EXHIBIT 10.4
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EMPLOYMENT AGREEMENT
This is an Employment Agreement dated as of October 1, 1999, between
HARRODSBURG FIRST FINANCIAL BANCORP, INC., a Delaware corporation ("Parent") and
ARTHUR L. FREEMAN ("Executive"), and joined in by FIRST FEDERAL SAVINGS BANK OF
HARRODSBURG ("Bank"), Parent's wholly owned subsidiary.
RECITAL
WHEREAS, Parent wishes to employ Executive as Chairman and Chief
Executive Officer of Parent and the Bank, and Executive is willing to accept
such employment, upon the terms and conditions contained in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the covenants
contained herein, the parties agree as follows:
1. Employment. Parent agrees to employ Executive as Chairman and Chief
Executive Officer of Parent and the Bank, and Executive hereby agrees to accept
such employment with Parent and the Bank, for the period provided in Section 6,
all upon the terms and conditions of this Agreement.
2. Duties and Responsibilities. Executive shall perform the duties
customary for the position of Chairman and Chief Executive Officer and such
other duties as the Board of Directors of Parent (the "Parent Board") or of the
Bank (the "Bank Board") may from time to time assign to him. Executive agrees to
use his best efforts for the benefit of Parent and the Bank, and throughout the
term of this Agreement shall devote his entire time, attention, and energies to
their business. Executive shall not engage in other business activities without
Parent's prior consent, whether or not such business activity is pursued for
profit, gain or other pecuniary advantage. Executive may invest his assets in
such form or manner as will not require any services on his part in the
operation of the affairs of the enterprises in which the investments are made.
3. Base Compensation. The Bank agrees to pay Executive during the term
of this Agreement a salary at the rate of $93,600 per year, payable in cash not
less frequently than monthly, less any amounts withheld at the direction of
Executive or as otherwise required by law; provided, that the rate of such
salary shall be reviewed by the Bank Board not less often than annually, and
Executive shall be entitled to receive annually an increase at such percentage
or in such an amount as the Bank Board in its sole discretion may decide at such
time.
4. Discretionary Bonus. Executive shall be entitled to participate in
any discretionary bonus that may be authorized by the Bank Board from time to
time for its senior management employees.
5. Incentive Compensation, Participation in Employee Benefit Plans and
Other Benefits.
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(a) Parent and the Bank agree to grant Executive the initial
incentive compensation benefits set forth in Appendix A to this Agreement.
Executive shall also be eligible to participate in any stock or other incentive
compensation programs that the Parent Board or the Bank Board adopt from time to
time for senior management employees of Parent or Bank.
(b) Executive shall be entitled to participate in all pension,
profit-sharing retirement, medical coverage or other employee benefit plans and
programs provided by Parent or Bank for which Executive is eligible in
accordance with the terms of such plans and programs. Parent and Bank expressly
reserve the right to alter, modify, amend or terminate any or all such benefit
plans and programs at any time and for any reason at their sole discretion.
(c) Bank shall provide Executive a reasonable expense account
and such fringe benefits that the Parent Board or the Bank Board provides for
senior management employees of Parent or the Bank. The Bank shall reimburse
Executive for all reasonable out-of-pocket expenses that Executive incurs in
connection with his service for the Bank, subject to Executive's compliance with
the Bank's expense and reimbursement policies.
(d) The Bank will provide Executive with an automobile, either
leased or purchased, at no expense to Executive, and pay for all maintenance and
insurance thereon, for use in connection with Executive's performance of his
duties. Executive will account for any personal use of the automobile in the
manner prescribed by the Bank from time to time, and acknowledges that the value
of that personal use will be reflected as taxable income on his W-2 form from
the Bank.
6. Term. The term of employment of Executive under this Agreement shall
be for the period commencing on October 1, 1999 (the "Effective Date") and
ending September 30, 2002; provided, however, that such term shall be
automatically extended for additional successive 12-month periods thereafter, if
neither party gives written notice to the other at least 30 days before
expiration of the original 12-month period or any renewal period thereafter of
that party's desire to terminate this Agreement.
