AUBURN SAVINGS BANK, FSB EMPLOYMENT AGREEMENT
Exhibit 10.3
AUBURN
SAVINGS BANK, FSB
THIS AGREEMENT (the
“Agreement”), is made this 15th day of
August, 2008, by and between AUBURN SAVINGS BANK, FSB, a
federally chartered savings bank (the “Bank”), and Xxxxx X. Xxxxxxxx
(“Executive”).
WHEREAS, Executive serves in a
position of substantial responsibility; and
WHEREAS, the Bank wishes to
assure Executive’s services for the term of this Agreement; and
WHEREAS, Executive is willing
to serve in the employ of the Bank during the term of this
Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and upon the
other terms and conditions provided for in this Agreement, the parties hereby
agree as follows:
1. Employment. The Bank will employ
Executive as its President and Chief Executive Officer and, as such, Executive
will be responsible for the overall management of the Bank, including
responsibility for establishing the business objectives, policies and strategic
plan of the Bank in conjunction with the Board of Directors of the Bank (the
“Board”). Executive shall also have all additional powers commonly
incident to his position, or which, consistent with his position, the Board
delegates to Executive. Executive also agrees to serve, if elected, as a
director of the Bank and as an officer and/or director of any subsidiary or
affiliate of the Bank and to carry out the duties and responsibilities
reasonably appropriate to those offices.
2. Location. Executive shall
be principally located at the principal administrative offices of the Bank,
which are currently located at 000 Xxxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxx.
3. Term.
(a) The
term of this Agreement shall include: (i) the initial term, consisting of the
period commencing on the date of this Agreement (the “Effective Date”) and
ending on the second anniversary of the Effective Date, plus (ii) any and all
extensions of the initial term made pursuant to this Section 3.
(b) During
the 30-day period concluding on each anniversary of the Effective Date, the
disinterested members of the Board may extend the Agreement term for an
additional year, so that the remaining term of the Agreement again becomes
twenty-four (24) months, unless Executive elects not to extend the term of this
Agreement by giving written notice in accordance with Section 17 of this
Agreement.
4. Base
Compensation.
(a) For
his services as President and Chief Executive Officer, the Bank agrees to pay
Executive an annual base salary at the rate of $103,700 per year, payable in
accordance with the Bank’s standard payroll policies and practices for officers
of the Bank. Executive will receive no additional compensation for
his service as a director of the Bank or as an officer and/or director of any
subsidiary or affiliate of the Bank.
(b) During
the term of this Agreement, the Board will review the level of Executive’s base
salary at least annually, based upon factors deemed relevant to the Board in its
sole discretion, in order to determine Executive’s base salary through the
remaining term of the Agreement.
5. Bonuses. Executive will participate
in discretionary bonuses or other incentive compensation programs that the Bank
may sponsor for or award from time to time to senior management
employees.
6. Benefit
Plans. Executive
will participate in life insurance, medical, dental, pension, profit sharing,
retirement and stock-based compensation plans and other programs and
arrangements that the Bank may sponsor or maintain for the benefit of its
employees.
7. Vacations
and Leave. Executive may
take vacations and other leave in accordance with the Bank’s policy for senior
executives, or otherwise as approved by the Board.
8. Expense
Payments and Reimbursements. The Bank will reimburse
Executive for all reasonable out-of-pocket business expenses incurred in
connection with his services under this Agreement upon substantiation of such
expenses and in accordance with applicable policies of the Bank.
9. Loyalty and
Confidentiality.
(a) During
the term of this Agreement, Executive will devote all his business time,
attention, skill, and efforts to the faithful performance of his duties under
this Agreement; provided, however, that from time to time, Executive may serve
on the boards of directors of, and hold any other offices or positions in,
companies or organizations that will not present any conflict of interest with
the Bank or any of its subsidiaries or affiliates, unfavorably affect the
performance of Executive’s duties pursuant to this Agreement, or violate any
applicable statute or regulation. Executive will not engage in any business or
activity contrary to the business affairs or interests of the Bank or any of its
subsidiaries or affiliates.
