Exhibit 10.4
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT (this "Agreement"), is made and
entered into as of the 1st day of July 2007, between Emclaire Financial Corp., a
Pennsylvania-chartered bank holding company (the "Corporation"), the Farmers
National Bank of Emlenton, a national banking association (the "Bank") and
Xxxxxxxx X. Xxxxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Executive is currently employed as a Senior Vice President
of the Corporation and the Bank (the Corporation and the Bank are referred to
together herein as the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive in the event that his employment with the
Employers is terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) Annual Compensation. The Executive's "Annual Compensation" for
purposes of this Agreement shall be deemed to mean the highest level of
compensation paid to the Executive by the Employers or any subsidiary thereof
and included in the Executive's gross income for tax purposes and any income
earned and deferred by the Executive pursuant to any plan or arrangement of the
Employers during the calendar year in which the Date of Termination occurs
(determined on an annualized basis) or either of the two calendar years
immediately preceding the calendar year in which the Date of Termination occurs.
(b) Cause. Termination by the Employers of the Executive's employment
for "Cause" shall mean termination because of personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order. For purposes of this paragraph, no act or failure to act
on the Executive's part shall be considered "willful" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable belief that
the Executive's action or omission was in the best interest of the Employers.
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(c) Change in Control. "Change in Control" shall mean a change in the
ownership of the Corporation or the Bank, a change in the effective control of
the Corporation or the Bank or a change in the ownership of a substantial
portion of the assets of the Corporation or the Bank, in each case as provided
under Section 409A of the Code and the regulations thereunder.
(d) Code. Code shall mean the Internal Revenue Code of 1986, as
amended.
(e) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause, the date on which the Notice of
Termination is given, and (ii) if the Executive's employment is terminated for
any other reason, the date specified in such Notice of Termination.
(f) Disability. "Disability" shall mean the Executive (i) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health
plan covering employees of the Employers.
(g) Good Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following a
Change of Control based on:
(i) any material breach of this Agreement by the
Employers, including without limitation any of the following:
(A) a material diminution in the Executive's base
compensation, (B) a material diminution in the Executive's
authority, duties or responsibilities, or (C) a material
diminution in the authority, duties or responsibilities of the
officer to whom the Executive is required to report, or
(ii) any material change in the geographic location
at which the Executive must perform his services under this
Agreement, including a material change in the Executive's
principal place of employment or the imposition of any
requirement that the Executive spend more than ninety (90)
business days per year at a location other than such principal
place of employment;
provided, however, that prior to any termination of employment
for Good Reason, the Executive must first provide written
notice to the Corporation within ninety (90) days of the
initial existence of the condition, describing the existence
of such condition, and the Corporation shall thereafter have
the right to remedy the condition within thirty (30) days of
the date the Corporation received the written notice from the
Executive. If the Corporation remedies the condition within
such thirty (30) cure period, then no Good Reason shall be
deemed to exist with respect to such condition.
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(h) IRS. IRS shall mean the Internal Revenue Service.
(i) Notice of Termination. Any purported termination of the Executive's
employment by the Employers for Cause, Disability or Retirement or by the
Executive for Good Reason shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated,
(iii) specifies a Date of Termination, which shall be not less than thirty (30)
nor more than ninety (90) days after such Notice of Termination is given, except
in the case of the Employers' termination of the Executive's employment for
Cause, which shall be effective immediately, and (iv) is given in the manner
specified in Section 7 hereof.
(j) Retirement. "Retirement" shall mean voluntary termination by the
Executive upon reaching age 65.
2. Term of Agreement. The term of this Agreement shall be for two
years, commencing as of July 1, 2007 (the "Start Date"). Commencing on the first
anniversary of the Start Date, the term of this Agreement shall extend for an
additional year on each annual anniversary of the Start Date of this Agreement
until such time as the Boards of Directors of the Employers or the Executive
give notice in accordance with the terms of Section 8 hereof of their or his
election, respectively, not to extend the term of this Agreement. Such written
notice of the election not to extend must be given not less than thirty (30)
days prior to any such anniversary date. If any party gives timely notice that
the term will not be extended as of any annual anniversary date, then this
Agreement shall terminate at the conclusion of its remaining term. The Boards of
Directors of the Employers will review this Agreement and the Executive's
performance annually for purposes of determining whether to extend this
Agreement. References herein to the term of this Agreement shall refer both to
the initial term and successive terms.
3. Benefits Upon Termination. If the Executive's employment by the
Employers shall be terminated within twenty four (24) months subsequent to a
Change in Control by (i) the Employers other than for Cause, Disability,
Retirement or as a result of the Executive's death, or (ii) the Executive for
Good Reason, then the Employers shall, subject to the provisions of Section 3
hereof, if applicable:
(a) pay to the Executive, in a lump sum as of the Date of Termination,
a cash amount equal to two (2) times the Executive's Annual Compensation; and
(b) maintain and provide for a period ending at the earlier of (i)
twenty-four (24) months after the Date of Termination or (ii) the date of the
Executive's full-time employment by another employer (provided that the
Executive is entitled under the terms of such employment to benefits
substantially similar to those described in this subparagraph (b)), at no cost
to the Executive, the Executive's continued participation in all group
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insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination (other than retirement
plans or stock compensation plans of the Employers), provided that in the event
that the Executive's participation in any plan, program or arrangement as
provided in this subparagraph (b) is barred, or during such period any such
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced, the Employers shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans, programs and arrangements immediately prior to the
Date of Termination. If the provision of any of the benefits covered by this
Section 3(b) would trigger the 20% tax and interest penalties under Section 409A
of the Code either due to the nature of such benefit or the length of time it is
being provided, then the benefit(s) that would trigger such tax and interest
penalties due to the nature of such benefit shall not be provided at all and the
benefit(s) that would trigger the tax and interest penalties if provided beyond
the "limited period of time" set forth in the regulations under Section 409A
shall not be provided beyond such limited period of time (collectively, the
"Excluded Benefits"), and in lieu of the Excluded Benefits the Employers shall
pay to the Executive, in a lump sum within 30 days following termination of
employment or within 30 days after such determination should it occur after
termination of employment, a cash amount equal to the cost to the Employers of
providing the Excluded Benefits.
