HOME FEDERAL SAVINGS BANK
CHANGE-IN-CONTROL AGREEMENT
This Change-in-Control Agreement (the "Agreement") is entered into as
of this 8th day of April, 1999, by and between Home Federal Savings Bank, a
federally-chartered savings bank (the "Bank") and Xxxxx X. Xxxxxxx (the
"Employee").
WHEREAS, the Employee is currently serving as a senior vice president
of the Bank, holding the title of Senior Vice President/Chief Financial Officer;
and
WHEREAS, the Bank is a wholly-owned subsidiary of HF Financial Corp.,
(the Holding Company"), and the Holding Company offers its common stock for sale
to the public and is subject to supervision by the Securities and Exchange
Commission ("SEC"); and
WHEREAS, both the Bank and the Holding Company are subject to
supervision by the Office of Thrift Supervision (the "OTS"); and
WHEREAS, the Board of Directors of the Bank recognizes that, as is the
case with publicly held corporations generally, the possibility of a
change-in-control of the Holding Company 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 its stockholders; and
WHEREAS, the Board of Directors of the Bank 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, although no
such change is now known of; and
WHEREAS, the Board of Directors of the Bank has approved and authorized
the execution of this Agreement with the Employee to take effect as stated in
Section 1 hereof.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, it is agreed as
follows:
1. TERM OF AGREEMENT. This Agreement will commence on the date hereof
and shall continue in effect until the third anniversary of the date hereof;
and, commencing on the first anniversary of the date hereof and on each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than 90 days prior to any
such date of automatic extension of this Agreement, the Bank shall have given
notice that the Agreement will not be so extended; provided, however, if a
Change-in-Control shall have occurred during the original or any extended term
of this Agreement, this Agreement shall in all events continue in effect for a
period of 24 months following a Change-in-Control; provided, further, that if
Employee becomes entitled to payments in accordance with Section 4 of this
Agreement (or assert a claim for such payments) during the term of this
Agreement as heretofore described, this Agreement will thereafter survive
indefinitely to ensure that Employee receives all payments and benefits to which
Employee is entitled pursuant to the terms hereof.
2. CHANGE-IN-CONTROL. No benefits shall be payable hereunder unless
there shall have been a Change-in-Control, as set forth below. For purposes of
this Agreement, a "Change-in-Control" shall mean:
a. a change-in-control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Holding Company is then subject to such reporting
requirement; or
b. the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Holding Company or any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such
person has become the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Holding
Company (i)
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representing 20% or more, but not more than 50%, of the combined
voting power of the Holding Company's then outstanding securities unless the
transaction resulting in such ownership has been approved in advance by the
Continuing Directors (as hereinafter defined); or (ii) representing more than
50% of the combined voting power of the Holding Company's then outstanding
securities (regardless of any approval by the Continuing Directors); provided,
however, that notwithstanding the foregoing, no Change-in-Control shall be
deemed to have occurred for purposes of this Agreement by reason of the
ownership of 20% or more of the total voting capital stock of the Holding
Company then issued and outstanding by the Holding Company, any subsidiary of
the Holding Company or any employee benefit plan of the Holding Company or of
any subsidiary of the Holding Company or any entity holding shares of the Common
Stock organized, appointed or established for, or pursuant to the terms of, any
such plan (any such person or entity described in this clause is referred to
herein as a "Company Entity"); or
c. any acquisition of control as defined in 12 Code of Federal
Regulations Section 574.4, or any successor regulation, of the Holding Company
which would require the filing of an application for acquisition of control or
notice of change in control in a manner which is set forth in 12 CFR Section
574.3, or any successor regulation; or
d. the Continuing Directors (as hereinafter defined), cease to
constitute a majority of the Holding Company's Board of Directors; or
e. the shareholders of the Holding Company approve (i) any
consolidation or merger of the Holding Company in which the Holding Company is
not the continuing or surviving Holding Company or pursuant to which shares of
Holding Company stock would be converted into cash, securities or other
property, other than a merger of the Holding Company in which shareholders
immediately prior to the merger have the same proportionate ownership of stock
of the surviving Holding Company immediately after the merger; (ii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Holding Company;
or (iii) any plan of liquidation or dissolution of the Holding Company.
