EXHIBIT 10.4
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE 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 Xxxxxxxx-Xxxxxxx (the "Employee").
WHEREAS, the Employee is currently serving as Vice President and
Secretary 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 the Employee's 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
Section 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
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.
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(b) The term "Commencement Date" means the date of completion of the
Bank's conversion to stock form
(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 the Employee's 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 the Employee's express written
consent, and shall, subject to the last sentence in this
paragraph, include a material diminution of or interference with
the Employee's duties, responsibilities and benefits as Vice
President and Secretary 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
demotion of the Employee; (3) 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; (4) a material adverse change in
the Employee's salary, 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; and (5) a
material permanent increase in the required hours of work or the
workload 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") and shall not include a material diminution of or
interference with the Employee's duties,
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responsibilities and benefits unless the employee or the Bank
submits written notice of involuntary termination within 120 days
thereof.
(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.
2. Term. The term of this Agreement shall be a period of two years
commencing on the Commencement Date, subject to earlier termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary thereafter until the first anniversary of the Commencement Date
after the Employee reaches age 65, the term of this Agreement shall be extended
for a period of one year in addition to the then-remaining term, provided that,
prior to such anniversary, the Board of Directors of the Bank explicitly reviews
and approves the extension. Reference herein to the term of this Agreement shall
refer to both such initial term and such extended terms.
3. Severance Benefits; Regulatory Provisions.
(a) Involuntary Termination in Connection With a Change in Control. In
the event of Involuntary Termination in connection with or within
24 months after a Change in Control which occurs during the term
of this Agreement, the Bank shall, subject to Section 4 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
200% 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 insurance benefits as the Bank maintained
for executive officers at the Date of Termination on terms
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as favorable to the Employee as applied at the Date of
Termination. The total of payments to the Employee under this
section shall not exceed three times his average compensation from
the Bank over the five most recent taxable years (or, if employed
by the Bank for a shorter period, over the period of his
employment by the Bank).
(b) 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 X.X.X.xx. 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 (i) 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.
(c) 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.
(d) 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.
(e) 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
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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.
4. Certain Reduction of Payments by the Bank.
(a) Notwithstanding any other provision of this Agreement, if the
value and amounts of benefits under this Agreement, together with
any other amounts and the value of benefits 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 amounts and benefits under this
Agreement shall be reduced (not less than zero) to the extent
necessary so as to maximize amounts and the value of benefits to
the Employee without causing any amount to become nondeductible by
the Bank or the Holding Company pursuant to or by reason of such
Section 280G. The Employee shall determine the allocation of such
reduction among payments and benefits 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. ss. 1828(k) and any regulations promulgated
thereunder.
5. 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.
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6. Attorneys and/or Fees. If the Employee is purportedly Terminated for
Cause and the Bank denies payments and/or benefits under Section 3(a) of this
Agreement on the basis that the Employee experienced Termination for Cause
rather than Involuntary Termination, but it is determined by a court of
competent jurisdiction or by an arbitrator pursuant to Section 13 that cause as
contemplated by Section 2(e) of this Agreement did not exist for termination of
the Employee's employment, 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 or
provision of any benefits 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 of employment or
collecting such amounts or benefits. Such reimbursement shall be in addition to
all rights to which the Employee is otherwise entitled under this Agreement.
7. No Assignments.
(a) This 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 3(a) hereof. For
purposes of implementing the provisions of this
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Section 7(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.
8. 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,
to the attention of the Board of Directors with a copy to the Secretary of the
Bank, or, if to the Employee, to such home or other address as the Employee has
most recently provided in writing to the Bank.
9. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
10. Headings. The 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.
11. 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.
12. 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
New York.
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13. 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.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ATTEST: HEMLOCK FEDERAL BANK FOR SAVINGS
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Xxxxxxx X. Xxxxxxx, President By: Xxxxxxx X. Xxxxxxxxx
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Its: Chairman and Chief
Executive Officer
EMPLOYEE
_________________________________
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