EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is made this eighteenth day of August, 2003, by and
between North Country Financial Corporation, a Michigan corporation, (the
"Corporation") and, Joseph E. Petterson (the "Employee").
WHEREAS, the Board of Directors of the Corporation believes that the
future services of the Employee in the capacity of Executive Vice President will
be of great value to the Corporation;
WHEREAS, the Corporation operates a wholly owned commercial banking
subsidiary known as North Country Bank & Trust Company which is engaged in the
general business of banking, hereinafter the "Bank"; and
WHEREAS, the Bank is presently the subject of a Cease and Desist Order
issued by the Federal Deposit Insurance Corporation and the Michigan Office of
Financial and Insurance Services; and
WHEREAS, the Employee is willing to serve in the employ of the
Corporation and the Bank on a full-time basis for the term of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties hereto have agreed and do hereby
mutually agree as follows:
1. Term -- Agreement to Serve
The Corporation hereby employs for itself, the Bank and or any
additional subsidiaries (hereinafter sometimes collectively referred to
as the "Corporation"), the services of Employee for a period commencing
as of the date first written above and terminating July 31, 2005 (the
"Termination Date"), subject to the rights of earlier termination
hereinafter set forth, to perform the duties of Executive Vice
President for the Corporation and the Bank. The Employee hereby accepts
such employment in consideration of the compensation and the other
terms and conditions herein provided, and agrees to serve the
Corporation well and faithfully and to devote his best efforts to such
employment as long as it shall continue hereunder. During the period of
such employment, the Employee will devote his substantial full-time
attention -- reasonable vacations, periods of illness and the like
excepted -- to the affairs of the Corporation.
2. Base Salary and Fringe Benefits
Except as otherwise provided herein, as compensation for these services
hereunder, the Corporation will pay to Employee, in installments and on
dates in accordance with its normal payroll, during the period of his
employment hereunder, a base salary at the aggregate rate of one
hundred seventy-five thousand ($175,000) per annum, subject to the
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right of the parties, by mutual agreement, to adjust such rate upward
in respect of any future period after the date hereof, (hereinafter
referred to as "Base Pay").
In addition the Corporation shall:
(a) Pay a cash retention bonus in the amount of seven thousand
five hundred dollars ($7,500) to Employee upon his
commencement of employment with the Corporation, and (ii) if,
during the term of this Agreement, the Bank is no longer
subject to any formal or informal enforcement action including
cease and desist orders, written agreements or memorandum of
understanding by any federal or state banking regulatory
agency, the Bank will pay to Employee a cash bonus equal to
one year of Employee's Base Pay.
(b) Provide four (4) weeks paid vacation annually beginning
January 1, 2004, with one (1) week paid vacation during the
period of initial employment through December 31, 2003.
(c) Reimburse fees and expenses incurred in connection with
business of the Corporation or the Bank, including fees for
attendance at banking related conventions and similar items
approved by the President and CEO.
(d) Provide an automobile allowance in the amount of $450 per
month and pay for the insurance, maintenance and gasoline
utilized by Employee while in Manistique, Michigan.
(e) Provide reimbursement to Employee during the initial one
hundred eighty (180) day term of this Agreement to cover
Employees living expenses, not to exceed one thousand dollars
($1,000) per month.
3. Bonus and Options
Subject to the rules and regulations applicable thereto, the
Corporation shall provide for Employee's participation in any option,
incentive employee benefit plans or compensation programs administered
by the Corporation or the Bank or under its direction, including any
employee bonus plans as may presently exist or are to be placed into
effect after the date hereof.
4. Termination of Employment
The employment of the Employee under the terms of this Agreement shall
cease and terminate as follows:
(a) Expiration of Term
On the Termination Date; or,
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(b) Death
On the date of his death; or,
(c) Disability
Upon receipt by the Employee of written notice from the
Corporation that, in its opinion, based on reliable medical
evidence, the Employee is unable by reason of permanent
physical or mental disability to continue the proper
performance of his duties hereunder. For purposes of this
Employment Agreement, the Employee's "permanent disability"
shall be deemed to have occurred after thirty (30) consecutive
days, during which thirty (30) days the Employee, by reason of
his physical or mental disability or illness, shall have been
unable, in the reasonable opinion of the Corporation, to
discharge his duties under this Employment Agreement. The date
of permanent disability shall be such thirtieth (30th) day;
or,
(d) Termination by the Corporation with Cause
For Cause at any time by action of the Board. For purposes
hereof, the term "Cause" shall mean receipt of any written
criticism of the performance of Employee by a regulatory
agency having jurisdiction over the Corporation or the Bank,
failure of the Employee to satisfactorily perform his duties
as determined annually in a written performance review by the
President and CEO, or the Employee's willful and repeated
failure to perform his duties under this Employment Agreement,
which failure has not been cured within thirty (30) days after
the Corporation gives notice thereof to the Employee; or,
(e) Termination by Employee's Resignation without Good Reason.
