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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 20, 1998, by and between Citizens
Bancshares, Inc. (the "Corporation"), which will have its principal office in
Bowling Green, Ohio, and Xxxxx X. Xxxxx (the "Employee").
WHEREAS, Mid Am, Inc. and Citizens Bancshares, Inc. have
entered into an Amended and Restated Agreement and Plan of Merger, dated
August 5, 1998 (the "Merger Agreement"), which provides for the merger of Mid
Am, Inc. into Citizens Bancshares, Inc. (the "Merger");
WHEREAS, in connection with the Merger the parties wish to
ensure continuity in management and leadership of the combined organization and
to minimize the departure or distraction of management in the event of a change
in control, and therefore desire to enter into this Employment Agreement;
WHEREAS, the Board of Directors of the Corporation (the
"Board") and the Board of Directors of Mid Am, Inc. have approved and authorized
the Corporation's entry into this Agreement with the Employee;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Corporation and the Employee agree as follows:
1. Effective Time. The provisions of this Agreement shall take
effect as of the Effective Time of the Merger as defined in the Merger Agreement
("Effective Time"), provided Employee is employed by Citizens Bancshares, Inc.
immediately prior to the Effective Time. As of the Effective Time the prior
Executive Employment Agreement between Employee, Citizens Bancshares, Inc. and
The Citizens Banking Company shall terminate and become null and void.
2. Employment. The Employee shall be employed as President and
Chief Operating Officer of the Corporation during the period (the "Initial
Period") commencing on the Effective Time and ending on the earlier to occur of
(i) the fifth anniversary of the Effective Time or (ii) the date that Xxxxx X.
Francisco ceases for any reason to serve as Chief Executive Officer of the
Corporation, and, unless otherwise determined by a majority of the entire Board,
as Chief Executive Officer of the Corporation for the period (the "Executive
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Period") commencing upon the expiration of the Initial Period and ending upon
the expiration of the Term. In such positions, the Employee shall render
executive, policy and other management services to the Corporation of the type
customarily performed by persons serving in a similar executive officer
capacity, subject to the powers by law vested in the Board and in the
Corporation's shareholders. During the Initial Period, the Employee shall have
primary responsibility for the commercial banking operations of the Corporation
and related acquisitions and, with respect to all other merger and acquisition
activity, shall have the right to participate fully in any such process,
including discussions and negotiations, and shall have such other duties as the
Chief Executive Officer of the Corporation or the Board may from time to time
reasonably direct or request. During the Initial Period, the Employee shall be
the second highest ranking executive officer of the Corporation and its
subsidiaries. During the Executive Period, the Employee shall report to the
Board and shall perform such other related duties as the Board may from time to
time reasonably request. The Employee shall be a full time employee of the
Corporation. During the Term, the Corporation shall nominate the Employee for
election to the Board at each election of directors at which his term thereon
would otherwise expire, unless a majority of the entire Board determines
otherwise.
The Employee shall perform his duties and responsibilities
under this Agreement faithfully, diligently and to the best of the Employee's
ability, and in compliance with all applicable laws in all material respects and
the Corporation's Sixth Restated Articles of Incorporation and Code of
Regulations, as they may be amended from time to time. Prior to the third
anniversary of the Effective Time, the Employee shall perform his duties
hereunder at the offices of the Corporation in Bowling Green or Salineville,
Ohio, as he, in his sole discretion, shall deem appropriate. Subsequent to the
third anniversary of the Effective Time, the Corporation may require the
Employee to perform his duties hereunder at its principal office in Bowling
Green, Ohio.
3. Term. The initial term of employment under this Agreement
shall be for a period of five (5) years commencing on the Effective Time (the
"Term"). This Agreement shall be automatically extended for one (1) additional
year on the third anniversary
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date of the Effective Time and if so renewed, for an additional one year renewal
term, annually on each succeeding anniversary date of the Effective Time (the
"Renewal Date"), unless either party gives notice to the other at least three
(3) months in advance of the Renewal Date that it does not intend to renew the
Agreement. References herein to the Term shall refer both to such initial term
and such successive renewal terms. The Term shall end upon the termination of
the Employee's employment under this Agreement.
