EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this ________ day of ______________________, 1996, by and between Hemlock
Federal Bank for Savings (hereinafter referred to as the "Bank" whether in
mutual or stock form), and Xxxxxxx X.
Xxxxxxx (the "Employee").
WHEREAS, the Employee is currently serving as the President of the
Bank; and
WHEREAS, the Bank has adopted a plan of conversion whereby the Bank
will convert to capital stock form as the subsidiary of Hemlock Federal
Financial Corporation (the "Holding Company"), subject to the approval of the
Bank's members and the Office of Thrift Supervision (the "Conversion"); and
WHEREAS, the board of directors of the Bank ("Board of Directors")
recognizes that, as is the case with publicly held corporations generally, the
possibility of a change in control of the Holding Company and/or the Bank may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of key
management personnel to the detriment of the Bank, the Holding Company and their
respective stockholders; and
WHEREAS, the Board of Directors believes it is in the best interests of
the Bank to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to his assigned duties
without distraction in the face of potentially disruptive circumstances arising
from the possibility of a change in control of the Holding Company or the Bank,
although no such change is now contemplated; and
WHEREAS, the Board of Directors has approved and authorized the
execution of this Agreement with the Employee to take effect as stated in
Section 2 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
(a) The term "Change in Control" means (1) an event of a nature that
(i) results in a change in control of the Bank or the Holding Company within the
meaning of the Home Owners' Loan Act of 1933 and 12 C.F.R. Part 574 as in effect
on the date hereof; or (ii) would be required to be reported in response to Item
1 of the current report on Form 8-K, as in effect on the date hereof, pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx
Xxx"); (2) any person (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly of securities of the Bank or the
Holding Company representing 20% or more of the Bank's or the Holding Company's
outstanding securities; (3) individuals who are members of the board of
directors
of the Bank or the Holding Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by the nominating committee serving under an Incumbent
Board, shall be considered a member of the Incumbent Board; or (4) a plan of
reorganization, merger consolidation, sale of all or substantially all of the
assets of the Bank or the Holding Company or a similar transaction in which the
Bank or the Holding Company is not the resulting entity. The term "change in
control" shall not include an acquisition of securities by an employee benefit
plan of the Bank or the Holding Company or the acquisition of securities of the
Bank by the Holding Company in connection with the Conversion. In the
application of 12 C.F.R. Part 574 to a determination of a Change in Control,
determinations to be made by the OTS or its Director under such regulations
shall be made by the Board of Directors.
(b) The term "Commencement Date" means the date of completion of the
Conversion.
(c) The term "Date of Termination" means the earlier of (1) the date
upon which the Bank gives notice to the Employee of the termination of his
employment with the Bank or (2) the date upon which the Employee ceases to serve
as an Employee of the Bank.
(d) The term "Involuntarily Termination" means termination of the
employment of Employee without his express written consent, and shall include a
material diminution of or interference with the Employee's duties,
responsibilities and benefits as President of the Bank, including (without
limitation) any of the following actions unless consented to in writing by the
Employee: (1) a change in the principal workplace of the Employee to a location
outside of a 30 mile radius from the Bank's headquarters office as of the date
hereof; (2) a material reduction in the number or seniority of other Bank
personnel reporting to the Employee or a material reduction in the frequency
with which, or in the nature of the matters with respect to which such personnel
are to report to the Employee, other than as part of a Bank- or Holding
Company-wide reduction in staff; (3) a material adverse change in the Employee's
salary, perquisites, benefits, contingent benefits or vacation, other than as
part of an overall program applied uniformly and with equitable effect to all
members of the senior management of the Bank or the Holding Company; (4) a
material permanent increase in the required hours of work or the workload of the
Employee; and (5) a material demotion of the Employee. The term "Involuntary
Termination" does not include Termination for Cause or termination of employment
due to retirement, death, disability or suspension or temporary or permanent
prohibition from participation in the conduct of the Bank's affairs under
Section 8 of the Federal Deposit Insurance Act ("FDIA").