The Employee may terminate his employment at any time by
resignation without Good Reason.
(f) Termination by the Corporation without Cause
At the election of the Corporation, at any time during the
term of this Agreement without cause.
(g) Termination Other Than for Cause; Resignation by the Employee
for Good Reason.
If the Company terminates the Employee's employment for any
reason other than Cause (as defined in Section 4(c)), or in
the event of the Employee's Resignation for Good Reason, the
Employee shall be entitled to receive the payments provided
for herein. "Resignation for Good Reason" shall mean the
termination of this Agreement by the Employee in the event
that (i) Employee is required to provide
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services at a work location other than the Corporation's main
office in Manistique, Michigan, or within a fifty mile radius
thereof (ii) Employee's duties are substantially reduced, or
(iii) the breach of this Agreement by the Corporation, or (iv)
there is any reduction in the Base Pay of Employee, or a
reduction in the other benefits provided to the Employee by
the Corporation, other than an immaterial change in the
benefits provided to Employee resulting from changes in
service providers, insurance companies and similar changes
affecting all employees generally under the Corporation's
health and welfare benefit plans.
(h) Payments Upon Termination
Upon termination of employment of the Employee pursuant to
Section 4(b),(c),(d) or (e) above, the Employee shall be
entitled to receive the amount of Base Pay and Benefits
(including cash payment for any unused vacation) provided for
in Paragraphs 2 and 3 hereof through the date of his
termination of employment. In the event of the termination of
employment of Employee pursuant to Sections 4(f) or (g) above,
the Corporation shall pay to the Employee his Base Pay and
other benefits listed in Paragraphs 2 and 3 through the
Termination Date, and at Employee's election shall pay the
aggregate amount of Base Pay, any accrued bonus, and unused
vacation pay otherwise payable to Employee, in a single lump
sum at such termination of employment.
5. Change in Control Provision.
If during the term of this Agreement or within one (1) year following
the Termination Date, the Corporation engages in a Change in Control
transaction as hereinafter defined, Employee's employment hereunder
shall automatically terminate two (2) months following the consummation
of the Change in Control Transaction (if not earlier terminated) and
Employee shall receive: (A) the payments provided to Employee upon a
termination without cause as set forth in 4(f), and (B) one year of
Employee's then Base Pay. In the event of: (X) Employee's termination
of employment prior to the Termination Date pursuant to 4(f) or (g),
the provisions of this paragraph 5 shall apply notwithstanding such
earlier termination of employment, and (Y) the provisions of this
paragraph 5 shall not apply and shall be void in the event of
termination of employment pursuant to 4(b)(c)(d)(and(e).
A "Change in Control" shall result if, and shall be deemed to have
occurred on the date of, a transaction pursuant to which:
(a) Any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13(d)(3) and 13(d)(5)
under the Exchange Act), directly or indirectly, of securities
of the Corporation representing twenty-five percent (25%) or
more of the combined voting power of the Corporation's then
outstanding securities;
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(b) A merger, consolidation, sale of assets, reorganization, or
proxy contest is consummated and, as a consequence of which,
members of the Board in office immediately prior to such
transaction or event constitute less than a majority of the
Board thereafter;
(c) During any period of 24 consecutive months, individuals who at
the beginning of such period constitute the Board (including
for this purpose any new director whose election or nomination
for election by the Corporation's stockholders was approved by
a vote of at least one-half of the directors then still in
office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the
Board; or
(d) A merger, consolidation or reorganization is consummated with
any other corporation pursuant to which the shareholders of
the Corporation immediately prior to the merger, consolidation
or reorganization do not immediately thereafter directly or
indirectly own more than fifty percent (50%) of the combined
voting power of the voting securities entitled to vote in the
election of directors of the merged, consolidated or
reorganized entity.
Notwithstanding the foregoing, no trust department or designated
fiduciary or other trustee of such trust department of the Corporation
or a subsidiary of the Corporation, or other similar fiduciary capacity
of the Corporation with direct voting control of the stock shall be
treated as a person or group within the meaning of subsection (i)(a)
hereof. Further, no profit-sharing, employee stock ownership, employee
stock purchase and savings, employee pension, or other employee benefit
plan of the Corporation or any of its subsidiaries, and no trustee of
any such plan in its capacity as such trustee, shall be treated as a
person or group within the meaning of subsection (i)(a) hereof.