4. Compensation. (a) Base Salary. The Corporation agrees to
pay the Employee during the Term an annual base salary ("Base Salary") of
$500,000. The Base Salary shall be reviewed at least annually during the Term by
the Board, and the Employee shall receive such increases in Base Salary, if any,
as the Personnel and Compensation Committee of the Board or any successor
thereto (the "Committee") in its absolute discretion may determine, together
with such performance or merit increases, if any, as the Committee in its
absolute discretion may determine. If Employee's Base Salary is increased by the
Company, such increased Base Salary shall then constitute the Base Salary for
all purposes of this Agreement. Employee's Base Salary shall not be reduced
during the Term. Participation with respect to discretionary bonuses, retirement
and other employee benefit plans and fringe benefits shall not reduce the Base
Salary payable to the Employee under this Section 4. The Base Salary shall be
payable to the Employee in equal installments in conformity with the
Corporation's normal payroll periods.
(b) Bonus. During the Term, the Employee shall be
eligible to receive an annual performance bonus (in an amount no greater than
100% of the Base Salary for the year with respect to which such performance is
measured) consistent with the Corporation's management incentive program, as
approved by the Committee, and shall have an annual target bonus under such
program equal to at least 40% of such Base Salary.
5. Withholding Obligation. The Corporation shall have the
ability to withhold from the compensation otherwise due to the Employee under
this Agreement any federal income tax, Federal Insurance Contribution Act tax,
Federal Unemployment Act tax, or other amounts required to be withheld from
compensation from time to time under the
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Internal Revenue Code of 1986, as amended (the "Code"), or under any state or
municipal laws or regulations.
6. Fringe Benefits.
(a) Vacations and Leave. During the Term, the
Employee shall be entitled to annual paid vacation of four (4) weeks per year or
such longer period as the Committee may approve. The Employee shall schedule the
timing of paid vacations in a reasonable manner. The Employee shall also be
entitled to such other leave, with or without compensation, as shall be mutually
agreed upon by the Committee and the Employee.
(b) Participation in Retirement and Employee Benefit
Plans. During the Term, the Employee shall be entitled to participate, on a
basis no less favorable than any other senior executive officer of the
Corporation, in benefit plans of the Corporation or its subsidiaries relating to
stock options, stock appreciation, stock purchases, pension, thrift, deferred
compensation, profit sharing, group life insurance, medical coverage, education
or other retirement or employee benefits that the Corporation may adopt for the
benefit of its executive employees.
(c) Other Benefits. During the Term, the Employee
shall be entitled to participate in any other fringe benefits which are or may
become applicable to the Corporation's executive employees, including the use of
an automobile, a reasonable expense account, the payment of reasonable expenses
for attending annual and periodic meetings of trade or business associations,
and any other benefits which are commensurate with the duties and
responsibilities to be performed by the Employee under this Agreement, on a
basis no less favorable than any other senior executive officer of the
Corporation.
7. Termination of Employment. The Employee's employment
hereunder and the Term may be terminated under the circumstances set forth in
paragraphs (a) through (e) below:
(a) Death. The Employee's employment hereunder shall
terminate upon his death. If the Employee shall die during the Term, the
Corporation shall pay to such person as the Employee has designated in a notice
filed with the Corporation, or, if no such
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notice is filed, to his estate, in substantially equal monthly installments,
from the date of his death for a period of two years, an annual amount equal to
the Employee's Base Salary as of his date of death.
(b) Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from his duties hereunder on a full-time basis for the entire period of
six (6) consecutive months, and within thirty (30) days after written Notice of
Termination is given (which may occur one month before or after the end of such
six (6) month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Corporation may terminate the Employee's
employment hereunder for "Disability". In that instance, he shall be entitled to
receive for two years, an annual amount equal to the Employee's Base Salary as
of his date of disability in addition to disability benefits of the type
currently provided to him, or, if more favorable to the Employee, benefits of
the type provided for other executive employees in similar positions with the
Corporation.
