination. The
arbitrator shall be chosen in accordance with the voluntary labor arbitration
rules of the American Arbitration Association. The place of the arbitration
shall be the offices of the American Arbitration Association in Chicago,
Illinois. The arbitrator shall not have jurisdiction or authority to change any
of the provisions of this Agreement but shall interpret or apply any clause or
clauses of this Agreement. The arbitrator shall have the power to compel the
attendance of witnesses at the hearing. The parties stipulate that the
provisions hereof, and the decision of the arbitrator with respect to any
grievance, shall be the sole and exclusive remedy for any alleged breach of the
employment relationship in which event the Company or Bank shall be entitled to
seek relief in any court having jurisdiction thereof. The parties hereby
acknowledge that subject to the foregoing exception, neither party has the right
to resort to any federal, state or local court or administrative agency
concerning breaches of this Agreement and that the decision of the arbitrator
shall be a complete defense to any suit, action or proceeding instituted in any
federal, state or local court or before any administration agency with respect
to any grievance which is arbitrable as herein set forth. The arbitration
provisions hereof shall, with respect to any grievance, survive the termination
or expiration of the Executive's employment under this Agreement.
11. MISCELLANEOUS.
(a) 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.
(b) 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.
(c) To the extent not preempted by Federal law, this Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois.
(d) Notwithstanding anything herein to the contrary, to the extent that
any compensation or benefits are paid to or received by Executive from the Bank
or any other subsidiary of the Company, such compensation or benefits shall be
deemed to satisfy the Company's obligations hereunder.
(e) Notices pursuant to this Agreement shall be in writing and shall be
deemed given to any party (i) upon delivery, if delivered personally or by
courier, or (ii) upon dispatch, if transmitted by telecopy or other means of
facsimile, provided a copy thereof is sent by regular mail or courier; or (c)
within forty-eight (48) hours after deposit thereof in U.S. mail, postage
prepaid for delivery as registered or certified mail, return receipt requested
and, if to the Company, addressed to the principal office of the Company,
attention: Chairman; or, if to the Executive, to the address set forth below the
Executive's signature on this Agreement, or to such other address as the party
to be notified shall have given to the other.
12. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Company, and its successors and Executive and his successors and
assigns. The Company shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, expressly and
unconditionally to assume and agree to perform the Company's obligations under
this Agreement, in the same manner and to the same extent that the Company would
be required to perform if no such succession or assignment had taken place.
IN WITNESS WHEREOF, each of the Company and Bank have caused this Agreement
to be executed by its duly authorized officer and the Executive has signed this
Agreement, effective as of the date first written above.
COVEST BANCSHARES, INC.
By:
--------------------------------
Its: Chairman
COVEST BANC, NATIONAL ASSOCIATION
By:
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Its: Chairman
Executive:
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Xxxxx X. Xxxxxxx
Address: X00X00000 Xxxxx Xxxx
Xxxxx, XX 00000
Telecopy No.: (000) 000-0000