6. Internal Revenue Code Section 280G.
In the event the payments required under this Agreement, when added
together with any other amounts required to be included by Employee
under the provisions of the Internal Revenue Code of 1986, as amended,
result in an "Excess Parachute Payment," as that term is defined in
Section 280G of the Code, then the amount of the payments provided for
in this agreement shall be reduced in an amount which eliminates any
and all excise tax to be imposed under Section 4999 (or any successor
thereto) of the Code.
7. Right to Other Benefits.
Except as otherwise specified herein, nothing in this Agreement shall
abridge, eliminate, or cause Employee to lose Employee's right or
entitlement to any other Corporation benefit to which Employee may be
entitled due to his status as an employee under any plan or policy of
Corporation on such terms and conditions as are required of any
employee under any plan or policy of Corporation. Further, nothing in
this Agreement shall create in Employee any greater rights or
entitlements, except as specified in this
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Agreement. The plans and policies referred to in this Paragraph 7
include, but are not limited to, life insurance plans, dental,
disability or health insurance benefits, severance policies, club
memberships, and accrued vacation pay.
8. Confidential Information
Employee shall not at any time, in any manner, while employed by the
Corporation or thereafter, either directly or indirectly, except in the
course of carrying out the Corporation's business or as previously
authorized in writing on behalf of the Corporation, disclose or
communicate to any person, firm, or corporation, any information of any
kind concerning any matters affecting or relating to the Corporation's
business or any of its data, figures, projections, estimates, customer
lists, tax records, personnel histories, and accounting procedures of
the Corporation, without regard to whether any or all of such
information would otherwise be deemed confidential or material.
9 Non-Assignability
(a) Except as provided herein, neither party to this Agreement
shall have the right to assign this Agreement or any rights or
obligations hereunder provided that nothing herein shall
prevent the Employee from designating one or more members of
his family or a trust or trusts for the members of his family
as a beneficiary or beneficiaries entitled to receive payments
hereunder as heretofore specified.
(b) Except as provided above, no title to any payments which shall
become due and payable to the Employee, his personal
representative or designated beneficiary under the provisions
hereof, shall be vested in him or any of them until the actual
payment thereof is made to such person by the Corporation in
accordance with the provisions of this Agreement. Neither he
nor any of them shall have the right or power to transfer,
assign, anticipate or encumber any interest in any such
payment, prior to the actual receipt thereof from the
Corporation. Neither this Agreement, the Corporation nor any
person's rights hereunder shall be liable for the debt,
contract or engagement of any of them. None of them shall be
permitted to appoint any agent or attorney-in-fact and except
as provided herein, to collect or receive his share of such
payments or any part thereof unless permission to do so shall
be specifically granted by the Corporation in writing. The
Corporation, in the absence of such written permission, shall
not in any manner recognize such appointment, transfer,
assignment or encumbrance.
(c) If the Employee or any personal representative or any
designated beneficiary attempts to transfer, assign or
encumber his interest in such payments, or any part thereof,
prior to the payment or distribution thereof to him or her;
or, if any transfer or seizure thereof is attempted to be made
or brought through the operation of any bankruptcy or
insolvency law, the right of the person taking such action or
concerned therein or affected thereby, and who would, but for
this
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provision, be entitled to receive such payments, or any part
thereof, shall forthwith and ipso facto terminate, all rights
bestowed on any such person being hereby, on the happening of
any such event, expressly revoked; and the Corporation shall
thereafter, in its absolute discretion, at such time or times
as it deems proper, cause such part of such person's
theretofore existing share of such payments to be paid to such
person or persons, including the Employee, of any parent,
spouse or child of said person, as the Corporation, in its
uncontrolled discretion, shall deem advisable; and the
remainder of such payments, if any, may be distributed by the
Corporation to the person or person who would have been
entitled to receive the same if such person had died
immediately prior to said attempted transfer, assignment or
encumbrance, or attempted transfer or seizure by operation of
law.
10. Binding Effect
This Agreement shall be binding upon and inure to the benefit of any
successor of the Corporation, and any such successor shall be deemed
substituted for the Corporation under the terms of this Agreement. As
used in this Agreement, the term "successor" shall include any person,
firm, corporation, or other business entity which, at any time, whether
by merger, purchase, or otherwise, acquires all or substantially all of
the assets or business of the Corporation.
