EXHIBIT 10.6
HOME FEDERAL BANK, FEDERAL SAVINGS BANK
--------------------------
Employment Agreement with
Xxxxxxx X. Xxxxx
--------------------------
THIS AGREEMENT entered into this 19th day of September, 2000, by
and between Home Federal Bank, Federal Savings Bank (the "Bank"), and Xxxxxxx X.
Xxxxx (the "Executive"), effective on the Effective Date.
WHEREAS, the parties desire by this writing to set forth the
continuing employment relationship of the Bank and the Executive.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in this Agreement, the following terms shall
have the meaning set forth herein.
(a) "Board" shall mean the Board of Directors of
the Bank.
(b) "Change in Control" shall mean any one of the following
events: (i) the acquisition of ownership, holding or power to vote more than 25%
of the Bank's or the Company's voting stock, (ii) the acquisition of the ability
to control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) during any period of two consecutive years, individuals (the "Continuing
Directors") who at the beginning of such period constitute the Board of
Directors of the Bank or the Company (the "Existing Board") cease for any reason
to constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. Notwithstanding the foregoing,
in the case of (i), (ii) and (iii) hereof, ownership or control of the Bank by
the Company itself shall not constitute a Change in Control. For purposes of
this paragraph only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
1
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
(d) "Codess.280G Maximum" shall mean the product of 1 and his
"base amount" as defined in Codess.280G(b)(3).
(e) "Company" shall mean HFB Financial Corporation.
(f) "Disability" shall mean, for purposes of this Agreement,
a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties under this Agreement and which results in the
Executive becoming eligible for long-term disability benefits under the Bank's
long-term disability plan (or, if the Bank has no such plan in effect, which
impairs the Executive's ability to substantially perform his duties under this
Agreement for a period of 180 consecutive days).
(g) "Effective Date" shall mean September 19, 2000..
(h) "Expiration Date" shall mean the date on which the term
of this Agreement expires pursuant to Section 5 hereof (taking into account any
and all renewals of such term).
(i) "Good Reason" shall mean any of the following events,
which has not been consented to in advance by the Executive in writing: (i) the
requirement that the Executive move his personal residence, or perform his
principal executive functions, more than 35 miles from his primary office as of
the later of the Effective Date and the most recent voluntary relocation by the
Executive; (ii) a material reduction in the Executive's base compensation under
this Agreement as the same may be increased from time to time; (iii) the failure
by the Bank to continue to provide the Executive with compensation and benefits
provided under this Agreement as the same may be increased from time to time, or
with benefits substantially similar to those provided to him under any of the
employee benefit plans in which the Executive now or hereafter becomes a
participant, or the taking of any action by the Bank which would directly or
indirectly reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by him under this Agreement; (iv) the assignment to the
Executive of duties and responsibilities materially different from those
normally associated with his position; (v) a failure to reelect the Executive to
the Board of Directors of the Bank; (vi) a material diminution or reduction in
the Executive's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Bank; or (vii) a
material reduction in the secretarial or other administrative support of the
Executive.
(j) "Just Cause" shall mean, in the good faith determination
of the Board, the 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
2
cease-and-desist order, or material breach of any provision of this Agreement.
No act, or failure to act, on the Executive's part shall be considered "willful"
unless he has acted, or failed to act, with an absence of good faith and without
a reasonable belief that his action or failure to act was in the best interest
of the Bank.
(k) "Present Value" shall mean the applicable federal rate,
as determined in accordance with the rules and regulations under Codess. 280G.
(l) "Protected Period" shall mean the period that begins on
the date six months before a Change in Control and ends on the later of the
second annual anniversary of the Change in Control or the expiration date of
this Agreement.
(m) "Trust" shall mean a grantor trust that is designed in
accordance with Revenue Procedure 92-64 and has a trustee independent of the
Bank.
2. Employment. The Executive is employed as Chief Operating
Officer of the Bank. The Executive shall render such administrative and
management services for the Bank as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity,
including as a full-time employee and officer of the Bank, service on the Bank's
Asset/Liability Management and Investment Committees which meet regularly. The
Executive shall also promote, by entertainment or otherwise, as and to the
extent permitted by law, the business of the Bank. The Executive's other duties
shall be such as the Board may from time to time reasonably direct, including
normal duties as an officer of the Bank.