4. Limitation of Benefits under Certain Circumstances. If the payments
and benefits pursuant to Section 3 hereof, either alone or together with other
payments and benefits which the Executive has the right to receive from the
Employers would constitute a "parachute payment" under Section 280G of the Code,
then the payments and benefits pursuant to Section 3 hereof shall be reduced by
the minimum amount necessary to result in no portion of the payments and
benefits under Section 3 being non-deductible to either of the Employers
pursuant to Section 280G of the Code and subject to the excise tax imposed under
Section 4999 of the Code. If the payments and benefits under Section 3 are
required to be reduced, the cash severance shall be reduced first, followed by a
reduction in the fringe benefits. The determination of any reduction in the
payments and benefits to be made pursuant to Section 3 shall be based upon the
opinion of independent tax counsel selected by the Employers and paid for by the
Employers. Such counsel shall promptly prepare the foregoing opinion, but in no
event later than thirty (30) days from the Date of Termination, and may use such
actuaries as such counsel deems necessary or advisable for the purpose. Nothing
contained herein shall result in a reduction of any payments or benefits to
which the Executive may be entitled upon termination of employment other than
pursuant to Section 3 hereof, or a reduction in the payments and benefits
specified in Section 3 below zero.
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5. Mitigation; Exclusivity of Benefits.
(a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise, except as set forth in Section 3(b) above.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
6. Withholding. All payments required to be made by the Employers
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employers may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
7. Assignability. The Employers may assign this Agreement and their
rights hereunder in whole, but not in part, to any corporation, bank or other
entity with or into which the Employers may hereafter merge or consolidate or to
which the Employers may transfer all or substantially all of their respective
assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or their rights hereunder. The Executive may not
assign or transfer this Agreement or any rights or obligations hereunder.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Bank: Secretary
Farmers National Bank of Emlenton
000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
To the Corporation: Secretary
Emclaire Financial Corp.
000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
To the Executive: Xxxxxxxx X. Xxxxxxx
At the address last appearing on the
personnel records of the Employers
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9. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer or officers as may be
specifically designated by the Boards of Directors of the Employers to sign on
their behalf. No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. In addition, notwithstanding anything in this Agreement to the
contrary, the Employers may amend in good faith any terms of this Agreement,
including retroactively, in order to comply with Section 409A of the Code.
10. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
11. Nature of Employment and Obligations.
(a) Nothing contained herein shall be deemed to create other than a
terminable at will employment relationship between the Employers and the
Executive, and the Employers may terminate the Executive's employment at any
time, subject to providing any payments specified herein in accordance with the
terms hereof.
(b) Nothing contained herein shall create or require the Employers to
create a trust of any kind to fund any benefits which may be payable hereunder,
and to the extent that the Executive acquires a right to receive benefits from
the Employers hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Employers.
12. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. Regulatory Actions. The following provisions shall be applicable to
the parties or any successor thereto, and shall be controlling in the event of a
conflict with any other provision of this Agreement, including without
limitation Section 3 hereof.
(a) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs pursuant to
notice served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA")(12 U.S.C. Sections 1818(e)(3) and 1818(g)(1)), the Bank's
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obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may, in its discretion: (i) pay the Executive all or part of
the compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(b) If the Executive is removed from office and/or permanently
prohibited from participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.
Sections 1818(e)(4) and (g)(1)), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the Executive and the Bank as of the date of termination shall not be
affected.
(c) If the Bank is in default, as defined in Section 3(x)(1) of the
FDIA (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall
terminate as of the date of default, but vested rights of the Executive and the
Bank as of the date of termination shall not be affected.
16. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. Section 1828(k)) and 12 C.F.R. Part
359.
17. Payment of Costs and Legal Fees and Reinstatement of Benefits. In
the event any dispute or controversy arising under or in connection with the
Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, the Executive shall be entitled to the
payment of (a) all legal fees incurred by the Executive in resolving such
dispute or controversy, and (b) any back-pay, including Base Salary, bonuses and
any other cash compensation, fringe benefits and any compensation and benefits
due to the Executive under this Agreement.
18. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. The Employers shall incur the cost of all fees and
expenses associated with filing a request for arbitration with the AAA, whether
such filing is made on behalf of the Employers or the Executive, and the costs
and administrative fees associated with employing the arbitrator and related
administrative expenses assessed by the AAA.
19. Entire Agreement. This Agreement embodies the entire agreement
between the Employers and the Executive with respect to the matters agreed to
herein. All prior agreements between the Employers and the Executive with
respect to the matters agreed to herein, including without limitation any prior
change in control agreement between the Employers and the Executive, are hereby
superseded and shall have no force or effect.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: EMCLAIRE FINANCIAL CORP.
By: /s/ Xxxxx X. Xxx
---------------------------------- --------------------------------
Xxxxx X. Xxx
Chairman of the Board, President
and Chief Executive Officer
FARMERS NATIONAL BANK
OF EMLENTON
By: /s/ Xxxxx X. Xxx
--------------------------------
Chairman of the Board
EXECUTIVE
By: /s/Xxxxxxxx X. Xxxxxxx
--------------------------------
Xxxxxxxx X. Xxxxxxx
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