(c) Cause. The Corporation may terminate the
Employee=s employment hereunder for Cause or without Cause. Termination for
Cause shall mean termination because of (i) the willful and continued failure by
the Employee to substantially perform his duties to the detriment of the
Corporation (other than any such failure resulting from his incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board which specifically identifies the
manner in which the Board believes that the Employee has not substantially
performed his duties to the detriment of the Corporation, or (ii) the willful
engaging by the Employee in gross misconduct materially and demonstrably
injurious to the Corporation. For purposes of this paragraph (c), no act or
failure to act by the Employee shall be considered "willful" unless done or
omitted to be done by the Employee in bad faith and without reasonable belief
that the Employee's action or omission was in the best interests of the
Corporation or its affiliates. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board, shall be conclusively
presumed to be done, or omitted to be done, by the
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Employee in good faith and in the best interests of the Corporation. Cause shall
not exist unless and until the Corporation has delivered to the Employee a copy
of a resolution duly adopted by two-thirds (b) of the entire Board 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 counsel, to be heard
before the Board), finding that in the good faith opinion of the Board the
Employee was guilty of conduct set forth in clause (i) or (ii) has occurred and
specifying the particulars thereof in detail. Following a Change in Control, the
Corporation must notify the Employee of any event constituting Cause within
ninety (90) days following the Corporation=s knowledge of its existence or such
event shall not constitute Cause under this Agreement.
(d) Good Reason. The Employee may terminate his
employment hereunder with or without Good Reason; provided, however, that the
Employee agrees not to terminate his employment hereunder (other than for Good
Reason or for Retirement) during the ninety-day period following a Change in
Control. Except as provided in Section 8(b) hereof following a Change in
Control, for purposes of this Agreement "Good Reason" shall mean any (i) removal
of the Employee from, or failure to re-appoint the Employee to, his position as
President and Chief Operating Officer, except in connection with termination of
the Employee for Cause, (ii) the failure to appoint the Employee to the position
of Chief Executive Officer at the end of the Initial Period, or after such
appointment the failure to reappoint the Employee to, or removal of the Employee
from, his position of Chief Executive Officer, (iii) failure by the Corporation
to comply with Section 2, 4 or 6 hereof in any material respect (iv) the
Corporation gives notice that it does not intend to renew the Agreement pursuant
to Section 3 above; or (v) any requirement that the Employee be based anywhere
more than thirty (30) miles from the office where the Employee is located at the
Effective Time with the exception of the relocation of Employee to Bowling
Green, Ohio as provided in Section 2 herein. For purposes of this Section 7(d),
"Good Reason" shall not exist under clause (iii) of the preceding sentence until
after Employee has given the Company notice of the applicable event within 90
days of such event and which is not remedied within
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30 days after receipt of written notice from Employee specifically delineating
such claimed event and setting forth Employee's intention to terminate
employment if not remedied; provided, that if the specified event cannot
reasonably be remedied within such 30-day period and the Company commences
reasonable steps within such 30-day period to remedy such event and diligently
continues such steps thereafter until a remedy is effected, such event shall not
constitute "Good Reason" provided that such event is remedied within 60 days
after receipt of such written notice. The Employee's right to terminate
employment for Good Reason shall not be affected by the Employee's incapacity
due to mental or physical illness and the Employee's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any event or
condition constituting Good Reason.
(e) Retirement. For purposes of this Agreement,
"Retirement" shall mean termination of the Employee's employment by either the
Employee (other than for Good Reason) or the Corporation (other than for Cause)
on or after the Employee's normal (i.e., not early) retirement age under the
terms of the Corporation's pension plan (or, any other tax-qualified plan, if no
pension plan exists); provided, that, following a Change in Control such normal
retirement age may not be reduced for purposes of this Agreement without the
consent of the Employee.
