Exhibit 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement
(“Agreement”) is effective as of this 4
th day of May, 2007, between Monarch Mortgage, a
division of Monarch Bank (“Monarch Mortgage”), and
Edward O. Yoder (“Employee”).
WHEREAS , Monarch Mortgage desires to employ Employee to
serve as its President and Chief Executive Officer of the mortgage
lending division of Monarch Bank, and Employee is willing to accept
such continued employment in accordance with the terms of this
Agreement; and
WHEREAS , Employee and Monarch Mortgage desire to enter
into this Agreement; and
WHEREAS , Employee recognizes the importance to Monarch
Mortgage and to the public of maintaining the high standards and
quality associated with Monarch Bank and Monarch Mortgage’s
name and reputation, and is willing to maintain such high standards
and quality;
NOW, THEREFORE
, it is agreed as
follows:
1. TERM OF EMPLOYMENT: Subject to
the provisions of this Agreement, Monarch Mortgage will employ
Employee for an initial term of two (2) years, beginning on
the Effective Date of May 1, 2007 (“Initial
Term”). Not less than three (3) months prior to the
expiration of the Initial Term, Monarch Bank’s President and
Chief Executive Officer, or a to be designated party should these
titles be held by more than one party, (the
“President”) shall conduct and complete a review of
Employee’s performance.
1.1 If the President determines upon
such review that Employee has performed in accordance with Monarch
Mortgage’s performance criteria, no further action will be
necessary, and Monarch Mortgage shall employ Employee for an
additional two-year period under the terms herein (“Successor
Term”). Thereafter, this Agreement shall automatically renew
for successive two-year periods unless either party gives three
(3) months written notice prior to the expiration of any
two-year term that it desires to terminate this Agreement. If
Monarch Mortgage terminates this Agreement at the expiration of one
of the Successor Terms, Employee will not be entitled to any
additional wages, compensation or benefits other than those due
through the end of the Successor Term.
1.2 If the President determines upon
such review that Employee has not performed in accordance with
Monarch Mortgage’s performance criteria, it shall so notify
Employee in writing at least three (3) months prior to the
expiration of the Initial Term hereof that this Agreement will not
be renewed (“Notice of Non-Renewal”), and this
Agreement shall expire and the employment created herein shall end
at the conclusion of the Initial Term. If Monarch Mortgage
terminates this Agreement at the end of the Initial Term, Employee
shall also receive three additional month’s regular base
salary following expiration pursuant to Monarch Mortgage’s
regular pay schedule.
1.3 The regular base salary payable
both prior to and following expiration as provided in subparagraph
1.2 shall not be paid if Employee competes with Monarch Mortgage in
violation of subparagraphs 6.2 and 10.4 hereof.
1.4 Monarch Mortgage, in its sole
discretion, shall have the option but not the obligation of
relieving Employee of actually performing any services following
the giving of a Notice of Non-Renewal. Employee shall nonetheless
be paid as provided in subparagraph 1.2 provided he neither seeks
or accepts employment in competition with Monarch Mortgage as
provided in subparagraph 1.3 nor breaches any other provision
hereof.
2. DUTIES: During his employment,
Employee will devote his best efforts and substantially his full
professional time to the business and affairs of Monarch Mortgage,
perform such services not inconsistent with his position as are
designated by the President, and use his best efforts to promote
the interest of Monarch Mortgage and Monarch Bank. Employee pledges
that during the term of this Agreement, Employee
shall not, directly or indirectly, engage in any
business that could detract from Employee’s ability to apply
his best efforts to the performance of his duties hereunder.
Employee further agrees to comply with all rules, regulations and
policies established or issued by Monarch Mortgage or Monarch Bank.
Subject to, and without limiting, the first sentence of this
paragraph 2, the foregoing duties and obligations of Employee shall
not prohibit Employee from serving as a director of entities not
affiliated with Monarch Mortgage, or from devoting time to
charitable organizations, personal investing or personal leisure
activities.
3. COMPENSATION: Monarch Mortgage
will pay Employee a regular base salary commensurate with his
position and performance, such salary to be determined from time to
time by the Board of Directors, but to be not less than $165,000
per year during the term of this Agreement. Such salary will be
payable in periodic installments on the same basis as that of other
employees of Monarch Bank who hold executive positions. In addition
to salary, Employee shall be entitled to receive the following
compensation while employed by Monarch Mortgage pursuant to the
terms and conditions of this Agreement:
3.1 For each quarterly period that
Employee is employed by Monarch Mortgage pursuant to the terms and
conditions of this Agreement, Employee will receive a percentage of
the quarterly pre-tax profit of Monarch Mortgage (the “Profit
Bonus”) to distribute to employees, including himself, as
appropriate. For purposes of this paragraph 3, (i) Profit
Bonus pool shall equal twenty-five (25%) Percent of the
quarterly net book income before taxes of Monarch Mortgage based on
its historical accounting practices and internal financial reports
consistently and reasonably computed and (ii) Monarch Mortgage
shall mean the assets, business and activities of the residential
mortgage lending division of Monarch Mortgage, together with the
functionally related assets of Monarch Mortgage regardless of the
specific entity that legally owns or conducts such assets, business
or activities; provided, however, that Monarch Mortgage shall not
include any non-residential or non-retail mortgage lending
activities that Monarch Mortgage, acting in good faith and upon
prior notice to Employee, determines cannot be efficiently
conducted through Monarch Mortgage. The Profit Bonus shall be
payable with respect to Monarch Mortgage’s pre-tax profit
during the fiscal quarters ending
March 31, June 30, September 30 and
December 31, beginning with the quarter ending
September 30, 2007. Any Profit Bonus to which Employee is
entitled shall be paid by the day that is 45 days following the end
of the quarter for which the Profit Bonus was earned. In the event
that, during any quarterly period, Monarch Mortgage suffers a
pre-tax loss, then the amount of such pre-tax loss shall be carried
forward into one or more subsequent quarterly periods such that
(i) the pre-tax losses shall be credited against (i.e.