(e) The terms "Termination for Cause" and "Terminated for Cause" mean
termination of the employment of the Employee because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of a 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. The Employee shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to the
Employee a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of the
Bank at a meeting of the Board called and held for such purpose (after
reasonable notice to the Employee and an
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opportunity for the Employee, together with the Employee's counsel, to be heard
before the Board), stating that in the good faith opinion of the Board the
Employee has engaged in the conduct described in the preceding sentence and
specifying the particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of three years
commencing on the Commencement Date, subject to earlier termination as provided
herein. Beginning on the first annual anniversary date following the
Commencement Date, and on each annual anniversary date thereafter, the term of
this Agreement shall be extended for a period of one year in addition to the
then-remaining term, provided that (1) the Bank has not given notice to the
Employee in writing at least 90 days prior to such renewal date that the term of
this Agreement shall not be extended further; and (2) prior to such renewal
date, the Board of Directors of the Bank has explicitly reviewed and approved
the extension. Reference herein to the term of this Agreement shall refer to
both such initial term and such extended terms.
3. Employment. The Employee is employed as the President of the Bank.
As President, Employee shall render such administrative and management services
as are customarily performed by persons situated in similar executive
capacities, and shall have such other powers and duties of an officer of the
Bank as the Board of Directors may prescribe from time to time.
4. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the term of this
Agreement the salary established by the Board of Directors, which shall be at
least the Employee's salary in effect as of the Commencement Date. The amount of
the Employee's salary shall be reviewed by the Board of Directors, beginning not
later than the first anniversary of the Commencement Date. Adjustments in salary
or other compensation shall not limit or reduce any other obligation of the Bank
under this Agreement. The Employee's salary in effect from time to time during
the term of this Agreement shall not thereafter be reduced.
(b) Discretionary Bonuses. The Employee shall be entitled to
participate in an equitable manner with all other executive officers of the Bank
in discretionary bonuses as authorized and declared by the Board of Directors to
its executive employees. No other compensation provided for in this Agreement
shall be deemed a substitute for the Employee's right to participate in such
bonuses when and as declared by the Board of Directors.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to the executive officers of the Bank, provided that the Employee
accounts for such expenses as required under such policies and procedures.
5. Benefits.
(a) Participation in Retirement and Employee Benefit Plans. The
Employee shall be entitled to participate in all plans relating to pension,
thrift, profit-sharing, group life insurance, medical and dental coverage,
education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Bank's executive officers participate. In
addition, the Employee shall be
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entitled to be considered for benefits under all of the stock and stock option
related plans adopted for the benefit of the Bank's executive or other
employees.
(b) Fringe Benefits. The Employee shall be eligible to participate in,
and receive benefits under, any other fringe benefit plans which are or may
become applicable to the Bank's executive officers.
6. Vacations; Leave. The Employee shall be entitled to annual paid
vacation in accordance with the policies established by the Bank's Board of
Directors for executive employees and to voluntary leave of absence, with or
without pay, from time to time at such times and upon such conditions as the
Board of Directors of the Bank may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination. The Board of Directors may terminate the
Employee's employment at any time, but, except in the case of Termination for
Cause, termination of employment shall not prejudice the Employee's right to
compensation or other benefits under this Agreement. In the event of Involuntary
Termination other than in connection with or within twelve (12) months after a
Change in Control, (1) the Bank shall pay to the Employee during the remaining
term of this Agreement, his salary at the rate in effect immediately prior to
the Date of Termination, payable in such manner and at such times as such salary
would have been payable to the Employee under Section 2 if the Employee had
continued to be employed by the Bank, and (2) the Bank shall provide to the
Employee during the remaining term of this Agreement health benefits as
maintained by the Bank for the benefit of its executive officers from time to
time during the remaining term of the Agreement.
(b) Termination for Cause. In the event of termination for cause, the
Bank shall pay the Employee his salary through the date of termination, and the
Bank shall have no further obligation to the Employee under this Agreement.
(c) Voluntary Termination. The Employee's employment may be voluntarily
terminated by the Employee at any time upon 90 days written notice to the Bank
or upon such shorter period as may be agreed upon between the Employee and the
Board of Directors of the Bank. In the event of such voluntary termination, the
Bank shall be obligated to continue to pay the Employee his salary and benefits
only through the date of termination, at the time such payments are due, and the
Bank shall have no further obligation to the Employee under this Agreement.
(d) Change in Control. In the event of Involuntary Termination in
connection with or within 12 months after a change in control which occurs at
any time while the Employee is employed under this Agreement, the Bank shall,
subject to Section 8 of this Agreement, (1) pay to the Employee in a lump sum in
cash within 25 business days after the Date of Termination an amount equal to
299% of the Employee's "base amount" as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"); and (2) provide to the Employee
during the remaining term of this Agreement such health benefits as are
maintained for executive officers of the Bank from time to time during the
remaining term of this Agreement.
