EXHIBIT 10.1

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Management Continuity Agreement

Dated: December 16, 2004

 

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MANAGEMENT CONTINUITY AGREEMENT

     This Management Continuity Agreement (“Agreement”) is entered into this
16th day of December, 2004 between Monarch Community Bancorp, Inc., a Maryland
corporation (the “Company”), and                (“Executive”).

     WITNESSETH:

     WHEREAS, the Executive is currently employed by the Company’s affiliate,
Monarch Community Bank (the “Bank”), as its                ; and

     WHEREAS, the Company desires to provide certain security to Executive in
connection with a change in control of the Company or the Bank;

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:

     Section 1. Definition of Change in Control; Change in Control Period

     1.1 Change in Control. For purpose of this Agreement, a “Change in Control”
of the Company shall be deemed to have occurred upon:

     (A) any third person, including a “group” as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, shall become the beneficial owner of shares
of the Company with respect to which 25% or more of the total number of votes
for the election of the Board maybe cast;

     (B) there occurs a change in control of the Bank within the meaning of the
Home Owners Loan Act of 1933 or 12 C.F.R. Part 574;

     (C) as a result of, or in connection with, any merger or other business
combination, sale of assets or contested election, wherein the persons who were
directors of the Company before such transaction or event cease to constitute a
majority of the Board of Directors of the Company or any successor to the
Company; or

     (D) the Company transfers substantially all of its assets to another
corporation or entity which is not an affiliate of the Company.

     Notwithstanding the foregoing, a Change of Control will not be deemed to
have occurred:

     (A) solely because more than 25% of the combined voting power of the then
outstanding voting securities of the Company are acquired by (1) a trustee or
other fiduciary holding securities under one or more employee benefit plans
maintained for employees of the Bank or the Company, or (2) in the event of a
merger or similar transaction involving

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the Company or the Bank occurs and immediately following such transaction,
persons who were shareholders of the Company immediately prior to such
transaction remain shareholders of the Company or other party to the transaction
in the same proportion as their previous ownership of stock; or

     (B) if Executive agrees in writing that the transaction or event in
question does not constitute a Change of Control for the purposes of this
Agreement.

     1.2 Change in Control Period. The Change-in-Control Period shall mean the
period commencing on the date of a Change in Control and ending on the twelve
(12) month anniversary of the date thereof.

     Section 2. Obligations of the Company upon Termination.

     2.1 Other than for Cause, Death, Disability or Retirement. If, during the
Change-in-Control Period, Executive’s employment is terminated by the Company or
the Bank other than for Cause (as hereinafter defined), Death, Disability (as
hereinafter defined), or Retirement (as hereinafter defined) or if Executive
terminates (his/her) employment for Good Reason (as hereinafter defined),
Executive shall receive:

     (A) (his/her) annual base salary for a period of twelve (12) months
following the date of termination in an amount not less than (his/her) base
salary in effect immediately prior to the Change in Control; plus

     (B) Executive and Executive’s family shall continue to be provided, at the
expense of the Company, continuing health care coverage under health care
programs in effect immediately prior to the Change of Control (or health care
programs substantially similar thereto) for a period of twelve (12) months after
the date of termination, provided that, to the extent Executive paid a portion
of the premium for such benefit while employed, Executive shall continue to pay
such portion during the period of continuation hereunder and provided further,
that if such benefit is subject to the health care continuation rules of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) then any period
of continuation hereunder shall be credited against the continuation rights
under COBRA and Executive will be required to complete all COBRA election and
other forms.

     2.2 Cause; Death; Disability; Retirement. If Executive’s employment is
terminated by reason of Death, Disability or Retirement during the
Change-in-Control Period, this Agreement shall terminate without further
obligation to Executive or (his/her) legal representatives other than the
obligation to pay to Executive (his/her) annual base salary through the date of
termination and to provide Executive any other benefits which have accrued prior
to the date of termination.

     2.3 Cause. If Executive’s employment shall be terminated for Cause during
the Change-in-Control Period, this Agreement shall terminate without further
obligations to Executive.

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Section 3. Definitions.

     3.1 Cause. For purposes of this Agreement, Cause shall mean termination due
to Executive’s personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties or to follow one or more specific written directives of the Board,
reasonable in nature and scope, 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 (which is not cured
within thirty (30) days after its occurrence and notice to Executive). Any
determination of “Cause” as defined by this Section 4.1 shall be determined by a
majority vote of the Board of Directors of the Company or the Bank.

     3.2 Disability. “Disability” shall have the meaning as such term has under
the Company’s Long-Term Disability Plan.

     3.3. Good Reason. For purposes of this Agreement, “Good Reason” shall mean
the occurrence of any of the following events which have not been consented to
in advance by Executive in writing:

     (A) if Executive would be required to move (his/her) personal residence or
perform (his/her) principal executive functions more than twenty-five (25) miles
from Executive’s primary office as of the date immediately prior to the Change
of Control;

     (B) if the Company should fail to maintain Executive’s base salary or fail
to maintain employee benefit plans or arrangements generally comparable to those
in place as of the date immediately prior to the Change in Control, except to
the extent that such reduction in employee benefit plans is part of an overall
adjustment in benefits for all employees of the Company or the Bank; or

     (C) if Executive would be assigned substantial duties and responsibilities
other than those normally associated with the position referenced in the
preambles to this Agreement.

The preceding events shall only provide the basis for “Good Reason” if Executive
provides notice of such events within one hundred twenty (120) days of their
occurrence in the manner required by Section 5.1 of this Agreement.

