EXHIBIT 10.1
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this ___ day of __________, 199_, by and between Xxxxx Xxxx Federal Savings &
Loan Association (hereinafter referred to as the "Bank" whether in mutual or
stock form), and Xxxxxx X. Xxxxxxx (the "Employee").
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer 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 _____________________
(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 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
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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; (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 or the Bank or
the Holding Company survives only as a subsidiary of another entity; or (5) a
merger of another corporation into the Bank or Holding Company which survives
if, as a result of such merger, less than 60% of the outstanding voting
securities of the Bank or Holding Company shall be owned in the aggregate
immediately after such merger by the owners of the voting shares of the Bank or
Holding Company outstanding immediately prior. 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 initial public offering of the Holding Company's stock in connection with
the Conversion.
(c) The term "Date of Termination" means the later 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 "Involuntary Termination" means termination of
the employment of Employee without the Employee's express written consent, and
shall include a material diminution of or interference with the Employee's
duties, responsibilities and benefits as President and Chief Executive Officer
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, perquisites, benefits, contingent benefits or vacation, other
than as part of an overall program applied uniformly and with equitable effect
to all employees 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
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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, material breach
of any provision of this Agreement. No act or failure to act by the Employee
shall be considered willful unless the Employee acted (or failed to act) with an
absence of good faith and without a reasonable belief that his action or failure
to act was reasonable and in the best interest of the Bank. Notwithstanding the
prior sentence, it shall constitute a material breach of this Agreement should
Employee, individually or acting in concert with a group, take any action
leading to 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, that is opposed by a majority of the Board of Directors;
provided, however, if Employee is acting in concert with one or more members of
the Board of Directors in actions leading to a change in control of the Bank and
the Employee reasonably believes such actions are in the best interest of the
Bank, such directors shall not be a material breach of this Agreement even if a
majority of the Board of Directors opposes any such change in control. 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 at a meeting of the Board called and held
for such purpose (after reasonable notice to the Employee and an 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 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 anniversary of the Commencement Date, and on each
anniversary 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 120 days prior to
such anniversary that the term of this Agreement shall not be extended further;
and (2) 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. Employment. The Employee is employed as President and Chief
Executive Officer of the Bank. As such, the Employee shall render 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.
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4. Compensation.
(a) Salary. The Bank agrees to pay the Employee during the
term of this Agreement an annual salary not less than $115,000. 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) 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. In addition to salary
provided in this section above, Employee shall be entitled to receive, as he has
from November 1, 1989, a "first tier" and "second tier" bonus. A "first tier"
bonus of $15,000 per year shall be paid to Employee based on satisfaction of two
criteria: (1) the Bank must achieve an after tax return on assets equal to or
better than .5%, and (2) the achievement of the objectives contained in the
Bank's strategic plan respecting such factors as gap position, asset mix,
liquidity, and IDC rating, it being also agreed that the strategic plan shall be
regularly updated by the officers and approved by the Strategic Planning
Committee. A "second tier" bonus shall be paid to Employee based on 5% of any
additional after tax earnings which the Bank enjoys beyond the requirements of
the first tier bonus. In the case of both the "first tier" and "second tier"
bonuses, payment of such bonuses shall also be contingent on the Bank
maintaining at all times a supervisory rating of not less than "3" and required
levels of tangible, core and risk-weighted capital as set forth in the
regulations of the OTS in effect as of the date of this Agreement.
(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.
(b) Fringe Benefits. The Employee shall be eligible to
participate in, and receive benefits under, any fringe benefit plans which are
or may become applicable to the Bank's executive officers.
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6. Vacations; Leave. The Employee shall be entitled to annual paid
vacation of not less than four weeks per year 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 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 12
months after a Change in Control, (1) the Bank shall pay to the Employee during
the remaining term of this Agreement the Employee's 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 4(a)
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 or substantially
the same health benefits as the Bank maintained for its executive officers
immediately prior to the Date of Termination.
(b) Termination for Cause. In the event of Termination for
Cause, the Bank shall pay the Employee the Employee's 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 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 to the Employee the
Employee's 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"1 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 or substantially the same
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1 Note that "base amount" is not the same as base salary. "Base amount"
is the employee's average annual compensation includable in his gross income for
tax purposes during the most recent five full taxable years.
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health benefits as the Bank maintained for its executive officers immediately
prior to the Date of Termination.
(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 (the "Recipient"), shall be entitled to receive
from the Bank in a lump sum the salary of the Employee for a period of six
months following the date of death at the rate at which salary was payable to
the Employee as of the date of death. If the Employee becomes disabled as
defined in the Bank's then current disability plan, if any, or if the Employee
is otherwise unable to serve as President and Chief Executive Officer, the
Employee shall be entitled to receive group and other disability income benefits
of the type, if any, then provided by the Bank for executive officers.
(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 (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.
(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 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.
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8. 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 in effect as of the Commencement Date, 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 in effect as of
the Commencement Date and 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. 1828(k) and any regulations promulgated thereunder.
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) 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
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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 Section 11(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,
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.
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. 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.
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
Maryland.
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 Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
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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: Xxxxx Xxxx Federal Savings & Loan
Association
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Secretary By:
Its:
Employee
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Xxxxxx X. Xxxxxxx
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