EXHIBIT 10.1
AMERICAN FINANCIAL HOLDINGS, INC.
EMPLOYMENT AGREEMENT
AMERICAN FINANCIAL HOLDINGS, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into on January 18, 2002, by and between
AMERICAN FINANCIAL HOLDINGS, INC. (the "Holding Company"), a corporation
organized under the laws of the state of Delaware, with its principal
administrative office at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ ("Executive"). Any reference to the "Bank" or "Institution" herein
shall mean American Savings Bank or any successor thereto.
WHEREAS, the Holding Company, the Bank and American Bank of
Connecticut, a Connecticut chartered savings bank ("ABC"), have entered into an
Agreement and Plan of Merger, dated as of July 18, 2001 (the "Merger
Agreement"), providing for, among other things, the merger of ABC with and into
the Bank, with the Bank being the surviving institution.
WHEREAS, continued employment of Executive is valuable to the success
of combined companies; and
WHEREAS, Executive is willing to serve in the employ of the Holding
Company in accordance with the terms of this Agreement.
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. CONSIDERATION PROVIDED BY THE EXECUTIVE.
On the terms and subject to the conditions set forth in this Agreement,
commencing at the Effective Time (as such term is defined in the Merger
Agreement) (the "Effective Date"), the Holding Company shall employ and
Executive agrees to serve as a senior executive vice president and Chief Banking
Officer of the Holding Company. Executive shall render administrative and
management services to the Holding Company such as are customarily performed by
persons in a similar executive capacity and reporting directly to the Chairman
and Chief Executive Officer of the Holding Company. During said period,
Executive also agrees to serve, if appointed, as an officer of any subsidiary of
the Holding Company. Failure to reappoint Executive as a senior executive vice
president and Chief Banking Officer of the Holding Company or failure to
reappoint Executive as a senior executive vice president and Chief Banking
Officer of the Institution, without the consent of Executive, shall constitute a
breach of this Agreement.
2. TERM.
(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the Effective Date and shall continue for a
period of thirty-six (36) full calendar months. The term of this Agreement shall
be extended for one day each day so that a constant thirty-six (36) calendar
month term shall remain in effect, until such time as the Board of Directors of
the Holding Company (the "Board") or Executive elects not to extend the term of
the Agreement by giving written notice to the other party in accordance with
Section 8 of this Agreement, in which case the term of this Agreement shall be
fixed and shall end on the third anniversary of the date of such written notice.
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Holding Company and the Bank and participation
in community and civic organizations; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
the Board's judgment, will not present any conflict of interest with the Holding
Company, or materially affect the performance of Executive's duties pursuant to
this Agreement.
(c) Notwithstanding anything herein contained to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement.
3. CONSIDERATION PROVIDED BY THE HOLDING COMPANY.
(a) The compensation specified under this Agreement shall constitute
consideration paid by the Holding Company in exchange for the duties described
in Section 1 of this Agreement. The Holding Company shall pay Executive as
compensation a salary of not less than $250,000 per year ("Base Salary"). Base
Salary shall include any amounts of compensation deferred by Executive under any
employee benefit plan or deferred compensation arrangement maintained by the
Bank or the Holding Company. Executive's Base Salary shall be payable in
accordance with the Holding Company's general payroll practices. During the
period of this Agreement, Executive's Base Salary shall be reviewed at least
annually; the first such review will be made no later than one year from the
date of this Agreement. Such review shall be conducted by the Board or a
committee designated by the Board, and the Board may increase Executive's Base
Salary at any time. The increased Base Salary shall become the new "Base Salary"
for purposes of this Agreement. In addition to the Base Salary provided in this
Section 3(a), the Holding Company shall also provide Executive, at no cost to
Executive, with all such other benefits as are provided uniformly to permanent
full-time employees of the Institution or the Holding Company.