(f) Date of Termination. For purposes of this
Agreement, "Date of Termination" means (1) the effective date on which the
Employee's employment by the Corporation terminates as specified in a Notice of
Termination by the Corporation or the Employee, as the case may be, or (2) if
the Employee's employment terminates by reason of death, the date of death of
the Employee. Notwithstanding the previous sentence, (i) if the Employee's
employment is terminated for Disability (as defined in Section 7(b)), then such
Date of Termination shall be no earlier than thirty (30) days following the date
on which a Notice of Termination is received, and (ii) if the Employee's
employment is terminated by the Corporation other than for Cause, then such Date
of Termination shall be no earlier than sixty (60) days following the date on
which a Notice of Termination is received.
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(g) Payment Upon Termination. Upon any termination of
employment hereunder, the Corporation shall pay the Employee, within ten (10)
days following his Date of Termination, a lump sum cash amount equal to the sum
of (i) the Employee's unpaid Base Salary through the Date of Termination, (ii)
any bonus payments which have become payable (other than deferred amounts), to
the extent not theretofore paid, (iii) any vacation pay owed with respect to
accrued, but unused, vacation, and (iv) any other benefit payments due to the
Employee.
(h) Termination Without Cause or For Good Reason. In
addition to the payments set forth in Section 7(g) hereof, in the event that the
Employee's employment with the Corporation terminates either (1) prior to a
Change in Control, if any, or (2) following the two-year period immediately
subsequent to a Change in Control (including as a result of non-renewal of the
Term by the Corporation during such two-year period), in each case as a result
of (i) a termination by the Employee for Good Reason, or (ii) a termination by
the Corporation without Cause (other than for Retirement or Disability), then
the Corporation shall pay to the Employee, in one lump sum within thirty days
following the Date of Termination, his unpaid prorated Base Salary and unpaid
prorated annual bonus based on the assumption that Employee would receive his
targeted annual bonus for the year of termination, plus an amount equal to the
greater of (x) the sum of Employee's then annual Base Salary plus targeted
annual bonus (hereinafter the Employee's "Annual Cash Compensation") multiplied
by the number of whole and partial years remaining in the Term as it existed
immediately preceding Employee's termination and (y) three (3) times Annual Cash
Compensation, payable within thirty days of the Date of Termination. In
addition, all stock options granted to the Employee after the Effective Time
shall vest and become immediately exercisable in full. The Corporation shall
continue to provide, for the remainder of the Term as it existed immediately
prior to Date of Termination, or if longer, for three years, the Employee (and
the Employee's dependents if applicable) with the same level of medical, dental,
accident, disability and life insurance benefits upon substantially the same
terms and conditions (including cost of coverage to the Employee); provided,
that, if the
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Employee cannot continue to participate in the Corporation's plans
providing such benefits, the Corporation shall otherwise provide such benefits
on the same after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event the Employee becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of the Employee's eligibility, but only to the extent
that the Corporation reimburses the Employee for any increased cost and provides
any additional benefits necessary to give the Employee the benefits hereunder.
8. Termination of Employment Following a Change in Control.
(a) Change in Control Defined. For purposes of this
Agreement, a "Change in Control" shall be deemed to have taken place if at
anytime following the Effective Time:
(i) individuals who constitute the Board immediately after
the Effective Time (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent
thereto whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Corporation in which
such person is named as a nominee for director, without
written objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially
elected or nominated as a director of the Corporation as a
result of an actual or threatened election contest with
respect to directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on
behalf of any person other than the Board shall be deemed to
be an Incumbent Director; (ii) any "person" (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of
1934 (the "Exchange Act") and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as
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defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25%
or more of the combined voting power of the Corporation's then
outstanding securities eligible to vote for the election of
the Board (the "Corporation Voting Securities"); provided,
however, that the event described in this paragraph (ii) shall
not be deemed to be a Change in Control by virtue of any of
the following acquisitions: (A) by the Corporation or any
Subsidiary, (B) by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
Subsidiary, or (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities.
