EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is hereby made this 1st day of January 2004 by and
between Citizens Financial Services, FSB (the "Bank"), a federally chartered
savings bank, and Thomas L. Darovic (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of CFS Bancorp, Inc.
(the "Corporation") and the Bank (together, the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers;
WHEREAS, the Corporation and the Bank desire to enter into separate
agreements with the Executive with respect to his employment by each 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 by the Bank in the event that his employment
with the Bank is terminated under specified circumstances;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, and upon the other terms and conditions hereinafter provided, 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) Base Salary. "Base Salary" shall have the meaning set forth in
Section 4(a) hereof.
b) Cause. Termination 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 or material breach of any
provision of this Agreement.
c) Change in Control. "Change in Control" means the announcement
or occurrence of any of the following: (i) an event that would
be required to be reported in response to Item 1(a) of Form
8-K or Item 6(e) of Schedule 14A of Regulation 14A pursuant to
the 1934 Securities and Exchange Act of 1934, as amended (1934
Act), or any successor thereto, whether or not any class of
securities of the Corporation is registered under the 1934
Act; (ii) any "person" is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of securities of the Corporation representing 20%
or
1
more of the combined voting power of the Corporation's then
outstanding securities; or (iii) during any period of
thirty-six consecutive months, individuals who at the
beginning of such period constitute the Board of Directors of
the Corporation cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for
election by stockholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
i) For purposes of the definition of "Change in
Control," a Person or group of Persons does not
include the CFS Bancorp, Inc. Employee Stock
Ownership Plan Trust which forms a part of the CFS
Bancorp, Inc. Employee Stock Ownership Plan (the
"ESOP"), or any other employee benefit plan,
subsidiary or affiliate of the Corporation, and the
outstanding shares of common stock of the
Corporation, on a fully diluted basis, include all
shares owned by the ESOP, whether allocated or
unallocated to the accounts of participants,
thereunder.
ii) For purposes of the definition of "Change in
Control," the term "Person" means any natural person,
proprietorship, partnership, corporation, limited
liability company, organization, firm, business,
joint venture, association, trust or other entity and
any government agency, body or authority.
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 or for
Disability, the date specified in the Notice of Termination,
and (ii) if the Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is
given or as specified in such Notice.
f) Disability. Termination by the Bank of the Executive's
employment based on "Disability" shall mean termination
because of any physical or mental impairment which qualifies
the Executive for disability benefits under the applicable
long-term disability plan maintained by the Employers or any
subsidiary or, if no such plan applies, which would qualify
the Executive for disability benefits under the Federal Social
Security System.
g) Good Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the
Executive within twelve (12) months following a Change in
Control of the Corporation based on:
i) Without the Executive's express written consent, the
failure to elect or to re-elect or to appoint or to
re-appoint the Executive to the offices of Executive
Vice President, or a material adverse change made by
the Employers in the Executive's functions, duties or
responsibilities;
ii) Without the Executive's express written consent, a
reduction by either of the Employers in the
Executive's Base Salary as the same may be increased
from time to time or,
2
except to the extent permitted by Section 4(b)
hereof, a reduction in the package of fringe benefits
provided to the Executive, taken as a whole;
iii) The principal executive office of either of the
Employers is relocated outside of the Chicago
Consolidated Metropolitan Statistical Area as defined
by the United States Census Bureau (CCMSA) or,
without the Executive's express written consent,
either of the Employers require the Executive to be
based anywhere other than an area in which the
Employers' principal executive office is located,
except for required travel on business of the
Employers to an extent substantially consistent with
the Executive's present business travel obligations;
iv) Any purported termination of the Executive's
employment for Disability or Retirement which is not
effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (i) below;
or
v) The failure by the Bank to obtain the assumption of
and agreement to perform this Agreement by any
successor.
h) IRS. "IRS" shall mean the Internal Revenue Service.
i) Notice of Termination. Any purported termination of the
Executive's employment by the Bank for any reason, including
without limitation for Cause, Disability or Retirement, or by
the Executive for any reason, including without limitation 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 dated 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 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 Bank's termination of Executive's employment for Cause,
which shall be effective immediately; and (iv) is given in the
manner specified in Section 11 hereof.
j) Retirement. "Retirement" shall mean voluntary termination by
the Executive after the Executive attains the age fifty-five
(55), with at least five years of active service.