     3.4 Retirement. For purpose of this Agreement, termination of Executive’s
employment based on “Retirement” shall mean voluntary termination in accordance
with the Company’s retirement policy, including early retirement, generally
applicable to the Company’s salaried employees or in accordance with any
retirement arrangement established with Executive’s consent.

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Section 4. Excise and Other Tax Ramifications.

     4.1 Reduction in Excess Parachute Payments Tax Ramifications. In the event
it shall be determined that any payment made hereunder or pursuant to any other
plan following a Change in Control (whether paid or payable pursuant to the
terms of this Agreement) would be subject to the excise tax imposed in
Section 4999 of the Internal Revenue Code of 1986 (the “Code”), then payments
pursuant to this Agreement or payments under any other agreement or plan that
are treated as being contingent upon a change in control under Section 280G of
the Code shall be reduced to the maximum amount that may be paid to Executive or
for (his/her) benefit without any such payment constituting an “parachute
payment,” as defined by Section 280G of the Code. The determination of the
maximum amount payable to Executive or for (his/her) benefit shall be made by an
accounting firm mutually acceptable to Executive and the Company, and unless
Executive directs otherwise, payments that are considered to be partially
contingent upon a change in control shall be the last payments to be reduced.

     4.2 Section 162(m). Should payments be precluded from deduction by the
Company under Section 162(m) of the Code, the Company may defer until the first
day of the tax year following the year in which determination is made that
payments will be non-deductible under 162(m) (the “Determination Year”) only
those amounts necessary to maintain the tax deductibility of compensation paid
to Executive in the Determination Year.

Section 5. Administration of the Agreement.

     5.1 Notice of Termination. Any termination by the Company or by Executive
shall be communicated by a written notice to the other party hereto and shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon by the party, shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision indicated and the date of
termination.

     5.2 Date of Termination. The date of termination shall mean:

     (A) if Executive’s employment is terminated by the Executive for Good
Reason, the date of the receipt of the notice contemplated by Section 5.1
hereof;

     (B) if Executive’s employment is terminated by the Company or the Bank
other than for Death, Disability or Retirement, the date of termination shall be
the date on which the Company or the Bank notifies Executive of the termination;
and

     (C) if Executive’s employment is terminated by reason of Death, Disability
or Retirement, the date of termination shall be the date of Executive’s Death,
Disability or Retirement, as the case may be.

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Section 6. Arbitration.

     (A) In the event of dispute under this Agreement, the parties agree
pursuant to MCLA 600.5001; MSA 27A.5001, et seq., to binding arbitration in
accordance with the rules of the American Arbitration Association (“AAA”) in
effect at the time a demand for arbitration of the dispute is made, with the
place of arbitration being Coldwater, Michigan. The prevailing party in any such
arbitration shall be entitled to recover from the other party all expenses for
attorneys, fees and costs incurred by the prevailing party in conjunction with
the arbitration proceedings. The decision and award of the arbitrator made under
the AAA rules shall be exclusive, final and binding on all parties, their heirs,
representatives, affiliates, successors and assigns. It is further agreed that
any arbitration award may be certified to the Branch County Circuit Court which
shall render a judgment upon the award made pursuant to said arbitration;

     (B) Limited civil discovery shall be permitted for the production of
documents and the taking of depositions, provided, however, that no party is
permitted to take the deposition of more than three witnesses except by
agreement of the other party or upon order of the arbitrator pursuant to the
motion of a party. Subject to the foregoing limitations, discovery shall be
conducted in accordance with the Michigan Court Rules with any enforcement
issues resolved by the arbitrator;

     (C) The arbitration and all proceedings, discovery and any award of the
arbitrator, are confidential. Neither the parties nor the arbitrator shall
disclose any information gained during the course of the arbitration or any
person or entity who is not a party to the arbitration unless permitted by law.
Attendance at the arbitration shall be limited to the parties, counsel and those
called as witnesses; and

     (D) Executive and the Company acknowledge that each has had the opportunity
to consult with counsel of choice before signing this agreement, and Executive
and the Company each hereby knowingly and voluntarily, without coercion, WAIVES
ALL RIGHTS TO TRIAL BY JURY or all disputes between them and instead agrees to
binding arbitration.

Section 7. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Company. Since the
Executive’s services are 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 the Company.

Section 8. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.

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Section 9. 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 Michigan, except to the extent that Federal law shall be
deemed to apply.

Section 10. 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.

Section 11. Notice. For 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 United States
registered mail, return receipt requested, postage prepaid, provided that all
notices to the Company be addressed to:

    Corporate Secretary
Monarch Community Bancorp, Inc.
375 North Willowbrook Road
Coldwater, MI 49036

and if to Executive:

   

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Section 12. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Agreement be reduced by any compensation earned by Executive or benefits
(including retirement benefits) provided to Executive as the result of
employment by another employer after the Change in Control.

Section 13. Termination of Agreement. The Agreement shall continue until, and
terminate, one (1) year from the date hereof; provided, however, that the
Agreement shall be renewed automatically for subsequent one (1) year periods
unless the Board of Directors of the Company, by resolution duly adopted at
least three (3) months prior to the end of the first one (1) year period or of
any subsequent one (1) year period, indicates that the Agreement shall not be
renewed. Further, if a Change in Control occurs during the term of the
Agreement, the Agreement shall continue until the Company shall have fully
performed all of its obligations hereunder.

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      MONARCH COMMUNITY BANCORP, INC.
 
   
By:
   

 

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  Donald L. Denney
Its:
  President and Chief Executive Officer
 
    EXECUTIVE
 
   

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