For purposes of this definition, "Continuing Director" shall mean any
person who is a member of the Board of Directors of the Holding Company, while
such person is a member of the Board of Directors, who is not an Acquiring
Person (as defined below) or an Affiliate or Associate (as defined below) of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and who (i) was a member of the Board of Directors on
the date of this Agreement as first written above; or (ii) subsequently becomes
a member of the Board of Directors, if such person's initial nomination for
election or initial election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors. For purposes of this
definition, "Acquiring Person" shall mean any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all
Affiliates and Associates of such person, is the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act) directly or indirectly, of
securities of the Holding Company representing 20% or more of the combined
voting power of the Holding Company's then outstanding securities, but shall not
include the Investors or any Holding Company Entity; and "Affiliate" and
Associate" shall have their respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.
3. TERMINATION FOLLOWING A CHANGE-IN-CONTROL. If a Change-in-Control
shall have occurred, Employee shall be entitled to the benefits provided in
Section 4(a) hereof upon any termination of Employee's employment during the
term of this Agreement unless such termination is (i) because of Employee's
death; (ii) by the Bank for Cause (as defined below); or (iii) by Employee other
than for Good Reason (as defined below):
a. CAUSE. Termination by the Bank of Employee's employment for
"Cause" shall mean termination upon (i) the willful and continued failure by
Employee to substantially perform Employee's duties with the Bank (other than
any such failures resulting from Employee's disability or from Employee's
termination for Good Reason), after a demand for substantial performance is
delivered to Employee which specifically identifies the manner in which the Bank
believes that Employee has not substantially performed his duties, and Employee
has failed to resume substantial performance of those duties on a continuous
basis within 14 days of receiving such demand; (ii) Employee's willful engaging
in conduct which is demonstrably and materially injurious to the Bank,
monetarily or otherwise; (iii) Employee's conviction of a felony which impairs
his ability substantially to perform Employee's duties with the Bank; (iv) the
Employee's personal dishonesty, incompetence, breach of fiduciary duty for
personal profit or willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and desist order; or (v)
the Employee's material breach of this Agreement. For purposes of this
Subsection, no act, or failure to act, on the part of the Employee shall be
deemed "willful" unless done, or omitted to be done, by Employee not in good
faith and without
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reasonable belief that Employee's action or omission was in
the best interest of the Bank. Failure to perform duties with the Bank during
any period of disability shall not constitute Cause.
b. GOOD REASON. Employee's termination of employment for "Good
Reason" shall mean termination by the Employee upon the occurrence, without his
express written consent, within 24 months following a Change-in-Control of any
one or more of the following:
i) the assignment to the Employee of any duties
inconsistent in any respect with Employee's position (including status,
offices, titles, and reporting requirements), authorities, duties, or other
responsibilities as in effect immediately prior to the Change-in-Control or
any other action of the Bank which results in a diminishment in such
position, authority, duties, or responsibilities, other than an insubstantial
and inadvertent action which is remedied by the Bank promptly after receipt
of notice thereof given by Employee;
ii) a reduction by the Bank in Employee's base
salary as in effect on the date hereof or as the same shall be increased from
time to time;
iii) the Bank's requiring Employee to be based
at a location outside of Sioux Falls, South Dakota;
iv) the failure by the Bank to (a) continue in
effect any material compensation or benefit plan, program, policy or practice
in which Employee was participating at the time of the Change-in-Control, or
(b) provide the Employee with compensation and benefits at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for
under each employee benefit plan, program, policy and practice as in effect
immediately prior to the Change-in-Control (or as in effect following the
Change-in-Control, if greater);
v) the failure of the Bank to obtain a
satisfactory agreement from any successor to the Bank to assume and agree to
perform this Agreement, as contemplated in Section 7 hereof; and
vi) any purported termination by the Bank of
the Employee's employment that is not effected pursuant to a Notice of
Termination (as defined below);
The Bank's right to terminate Employee's employment pursuant to this
Subsection shall not be affected by the Employee's incapacity due to physical or
mental illness. The Employee's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder. Employee's termination of employment for Good Reason as
defined in this Subsection 3(b) shall constitute termination for Good Reason for
all purposes of this Agreement, notwithstanding that the Employee may also
thereby be deemed to have "retired" under any applicable retirement programs of
the Bank.