(b) The Holding Company will provide Executive with the opportunity to
participate in employee benefit plans, arrangements and perquisites
substantially equivalent to those in which Executive was participating or
otherwise deriving a benefit from immediately prior to the beginning of the term
of this Agreement. Without limiting the generality of the foregoing provisions
of this Subsection (b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans, whether tax-qualified or otherwise,
including, but not limited
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to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plan, medical coverage or any other
employee benefit plan or arrangement made available by the Holding Company or
the Bank now or in the future to its senior executives and key management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements. Executive will be
entitled to incentive compensation and bonuses as provided in any plan or
arrangement of the Institution or Holding Company in which Executive is eligible
to participate. Specifically, and without limitation of the foregoing, Executive
shall participate in the Bank's Executive Incentive Compensation Plan with a
target award of 40% of Base Salary ("EICP Target") for 2002. Nothing paid to
Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which Executive is entitled under this Agreement.
(c) As of the Effective Date of this Agreement, Executive shall be
eligible to participate in the American Savings Bank Supplemental Executive
Retirement Plan (the "SERP") with credit for service as an employee of ABC for
vesting purposes only. For 2002 only, Executive's benefit under Section 4.01 of
the SERP shall equal the benefit that would have been credited to Executive
under Section 4.01(a) of the SERP had he been eligible to participate in the
American Savings Bank Employee Stock Ownership Plan for that year, without any
reduction made under Section 4.01(b) of the SERP. For purposes of Section 4.02
of the SERP, the determination made under Section 4.02(b) of the SERP shall
include the benefit determined above for purposes of Section 4.01(a) of the SERP
for the 2002 plan year.
(d) In addition to the Base Salary provided for by paragraph (a) of
this Section 3 and other compensation provided for by paragraph (b) of this
Section 3, the Holding Company or the Bank shall provide Executive with an
automobile and shall pay or reimburse Executive for all reasonable travel and
other expenses incurred by Executive in performing his obligations under this
Agreement, including, but not limited to, all costs associated with Executive's
automobile that are mutually agreed upon by Executive and the Holding Company.
The Holding Company or the Bank shall maintain Executive's memberships at the
Waterbury Country Club and the YMCA of New Britain, Connecticut.
(e) During the term of this Agreement, Executive will be reimbursed, up
to $3,000 annually, for costs associated with personal financial planning. The
Holding Company or the Bank shall also provide Executive with a one-time
reimbursement of up to $3,000 for personal estate planning.
(f) Executive shall be entitled to vacation in accordance with the
standard vacation policies of the Holding Company or the Bank for senior
executive officers, but in any event not less than four (4) weeks. Executive
shall take vacation at a time mutually agreed upon by the Holding Company and
Executive. Executive shall receive his Base Salary and other benefits during
periods of vacation. Executive shall also be entitled to paid legal holidays in
accordance with the policies of the Holding Company or the Bank. Executive shall
also be entitled to sick leave in accordance with the policies of the Holding
Company or the Bank for senior executive officers.
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(g) On the Effective Date, Executive shall be granted a stock option to
purchase 100,000 shares of American Financial Holdings, Inc. common stock (the
"Option"), pursuant to the American Financial Holdings, Inc. 2000 Stock-Based
Incentive Plan, as amended (the "Plan"). The Option shall (i) have an exercise
price determined in accordance with the Plan, (ii) be classified as an
"incentive stock option" to the greatest extent permitted by Internal Revenue
Code Section 422 and (iii) become exercisable in five (5) equal annual
installments commencing on the first anniversary of the grant date unless
accelerated pursuant to the terms of the Plan or Executive's individual award
agreement. Executive's individual award agreement shall incorporate the special
acceleration provision described in Section 23 of this Agreement. In all other
respects, the terms and conditions of the Option shall be consistent with the
Plan and the terms and conditions set forth in the Option agreements for other
senior executive officers of the Holding Company.
(h) On the Effective Date, Executive shall receive a restricted stock
award for 50,000 shares of American Financial Holdings, Inc. common stock,
pursuant to the Plan. The restricted stock award shall vest in five (5) equal
annual installments commencing on the first anniversary of the award date.