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(e) Death; Disability. In the event of the death of the Employee while
employed under this Agreement and prior to any termination of employment, the
Employee's estate, or such person as the Employee may have previously designated
in writing, shall be entitled to receive from the Bank the salary of the
Employee through the last day of the calendar month in which the Employee died.
If the Employee becomes disabled as defined in the Bank's then current
disability plan or if the Employee is otherwise unable to serve in his present
capacity, the Employee shall be entitled to receive group and other disability
income benefits of the type then provided by the Bank for executive officers. In
the event of such disability, this Agreement shall not be suspended. However,
the Bank shall be obligated to pay the Employee compensation pursuant to
Sections 4(a) and (b) hereof only to the extent the Employee's salary, in the
absence of such disability, would exceed (on an after tax basis) the disability
income benefits received pursuant to this paragraph. In addition, the Bank shall
have the right, upon resolution of its Board, to discontinue paying cash
compensation pursuant to Sections 4(a) and (b) beginning six months following a
determination that Employee qualifies for the foregoing disability income
benefits.
(f) Temporary Suspension or Prohibition. If the Employee 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. ss. 1818(e)(3) and (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 (1) pay the Employee 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.
(g) Permanent Suspension or Prohibition. If the Employee 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 (g)(1) of the FDIA, 12
U.S.C. ss. 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 vested
rights of the contracting parties shall not be affected.
(h) Default of the Bank. If the Bank is in default (as defined in
Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.
(i) Termination by Regulators. 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: (1) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation 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 the
FDIA; or (2) by the Director or his or her designee, at the time the Director 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 to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by any such action.
(j) Section 563.39(b). So long as 12 C.F.R. ss. 563.39(b)(1995) remains
in effect and applicable to the Bank, in the event that any of the termination
provisions of this Agreement conflict with 12 C.F.R. ss. 563.39(b)(1995), the
latter shall prevail.
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8. Certain Reduction of Payments by the Bank.
(a) Notwithstanding any other provisions of this Agreement, if payments
under this Agreement, together with any other payments received or to be
received by the Employee in connection with a Change in Control would cause any
amount to be nondeductible by the Bank or the Holding Company for federal income
tax purposes pursuant to Section 280G of the Code, then benefits under this
Agreement shall be reduced (not less than zero) to the extent necessary so as to
maximize payments to the Employee without causing any amount to become
nondeductible by the Bank or the Holding Company. The Employee shall determine
the allocation of such reduction among payments to the Employee.
(b) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
1828(k) and any regulations promulgated thereunder.
(c) Notwithstanding any other provisions of this Agreement, payments
under Section 7 of this Agreement shall not exceed three times the Employee's
average annual compensation based on the most recent five taxable years.
9. No Mitigation. The Employee shall not be required to mitigate the
amount of any salary or other payment or benefit provided for 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
the Employee as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
10. Attorneys Fees. In the event the Bank exercises its right of
Termination for Cause, but it is determined by a court of competent jurisdiction
or by an arbitrator pursuant to Section 17 that cause did not exist for such
termination, or if in any event it is determined by any such court or arbitrator
that the Bank has failed to make timely payment of any amounts owed to the
Employee under this Agreement, the Employee shall be entitled to reimbursement
for all reasonable costs, including attorneys' fees, incurred in challenging
such termination or collecting such amounts. Such reimbursement shall be in
addition to all rights to which the Employee is otherwise entitled under this
Agreement.
11. No Assignments.
(a) his Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Bank shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Bank in the same amount and on the same terms as the compensation
pursuant to Section 7(d) hereof. For purposes of implementing the provisions of
this
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Section 12(a), the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder shall inure
to the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amounts would still
be payable to the Employee hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Employee's devisee, legatee or other designee
or if there is no such designee, to the Employee's estate.
12. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Bank at its home office
the attention of the Board of Directors with a copy to the Secretary of the
Bank, or, if the Employee, to such home or other address as the Employee has
most recently provided in writing to the Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. Paragraph Headings. The paragraph headings used in this Agreement
are included solely for convenience and shall not affect, or be used in
connection with, the interpretation of this Agreement.
15. 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.
16. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Illinois.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Bank then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
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THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ATTEST: HEMLOCK FEDERAL BANK FOR
SAVINGS
___________________________________ By: _____________________________
Xxxxxxx Xxxxxxxx-Xxxxxxx, Secretary Xxxxxxx X. Xxxxxxxxx
Its: Chairman and Chief Executive
Officer
EMPLOYEE
___________________________________
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