7. Vacations and Sick Leave. At such reasonable times as the Bank Board
shall in its discretion permit, Executive shall be entitled, without loss of
pay, to absent himself voluntarily from the performance of his employment under
this Agreement, with all such voluntary absences to count as vacation times;
provided that:
(a) Executive shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Bank Board
for senior management employees of the Bank.
(b) Executive shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Executive shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Bank
Board for senior management employees of the Bank.
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(c) In addition to the aforesaid paid vacations, Executive
shall be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Bank for such additional periods of time
and for such valid and legitimate reasons as the Bank Board may authorize.
Further, the Executive shall be entitled to such leave or leaves of absence with
or without pay at such time or times and upon such terms and conditions as the
Bank Board in its discretion may determine.
(d) In addition, Executive shall be entitled to an annual sick
leave benefit as established by the Bank Board for senior management employees
of the Bank. If Executive does not use any sick leave benefit during the
applicable year, such leave shall accrue to subsequent years only to the extent
authorized by the Bank Board for employees of the Bank.
8. Loyalty; Confidentiality and Noncompetition
(a) Employment Relationship and Acknowledgments. Executive
acknowledges that:
(i) Executive's employment by Parent and the Bank
creates a relationship of confidence and trust between Executive and Parent
and the Bank;
(ii) Parent and the Bank have a proprietary
interest in documents and information applicable to its business or to the
business of its clients and customers which may be made known to Executive
during the period of Executive's employment;
(b) Confidentiality.
(i) Restricted Disclosure and Use. Notwithstanding
any other provision of this Agreement, unless Executive shall first secure
Parent and the Bank's written consent, and except for authorized use in
performance of Executive's duties on behalf of and for the benefit of Parent and
the Bank, Executive shall not disclose to any others, or use, at any time, in
any way, or anywhere, either during or subsequent to employment with Parent and
the Bank, any trade secret or other confidential information (of either
technical or non-technical nature) of Parent and the Bank.
(ii) Return of Materials Upon Termination. Upon
termination of Executive's employment, Executive shall promptly deliver to
Parent and the Bank all confidential material relating in any way to Parent and
the Bank's business and which are in the possession of or under the control of
Executive, whether made, written or obtained by Executive or others. Executive
shall retain no copies of such materials, either for Executive's own use or
otherwise.
(c) Noncompetition and Non-Solicitation
(i) General. Executive, during and following
termination of employment with Parent and the Bank, shall not directly or
indirectly, individually, in partnership or through a corporation, as
proprietor, manager, executive, major stockholder or consultant, compete with
Parent
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and the Bank or assist others to so compete. Except as otherwise stated herein,
this covenant-not-to-compete shall be limited to: (1) a period of two years
following such termination; (2) any business in which Parent or the Bank are
actually engaged or intend to engage within said two year period; and (3) those
geographical areas where Parent and the Bank, at the time of said termination,
are actually doing business or intend to do business within said two year
period.
(ii) Non-Solicitation of Customers. Executive
further agrees that during his employment and for a period of two years
following the date of any termination of his employment, he will not, by
influencing or attempting to influence previously existing customers, or
otherwise, either directly or indirectly, divert or attempt to divert from
Parent and the Bank, any business Parent and the Bank had enjoyed or solicited
anywhere during the past two years, or in connection with which Executive worked
during the last two years of his employment.
(iii) Non-Solicitation of Management Employees.
Executive agrees that following any termination of his employment with Parent
and the Bank, he shall not, directly or indirectly, approach or solicit any
management employee of Parent and the Bank with a view to hiring such employee
for any other entity or persuading such employee to leave the employment of
Parent and the Bank.
(d) Survival. The provisions of this Section 8 shall
survive any termination of this Agreement.
9. Termination and Termination Pay.
Executive's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of Executive during the term of this Agreement,
in which event Executive's estate shall be entitled to receive the compensation
due Executive through the last day of the calendar month in which Executive's
death shall have occurred.