Executive's individual award agreement shall incorporate the special
acceleration provision described in Section 23 of this Agreement. In all other
respects, the terms and conditions of Executive's restricted stock award shall
be consistent with the Plan and the terms and conditions set forth in the stock
award agreements for other senior executive officers of the Holding Company.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during Executive's term of employment under this Agreement, the provisions of
this Section 4 shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) termination by the
Holding Company of Executive's full-time employment hereunder for any reason
other than Termination for Cause, as defined in Section 7 hereof; or (ii)
Executive's resignation from the Holding Company's employ, upon any of (A)
notice to Executive by the Holding Company of non-renewal of the term of this
Agreement, (B) failure to appoint or reappoint Executive as a senior executive
vice president and Chief Banking Officer of the Bank, or failure to appoint or
reappoint Executive as a senior executive vice president and Chief Banking
Officer of the Holding Company, unless Executive consents to any such event, (C)
material change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1 above (and any such material change shall be deemed a continuing
breach of this Agreement), (D) relocation of Executive's principal place of
employment by more than fifty (50) miles from its location at the effective date
of this Agreement, or a material reduction in the benefits and perquisites
available to Executive to which Executive does not consent, (E) liquidation or
dissolution of the Institution or the Holding Company, (F) breach of this
Agreement by the Holding Company, (G) Executive's voluntary termination of
employment prior to January 31, 2003, or (H) Executive's voluntary termination
of employment following his appointment by the Boards of Directors of the Bank
and the Holding Company as President and Chief Operating Officer of the Bank and
the Holding
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Company (if such appointment occurs) if thereafter during the term of this
Agreement but prior to January 31, 2005, the Boards of Directors of the Bank and
the Holding Company notify the Executive that he is ineligible for promotion as
Chief Executive Officer under the Holding Company's and the Bank's executive
succession plan or there occurs a change in Executive's reporting
responsibilities. Upon the occurrence of any event described in clauses (A),
(B), (C), (D), (E) (F), (G) or (H), above, Executive shall have the right to
elect to terminate his employment under this Agreement by resignation upon not
less than sixty (60) days' prior written notice given within a reasonable period
of time not to exceed, except in case of a continuing breach, four calendar
months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination (other than an Event
of Termination under Section 4(a)(ii)(G)) on the Date of Termination as defined
in Section 8, the Holding Company shall be obligated to pay Executive, or, in
the event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be: (i) the amount of the remaining payments and
benefits (but excluding any restricted stock and/or stock options) that
Executive would have earned if he had continued his employment with the
Institution or Holding Company during the remaining unexpired term of this
Agreement, based on the Executive's Base Salary and benefits provided at the
Date of Termination, as set out in Sections 3(a) and (b) hereof, as the case may
be, and (ii) the amount still due the Executive under any paragraph of Section 3
for service through the Date of Termination. At the election of Executive, which
election is to be made within thirty (30) days of the Date of Termination, such
payments shall be made in a lump sum or paid monthly during the remaining term
of the agreement following Executive's termination. In the event that no
election is made, payment to Executive will be made in a lump sum. Such payments
shall not be reduced in the event Executive obtains other employment following
termination of employment.
(c) Upon the occurrence of an Event of Termination (other than an Event
of Termination under Section 4(a)(ii)(G)), Executive will be entitled to receive
benefits due him under or contributed by the Institution or the Holding Company
on his behalf pursuant to any retirement, incentive, profit sharing, bonus,
performance, disability or other employee benefit plan maintained by the
Institution or the Holding Company on Executive's behalf to the extent such
benefits are not otherwise paid to Executive under a separate provision of this
Agreement.
(d) To the extent that the Institution or the Holding Company continues
to offer any life, medical, health, disability or dental insurance plan or
arrangement in which Executive participates in on the last day of his employment
(each being a "Welfare Plan"), after an Event of Termination (other than an
Event of Termination under Section 4(a)(ii)(G)), Executive and his dependents
shall continue participating in such Welfare Plans, subject to the same premium
contributions on the part of Executive as were required immediately prior to the
Event of Termination (other than an Event of Termination under Section
4(a)(ii)(G)) until the earlier of (i) his death; (ii) his employment by another
employer other than one of which he is the majority owner; or (iii) the end of
the remaining term of this Agreement. If the Institution or the Holding Company
does not offer the Welfare Plans after the Event of Termination (other than an
Event of Termination under Section 4(a)(ii)(G)), then the Holding Company shall
provide Executive with a payment equal to the actuarial value of the provision
of such benefit for the period which runs
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until the earlier of (i) his death; (ii) his employment by another employer
other than one of which he is the majority owner; or (iii) the end of the
remaining term of this Agreement.