3. Base Compensation. The Bank agrees to pay the Executive during
the term of this Agreement a salary at the rate of $85,000.00 per annum, payable
in cash not less frequently than monthly. The Board shall review, not less often
than annually, the rate of the Executive's salary, and in its sole discretion
may decide to increase his salary.
4. Discretionary Bonuses. The Executive shall participate in an
equitable manner with all other senior management employees of the Bank in
discretionary bonuses that the Board may award from time to time to the Bank's
senior management employees. No other compensation provided for in this
Agreement shall be deemed a substitute for the Executive's right to participate
in such discretionary bonuses. Notwithstanding the foregoing, following a Change
in Control, the Executive shall receive discretionary bonuses that are made no
less frequently than, and in annual amounts not less than, the average annual
discretionary bonuses paid to the Executive during the calendar year immediately
preceding the year in which such Change in Control occurs.
5. Other Benefits.
(a) Participation in Retirement, Medical and Other Plans.
During the term of this Agreement, the Executive shall be eligible to
participate in the following benefit plans maintained by the Bank: group
hospitalization, disability, health, dental, sick leave, life insurance, travel
and/or accident insurance, auto allowance/auto lease, retirement, pension,
and/or other present or future qualified plans provided by the Bank, generally,
3
which benefits, taken as a whole, must be at least as favorable as those in
effect on the Effective Date. Further, if the Executive retires from employment
with the Bank at or after age 55 and for a reason other than Just Cause, the
Bank shall provide the Executive and his legal dependents with medical insurance
coverage that is not less favorable than the coverage that the Bank provides for
its officers. The Bank shall pay all premiums for this coverage, shall provide
it for the Executive's lifetime, and agrees that this obligation shall survive
expiration of this Agreement.
(b) Employee Benefits; Expenses. The Executive shall be
eligible to participate in any fringe benefits which are or may become available
to the Bank's senior management employees, including for example: any stock
option or incentive compensation plans, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Executive under this Agreement. The Executive shall be reimbursed for all
reasonable out-of-pocket business expenses which he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Bank.
6. Term. The Bank hereby employs the Executive, and the Executive
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 12 months thereafter (or such earlier date as
is determined in accordance with Section 10). Additionally, on each annual
anniversary date from the Effective Date, the Executive's term of employment
shall be extended for an additional one-year period beyond the then effective
expiration date, provided the Board determines in a duly adopted resolution that
the performance of the Executive has met the Board's requirements and standards,
and that this Agreement shall be extended. Only those members of the Board who
have no personal interest in this Employment Agreement shall discuss and vote on
the approval and subsequent review of this Agreement.
In the event the Executive serves the full term of this
Agreement, and the Bank does not offer to renew this Agreement upon
substantially the same terms and conditions for an additional one- year term,
the Executive shall be entitled to a severance benefit equal to twelve months of
his then current base monthly salary, plus such vested employee benefits to
which the Executive may be entitled when due and payable.
7. Loyalty; Noncompetition.
(a) During the period of his employment hereunder and except
for illnesses, reasonable vacation periods, and reasonable leaves of absence,
the Executive shall devote all his full business time, attention, skill, and
efforts to the faithful performance of his duties hereunder; provided, however,
from time to time, the Executive may serve on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which will
not present any conflict of interest with the Bank or any of its subsidiaries or
affiliates, or unfavorably affect the performance of the Executive's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Executive shall not
4
engage in any business or activity contrary to the business affairs or interests
of the Bank, or be gainfully employed in any other position or job other than as
provided above.
(b) Nothing contained in this Section shall be deemed to
prevent or limit the Executive's right to invest in the capital stock or other
securities of any business dissimilar from that of the Bank, or, solely as a
passive or minority investor, in any business.
8. Standards. The Executive shall perform his duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Bank will provide the Executive with the
working facilities and staff customary for similar executives and necessary for
him to perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board
shall in its discretion permit, the Executive shall be entitled, without loss of
pay, to absent himself voluntarily from the performance of his employment under
this Agreement, all such voluntary absences to count as vacation time, provided
that:
(a) The Executive shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Bank.