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction
involving the Corporation or any of its Subsidiaries that
requires the approval of the Corporation's stockholders,
whether for such transaction or the issuance of securities in
the transaction (a "Business Combination"), unless immediately
following such Business Combination: (A) more than 60% of the
total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by
Corporation Voting Securities that were outstanding
immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such
Corporation Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting
power of such Corporation Voting Securities among the holders
thereof immediately prior to the Business Combination, (B) no
person (other than any employee benefit plan (or related
trust) sponsored or maintained by the
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Surviving Corporation or the Parent Corporation), is or
becomes the beneficial owner, directly or indirectly, of 25%
or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (C) at least 50% of the members of
the board of directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent
Directors at the time of the Board's approval of the execution
of the initial agreement providing for such Business
Combination; or (iv) the stockholders of the Corporation
approve a plan of complete liquidation or dissolution of the
Corporation or a sale of all or substantially all of the
Corporation's assets or deposits.
Notwithstanding the foregoing, a Change in Control of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 25% of the Corporation Voting Securities as a
result of the acquisition of Corporation Voting Securities by the Corporation
which reduces the number of Corporation Voting Securities outstanding; provided,
that if after such acquisition by the Corporation such person becomes the
beneficial owner of additional Corporation Voting Securities that increases the
percentage of outstanding Corporation Voting Securities beneficially owned by
such person, a Change in Control of the Corporation shall then occur.
(b) Good Reason. During the two-year period following a
Change in Control, "Good Reason" shall mean, without the Employee's express
written consent, the occurrence of any of the following events:
(1) the assignment to the Employee of any duties or
responsibilities (including reporting responsibilities) inconsistent in any
material and adverse respect with the Employee=s duties and responsibilities
with the Corporation immediately prior to such Change in Control (including any
diminution of such duties or responsibilities), removal of Employee from, or
failure to reappoint the Employee to,
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his position as President and Chief Operating Officer, or the failure to appoint
the Employee to the position of Chief Executive Officer at the end of the
Initial Period or to reappoint him to such position, or the removal of Employee
from such position, thereafter;
(2) a reduction by the Corporation in the Employee's rate of
annual Base Salary or annual target bonus opportunity (including any adverse
change in the formula for such annual bonus target) as in effect immediately
prior to such Change in Control or as the same may be increased from time to
time thereafter;
(3) any requirement of the Corporation that the Employee (i)
be based anywhere more than thirty (30) miles from the office where the Employee
is located at the time of the Change in Control or (ii) travel on the
Corporation's business to an extent substantially greater than the travel
obligations of the Employee immediately prior to such Change in Control;
(4) the failure of the Corporation to (i) continue in effect
any employee benefit plan, compensation plan, welfare benefit plan or material
fringe benefit plan in which the Employee is participating immediately prior to
such Change in Control, or the taking of any action by the Corporation which
would adversely affect the Employee's participation in or reduce the Employee's
benefits under any such plan, unless the Employee is permitted to participate in
other plans providing the Employee with substantially equivalent aggregate
benefits (at substantially comparable cost with respect to welfare benefit
plans), or (ii) provide the Employee with paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Corporation and
its affiliated companies as in effect for the Employee immediately prior to such
Change in Control; or
(5) any refusal by the Company to continue to permit Executive
to engage in activities not directly related to the business of the Company
which Executive was permitted to engage in prior to the Change in Control;
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(6) any purported termination of Executive's
employment which is not effectuated pursuant to Section 11(b) (and
which will not constitute a termination hereunder); or
(7) the failure of the Corporation to obtain the
assumption agreement from any successor as contemplated in Section
12(a) hereof.
Notwithstanding anything herein to the contrary,
termination of employment by Executive for any reason during the 30-day
period commencing one (1) year after the date of a Change in Control
shall constitute Good Reason.