(e) In the event that Executive is receiving monthly payments pursuant
to Section 4(b) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis. Such election shall be irrevocable for the year for
which such election is made.
(f) Notwithstanding anything to the contrary in this Section 4, upon
the occurrence of an Event of Termination as described in subsection (a)(ii)(G)
of this Section 4, Executive shall receive a lump sum payment in the amount of
Two Million Dollars ($2,000,000) and continuation of the Welfare Plan benefits
in the same manner and to the same extent as set forth under Section 4(d) of
this Agreement in lieu of any other payment and benefits under this Agreement
and solely in consideration of the restrictions imposed on Executive under
Section 10 of this Agreement.
(g) In addition to the benefits provided in paragraphs (b), (c), and
(d) of this Section 4, upon the occurrence of an Event of Termination as
described in subsection (a)(ii)(H) of this Section 4, all unvested restricted
stock awards and unvested stock options held by Executive shall vest 100% as of
Executive's termination date.
(h) For the purpose of this Section, termination of Executive based on
"Retirement" shall mean termination in accordance with the Holding Company's or
Bank's retirement policy or in accordance with any retirement arrangement
established with Executive's consent with respect to him. Upon termination of
Executive upon Retirement, Executive shall be entitled to all benefits under any
retirement plan of the Holding Company or the Bank and other plans to which
Executive is a party or a participant.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Bank shall mean an event of a nature that: (i) would be
required to be reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇"); or (ii) results in a
Change in Control of the Bank or the Holding Company within the meaning of the
Change in Bank Control Act and the Rules and Regulations promulgated by the
Federal Deposit Insurance Corporation ("FDIC") at 12 C.F.R. ss. 303.4(a), with
respect to the Bank, and the Rules and Regulations promulgated by the Office of
Thrift Supervision ("OTS") (or its predecessor agency), with respect to the
Holding Company, as in effect on the date of this Agreement; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of voting securities of the
Bank or the Holding Company representing 20% or more of the Bank's or the
Holding Company's outstanding voting securities or right to acquire such
securities except
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for any voting securities of the Bank purchased by the Holding Company and any
voting securities purchased by any employee benefit plan of the Holding Company
or its Subsidiaries, or (B) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Holding Company's stockholders was approved by a Nominating Committee
solely composed of members which are Incumbent Board members, shall be, for
purposes of this clause (B), considered as though he were a member of the
Incumbent Board, or (C) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Holding Company or
similar transaction occurs or is effectuated in which the Bank or Holding
Company is not the resulting entity, or (D) a proxy statement has been
distributed soliciting proxies from stockholders of the Holding Company, by
someone other than the current management of the Holding Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Holding Company or Bank with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Holding Company shall be distributed, or (E) a
tender offer is made for 20% or more of the voting securities of the Bank or
Holding Company then outstanding.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control occur within one (1) year of the Effective Date (as defined
in Section 1 of this Agreement), then, in lieu of any other payments under this
Agreement, Executive shall be entitled to receive the greater of (i) Two
Million, Five Hundred Thousand Dollars ($2,500,000) or, (ii) Five Hundred
Thousand Dollars ($500,000), plus the benefits provided in paragraphs (d), (e),
(f), (g) and (h) of this Section 5 upon Executive's termination of employment on
or after the Change in Control occurs due to (1) Executive's dismissal; (2)
Executive's voluntary resignation for any reason on or within the sixty (60) day
period immediately following the date a Change in Control occurs; or (3)
Executive's resignation following a demotion, loss of title, office or
significant authority or responsibility, reduction in annual compensation or
benefits or relocation of his principal place of employment by more than fifty
(50) miles from its location immediately prior to the Change in Control, unless
such termination is because of his death, or Termination for Cause.
(c) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred more than one (1) year from the Effective Date
or the Board has determined that a Change in Control has occurred more than one
(1) year after the Effective Date, Executive shall be entitled to the benefits
provided in paragraphs (d), (e), (f) (g) and (h) of this Section 5 upon his
termination of employment on or after the date the Change in Control occurs at
any time during the term of this Agreement due to (1) Executive's dismissal; (2)
Executive's voluntary resignation for any reason on or within the sixty (60) day
period immediately following the date a Change in Control has occurred; or (3)
Executive's resignation following any demotion, loss of title, office or
significant authority or responsibility, reduction in annual compensation or
benefits or relocation of his principal place of employment by more than 50
miles from its location immediately prior to the Change in Control, unless such
termination is
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because of his death, or Termination for Cause; provided, however, that such
payments shall be reduced by any payment made under Section 4 of this agreement.