(b) The Executive shall not receive any additional
compensation from the Bank on account of his failure to take a vacation, and the
Executive shall not accumulate unused vacation or sick leave from one fiscal
year to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the
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 Board may in its
discretion determine. Further, the Board may grant to the Executive a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Executive shall be entitled to an annual
sick leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12
hereof, the Executive's employment hereunder may be terminated under the
following circumstances:
(a) Death. The Executive's employment under this Agreement
shall terminate upon his death during the term of this Agreement, in which event
the Executive's estate shall be entitled to receive the compensation due the
Executive through the Agreement's Expiration Date.
5
(b) Disability. The Bank may terminate the Executive's
employment after having established the Executive's Disability. The Executive
shall be entitled to the compensation and benefits provided for under this
Agreement for (i) any period during the term of this Agreement and prior to the
establishment of the Executive's Disability during which the Executive is unable
to work due to the physical or mental infirmity, or (ii) any period of
Disability which is prior to the Executive's termination of employment pursuant
to this Section; provided that any benefits paid pursuant to the Bank's long
term disability plan will continue as provided in such plan. During any period
that the Executive shall receive disability benefits and to the extent that the
Executive shall be physically and mentally able to do so, he shall furnish such
information, assistance and documents so as to assist in the continued ongoing
business of the Bank and, if able, shall make himself available to the Bank to
undertake reasonable assignments consistent with his prior position and his
physical and mental health. The Bank shall pay all reasonable expenses incident
to the performance of any assignment given to the Executive during the
disability period.
(c) Just Cause. The Board may, by written notice to the
Executive, immediately terminate his employment at any time, for Just Cause. The
Executive shall have no right to receive compensation or other benefits for any
period after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board
may, by written notice to the Executive, immediately terminate his employment at
any time for a reason other than Just Cause, in which event the Executive shall
be entitled to receive the following compensation and benefits (unless such
termination occurs during the Protected Period, in which event the benefits and
compensation provided for in Section 12 shall apply): (i) the salary provided
pursuant to Section 3 hereof, up to the Expiration Date, plus said salary for an
additional 12-month period, and (ii) at the Executive's election either (A) cash
in an amount equal to the Present Value of the cost to the Executive of
obtaining all health, life, disability and other benefits which the Executive
would have been eligible to participate in through the Expiration Date based
upon the benefit levels substantially equal to those that the Bank provided for
the Executive at the date of termination of employment, or (B) continued
participation under such Bank benefit plans through the Expiration Date, but
only to the extent the Executive continues to qualify for participation therein;
provided that in no event shall the total value of the payments due under (i)
and (ii) hereof exceed one years' total compensation. All amounts payable to the
Executive shall be paid, at the option of the Executive, either in periodic
payments through the Expiration Date, or in one lump sum within ten days of such
termination (in which event he shall receive the Present Value of such periodic
payments).
(e) Good Reason. The Executive shall be entitled to receive
the compensation and benefits payable under subsection 10(d) hereof in the event
that he voluntarily terminates employment within 90 days of an event that
constitutes Good Reason, (unless such voluntary termination occurs during the
Protected Period, in which event the benefits and compensation provided for in
Section 12 shall apply).
(f) Voluntary Termination by Executive. Subject to Section 12
hereof, the Executive may voluntarily terminate employment with the Bank during
the term of this Agreement, upon at least 90 days' prior written notice to the
Board, in which case the Executive shall receive only his compensation, vested
6
rights and employee benefits up to the date of his termination (unless such
termination occurs pursuant to Section 10(e) hereof or within the Protected
Period, in which event the benefits and compensation provided for in Sections
10(d) or 12, as applicable, shall apply).
11. No Mitigation. The 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 the Executive in any
subsequent employment.