3
2) TERM OF EMPLOYMENT.
a) The Bank hereby employs the Executive as Executive Vice
President, and the Executive hereby accepts said employment
and agrees to render such services to the Bank on the terms
and conditions set forth in this Agreement. The term of this
Agreement shall be a period of one (1) year commencing as of
the date hereof (the "Commencement Date"), subject to earlier
termination as provided herein. Reference herein to the term
of this Agreement shall refer to both such initial term and
any extended terms. The Board of Directors of the Bank shall
annually review whether to permit further extensions of the
term of this Agreement. As part of such review, the Board of
Directors shall consider all relevant factors, including the
Executive's performance hereunder, and shall either expressly
approve further extensions of the time of this Agreement or
decide to provide notice to the contrary.
b) During the term of this Agreement, the Executive shall perform
such executive services for the Bank as may be consistent with
his titles and from time to time assigned to him by the Bank's
Board of Directors. The Executive further agrees to serve
without additional compensation as an officer and director of
any of the Bank's subsidiaries and agrees that any amounts
received from such corporation may be offset against the
amounts due hereunder. In addition, it is agreed that the Bank
may assign the Executive to one of its subsidiaries for
payroll purposes.
3) LOYALTY AND CONFIDENTIALITY.
a) The Executive shall devote his or her full time and best
efforts to the performance of his or her employment under this
Agreement. During the term of this Agreement, the Executive
shall not, at any time or place, either directly or indirectly
engage in any business or activity in competition with the
business affairs or interests of the Employers or be a
director, officer or consultant to any bank, savings and loan
association, credit union, thrift, savings bank, or similar
institution in the CCMSA.
b) For purposes of this Agreement, directly or indirectly
engaging in any business activity in competition with the
business or affairs of the Employers includes, but is not
limited to, serving or acting as an owner, partner, agent,
beneficiary, or employee of any person, firm or corporate
entity so engaged; except that nothing herein contained shall
be deemed to prevent or limit the right of Executive to invest
any of his surplus funds in the capital stock or other
securities of any corporation whose stock or securities are
publicly owned or are regularly traded on any public exchange,
nor shall anything herein contained be deemed to prevent
employee from investing or limit employee's right to invest
his surplus funds in real estate.
c) All information relating to business of the Employers
including, but not limited to, that business obtained or
serviced by Executive and all customer listings, contact
lists, expiration cards, asset reports, instruments,
documents, papers and other material used in connection with
such business, shall be the exclusive property of the
Employers.
4
Executive shall keep all such information and material
confidential; none of it will be copied, reproduced or
duplicated without the express written permission of the
Employers, and Executive shall return all material containing
such information to Employers upon their request or upon
termination of employment. Executive also agrees that he or
she will not utilize the confidential information or trade
secrets of the Employers, either directly or indirectly, for
any purposes except performance of the Executive's
responsibilities and in furtherance of the Employers'
business, unless otherwise expressly authorized by Employers
in writing in advance.
d) Executive agrees that, during his employment, and following
the date of his involuntary termination of employment for
Cause, or his voluntary termination without Good Reason, the
Executive:
i) will not, for three (3) years following the end of
his employment, solicit any of the Employers' past or
current customers or clients for the benefit of
anyone other than Employers or their affiliates;
ii) will not divulge the names of any of the Employers'
past or then current customers to any other person,
corporation or entity;
iii) will not divulge to anyone, except the Employers or
their representatives, any information regarding
their management strategies, marketing information or
goals, policies and/or other information regarding
the affairs of the Employers, all of which Executive
is hereby obligated to keep secret, however and
whenever such information comes to his or her
attention; and
iv) will not, for three (3) years following the end of
his employment, either directly or indirectly, induce
or solicit any person to leave the employ of the
Employers.
4) COMPENSATION AND BENEFITS.
a) The Employers shall compensate and pay the Executive for his
services during the term of this Agreement at a minimum base
salary of $119,600 per year ("Base Salary"), which may be
increased from time to time in such amounts as may be
determined by the Boards of Directors of the Employers and may
not be decreased without the Executive's express written
consent. In addition to his Base Salary, the Executive shall
be entitled to receive during the term of this Agreement such
bonus payments as may be determined by the Boards of Directors
of the Employers, in their sole discretion.
b) During the term of this Agreement, the Executive shall be
entitled to participate in and receive the benefits of any
pension or other retirement benefit plan, profit sharing,
stock option, employee stock ownership, or other plans,
benefits and privileges given to employees and executives of
the Employers, to the extent commensurate with his then duties
and responsibilities, as fixed by the Boards of Directors of
the Employers. The Bank
5
shall not make any changes in such plans, benefits or
privileges which would adversely affect the Executive's rights
or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executive officers of the Bank and
does not result in a proportionately greater adverse change in
the rights of or benefits to the Executive as compared with
any other executive officer of the Bank. Nothing paid to the
Executive under any plan or arrangement presently in effect or
made available in the future shall be deemed to be in lieu of
the salary payable to the Executive pursuant to Section 4(a)
hereof.