(d) Upon the occurrence of a Change in Control followed by Executive's
termination of employment, as provided in Section 5(c), the Holding Company
shall pay Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the greater of: (1) the payments due for the
remaining term of the Agreement or (2) three (3) times Executive's average
annual compensation for the three (3) preceding taxable years. In determining
Executive's average annual compensation, annual compensation shall include Base
Salary and any other taxable income, including but not limited to amounts
related to the granting, vesting or exercise of restricted stock or stock option
awards, commissions, bonuses, pension and profit sharing plan contributions or
benefits (whether or not taxable), retirement benefits, director or committee
fees and fringe benefits paid or to be paid to Executive or paid for Executive's
benefit during any such year. In addition to the foregoing, upon the occurrence
of a Change in Control during the 2003 calendar year followed by Executive's
termination of employment, under the circumstances specified in Section 5(c),
the Holding Company shall provide Executive with an additional Two Hundred and
Fifty Thousand Dollar ($250,000) cash payment. At the election of Executive,
which election is to be made prior to or within thirty (30) days of the Date of
Termination on or following a Change in Control, such payment may be made in a
lump sum (without discount for early payment) on or immediately following the
Date of Termination (which may be the date a Change in Control occurs) or paid
in equal monthly installments during the thirty-six (36) months following
Executive's termination. In the event that no election is made, payment to
Executive will be made on a monthly basis during the thirty-six (36) months
following Executive's termination.
(e) Upon the occurrence of a Change in Control, Executive will be
entitled to receive benefits due him under or contributed by the Institution or
the Holding Company on his behalf pursuant to any retirement, incentive, profit
sharing, bonus, performance, disability or other employee benefit plan
maintained by the Institution or the Holding Company on Executive's behalf to
the extent such benefits are not otherwise paid to Executive under a separate
provision of this Agreement.
(f) Upon the occurrence of a Change in Control and Executive's
termination of employment in connection therewith, the Institution will cause to
be continued life, medical and disability coverage substantially identical to
the coverage maintained by the Institution or Holding Company for Executive and
any of his dependents covered under such plans prior to the Change in Control.
Such coverage and payments shall cease upon the expiration of thirty-six (36)
full calendar months following the Date of Termination. In the event Executive's
participation in any such plan or program is barred, the Holding Company shall
arrange to provide Executive and his dependents with benefits substantially
similar as those of which Executive and his dependents would otherwise have been
entitled to receive under such plans and programs from which their continued
participation is barred or provide their economic equivalent.
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(g) The use or provision of any membership, license, automobile use, or
other perquisites shall be continued during the remaining term of the Agreement
on the same financial terms and obligations as were in place immediately prior
to the Change in Control. To the extent that any item referred to in this
paragraph will at the end of the term of this Agreement, no longer be available
to the Executive, the Executive will have the option to purchase all rights then
held by the Institution or the Holding Company to such item for a price equal to
the then fair market value of the item.
(h) In the event that Executive is receiving monthly payments pursuant
to Section 5(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis pursuant to such section. Such election shall be
irrevocable for the year for which such election is made.
(i) Notwithstanding the preceding paragraphs of this Section 5, for any
taxable year in which the Executive shall be liable, as determined for the
payment of an excise tax under Section 4999 of the Code (or any successor
provision thereto), with respect to any payment in the nature of the
compensation made by the Institution or the Holding Company (or for the benefit
of) Executive pursuant to this Agreement or otherwise, the Institution shall pay
to the Executive an amount determined under the following formula:
An amount equal to: (E x P) + X
WHERE:
X = E x P
-----------------
1 - [(FI x (1 - SLI)) + SLI + E + (M + PO)]
E = the rate at which the excise tax is assessed under
Section 4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this Section
5;
FI = the highest marginal rate of federal income,
employment, and other taxes (other than taxes imposed
under Section 4999 of the Code) applicable to
Executive for the taxable year in question;
SLI = the sum of the highest marginal rates of income and
payroll tax applicable to Executive under applicable
state and local laws for the taxable year in
question;
M = highest marginal rate of Medicare Tax; and
PO = adjustment for phase out of or loss of deduction,
personal exemption or other similar items.