subtracted from) subsequent quarterly pre-tax profits for purposes
of determining whether a Profit Bonus is payable for any subsequent
quarters and the amount of such Profit Bonus and (ii) no
Profit Bonus shall be payable to Employee during any calendar year
if, as of the end of any given quarter during the year, Monarch
Mortgage has suffered a net pre-tax loss on a year to date basis.
Employee, subject to the approval of the Monarch Bank’s
President, shall determine on a quarterly basis (i) which
employees, including himself, of Monarch Mortgage will be entitled
to the Profit Bonus; and (ii) what portion, if any, of the
pre-tax profit pool each eligible employee will receive. It is the
intent of the parties that Employee shall not in any quarter award
more than half of the entire Profit Bonus Pool to
himself.
3.2 Employee shall be entitled to
receive a percentage of the quarterly spread income bonus equal to
ten percent (10.0 %) percent of the spread income of Monarch
Mortgage, as the term is defined herein (“Spread Income
Bonus”) to distribute to employees, including himself, as
appropriate. The Spread Income Bonus shall be payable with respect
to Monarch Mortgage’s spread income for each of Monarch
Mortgage’s fiscal quarters ending
March 31, June 30, September 30, and
December 31, beginning with the quarter ending
September 30, 2007. Employee, subject to the approval of the
Monarch Bank’s President, shall determine on a quarterly
basis (i) which employees, including himself, of Monarch
Mortgage will be entitled to the Spread Income Bonus; and
(ii) what portion, if any, of the Spread Income pool each
eligible employee will receive. Any Spread Income Bonus due shall
be paid to Employee within 45 days following the end of the quarter
for which the Spread Income Bonus is earned. For purposes of this
Agreement, “Spread Income” shall mean the income earned
by Monarch Mortgage from the time Monarch Mortgage’s loans
close until the time such loans are sold to third party investors,
as determined by the excess of the interest rate earned by Monarch
Mortgage on such loans over Monarch Mortgage’s cost of funds.
Monarch Mortgage’s cost of funds shall be determined by
Monarch Bank in good faith based on its actual cost of funds
designated to support Monarch Mortgage’s funding activity
with the addition of a reasonable overhead factor.
2
3.3 Employee shall be entitled to commissions up
to 65 basis points of his personal production as determined by
Monarch Bank’s President.
3.4 The provisions of paragraph 3
related to the Profit Bonus, Spread Income Bonus and personal
production commissions shall not prohibit in any respect Monarch
Mortgage’s right to discontinue its residential mortgage
lending operations if Monarch Mortgages determines in good faith
that such operations are not profitable on a sustained basis, are
no longer allowed under applicable law as in effect from time to
time or otherwise are not in the best interests of Monarch
Mortgage.
3.5 In the event that, during the
Initial Term or Successor Term, Employee’s employment under
this Agreement is terminated without cause (as the term cause is
defined in paragraph 6), then a partial quarter Profit Bonus and
Spread Income Bonus shall be payable based on Monarch Mortgage
Mortgage’s pre-tax profit and Spread Income for the period
beginning on the first day of the quarter in which employment is
terminated and ending on the date of such termination. Any partial
quarter Profit Bonus or Spread Income Bonus shall be payable by the
day that is forty-five (45) days after the end of the quarter
in which termination occurs and shall be calculated in accordance
with the provisions of this paragraph 3 above. Except as otherwise
set forth in this subparagraph 3.2, in the event Employee’s
employment with Monarch Mortgage is terminated during the Initial
Term or any Successor Term, Employee shall not be entitled to
receive a partial quarter or pro-rated Profit Bonus or Spread
Income Bonus for the period beginning on the first day of the
quarter in which termination occurs and ending on the date of
termination.
BENEFITS
4.1. During each full year of
employment, Employee shall have 26 days of paid time
off.
4.2. During Employee’s
employment with Monarch Mortgage, Employee will be provided with a
reasonable leased automobile and fuel expense reimbursement, or
automobile allowance, as determined by Employee and Monarch
Bank’s President.