c) During the term of this Agreement, the Executive shall be
entitled to paid annual vacation in accordance with the
policies as established from time to time by the Boards of
Directors of the Employers. The Executive shall not be
entitled to receive any additional compensation from the
Employers for failure to take a vacation, nor shall the
Executive be able to accumulate unused vacation time from one
year to the next, except to the extent authorized by the
Boards of Directors of the Employers.
d) In the event the Executive's employment is terminated due to
Disability or Retirement, the Employers shall provide
continued life, medical, disability coverage substantially
identical to the coverage maintained by the Employers for the
Executive immediately prior to his termination. Such coverage
shall cease upon the expiration of the remaining term of this
Agreement in the event of retirement and in three (3) years in
the event of Disability.
e) In the event of the Executive's death during the term of this
Agreement, the Employers shall provide to the Executive's
spouse and children continued medical coverage substantially
identical to the coverage maintained by the Employers for the
Executive immediately prior to his death for a period of no
less than three (3) years.
f) Notwithstanding anything to the contrary in sub-sections (d)
and (e) of this Section 4, in no event will the Executive, his
spouse or family be entitled to continued medical benefits
from the Employers if medical benefits if said individual is
eligible to receive medical benefits from an alternative
source or from another employer or if said spouse and children
would no longer be eligible for coverage if the Executive were
still employed.
g) The Executive's compensation, benefits and expenses shall be
paid by the Corporation and the Bank in the same proportion as
the time and services actually expended by the Executive on
behalf of each respective Employer. Any amounts received from
the Corporation may be offset against the amounts due
hereunder.
h) During the term of the Agreement, the Employers will provide
suitable office space, desk, chairs, filing cabinets,
telephones and other usual and customary office furniture,
fixtures and equipment adequate for the efficient performance
of the duties assigned to the Executive.
i) During the term of this Agreement, the Employers shall provide
to the Executive, at the Employer's cost, all perquisites
which other senior executives of the Company are
6
generally entitled to receive, including the payment of his or
her annual dues at a health and fitness center mutually
acceptable to the Executive and the Employer.
j) During the term of this Agreement, the Employers will provide
to Executive the use of an automobile. Employers will pay all
automobile operating expenses incurred by Executive in the
performance of Executive's duties. The Employers will procure
and maintain in force an automobile liability policy for the
automobile with coverage in the minimum amount of $1,000,000
combined single limit on bodily injury and property damage.
5) EXPENSES. The Employers shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the
Executive in furtherance of or in connection with the business of the
Employers, including, but not by way of limitation, automobile expenses
and other traveling expenses, and all reasonable entertainment expenses
(whether incurred at the Executive's residence, while traveling or
otherwise), subject to such reasonable documentation and other
limitations as may be established by the Boards of Directors of the
Employers. If such expenses are paid in the first instance by the
Executive, the Employers shall reimburse the Executive therefor.
6) TERMINATION.
a) The Bank shall have the right, at any time upon prior Notice
of Termination, to terminate the Executive's employment
hereunder for any reason, including without limitation
termination for Cause, Disability or Retirement, and the
Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any
reason.
b) In the event that (i) the Executive's employment is terminated
by the Bank for Cause or (ii) the Executive terminates his
employment hereunder other than for Disability, Retirement,
death or Good Reason, the Executive shall have no right
pursuant to this Agreement to compensation or other benefits
for any period after the applicable Date of Termination.
c) In the event that the Executive's employment is terminated as
a result of Disability, Retirement or the Executive's death
during the term of this Agreement, the Executive shall have no
right pursuant to this Agreement to compensation or other
benefits for any period after the applicable Date of
Termination, except as provided for in Sections 4(d) and 4(e)
hereof.