(b) The Bank Board may terminate Executive's employment at any
time, but any termination by the Bank Board other than termination for Just
Cause, shall not prejudice Executive's right to compensation or other benefits
under the Agreement. Executive shall have no right to receive compensation or
other benefits for any period after termination for Just Cause. Termination for
"Just Cause" shall include termination because of Executive's 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 the Agreement.
(c) Except as provided pursuant to Section 13 herein, in the
event Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay
Executive the salary provided pursuant to Section 2 herein, up to the date of
termination of the term (including any renewal term) of this Agreement and the
cost of Executive obtaining all health, life, disability, and other benefits
which Executive would
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be eligible to participate in through such date based upon the benefit levels
substantially equal to those being provided Executive at the date of termination
of employment.
(d) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(l) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1)
of FDIA) all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.
(f) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her designee, at the time that the Director of
the OTS, or his or 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. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(g) The voluntary termination by Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Bank Board, other than pursuant to Section 12(b), in which case Executive shall
be entitled to receive only the compensation, vested rights, and all employee
benefits up to the date of such termination.
(h) Notwithstanding anything herein to the contrary, any
payments made to Executive pursuant to the Agreement, or otherwise, shall be
subject to and conditional upon compliance with 12 USC ss.1828(K) and any
regualtion promulgated thereunder.
10. Suspension of Employment. If Executive is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay Executive
all or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate any of its obligations which were suspended.
11. Disability. If Executive shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined in the sole
judgment of a doctor engaged by the Bank Board, Executive shall nevertheless
continue to receive the compensation and benefits provided under the terms of
this
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Agreement as follows: 100% of such compensation and benefits for the period of
12 months, but not exceeding the remaining term of the Agreement, and 65%
thereafter for the remainder of the term of the Agreement. Such benefits noted
herein shall be reduced by any benefits otherwise provided to Executive during
such period under the provisions of disability insurance coverage in effect for
Bank employees. Thereafter, Executive shall be eligible to receive benefits
provided by the Bank under the provisions of disability insurance coverage in
effect for Bank employees. Upon returning to active full-time employment,
Executive's full compensation as set forth in this Agreement shall be reinstated
as of the date of commencement of such activities. If Executive returns to
active employment on other than a full-time basis, then his compensation (as set
forth in Paragraph 3 of this Agreement) shall be determined in proportion to the
time spent in said employment, or as shall otherwise be agreed to by the
parties.
12. Change in Control
(a) Notwithstanding any provision herein to the contrary, in
the event of the involuntary termination of Executive's employment under this
Agreement during the term of this Agreement following any change in control of
the Bank or Parent, absent Just Cause, Executive shall be paid an amount equal
to the product of 2.99 times Executive's "base amount" as defined in Section
280G(b) (3) of the Internal Revenue Code of 1986, as amended (the "Code") and
any proposed or final regulations thereunder, less the value of any benefits
provided or rights accelerated by the change in control, as determined pursuant
to Section 280G of the Code and any proposed or final regulations thereunder.