(b) The
Executive understands and agrees that the Executive's employment creates a
relationship of confidence and trust between the Executive, on the one hand, and
the Bank, on the other hand, with respect to all Confidential Information (as
defined in Section 9(c) below). At all times, both during the period
of the Executive's employment by the Bank and after the termination of the
Executive’s employment, the Executive shall keep in confidence and trust all
such Confidential Information and, except as required by law, shall not use or
disclose any such Confidential Information other than for the benefit of the
Bank without the written consent of the Bank.
(c) “Confidential
Information” means information belonging to the Bank or its affiliates that is
of value to the Bank or its affiliates in the course of conducting their
business and the disclosure of which could result in a competitive or other
disadvantage to any of them. Confidential Information includes,
without limitation, financial information, reports, and forecasts; inventions,
improvements and other intellectual property; trade secrets; know-how; designs,
processes or formulae; software; market or sales information or plans; customer
lists; and business plans, prospects and opportunities (such as possible
acquisitions or dispositions of businesses or facilities) that have been
discussed or considered by the management of the Bank or its
affiliates. Confidential Information includes information developed
by the Executive in the course of the Executive's employment by the Bank, as
well as other information to which the Executive may have access in connection
with the Executive's employment. Confidential Information also
includes the confidential information of others, including suppliers and
customers, with which the Employer has a business
relationship. Notwithstanding the foregoing, Confidential Information
does not include information in the public domain, unless due to breach of the
Executive's duties under Section 9(b).
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10. Termination
and Termination Pay.
Subject to Section 11 of this Agreement, Executive’s employment under
this Agreement may be terminated in the following circumstances:
(a) Death. Executive’s
employment under this Agreement will terminate upon his death during the term of
this Agreement, in which event Executive’s estate will receive the base
compensation and any accrued and unpaid bonus due to Executive through the date
of death. No further compensation or benefits shall be provided in
the event of a termination under this Section 10(a), except to the extent
required by law or under the terms of Company’s benefit plans or
programs.
(b) Disability. Executive’s
employment under this Agreement will terminate upon Executive’s Disability upon
30 days' written notice by the Bank. For purposes of this Agreement,
“Disability” shall be defined as any mental or physical condition that, with or
without reasonable accommodation, prevents Executive from performing his duties
for a period of twenty consecutive weeks, or for shorter periods aggregating
twenty weeks in any twelve (12) month period during the Term. No
further compensation or benefits shall be provided in the event of a termination
under this Section 10(b), except to the extent required by law or under the
terms of Company’s benefit plans or programs.
(c) Termination for
Cause.
(i) The
Company may terminate this Agreement, immediately upon written notice to
Executive, for Cause. In the event of a termination for Cause,
Executive shall only be entitled to such base compensation as may have been
earned and unpaid through the date of termination and no further compensation or
benefits shall be provided, except to the extent required by law or under the
express terms of Bank’s other benefit plans or programs.
(ii) For
purposes of this Agreement, “Cause” shall mean 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
this Agreement.
(d) Voluntary Termination by
Executive. Executive may voluntarily terminate employment during the term
of this Agreement upon at least sixty (60) days prior written notice to the
Board. Upon Executive’s voluntary termination, he will receive only his
compensation and vested rights and benefits through the date of his termination.
Following termination pursuant to this Section 10(d), Executive will be subject
to the restrictions set forth in Section 10(f) of this Agreement for a period of
one (1) year from his termination date.
(e) Without Cause or With Good
Reason.
(i) In
addition to termination pursuant to Sections 10(a) through 10(d), the Bank may,
by written notice to Executive, immediately terminate his employment at any time
for a reason other than Cause (a termination “Without Cause”) and Executive may,
by written notice to the Board, immediately terminate this Agreement at any time
within ninety (90) days following an event constituting “Good Reason,” as
defined below (a termination “With Good Reason”).
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(ii) Subject
to Section 11 of this Agreement, in the event of termination Without Cause or
With Good Reason, Executive will receive his base salary as of one (1) year from
the date of termination, with such amount paid in one lump sum within ten (10)
calendar days of his termination. Executive will also continue to participate in
any benefit plans of the Bank (subject to the terms and conditions of such
plans) that provide medical, dental and life insurance coverage for the twelve
(12) calendar months following such termination.