Any event or condition described in Section 8(b)(1) through
(7) which occurs prior to a Change in Control, but with respect to which the
Employee is able to reasonably demonstrate was at the request or suggestion of a
third party who had indicated an intention or taken steps reasonably calculated
to effect a Change in Control, shall constitute Good Reason following a Change
in Control for purposes of this Agreement (as if a Change in Control had
occurred immediately prior to the occurrence of such event or condition)
notwithstanding that it occurred prior to the Change in Control. An isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Corporation promptly after receipt of notice thereof given by the
Employee shall not constitute Good Reason. The Employee's right to terminate
employment for Good Reason shall not be affected by the Employee's incapacity
due to mental or physical illness and the Employee's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any event or
condition constituting Good Reason.
(c) In addition to the payments set forth in Section 7(g)
above, in the event the Employee's employment with the Corporation terminates
within two (2) years following a Change in Control either (i) by the Corporation
without Cause (other than for Retirement or Disability) or (ii) by the Employee
for Good Reason, then the Corporation shall (1) pay to the Employee, within ten
(10) days following the Employee's Date of Termination, a lump sum cash amount
equal to the greater of (A) the amount of the payment that would be owed to the
Employee under Section 7(h) herein (as if Section 7(h) were triggered), and
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(B) three (3) times the sum of (i) the highest annual rate of Base Salary of the
Employee during the 3-year period immediately preceding the Employee's Date of
Termination and (ii) the highest annual bonus earned by Employee in respect of
the three (3) fiscal years of the Corporation immediately preceding the year in
which the Employee's Date of Termination occurs (or if the Employee has not been
employed by the Corporation for such three-fiscal-year period, the greater of
(x) the highest target annual bonus (without regard to any reduction that would
give rise to Good Reason) for the year in which the Employee's Date of
Termination occurs and (y) the amount otherwise determined under this clause
(ii) without regard to this parenthetical) and (2) continue to provide, for a
period of the longer of three (3) years and the remaining period of the Term as
it existed immediately before the Date of Termination, the Employee (and the
Employee's dependents if applicable) with the same level of medical, dental,
accident, disability and life insurance benefits upon substantially the same
terms and conditions (including cost of coverage to the Employee) as existed
immediately prior to the Employee's Date of Termination (or, if more favorable
to the Employee, as such benefits and terms and conditions existed immediately
prior to the Change in Control); provided, that, if the Employee cannot continue
to participate in the Corporation plans providing such benefits, the Corporation
shall otherwise provide such benefits on the same after-tax basis as if
continued participation had been permitted. Notwithstanding the foregoing, in
the event the Employee becomes reemployed with another employer and becomes
eligible to receive welfare benefits from such employer, the welfare benefits
described herein shall be secondary to such benefits during the period of the
Employee's eligibility, but only to the extent that the Corporation reimburses
the Employee for any increased cost and provides any additional benefits
necessary to give the Employee the benefits hereunder. In addition, all stock
options granted to the Employee after the Effective Time shall vest and become
immediately exercisable in full.
(d) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution, or any acceleration of vesting of any benefit or award, by the
Corporation or its affiliated companies to or for the
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benefit of the Employee (whether paid or payable, distributed or distributable
or accelerated or subject to acceleration pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 8(d)) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Employee of all taxes imposed upon the Gross-Up Payment
and any interest or penalties imposed with respect to such taxes, the Employee
retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise
Tax imposed upon the Payments and (y) the product of any deductions disallowed
because of the inclusion of the Gross-Up Payment in the Employee's adjusted
gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made. For
purposes of determining the amount of the Gross-Up Payment, the Employee shall
be deemed to (A) pay federal income taxes at the highest marginal rates of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made, (B) pay applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the Gross-Up Payment
is to be made, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes and (C) have otherwise
allowable deductions for federal income tax purposes at least equal to those
which could be disallowed because of the inclusion of the Gross-Up Payment in
the Employee's adjusted gross income. The payment of a Gross-Up Payment under
this Section 8(d) shall in no event be conditioned upon the Employee's
termination of employment or the receipt of severance benefits under this
Agreement.