12. Change in Control.
(a) Trigger Events. The Executive shall be entitled to
collect the severance benefits set forth in subsection (b) hereof in the event
that either (i) the Executive voluntarily terminates employment either for any
reason other than Just Cause within the 30-day period beginning on the date of a
Change in Control, (ii) the Executive voluntarily terminates employment within
90 days of an event that both occurs during the Protected Period and constitutes
Good Reason, or (iii) the Bank or its successor(s) in interest terminates the
Executive's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Executive becomes
entitled to collect severance benefits pursuant to Section 12(a) hereof, the
Bank shall pay the Executive a severance benefit equal to the difference between
the Code ss.280G Maximum and the sum of any other "parachute payments" as
defined under Code ss.280G(b)(2) that the Executive receives on account of the
Change in Control. Said sum shall be paid, at the election of the Executive,
either (i) in one lump sum within ten days of the later of the date of the
Change in Control and the Executive's last day of employment with the Bank, or
(ii) periodic payments over a period of up to sixty months with interest
accruing on unpaid amounts at the same rate that would be applied to determine
Present Value. In the event that the Executive and the Bank jointly agree that
the Executive has collected an amount exceeding the Code ss.280G Maximum, the
parties may agree in writing that such excess shall be treated as a loan ab
initio which the Executive shall repay to the Bank, on terms and conditions
mutually agreeable to the parties, together with interest at the applicable
federal rate provided for in Section 7872(f)(2)(B) of the Code.
(c) Funding of Grantor Trust upon Change in Control.
Notwithstanding any other provision of this Agreement that may be contrary or
inconsistent herewith, not later than ten business days after a Change in
Control, the Bank shall (i) deposit in a Trust an amount equal to the Code
ss.280G Maximum, unless the Executive has previously provided a written release
of any claims under this Agreement, and (ii) provide the trustee of the Trust
with a written direction to hold said amount and any investment return thereon
in a segregated account for the benefit of the Executive, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. At any time or from time to time during the 27-consecutive month
period after a Change in Control, the Executive may provide the trustee of the
7
Trust with a written notice directing that the trustee pay to the Executive an
amount designated in the notice as being payable pursuant to this Agreement.
Within three business days after receiving said notice, the trustee of the Trust
shall pay the Executive the amount designated therein in immediately available
funds, and shall thereafter send the Bank a written notice thereof. Upon the
earlier of the Trust's final payment of all amounts due under the following
paragraph or the date 27 months after the Change in Control, the trustee of the
Trust shall pay to the Bank the entire balance remaining in the segregated
account maintained for the benefit of the Executive. The Executive shall
thereafter have no further interest in the Trust.
13. Indemnification. The Bank agrees that its Bylaws shall
continue to provide for indemnification of directors, officers, employees and
agents of the Bank, including the Executive, during the full term of this
Agreement, and to at all times provide adequate insurance for such purposes.
14. Reimbursement of Executive for Enforcement Proceedings. In
the event that any dispute arises between the Executive and the Bank as to the
terms or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Executive takes to
defend against any action taken by the Bank, the Executive shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Executive obtains either
a written settlement or a final judgement by a court of competent jurisdiction
substantially in his favor. Such reimbursement shall be paid within ten days of
the Executive's furnishing to the Bank written evidence, which may be in the
form, among other things, of a cancelled check or receipt, of any costs or
expenses incurred by the Executive.
15. Federal Income Tax Withholding. The Bank may withhold all
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
(a) Bank. This Agreement shall not be assignable by the Bank,
provided that 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, as the case may be.
(b) Executive. Since the Bank is contracting for the unique
and personal skills of the Executive, the Executive shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Bank; provided, however, that nothing in this
paragraph shall preclude (i) the Executive from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Executive or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.
8
(c) Attachment. Except as required by law, no right of the
Executive to receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment, encumbrance, charge,
pledge, or hypothecation or to exclusion, attachment, levy or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement
shall be binding unless made in writing and signed by all of the parties, except
as herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal
law, the laws of the State of Kentucky shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
19. 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.
20. 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 and shall
supersede any prior agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first hereinabove written.
HOME FEDERAL BANK, FEDERAL
SAVINGS BANK
Witnessed by:
By:
-------------------------------------- --------------------------
Secretary Its Chairman of the Board
EXECUTIVE
Witnessed by:
-------------------------------------- -----------------------------
Secretary Xxxxxxx X. Xxxxx