(iii) For
purposes of this Agreement, “Good Reason” exists if, without Executive’s express
written consent, any of the following occur:
(1) a
material reduction in Executive’s responsibilities or authority in connection
with his employment with the Bank;
(2) assignment
to Executive of duties of a non-executive nature or duties for which he is not
reasonably equipped by his skills and experience;
(3) a
reduction in salary or benefits contrary to the terms of this Agreement, or,
following a Change in Control as defined in Section 11 of this Agreement, any
reduction in salary or material reduction in benefits below the amounts
Executive was entitled to receive prior to the Change in Control;
(4) termination
of incentive and benefit plans, programs or arrangements, or reduction of
Executive’s participation, that is not applicable to other similarly situated
participants and to such an extent as to materially reduce their aggregate value
below their aggregate value as of the Effective Date;
(6) a
requirement that Executive relocate his principal business office or his
principal place of residence outside of the area consisting of a thirty-five
(35) mile radius from the current main office and any branch of the Bank, or the
assignment to Executive of duties that would reasonably require such a
relocation; or
(7) liquidation
or dissolution of the Bank.
(iv) Notwithstanding
the foregoing, a reduction or elimination of Executive’s benefits under one or
more benefit plans, programs or arrangements maintained by the Bank as part of a
good faith, overall reduction or elimination of such plans or benefits,
applicable to all participants in a manner that does not discriminate against
Executive (except as such discrimination may be necessary to comply with law),
will not constitute an event of Good Reason or a material breach of this
Agreement, provided that benefits of the same type or to the same general extent
as those offered under such plans prior to the reduction or elimination are not
available to other officers of the Bank or any affiliate under a plan or plans
in or under which Executive is not entitled to participate.
(v) Notwithstanding
anything to the contrary contained in this Agreement, in order to be eligible
for payment of the severance benefits set forth in this Section 10(e), Executive
must first within the ten (10) day period following termination (1) execute and
deliver to the Bank a general release and waiver of claims in a form reasonably
satisfactory to the Bank, be and remain in full compliance with all obligations
under this Agreement, and agree to cooperate reasonably with the Bank at the
Bank’s sole expense and upon the Bank’s reasonable request for a period of
twelve (12) months following the termination, and (2) resign from any and all
positions, including, without limitation, as a director or officer, that the
Executive then holds with the Bank, any affiliate of the Bank, or any benefit
plan of the Bank or any of its affiliates.
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(f) Continuing Covenant Not to
Compete or Interfere with Relationships. Notwithstanding anything to the
contrary contained in this Agreement, during the term of this Agreement and
following a termination by the Bank or Executive pursuant to Section 10(d) or
10(e):
(i) Executive’s
obligations under Section 9(b) of this Agreement will continue in effect;
and
(ii) during
the period ending on the first anniversary of the termination, Executive will
not serve as an officer, director or employee of or consultant to any bank
holding company, bank, savings association, savings and loan holding company,
mortgage company, credit union or other financial institution that both (1)
offers products or services competing with those offered by the Bank and (2) has
one or more offices or branches located within thirty-five (35) miles from
the main office or any branch of the Bank and, further, Executive will not
interfere in any way with the relationship of the Bank, its subsidiaries or
affiliates and any of their employees, agents, or representatives.
(iii) during
the period ending on the first anniversary of such termination, Executive (1)
shall not, directly or indirectly, recruit or otherwise solicit, induce or
influence any person to leave employment with the Bank (other than terminations
of employment of subordinate employees undertaken in the course of Executive's
employment with the Bank) and (2) shall not solicit or encourage any customer or
supplier to terminate or otherwise modify adversely its business relationship
with the Bank other than actions taken by Executive in good faith in the
ordinary course of business during the course of Executive’s employment with the
Bank. Nothing contained in this Section 10(f)(iii) shall restrict
Executive from advertising employment opportunities to the general public or
from hiring individuals who have not been directly or indirectly solicited,
induced or influenced by Executive to leave employment with the
Bank.