(e) Subject to the provisions of Section 8(d), all
determinations required to be made under this Section 8(e), including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be
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utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Corporation as of the date immediately
prior to the Change in Control (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Corporation and the Employee within
fifteen (15) business days of the receipt of notice from the Corporation or the
Employee that there has been a Payment, or such earlier time as is requested by
the Corporation (collectively, the "Determination"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Employee may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Corporation and the Corporation shall enter into any agreement
requested by the Accounting Firm in connection with the performance of its
services hereunder. The Gross-Up Payment under this Section 8(e) with respect to
any Payment shall be made no later than thirty (30) days following such Payment.
If the Accounting Firm determines that no Excise Tax is payable by the Employee,
it shall furnish the Employee with a written opinion to such effect, and to the
effect that failure to report the Excise Tax, if any, on the Employee's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Corporation and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the Determination, it
is possible that Gross-Up Payments which will not have been made by the
Corporation should have been made ("Underpayment") or Gross-Up Payments are made
by the Corporation which should not have been made ("Overpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employee thereafter is required to make payment of any additional Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(d)(2)(B) of the Code) shall be promptly paid by the Corporation
to or for the benefit of the Employee. In the event the amount of the Gross-Up
Payment exceeds the
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amount necessary to reimburse the Employee for his Excise Tax, the Accounting
Firm shall determine the amount of the Overpayment that has been made and any
such Overpayment (together with interest at the rate provided in Section
1274(d)(2)(B) of the Code) shall be promptly paid by the Employee to or for the
benefit of the Corporation. The Employee shall cooperate, to the extent his
expenses are reimbursed by the Corporation, with any reasonable requests by the
Corporation in connection with any contests or disputes with the Internal
Revenue Service in connection with the Excise Tax.
9. Covenants Not to Compete; Confidentiality.
(a) The Employee covenants that if, during the Term, and
either prior to or more than two years following a Change in Control, he
voluntarily terminates his employment with the Corporation under circumstances
which do not constitute Good Reason (unless such termination is approved by the
Board) or his employment is terminated by the Corporation for Cause, he shall
not without the consent of the Board, for a period of one (1) year following
such Date of Termination:
(1) engage or be interested, whether alone or together with or
on behalf or through any other person, firm, association, trust, venture, or
corporation, whether as sole proprietor, partner, shareholder (unless his
interest as a shareholder qualifies under clause (4)(i) or (4)(ii) below),
agent, officer, director, employee, adviser, consultant, trustee, beneficiary or
otherwise, in any business principally and directly engaged in the operation of
a business that is competitive with any business in which the Corporation is
engaged; which business operates in a geographic area in which, at the time of
such termination of employment, the Corporation is conducting substantial
business or plans to conduct substantial business (a "competing business");
(2) assist others in conducting any competing business;
(3) directly or indirectly recruit or induce or hire any
person who is an employee of the Corporation or any of its subsidiaries, or
solicit any of the Corporation=s customers, clients or providers; or
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(4) own any capital stock or any other securities of,
or have any other direct or indirect interest in, any entity which owns
or operates a competing business, other than the ownership of (i) less
than five percent (5%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Employee or any affiliate of the
Employee or (ii) any limited partnership interest of less than 5 % in
such an entity.
Nothing contained in this section, however, shall prohibit the
Employee from taking any of the actions set forth in clause (1), (2), (3) or (4)
above if (i) the Employee's employment has been terminated other than for Cause,
or (ii) the Employee has terminated employment for Good Reason.
(b) In the event that the Employee breaches or threatens to
breach any of the terms of this Section 9, the Employee acknowledges that the
Corporation=s remedy at law would be inadequate and that the Corporation shall
be entitled to an injunction restraining the Employee from committing or
continuing such breach.