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With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Section or otherwise and
on which an excise tax under Section 4999 of the Code will be assessed, the
payment determined under this Section 5 shall be made to Executive on the
earliest of (i) the date the Institution is required to withhold such tax, (ii)
the date the tax is required to be paid by Executive, or (iii) at the time of
the Change in Control. It is the intention of the parties that the Institution
provide Executive with a full tax gross-up under the provisions of this Section,
so that on a net after-tax basis, the result to Executive shall be the same as
if the excise tax under Section 4999 (or any successor provisions) of the Code
had not been imposed. The tax gross-up may be adjusted if alternative minimum
tax rules are applicable to Executive.
(j) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the amount determined as "P", above (such greater amount being hereafter
referred to as the "Determinative Excess Parachute Payment") then the
Institution's independent accountants shall determine the amount (the
"Adjustment Amount") the Institution must pay to the Executive, in order to put
the Executive (or the Institution, as the case may be) in the same position as
the Executive (or the Holding Company, as the case may be) would have been if
the amount determined as "P" above had been equal to the Determinative Excess
Parachute Payment. In determining the Adjustment Amount, the independent
accountants shall take into account any and all taxes (including any penalties
and interest) paid by or for Executive or refunded to Executive or for
Executive's benefit. As soon as practicable after the Adjustment Amount has been
so determined, the Holding Company shall pay the Adjustment Amount to Executive.
(k) In each calendar year that Executive receives payments or benefits
under this Agreement, Executive shall report on his state and federal income tax
returns such information as is consistent with the determination made by the
independent accountants of the Holding Company as described above. The Holding
Company shall indemnify and hold Executive harmless from any and all losses,
costs and expenses (including without limitation, reasonable attorney's fees,
interest, fines and penalties), which Executive incurs as a result of so
reporting such information. Executive shall promptly notify the Holding Company
in writing whenever the Executive receives notice of the institution of a
judicial or administrative proceeding, formal or informal, in which the federal
tax treatment under Section 4999 of the Code of any amount paid or payable under
this Agreement is being reviewed or is in dispute. The Holding Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Holding
Company may have in connection therewith without prior consent of the Holding
Company.
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6. DISABILITY BENEFITS.
In the event of the disability of Executive, the Holding Company shall
continue to pay Executive the compensation provided by this Agreement during the
period of his disability. In the event Executive is disabled for a continuous
period exceeding 12 calendar months, the Holding Company may, at its election,
terminate this Agreement; provided, however, the last 6 months of such 12-month
period shall constitute the "elimination period" for benefit determination under
the Holding Company's or the Bank's Long-Term Disability Plan. As used in this
Agreement, the term "disability" shall mean the complete and permanent inability
of Executive to perform his duties under this Agreement as determined by an
independent physician selected with the approval of the Holding Company or the
Bank and Executive. If, in the opinion of said physician, there is a reasonable
prognosis of recovery, this Agreement may not be terminated by the Holding
Company pursuant to this Section 6.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of: (1)
Executive's personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses), final cease and desist order or material breach of any provision of
this Agreement which results in a material loss to the Institution or the
Holding Company, or (2) Executive's conviction of a crime or act involving moral
turpitude or a final judgement rendered against Executive based upon actions of
Executive which involve moral turpitude. For the purposes of this Section, no
act, or the failure to act, on Executive's part shall be "willful" unless done,
or omitted to be done, not in good faith and without reasonable belief that the
action or omission was in the best interests of the Institution or its
affiliates. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a Notice of Termination which shall include a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths of the members of
the Board at a meeting of the Board called and held for that purpose (after
reasonable notice to Executive and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, Executive was guilty of conduct justifying Termination for Cause
and specifying the particulars thereof in detail. The Executive shall not have
the right to receive compensation or other benefits for any period after
Termination for Cause. During the period beginning on the date of the Notice of
Termination for Cause pursuant to Section 8 hereof through the Date of
Termination, stock options and related limited rights granted to Executive under
any stock option plan shall not be exercisable nor shall any unvested awards
granted to Executive under any stock benefit plan of the Institution, the
Holding Company or any subsidiary or affiliate thereof, vest. At the Date of
Termination, such stock options and related limited rights and any such unvested
awards shall become null and void and shall not be exercisable by or delivered
to Executive at any time subsequent to such Termination for Cause.