Said sum shall be paid, at the option of Executive, either in one (1) lump sum
within thirty (30) days after such termination (discounted to present value
using the "prime rate" published in The Wall Street Journal as of the date of
such payment), or in periodic payments over the next 36 months or the remaining
term of this Agreement whichever is less, as if Executive's employment had not
been terminated, and such payments shall be in lieu of any other future payments
which Executive would be otherwise entitled to receive under Section 10 of this
Agreement. Notwithstanding the foregoing, all sums payable hereunder shall be
reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments or benefits to be made to or
provided by Executive by Parent or the Bank shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "control" shall
refer to the ownership, holding or power to vote more than 25% of Parent's or
the Bank's voting stock, the control of the election of a majority of Parent's
or the Bank's directors, or the exercise of a controlling influence over the
management or policies of Parent or the Bank by any person or by persons acting
as a group within the meaning of Section 13(d) of the Securities Exchange Act of
1934. The term "person" means an individual other than Executive, or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to
the contrary, Executive may voluntary terminate his employment during the term
of this Agreement following a change in control of the Bank or Parent, and
Executive shall thereupon be entitled to receive the payment described in
Section 12 (a) of this Agreement, upon the occurrence, or within ninety (90)
days thereafter, of any of the following events, which have not been consented
to in advance by
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Executive in writing: (i) a requirement that Executive perform his principal
executive functions more than thirty-five (35) miles from Executive's primary
office as of the signing of this Agreement; (ii) in the organizational structure
of the Bank or Parent, Executive being required to report to a person or persons
other than the Bank Board or the Parent Board; (iii) the failure by the Bank or
Parent to maintain Executive's base compensation in effect at the date of the
change in control and the benefits substantially comparable (in the aggregate)
to the employee benefits plans, including material fringe benefit, stock option
and retirement plans existing at the date of the change in control; (iv)
Executive being assigned significant duties and responsibilities inconsistent
with Executive's position, duties, responsibilities or status at the date of the
change in control; (v) the failure to elect or reelect Executive to the Parent
Board or the Bank Board; or (vi) a material reduction or dimunition of
Executive's responsibilities or authority existing at the date of the change in
control.
13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Bank or Parent which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Bank or
Parent.
(b) Since Parent and the Bank are contracting for the unique
and personal skills of Executive, Executive shall be precluded from assigning or
(delegating his rights or duties hereunder without first obtaining the written
consent of Parent and the Bank.
14. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties.
15. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Kentucky, except to the extent that Federal law shall be
deemed to apply.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Enforcement. Executive acknowledges that the restrictions contained
in Section 8, in view of the nature of the business in which Parent and the Bank
are engaged, are reasonable and necessary in order to protect the legitimate
business interests of Parent and the Bank and that any violation of Section 8
would result in irreparable injury to Parent and the Bank. In the event of a
breach or a threatened breach by Executive of the Section 8 of this Agreement,
Parent and the Bank shall be entitled to an injunction restraining Executive
from the commission of such breach, and to recover their attorneys' fees, costs
and expenses related to the breach or threatened breach. Nothing herein
contained shall be construed as prohibiting Parent and the Bank from pursuing
any other remedies available to them for such breach or threatened breach,
including the recovery of money damages. These covenants and disclosures shall
each be construed as independent of any other provisions in this Agreement, and
the existence of any claim or cause of action by Executive against
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Parent and the Bank, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Parent and the Bank of such
covenants and agreements. If any provision of this Agreement, including Section
8, is invalid in part or in whole, it will be deemed to have been amended,
whether as to time, area covered or otherwise, as and to the extent required for
its validity under applicable law and, as so amended, will be enforceable. The
parties will execute all documents necessary to evidence such amendment.
18. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Parent or the Bank shall incur the cost of all fees
and expenses associated with filing a request for arbitration with the AAA,
whether such filing is made on behalf of Parent, the Bank or Executive, and the
costs and administrative fees associated with employing the arbitrator and
related administrative expenses assessed by the AAA. Parent or the Bank shall
reimburse Executive for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions, following the delivery
of the decision of the arbitrator finding in favor of Executive; provided that
if such finding is not in favor of Executive then such Executive shall reimburse
Parent or the Bank for the initial filing fee paid by either of them to the AAA.
Further, the settlement of the dispute by the parties to be approved by the Bank
Board or the Parent Board may include a provision for the reimbursement by the
Bank or Parent to Executive for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions.
Additionally, the Bank Board or the Parent Board may authorize such
reimbursement of such costs and expenses by separate action upon a written
action and determination of such Board following a final disposition of the
matter. Such reimbursement shall be paid within ten (10) days of Executive
furnishing to the Bank or Parent evidence, which may be in the form, among other
things, of a canceled check or receipt, of any costs or expenses incurred by
Executive.
19. Entire Agreement This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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