(g) To
the extent Executive is a member of the Board on the date of termination of
employment with the Bank, Executive will resign from the Board immediately
following such termination of employment with the Bank. Executive will be
obligated to tender this resignation regardless of the method or manner of
termination, and such resignation will not be conditioned upon any event or
payment. Executive acknowledges that termination of his employment
shall constitute cause for removal of his position on the Board by either the
other members of the Board or the stockholders of the Bank.
11. Termination in Connection
with a Change in Control.
(a) For
purposes of this Agreement, a “Change in Control” means any of the following
events:
(i) Merger: Auburn
Bancorp, Inc. (the “Company”) merges into or consolidates with another entity,
or merges another corporation into the Company, and as a result, less than a
majority of the combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were stockholders of
the Company immediately before the merger or consolidation;
(ii) Acquisition of Significant
Share Ownership: There is filed, or is required to be filed, a report on
Schedule 13D or another form or schedule (other than Schedule 13G) required
under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended, if the schedule discloses that the filing person or persons acting in
concert has or have become the beneficial owner of 25% or more of a class of the
Company’s voting securities, but this clause (ii) shall not apply to beneficial
ownership of Company voting shares by Auburn Bancorp, MHC or held in a fiduciary
capacity by an entity of which the Company directly or indirectly beneficially
owns 50% or more of its outstanding voting securities;
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(iii) Change in Board
Composition: During any period of two consecutive years, individuals who
constitute the Company’s Board of Directors at the beginning of the two-year
period cease for any reason to constitute at least a majority of the Company’s
Board of Directors; provided, however, that for purposes of this clause (iii),
each director who is first elected by the board (or first nominated by the board
for election by the members) by a vote of at least two-thirds (2/3) of the
directors who were directors at the beginning of the two-year period shall be
deemed to have also been a director at the beginning of such period;
or
(iv) Sale of Assets: The
Company or the Bank sells to a third party all or substantially all of its
assets.
Notwithstanding
anything in this Agreement to the contrary, in no event shall the conversion of
the Bank’s mutual holding company parent, Auburn Bancorp, MHC, from mutual to
stock form, i.e., a “second step conversion,” constitute a “Change in Control”
for purposes of this Agreement.
(b) Termination. If
within the period ending one year after a Change in Control, (i) the Bank
terminates Executive’s employment without Cause, or (ii) Executive voluntarily
terminates his employment With Good Reason, the Bank will, within ten (10)
calendar days of the termination of Executive’s employment, make a lump-sum cash
payment to him equal to two times Executive’s average annual taxable
compensation (as reported on Form W-2) over the five (5) most recently completed
calendar years (or years of employment, annualized for partial years of
employment, if less than five), ending with the year immediately preceding the
effective date of the Change in Control. The cash payment made under this
Section 11(b) shall be made in lieu of any payment also required under Section
10(e) of this Agreement because of Executive’s termination of employment;
however, Executive’s rights under Section 10(e) are not otherwise affected by
this Section 11. Following termination of employment, Executive will also
continue to participate in any benefit plans of the Bank (subject to the terms
and conditions of such plans) that provide medical, dental and life insurance
coverage until the earlier of: (i) Executive’s death; (ii) Executive’s
employment by another employer other than one of which he is the majority owner;
or (iii) twenty-four (24) months after his termination of
employment.
12. Reimbursement
of Executive’s Expenses to Enforce this Agreement. The Bank will reimburse
Executive for all out-of-pocket expenses, including, without limitation,
reasonable attorneys’ fees, incurred by Executive in connection with his
successful enforcement of the Bank’s obligations under this Agreement.
Successful enforcement means the grant of an award of money or the requirement
that the Bank take some specified action: (i) as a result of court order; or
(ii) otherwise following an initial failure of the Bank to pay money or take
action promptly following receipt of a written demand from Executive stating the
reason that the Bank must make payment or take action under this
Agreement.
13. Limitation
of Benefits Under Certain Circumstances. Notwithstanding any other
provision of this Agreement, in the event that it is determined by the Bank in
its reasonable discretion that the payments and benefits pursuant to Section 11
of this Agreement, either alone or together with other payments and benefits
Executive has the right to receive from the Bank, would constitute a “parachute
payment” under Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), the payments and benefits pursuant to Section 11 shall be reduced
to the minimum extent necessary to result in no portion of the payments and
benefits under Section 11 being non-deductible to the Bank pursuant to Section
280G of the Code and subject to the excise tax imposed under Section 4999 of the
Code.