c. NOTICE OF TERMINATION. Any purported termination of the
Employee's employment by the Bank or by the Employee (other than by reason of
the Employee's death) within 24 months following the month in which a
Change-in-Control occurs, shall be communicated by Notice of Termination to the
other party hereto in accordance with Section 8 hereof. No purported termination
of the Employee's employment by the Bank shall be effective if it is not
pursuant to a Notice of Termination. Failure by the Employee to provide Notice
of Termination shall not limit any of the Employee's rights under this Agreement
except to the extent the Bank can demonstrate that it suffered actual damages by
reason of such failure. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and the Date of Termination
(as defined below) and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
d. DATE OF TERMINATION. "Date of Termination" shall mean the
date specified in the Notice of Termination (except in the case of the
Employee's death, in which case Date of Termination shall be the date of death);
provided, however, that if the Employee's employment is terminated by the Bank,
the date specified in the Notice of
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Termination shall be at least 30 days from the date the Notice of Termination is
given to the Employee and if the Employee terminates his employment for Good
Reason, the date specified in the Notice of Termination shall not be more than
60 days from the date the Notice of Termination is given to the Bank.
4. COMPENSATION UPON TERMINATION. Following a Change-in-Control, upon
termination of employment during the term of this Agreement the Employee shall
be entitled to the following benefits:
a. If employment by the Bank shall be terminated (A) by the Bank for
any reason other than Cause, or (B) by the Employee for Good Reason, the
Employee shall be entitled to the benefits, to be funded from the general assets
of the Bank, provided below;
i) the Bank shall pay the Employee full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given;
ii) the Bank will pay as severance benefits to the
Employee, not later than 30 days following the Date of Termination, a lump
sum severance payment equal to 1.5 times the sum of (A) the Employee's annual
base salary in effect at the time Notice of Termination is given or
immediately prior to the date of the Change-in-Control, whichever is greater,
and (B) annual incentive compensation payments which were potentially
available to the Employee at the time Notice of Termination is given or
immediately prior to the date of the Change-in-Control, whichever is greater
(or if there is no such incentive payment, the amount earned in the last
fiscal year prior to the Change-in-Control);
iii) for a 18-month period after the Date of
Termination, the Bank will arrange to provide the Employee with welfare
benefits (including life and health insurance benefits), perquisites and
other employee benefits of substantially similar design and cost to the
Employee as the welfare benefits, perquisites and other employee benefits
available to the Employee immediately prior to the Notice of Termination; but
benefits otherwise receivable by the Employee pursuant to this Subsection
(iii) shall be discontinued if the Employee obtains full-time employment
providing welfare benefits during the 18-month period following the Date of
Termination;
iv) the full amount of any long-term cash incentive
award for any plan periods then in progress to the extent not provided for in
such plan or plans; and
v) the Bank shall pay for individual out-placement
counseling services for the Employee.
b. The payments provided for in Section 4(a) above shall be made not
later than 30 days following the Date of Termination; provided, however, that if
the amounts of such payments cannot be finally determined, on or before such
day, the Bank shall pay to the Employee on such day an estimate as determined in
good faith by the Bank of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest from the date of such
estimated payment at the rate provided in Section 1274(b)(2)(B) of the Internal
Revenue Code of 1986, as amended (the "Code")) as soon as the amount thereof can
be determined but in no event later than 45 days after the Date of Termination.
In the event that the amount of the estimated payment exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Bank to the Employee payable no later than 30 days after demand by
the Bank (together with interest from the date of such estimated payment at the
rate provided in Section 1274(b)(2)(B) of the Code.
c. The Bank shall also pay to the Employee any legal fees and expenses
incurred by the Employee (i) as a result of successful litigation against the
Bank for nonpayment of any benefit hereunder, or (ii) in connection with any
dispute with any Federal, state or local governmental agency with respect to
benefits claimed under this Agreement. If the Employee utilizes arbitration to
resolve any such dispute, the Bank will pay any legal fees and expenses incurred
by the Employee in connection therewith.
d. The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 4 be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the Date of Termination, or otherwise, except as set forth in
Section 4a(iii) hereof.