11. Entire Agreement
This Agreement contains the entire agreement of the parties hereto
concerning the subject matter hereof, and cancels any and all other
oral or written agreements or understandings between the parties with
respect to the subject matter hereof. The Agreement may not be changed
orally, but only by agreement in writing signed by both parties.
12. Authorization for Acts of Corporation
Any act, request, approval, consent or opinion of the Corporation
hereunder shall be authorized, given or expressed by resolution of its
Board of Directors.
13. Arbitration.
The parties hereto agree to arbitrate any issue, misunderstanding,
disagreement or dispute in connection with the terms in effect in this
Agreement before one arbitrator mutually agreeable to the parties. The
arbitration shall be administered by the National Arbitration Forum
("NAF") and conducted under its rules, except as otherwise provided
below. If either party determines that the parties have been unable to
agree upon one arbitrator, then such party may appoint one arbitrator
and require the other party to appoint a second arbitrator. Whereupon,
the two appointed arbitrators shall appoint a third neutral arbitrator.
If the arbitrators selected by the parties are unable or fail to agree
upon the third arbitrator, the NAF shall select the third arbitrator.
Failure by a party to either (i) accept as mutually agreeable, or (ii)
appoint an arbitrator, within 30 days of receipt of
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notice of the appointment of an arbitrator by the other party, shall be
deemed as acceptance of arbitration by such single arbitrator. The
arbitration shall occur in Manistique, Michigan, or such other place as
mutually agreed upon. The prevailing party shall be entitled to recover
any and all costs associated with any arbitration proceeding (and any
subsequent proceeding to enforce rights thereunder) including the
recovery of reasonable attorneys fees. Judgment on the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction
thereof. This arbitration agreement shall be governed by the Michigan
Arbitration Act, MCLA Section 600.5001, et seq. Information may be
obtained from the NAF on-line at www.arb-forum.com, by calling
800-474-2371 or writing to P.O. Box 50191, Minneapolis, MN, 55405.
14. Noncompetition and Nonsolicitation Agreement and Business Protection.
Notwithstanding anything to the contrary contained elsewhere in this
Agreement:
(a) Noncompetition Agreement and Nonsolicitation Agreement
(i) In view of Employee's importance to the success of the
Corporation, Employee and Corporation agree that the
Corporation would likely suffer significant harm from
Employee's competing with Corporation during Employee's term
of employment with Corporation and for some period of time
thereafter. Accordingly, Employee agrees that Employee shall
not engage in competitive activities while employed by
Corporation and during the Restricted Period. Employee shall
be deemed to engage in competitive activities if he shall,
without the prior written consent of the Corporation, (i)
within a seventy-five (75) mile radius of the main office or
any branch office of the Bank, render services directly or
indirectly, as an employee, officer, director, consultant,
advisor, partner or otherwise, for any organization or
enterprise which competes directly or indirectly with the
business of Corporation or any of its affiliates in providing
financial products or services (including, without limitation,
banking, insurance, or securities products or services) to
consumers and businesses, or (ii) directly or indirectly
acquires any financial or beneficial interest in (except as
provided in the next sentence) any organization which conducts
or is otherwise engaged in a business or enterprise within a
seventy-five (75) mile radius of the main office or any branch
office of the Bank, which competes directly or indirectly with
the business of Corporation or any of its affiliates in
providing financial products or services (including, without
limitation, banking, insurance or securities products or
services) to consumers and businesses. Notwithstanding the
preceding sentence, Employee shall not be prohibited from
owning less that 5 percent of any publicly traded corporation,
whether or not such corporation is in competition with
Corporation. For purposes of this Paragraph 14 the term
"Restricted Period" shall equal twelve months, commencing as
of the date of Employee's termination of employment.
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(ii) While employed by Corporation and for a period of twelve
months following Employee's termination of employment with
Corporation, Employee agrees that Employee shall not, in any
manner directly (i) solicit by mail, by telephone, by personal
meeting, or by any other means, any customer or prospective
customer of Corporation to whom Employee provided services, or
for whom Employee transacted business, or whose identity
become known to Employee in connection with Employee's
services to Corporation (including employment with or services
to any predecessor or successor entities), to transact
business with a person or an entity other than the Corporation
or its affiliates or reduce or refrain from doing any business
with the Corporation or its affiliates or (ii) interfere with
or damage (or attempt to interfere with or damage) any
relationship between Corporation or its affiliates and any
such customer or prospective customer. The term "solicit" as
used in this Agreement means any communication of any kind
whatsoever, inviting, encouraging or requesting any person to
take or refrain from taking any action with respect to the
business of Corporation and its subsidiaries.