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14. Injunctive
Relief. Upon a
breach or threatened breach of Section 10(f) of this Agreement or the
prohibitions upon disclosure contained in Section 9(b) of this Agreement, the
parties agree that there is no adequate remedy at law for such breach, and the
Bank shall be entitled to injunctive relief restraining Executive from such
breach or threatened breach, but such relief shall not be the exclusive remedy
for a breach of this Agreement. The parties further agree that Executive,
without limitation, may seek injunctive relief to enforce the obligations of the
Bank under this Agreement.
15. Successors and
Assigns.
(a) This
Agreement shall inure to the benefit of and be binding upon any corporate or
other successor of the Bank which shall acquire, directly or indirectly, by
merger, consolidation, purchase or otherwise, all or substantially all of the
assets or stock of the Bank.
(b) Since
the Bank is contracting for the unique and personal skills of Executive,
Executive shall not assign or delegate his rights or duties under this Agreement
without first obtaining the written consent of the Bank.
16. No
Mitigation.
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to Executive in any subsequent employment.
17. Notices. All notices, requests,
demands and other communications in connection with this Agreement shall be made
in writing and shall be deemed to have been given when delivered by hand or 48
hours after mailing at any general or branch United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Bank at its
principal business office and to Executive at his home address as maintained in
the records of the Bank.
18. No Plan
Created by this Agreement. Executive and the Bank
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act of 1974 (“ERISA”) or any other law or regulation, and each party
expressly waives any right to assert the contrary. Any assertion in any judicial
or administrative filing, hearing, or process that an ERISA plan was created by
this Agreement shall be deemed a material breach of this Agreement by the party
making the assertion.
19. Amendment
and Waiver.
(a) No
amendments or modifications to this Agreement shall be binding unless made in
writing and signed by all of the parties, except as herein otherwise
specifically provided.
(b) No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and will not constitute a waiver or
such term or condition for the future as to any act other than that specifically
waived.
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20. Applicable
Law. Except to
the extent preempted by federal law, the laws of the State of Maine shall govern
this Agreement in all respects, whether as to its validity, construction,
capacity, performance or otherwise.
21. Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any one provision shall not affect the validity or enforceability of the other
provisions of this Agreement.
22. Headings. Headings contained in this
Agreement are for convenience of reference only.
23. Entire
Agreement. This
Agreement, together with any modifications subsequently agreed to in writing by
the parties, shall constitute the entire agreement among the parties with
respect to the foregoing subject matter, other than written agreements
applicable to specific plans, programs or arrangements described in Sections 5
and 6.
24. Required
Provisions. In
the event any of the foregoing provisions of this Agreement conflict with the
terms of this Section 24, this Section 24 shall prevail.
(a) The
Bank’s Board of Directors may terminate Executive’s employment at any time, but
any termination by the Bank, other than termination for Cause, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after termination for Cause as defined in Section 10(c)
of this Agreement.
(b) If
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(3) or (g)(1), the Bank’s 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 Bank may, in its
discretion: (i) pay Executive all or part of the compensation withheld while its
contract obligations were suspended; and (ii) reinstate (in whole or in part)
any of the obligations which were suspended.
(c) If
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If
the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1813(x)(1), 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.
(e) All
obligations under this Agreement shall terminate, except to the extent
determined that continuation of the Agreement is necessary for the continued
operation of the institution: (i) by the Director of the Office of Thrift
Supervision (OTS), or his 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 Federal
Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the Director of the
OTS (or his designee) at the time the Director (or his designee) approves a
supervisory merger to resolve problems related to the operations of the Bank or
when the Bank is determined by the Director 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.
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(f) Any
payments made to Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and FDIC
Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on August 15, 2008.
AUBURN
SAVINGS BANK, FSB
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By:
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/s/ Xxxxxx X. Xxxxxx
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Xxxxxx
X. Xxxxxx
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| Senior Vice President and Treasurer |
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EXECUTIVE
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/s/ Xxxxx X. Xxxxxxxx
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Xxxxx
X. Xxxxxxxx
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