4.3. Employee will be eligible to
participate in Monarch Mortgage’s 401 (k) Plan, under
the terms and conditions of such Plan as modified from time to
time. As of the date of this Agreement, (i) Monarch Mortgage
employees have the option of deferring up to 6% of their base
compensation on a pre-tax basis in various investment options and
(ii) matching contributions are made at the sole discretion of
Monarch Bank’s Board of Directors.
4.4. Employee will participate in
the various employee benefits, disability and retirement plans
provided for similarly situated employees according to the terms
and conditions of those plans, as determined by the Monarch
Bank’s Board of Directors. Employee is eligible for health,
dental, life, and disability insurance through Monarch
Mortgage’s plans, under the specific terms and conditions of
such plan as in effect from time to time.
4.5. Employee will participate in
Monarch Bank’s Supplemental Executive Retirement Plan
(“SERP”), pursuant to which Employee will be eligible
to receive a retirement benefit of $30,000 per year for ten
(10) years following Employee’s retirement from Monarch
Mortgage. The SERP benefit (i) is contingent upon Employee
being employed by Monarch Mortgage for not less than ten
(10) years, and (ii) will first be paid upon the
Employee’s retirement from Monarch Mortgage or Employee
reaching 65 years of age. Terms and conditions of this plan are in
the plan document which includes, among other provisions, that in
the event of change of control of Monarch Bank Financial Holdings,
Inc., the SERP benefits shall vest and be funded.
5. DISABILITY: In the event that
Employee, by reason of physical or mental incapacity or disability
(“Disability”), is unable, with or without reasonable
accommodation, to perform his duties and responsibilities under
this Agreement, then Monarch Mortgage will pay to Employee his
regular base salary for a three (3)
3
month period following the date on which the
Disability first begins, after which time it is intended that the
payments under the disability insurance maintained by Monarch
Mortgage for Employee will be in effect. Thereafter, Monarch
Mortgage will have no obligation to pay Employee any compensation
under this Agreement; provided, however, that for a period of one
(1) year following the date the Disability first begins,
Employee shall have the right to return to employment under this
Agreement if Employee, with or without reasonable accommodation, is
again able to fully perform his duties. Upon such a return to
employment, Employee shall work as mutually agreed upon by Monarch
Mortgage and Employee, and Employee shall receive the same
compensation and benefits as set forth in this Agreement, subject
to appropriate pro-ration of compensation if Employee works less
than the same schedule he had previously worked.
6. TERMINATION WITHOUT CAUSE;
SEVERANCE PAY:
6.1 During the Initial or any
Successor Terms Monarch Mortgage may terminate Employee’s
employment without cause upon 30 days prior written notice.
However, if Monarch Mortgage terminates employee’s employment
pursuant to this subparagraph 6.1 , Monarch Mortgage shall pay to
Employee, on its regular payroll dates, an amount equal to the
greater of: (i) the unpaid salary (at the rate in effect at
the time the notice of termination was given) that would otherwise
have been paid to the Employee pursuant to this Agreement for the
period from the effective date of termination to the end of the
Term or (ii) one (1) year’s annual salary of the
Employee in effect at the time the notice of termination was given
(the “Severance Pay”). The Severance Pay provisions of
this paragraph shall not apply if Monarch Mortgage provides notice
of termination as set forth in paragraphs 1.1 or 1.2 of this
Agreement. Notwithstanding the foregoing, in the event Employee
elects to compete with Monarch Mortgage as described below in
paragraphs 6.2 and 10.4, Monarch Mortgage shall have the right to
immediately terminate Employee’s Severance Pay.
6.2 It is the specific intent of the
parties that as long as Employee is receiving Severance Pay,
Employee shall comply with non-competition covenant contained in
paragraph 10.4 of this Agreement.
6.3. Monarch Mortgage and Employee
have examined in detail paragraphs 6 and 10 and agree that the
restraints imposed upon Employee are reasonable in light of the
legitimate interests of Employer, and are not unduly harsh upon
Employee’s ability to earn a livelihood. The parties further
agree that any breach of this agreement by Monarch, whether or not
it pre-dates a breach by Employee shall not serve as defense to the
enforcement of the restrictive covenants contained in this
agreement.
6.4 Notwithstanding any provision of
this Agreement to the contrary, any payments made to Employee
pursuant to this Agreement, or otherwise, are subject to and
conditional upon their compliance with 12 U.S.C. § 1828(k) and
any regulations promulgated hereunder.
7. TERMINATION FOR CAUSE: The
Employee’s employment may be terminated at any time by
Monarch Mortgage for “cause.” As used in this
Agreement, the term “cause” means (i) personal
dishonesty; (ii) gross neglect related to employment;
(iii) incompetence; (iv) willful misconduct;
(v) breach of loyalty or fiduciary duty to Monarch Mortgage;
(vi) intentional failure to perform assigned or agreed upon
duties; (vii) willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses); or
(viii) material breach of any provision of this Agreement.
Termination by Monarch Mortgag