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e. Notwithstanding anything in this Agreement to the contrary, no
payments may be made pursuant to Section 4 hereof without the prior approval
of the OTS if following such payment the Bank would not be in compliance with
its fully phased-in capital requirements as defined in OTS regulations.
Further, any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 USC
Section 1828(k) and any regulations promulgated thereunder.
5. CERTAIN REDUCTION OF PAYMENTS BY THE BANK. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Bank to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be nondeductible
(in whole or part) by the Bank for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of the Employee pursuant to this Agreement
(such amounts payable or distributable pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. The "Reduced Amount" shall be an amount, not less than zero, expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Bank because of
Section 280G of the Code. For purposes of this Section 5, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
6. NONEXCLUSIVITY RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any benefit, bonus,
incentive, retirement or other plan or program provided by the Bank and for
which the Employee may qualify, nor, except as provided in Section 13, shall
anything herein limit or reduce such rights as the Employee may have under any
other agreement with, or plan, program, policy or practice of, the Bank. Amounts
which are vested benefits or which the Employee is otherwise entitled to receive
under any agreement with, or plan, program, policy or practice of, the Bank
(including, without limitation, the cashout of unused vacation days upon
termination of employment) shall be payable in accordance with such agreement,
plan, program, policy or practice, except as explicitly modified by this
Agreement.
7. SUCCESSORS
a. The Bank will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Bank or of any division
or subsidiary thereof employing 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 if no such succession had taken place. Failure of
the Bank to obtain such assumption and agreement prior to the effectiveness of
any such succession 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 he would be entitled hereunder if his employment were terminated for Good
Reason following a Change-in-Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination and Notice of Termination shall be deemed to have
been given on such date.
b. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If the
Employee should die while any amount would still be payable to him hereunder if
he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to his devisee,
legatee or other designee or, if there is no such designee, to his estate or, if
no estate, in accordance with applicable law.
8. NOTICE. For the purpose 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 delivered or mailed by United States
registered mail, postage prepaid, addressed to the other party as follows:
IF TO THE BANK, TO:
Home Federal Savings Bank
Attention: Corporate Secretary
000 Xxxxx Xxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
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IF TO EMPLOYEE, TO:
Xxxxx X. Xxxxxxx
000 X. 00xx Xxxxxx
Xxxxx Xxxxx, XX 00000
Either party to this Agreement may change its address for purposes
of this Section 8 by giving 15 days' prior notice to the other party hereto.
9. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Employee and such officer as may be specifically
designated by the Board to sign on behalf of the Bank. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of South Dakota.
10. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. ARBITRATION. If the Employee so elects, 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
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Employee shall be
entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement. If the Employee does not elect arbitration,
he may pursue any and all legal remedies available to him.
13. EMPLOYMENT AGREEMENT. Reference is hereby made to that certain
Agreement, dated contemporaneously with this Agreement, by and between the Bank
and the Employee. The termination of the Employment Agreement shall have no
effect on the term of this Agreement. All terms and conditions of the Employment
Agreement shall continue in full force and effect (until termination of the
Employment Agreement in accordance with its terms), including following a
Change-in-Control, except as expressly modified by this Section. The mutual
promises in this Agreement and in the Employment Agreement shall serve as
consideration for each agreement contemporaneously executed.
14. EFFECTIVE DATE. This Agreement shall become effective as of the
date first set forth above.
15. EMPLOYMENT. This Agreement does not constitute a contract of
employment or impose on the Bank any obligation to retain the Employee as an
employee, to continue his current employment status or to change any employment
policies of the Bank.
16. AMENDMENTS. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
17. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or unenforceability of the other provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HOME FEDERAL SAVINGS BANK
/s/ Xxxxxx X. Xxxx
-------------------------------
By: Xxxxxx X. Xxxx
----------------------------
Its: Chairman, President and
---------------------------
Chief Executive Officer
-----------------------
EMPLOYEE
/s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx
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