d) In the event that (i) the Executive's employment is terminated
by the Bank for other than Cause, Disability, Retirement or
the Executive's death or (ii) such employment is terminated by
the Executive (a) due to a material breach of this Agreement
by the Bank, which breach has not been cured within fifteen
(15) days after a written notice of non-compliance has been
given by the Executive to the Employers, or (b) for Good
Reason, then the Bank shall, subject to the provisions of
Section 7 hereof, if applicable:
7
i) pay to the Executive, in either twenty-six (26) equal
bi-weekly installments beginning with the first
business day of the month following the Date of
Termination or in a lump sum within five business
days of the Date of Termination (at the Executive's
election), a cash severance amount equal to the
Executive's salary plus cash bonuses earned during
the previous calendar year (regardless of when paid),
and
ii) maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term
of employment pursuant hereto prior to the Notice 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 insurance, life insurance,
health and accident insurance, disability insurance
and other employee benefit plans, programs and
arrangements offered by the Bank in which the
Executive was entitled to participate immediately
prior to the Date of Termination (excluding (x) stock
option and restricted stock plans of the Employers,
(y) bonuses and other items of cash compensation, and
(z) other benefits, or portions thereof), 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 Bank 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.
7) 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.
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.
8) WITHHOLDING. All payments required to be made by the Bank hereunder to
the Executive shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Bank may
reasonably determine should be withheld pursuant to any applicable law
or regulation.
9) ASSIGNABILITY. The Bank may assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Bank may hereafter merge or
consolidate or to which the Bank may transfer all or substantially all
of its
8
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 Bank hereunder as fully as if it had been originally
made a party hereto, but may not otherwise assign this Agreement or its
rights and obligations hereunder. The Executive may not assign or
transfer this Agreement or any rights or obligations hereunder.
10) 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:
a) To the Bank: Corporate Secretary
Citizens Financial Services, FSB
707 Ridge Road
Munster, Indiana 46321
b) To the Corporation: Corporate Secretary
CFS Bancorp, Inc.
707 Ridge Road
Munster, Indiana 46321
c) To the Executive: Thomas L. Darovic
13733 Natchez Trail
Orland Park, IL 60467
11) AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer or
officers as may be specifically designated by the Board of Directors of
the Bank to sign on its 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.
12) 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 State of Indiana.
13) NATURE OF OBLIGATIONS. Nothing contained herein shall create or require
the Bank 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 Bank hereunder, such right shall be
no greater than the right of any unsecured general creditor of the
Bank.
9
14) 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.
15) VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and
effect.
16) 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.
17) REGULATORY ACTIONS. The following provisions shall be applicable to the
parties to the extent that they are required to be included in
employment agreements between a savings association and its employees
pursuant to Section 563.39(b) of the Regulations Applicable to All
Savings Associations, 12 C.F.R. Section 563.39(b), 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
6 hereof.
a) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Employers'
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 Employers'
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 Employers may, in
their 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 Employers'
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 Employers under this Agreement
shall terminate as of the effective date of the order, but
vested rights of the Executive and the Employers 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 Employers as of the
date of termination shall not be affected.
d) All obligations under this Agreement shall be terminated
pursuant to 12 C.F.R. Section 563.39(b)(5) (except to the
extent that it is determined that continuation of the
Agreement for the continued operation of the Employers is
necessary): (i) by the Director of the Office of Thrift
Supervision ("OTS"), or his/her designee, at the time the
Federal Deposit Insurance Corporation ("FDIC") enters into an
agreement to provide assistance to or on behalf of the Bank
under the authority contained in Section 13(c) of the FDIA (12
U.S.C. Section 1823(c)); or (ii) by the Director of the OTS,
or his/her designee, at the time the Director or
10
his/her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or
unsound condition, but vested rights of the Executive and the
Employers as of the date of termination shall not be affected.
18) 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 Federal Deposit Insurance
Act (12 U.S.C. Section 1828(k)) and the regulations promulgated
thereunder, including 12 C.F.R. Part 359. In the event of the
Executive's termination of employment with the Bank for Cause, all
employment relationships and managerial duties with the Bank shall
immediately cease regardless of whether the Executive remains in the
employ of the Corporation following such termination. Furthermore,
following such termination for Cause, the Executive will not, directly
or indirectly, influence or participate in the affairs or the
operations of the Bank.
19) 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 (2) 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.
20) ENTIRE AGREEMENT. This Agreement embodies the entire agreement between
the Bank and the Executive with respect to the matters agreed to
herein. All prior agreements between the Bank and the Executive with
respect to the matters agreed to herein are hereby superseded and shall
have no force or effect. Notwithstanding the foregoing, nothing
contained in this Agreement shall affect the agreement of even date
being entered into between the Corporation and the Executive.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date first above written.
ATTEST: CITIZENS FINANCIAL SERVICES, FSB
/s/ Monica F. Sullivan By: /s/ Thomas F. Prisby
- ---------------------- ----------------------------
EXECUTIVE
/s/ Thomas L. Darovic
----------------------------
Thomas L. Darovic
11