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8. NOTICE.
(a) Any purported termination by the Holding Company or by Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given);
provided, however, that if a dispute regarding the Executive's termination
exists, the "Date of Termination" shall be determined in accordance with Section
8(c) of this Agreement.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and; provided, further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Holding Company
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue him as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.
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10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder pursuant
to Section 4 of this Agreement, Executive agrees not to compete with the Holding
Company for a period of one (1) year (two (2) years in the case of an Event of
Termination as described under Section 4(a)(ii)(G) of this Agreement) following
such termination in any city, town or county in which the Executive's normal
business office is located and the Institution or the Holding Company has an
office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination (or, in the case
of an Event of Termination, as described under Section 4(a)(ii)(G) of this
Agreement, the date immediately preceding the Effective Date), except as agreed
to pursuant to a resolution duly adopted by the Board. Executive agrees that
during such period and within said cities, towns and counties, Executive shall
not work for or advise, consult or otherwise serve with, directly or indirectly,
any entity whose business materially competes with the depository, lending or
other business activities of the Institution or the Holding Company. The parties
hereto, recognizing that irreparable injury will result to the Institution and
the Holding Company, its business and property in the event of Executive's
breach of this Subsection 10(a) agree that in the event of any such breach by
Executive, the Holding Company, will be entitled, in addition to any other
remedies and damages available, to an injunction to restrain the violation
hereof by Executive, Executive's partners, agents, servants, employees and all
persons acting for or under the direction of Executive. Executive represents and
admits that in the event of the termination of his employment pursuant to
Section 4 of this Agreement, Executive's experience and capabilities are such
that Executive can obtain employment in a business engaged in other lines and/or
of a different nature than the Institution and that the enforcement of a remedy
by way of injunction will not prevent Executive from earning a livelihood.
Nothing herein will be construed as prohibiting the Holding Company from
pursuing any other remedies available to the Holding Company for such breach or
threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Institution as it
may exist from time to time, is a valuable, special and unique asset of the
business of the Institution. Executive will not, during or after the term of his
employment, disclose any knowledge of the past, present, planned or considered
business activities of the Institution thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas, which are not solely and exclusively derived from
the business plans and activities of the Institution and the Holding Company.
Further, Executive may disclose information regarding the business activities of
the Institution and the Holding Company to the Connecticut Department of Banks,
OTS and the FDIC pursuant to a formal regulatory request. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Institution and the Holding Company or
from rendering any services to any person, firm, corporation, other entity to
whom such knowledge, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing
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herein will be construed as prohibiting the Institution from pursuing any other
remedies available to the Holding Company for such breach or threatened breach,
including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid in
cash or check from the general funds of the Holding Company subject to Section
13 hereof.
(b) Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement of even date herewith,
between Executive and the Bank, such compensation payments and benefits paid by
the Bank will be subtracted from any amount due to Executive under similar
provisions of this Agreement.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes and extinguishes any rights under Executive's written
employment agreement with ABC dated June 27, 2001, and expressly supercedes the
letter agreement relating the Executive's continuing employment with the
Institution and the Holding Company dated November 16, 2001 except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
13. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Institution and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) 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
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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.
15. REQUIRED PROVISIONS.
Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any rules and regulations promulgated thereunder, including 12
C.F.R. Part 359.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of
Connecticut, unless otherwise specified herein.
19. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Holding Company, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. PAYMENT OF COSTS AND LEGAL FEES AND REINSTATEMENT OF BENEFITS.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of: (1) all legal fees incurred by Executive in resolving such dispute or
controversy, and (2) any back-pay, including salary, bonuses and any other cash
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compensation, fringe benefits and any compensation and benefits due Executive
under this Agreement.
21. INDEMNIFICATION.
During the term of this Agreement and for an additional period of seven
years thereafter, the Institution shall provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense, and shall indemnify, hold
harmless and defend Executive (and his heirs, executors and administrators) to
the fullest extent permitted under Delaware law against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his having
been a director or officer of the Institution (whether or not he continues to be
a director or 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.