10. Payment Obligation Absolute. Except as expressly
provided with respect to continued welfare benefits under Sections 7(h) and
8(c), the Corporation's obligation to pay the Employee the compensation and
other benefits provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Corporation may have
against the Employee. All amounts payable by the Corporation hereunder shall be
paid without notice or demand.
11. Notice.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
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If to the Employee:
00 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to the Corporation:
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Attention: Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice (a "Notice of Termination") of the
Employee's Date of Termination by the Corporation or the Employee, as the case
may be, to the other, shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated and
(iii) specify the Date of Termination. The failure by the Employee or the
Corporation to set forth in such notice any particular fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Corporation hereunder or preclude the Employee or the
Corporation from asserting such fact or circumstance in enforcing the Employee=s
or the Corporation's rights hereunder.
12. General Provisions.
(a) No Assignments. This Agreement is personal to each of the
parties hereto. Neither party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party; provided, however, that the Corporation agrees that concurrently with any
merger or sale of assets which would constitute a Change in Control hereunder,
it will cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Employee (or his beneficiary
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or estate), all of the obligations of the Corporation hereunder. Failure of the
Corporation to obtain such assumption prior to the effectiveness of any such
merger or sale of assets, shall be a breach of this Agreement and shall
constitute Good Reason hereunder and shall entitle the Employee to compensation
and other benefits from the Corporation in the same amount and on the same terms
as the Employee would be entitled hereunder if the Employee's employment were
terminated following a Change in Control under Section 8(c) hereof. For purposes
of implementing the foregoing, the date on which any such merger or sale of
assets becomes effective shall be deemed the date Good Reason occurs, and shall
be the Date of Termination if requested by the Employee. Notwithstanding the
foregoing, this Agreement shall inure to the benefit of and be enforceable by
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die while any amounts would be payable to the Employee hereunder had the
Employee continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to such person or
persons appointed in writing by the Employee to receive such amounts or, if no
person is so appointed, to the Employee=s estate.
(b) Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Employee's employment with
the Corporation or involving the failure or refusal (or any alleged failure or
refusal) of the Corporation to perform fully in accordance with the terms
hereof, the Corporation shall reimburse Employee, on a current basis, for all
reasonable legal fees and expenses, if any, incurred by Employee in connection
with such contest or dispute (regardless of the result thereof), together with
interest in an amount equal to the prime rate as published in The Wall Street
Journal from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from the
date the Corporation receives Employee's statement for such fees and expenses
through the date of payment thereof, regardless of whether or not Employee's
claim is upheld by a court of competent jurisdiction; provided, however,
Employee shall be required to repay any such amounts to the
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Corporation to the extent that a court issues a final and non-appealable order
setting forth the determination that the position taken by Employee was
frivolous or advanced by Employee in bad faith.
(c) Entire Agreement; Amendments or Additions; Action by
Board. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
oral and written agreements, memoranda, understandings and undertakings between
the parties hereto relating to the subject matter hereof. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties. Except as provided in Section 2, the prior approval by a
two-thirds 2/3 affirmative vote of the full Board shall be required in order for
the Corporation to authorize any amendments or additions to this Agreement, to
give any consents or waivers of provisions of this Agreement, or to take any
other action under this Agreement including any termination of the employment of
the Employee with or without Cause. For purposes of Board approval with respect
hereto, if the Employee is also a director of the Corporation, he shall abstain
from acting on matters pertaining to this Agreement and shall not be counted as
a Board member for purposes of the two-thirds 2/3 requirement.
(d) Governing Law. This Agreement shall be governed by the
laws of the State of Ohio as to all matters, including, but not limited to,
matters of validity, construction, effect and practice.
(e) 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.
(f) Section Headings. The section 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.
(g) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Citizens Bancshares, Inc.
By: /s/ XXXXX X. XXXXXX
----------------------------
EMPLOYEE:
/s/ XXXXX X. XXXXX
---------------------------
Xxxxx X. Xxxxx
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