(iii) While employed by Corporation and for a period of twelve
months following Employee's termination of employment with
Corporation, Employee agrees that Employee shall not, in any
manner directly solicit any person who is an employee of
Corporation or any of its affiliates to apply for or accept
employment or a business opportunity with any other person or
entity in which he has an ownership interest or directly or
indirectly receives compensation therefrom.
(iv) The parties agree that nothing herein shall be construed to
limit or negate the common law of torts or trade secrets or
Michigan Law where it provides broader protection than that
provided herein.
(b) Confidential Information
Employee has obtained and may obtain confidential information
concerning the businesses, operations, financial affairs,
organizational and personnel matters, policies, procedures and other
non-public matters of Corporation and its affiliates, and those of
third-parties that is not generally disclosed to persons not employed
by Corporation or its subsidiaries. Such information (referred to
herein as the "Confidential Information") may have been or may be
provided in written form or orally. Employee shall not disclose to any
other person the Confidential Information at any time during his
employment with Corporation or after the termination of his employment,
provided that Employee may disclose such Confidential Information only
to a person who is then a director, officer, employee, partner,
attorney or agent of Corporation who, in Employee's reasonable good
faith judgment, has a need to know the Confidential Information. At
Employee's termination of employment, Employee shall return to the
Corporation any and all memorandum, notes, records, papers, financial
models, flowcharts, work papers, computer codes, software and any other
documents relating to the operations of the business of the Corporation
or the Bank.
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(c) Remedies
(i) Employee acknowledges that a violation on Employee's part of
this Paragraph 14 would cause immeasurable and irreparable
damage to Corporation. Accordingly, Employee agrees that
notwithstanding Paragraph 13 hereof, Corporation shall be
entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any of
the provisions of this Paragraph 14, in addition to any other
remedies it may have at law.
(ii) In addition to Corporation's right to seek injunctive relief
as set forth in subsection (i) above of this Section 14(c) in
the event that Employee shall violate the terms and conditions
of this Paragraph 14, Corporation may: (i) make a general
claim for damages and (ii) terminate any payments or benefits
payable by Corporation, if applicable, to Employee.
15. Confidential Information
Employee shall not at any time, in any manner, while employed by the
Corporation or thereafter, either directly or indirectly, except in the
course of carrying out the Corporation's business or as previously
authorized in writing on behalf of the Corporation, disclose or
communicate to any person, firm, or corporation, any information of any
kind concerning any matters affecting or relating to the Corporation's
business or any of its data, figures, projections, estimates, customer
lists, tax records, personnel histories, and accounting procedures of
the Corporation, without regard to whether any or all of such
information would otherwise be deemed confidential or material.
16. Governing Law
This Agreement is executed and delivered in the State of Michigan and
is intended to be interpreted, construed and enforced in accordance
with the laws of such State.
17. Regulatory Approval of Agreement.
Employee and the Corporation acknowledge and agree that: (i) certain
approvals of state and federal banking regulatory agencies are required
to be received by the Corporation in order to fully bind the
Corporation to the terms hereof; and (ii) the Corporation shall submit
this Agreement to any and all state and federal banking regulatory
agencies with supervisory and regulatory authority over the Corporation
and/or the Bank as soon as practicable following its execution and
agrees to use its best efforts to obtain as promptly as practicable any
all consents required to permit the full enforcement of the provisions
of this Agreement, including the payment of all compensation, benefits,
bonuses, and change in control payments of any and all types
contemplated herein as may be required by law, regulation, enforcement
action or otherwise; (iii) Employee agrees that this Agreement shall
not be binding until all required regulatory approvals to which the
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Corporation is subject have been received; and (iv) Employee
acknowledges and agrees that all terms of this Agreement may, to the
extent permitted or required by law, applicable banking regulations, or
by a written agreement between the Corporation (or Bank) and its (or
their) banking regulatory agencies and not otherwise waived in writing,
be modified, terminated, or prohibited (from enforcement) by the
banking regulatory agencies having jurisdiction or oversight authority
regarding the Corporation and the Bank.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by the Chairman of its Board of Directors, and the
Employee has signed this Agreement, all as of the date and year first above
written.
North Country Financial Corporation
By: /s/ C. James Bess
-------------------------------------
C. James Bess
President and Chief Executive Officer
/s/ John Lindroth
-------------------------------------
John Lindroth
Chairman
/s/ Joseph E. Petterson
-----------------------------------------
Joseph E. Petterson
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