22. SUCCESSOR TO THE HOLDING COMPANY.
The Holding Company shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Holding Company,
expressly and unconditionally to assume and agree to perform the Holding
Company's obligations under this Agreement, in the same manner and to the same
extent that the Holding Company would be required to perform if no such
succession or assignment had taken place.
23. SPECIAL VOLUNTARY TERMINATION PROVISIONS.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that, on or before January 31, 2003, Executive is not appointed to serve
as the President and Chief Operating Officer of both the Holding Company and the
Bank, Executive may, during the period beginning February 1, 2003 and ending
February 28, 2003, voluntarily terminate his employment with the Holding Company
and receive the payments and benefits provided for in paragraph (b) of this
Section. For purposes of this Section 23, the period February 1, 2003 through
February 28, 2003 is referred to below as the "COO window period."
(b) In the event of Executive's voluntary termination of employment
during the COO window period, Executive shall receive a cash payment of Two
Million, Five Hundred Thousand Dollars ($2,500,000), reduced by the value of
Executive's vested restricted stock (determined by reference to the "Fair Market
Value" of the stock on such date as such term is defined in the Plan) and the
value of Executive's vested stock options (determined by reference to the
"spread" in the options on such date) at the date of Executive's termination of
employment. In addition, the Holding Company shall continue Executive's benefits
under each Welfare Plan sponsored by the Holding Company at the time of his
termination in the same manner and to the same extent as set forth under Section
4(d) of this Agreement. The payment shall be made not later than ten
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(10) business days following the effective date of Executive's termination of
employment pursuant to Section 23(a) of this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary, in the
event that, on or before January 31, 2005, Executive is not appointed to serve
as the Chief Executive Officer of both the Holding Company and the Bank,
Executive may, during the period beginning February 1, 2005 and ending February
28, 2005, voluntarily terminate his employment with the Holding Company and
receive the payments and benefits provided for in paragraph (d) of this Section.
For purposes of this Section 23, the period February 1, 2005 through February
28, 2005 is referred to below as the "CEO window period."
(d) In the event of Executive's voluntary termination of employment
during the CEO window period, Executive shall receive the remaining payments and
benefits due him under this Agreement determined in the same manner and to the
same extent as set forth under Sections 4(b) and 4(d) of this Agreement. In
addition, the Holding Company shall vest all Executive's outstanding stock
options and stock awards as of his termination date. The payment due under this
Section 23(d) shall be made not later than ten (10) business days following the
effective date of Executive's termination of employment pursuant to Section
23(c) of this Agreement.
(e) Executive acknowledges and agrees that a failure to appoint
Executive as President and Chief Operating Officer of the Holding Company and
the Bank or Chief Executive Officer of the Holding Company and the Bank shall
not provide Executive with a basis for voluntary termination under Section 4 of
this Agreement and that the sole payments and benefits due Executive in the
event of his voluntary termination of employment during the COO window period or
the CEO window period are set forth in Sections 23(b) and (d), respectively, of
this Agreement. Executive further acknowledges that, in the event he does not
terminate employment during the COO window period or CEO window period, upon
Executive's termination of employment outside of the COO window period or the
CEO window period, the payments and benefits due Executive in the event of his
voluntary termination of employment shall be determined solely by reference to
the other provisions of this Agreement.
24. APPOINTMENT AS CHIEF EXECUTIVE OFFICER.
In the event Executive is appointed as the Chief Executive Officer of
the Holding Company and the Bank, the Holding Company shall enter into a new
agreement with Executive consistent with the Holding Company's prior practice as
applied to its chief executive officer.
25. TAX WITHHOLDING.
The Holding Company may withhold from any benefits payable under this
Agreement all federal, state, city or other taxes as shall be required pursuant
to any law or governmental regulation or ruling.
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SIGNATURES
IN WITNESS WHEREOF, American Financial Holdings, Inc. have caused this
Agreement to be executed and its seals to be affixed hereunto by its duly
authorized officer, and Executive has signed this Agreement, on the 18th day of
January, 2002.
ATTEST: AMERICAN FINANCIAL HOLDINGS, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
[SEAL]
WITNESS: EXECUTIVE
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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