EXHIBIT 10.3
SEVERANCE AGREEMENT
THIS SEVERANCE PAY AGREEMENT ("Agreement") is made and entered into as of
this 25th day of January, 1996, by and between AVONDALE FINANCIAL CORP. AND ITS
SUBSIDIARIES, Jointly and Severally, (the "Company") (which, together with any
successor thereto which executes and delivers the assumption agreement provided
for in Section 11(a) hereof or which otherwise becomes bound by the terms and
provisions of this Agreement by operation of law), and Xxxxxx X. Xxxxx (the
"Employee").
WHEREAS, the Employee is currently serving as Executive Vice President of
the Company and Vice President of Avondale Financial Corp. (the "Holding
Company"); and
WHEREAS, the Board of Directors of the Company recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of the 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 Company and
its stockholders; and
WHEREAS, the Board of Directors of the Company believes it is in the best
interests of the Company to enter into this Agreement with the Employee in order
to assure continuity of management of the Company 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 Company, although no such
change is now contemplated; and
WHEREAS, the Board of Directors of the Company 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. The term of this Agreement shall be a period of three years
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commencing January 1, 1996 (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 of this Agreement,
unless either the Company or the Employee gives contrary written
notice to the other not less than 90 days in advance of the date on
which the term of this Agreement would otherwise be extended.
Notwithstanding any other statement or provision in this Agreement to
the contrary, this Agreement will not be automatically extended
unless, prior thereto, the Board of Directors of the Company reviews a
formal performance evaluation of the Employee performed by
disinterested members of the Board of Directors of the Company and
reflected in the minutes of the Board of Directors. Reference herein to the
term of this Agreement shall refer to both such initial term and such
extended terms.
2. Termination of Agreement
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(a) The Employee may terminate this Agreement at any time upon 90 days
written notice to the Company or upon such shorter period as may be
agreed upon between the Employee and the Board of Directors of the
Company.
(b) In the event the Company terminates the Employee without there being a
"Change of Control" as defined below; or in the event the Company
terminated the employee for cause (as defined below) at any time
before or after a "Change of Control", this Agreement shall terminate
as of the Date of Termination (as defined below).
(c) In the event of the death of the Employee during the term of this
Agreement and prior to any termination hereunder, this Agreement shall
terminate as of the date of such death.
(d) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Company's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit
Insurance Act ("FDIA"), 12 U.S.C. (S)1818(e)(3) and (g)(1), the
Company'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 Company may in its discretion
reinstate in whole or in part any of its obligations which were
suspended.
(e) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Company's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. (S)1818
(e)(4) and (g)(1), all obligations of the Company under this Agreement
shall terminate as of the effective date of the order, but vested
rights of the contacting parties shall not be affected.
(f) If the Company 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 contacting parties.
(g) 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 Company: (i) by the Director of the
Office of Thrift Supervision (the "Director") or his or her designee,
at the time the Federal Deposit Insurance Corporation ("FDIC") enters
into an agreement to provide assistance to or on behalf of the Company
under the authority contained in Section 13(c) of the FDIA; or (ii) 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 Company or when the
Company 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.
(h) If the Employee shall become disabled as defined in the Company's
then current disability plan or if the Employee shall be
otherwise unable to serve as Executive Vice President, this
Agreement shall not be suspended.
(i) In the event the Company purports to terminate the Employee 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 such court or arbitrator that the Company 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.
3. Change in Control
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(a) Involuntary Termination. If the Employee's employment is
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involuntarily terminated (other than for cause or pursuant to any
of Sections 2(d) through 2(g)) in connection with or within 12
months after a change in control which occurs at any time during
the term of this Agreement, the Employee shall be entitled to the
benefits provided below:
(i) The Company shall pay to the Employee in a lump sum in cash
within 25 business days after the Date of Termination (as
hereinafter defined) of employment an amount equal to 200
percent of the Employee's "base amount" of compensation, as
defined in Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended ("Code"); plus 200 percent of the
Employee's average annual bonus paid over the prior two
years; plus
(ii) The Company shall continue to provide the Employee with the
health benefits he was receiving before the Date of
Termination for twenty-four months from the Date of
Termination.
Notwithstanding any other provision herein to the contrary,
the amounts payable to the Employee pursuant to subsection (i)
above shall be limited, such that these amounts will not exceed
three times the Employee's average annual compensation over the
most recent five year period or be nondeductible by the Company
for Federal income tax purposes pursuant to Section 280G of the
Code.
(b) Definitions. For purposes of this Agreement, "Date of Termination" means
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the earlier of (i) the date upon which the Company gives notice to the
Employee of the termination of his employment with the Company or (ii) the
date upon which the Employee ceases to serve as an Employee of the Company.
"Change in control" is defined solely as any acquisition of control (other
than pursuant to the Conversion or by a trustee or other fiduciary holding
securities under an employee benefit plan of the Holding Company or a
subsidiary of the Holding Company), as defined in 12 C.F.R. (S) 574.4, or
any successor regulation, of the Company or Holding Company which would
require the filing of an application for acquisition of control or notice
of change in control in a manner as set forth in 12 C.F.R. (S) 574.3, or
any successor regulation.
The terms "termination" or "involuntarily terminated" in this Agreement
shall refer to the termination of the employment of Employee without his
express written consent. In addition, a material diminution of or
interference with the Employee's duties, responsibilites and benefits as an
Executive Officer of the Company shall be deemed and shall constitute an
involuntary termination of employment to the same extent as express notice
of such involuntary termination. Any of the following actions shall
constitute such diminution or interference unless consented to in writing
by the Employee: (1) a change in the principal workplace of the Employee to
a location outside of a 50 mile radius from the Company's headquarters
office as of the date hereof; (2) a material demotion of the Employee, a
material reduction in the number or seniority of other Company 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 Company-
wide reduction in staff; (3) a material reduction or adverse change in the
salary, perquisites, benefits, contingent benefits or vacation time which
had theretofore been provided to the Employee, other than part of an
overall program applied uniformly and with equitable effect to all members
of the senior management of the Company; and (4) a material increase in the
required hours of work or the workload of the Employee.
For purposes of this Agreement, termination for "cause" shall include
termination for 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.
Notwithstanding the foregoing, 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 resolution, duly adopted by the
affirmative vote of not less than a majority of the entire membership of
the Board of Directors of the Company 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 was guilty of conduct constituting "cause" as
set forth above and specifying the particulars thereof in detail.
4. Certain Reduction of Payments by the Company
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(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company 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 Company 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
Company because of Section 280G of the Code. For purposes of this
Section 4, present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section 4 shall be
made by the Company's independent auditors, or at the election of such
auditors by such other firm or individuals of recognized expertise as
such auditors may select (such auditors or, if applicable, such other
firm or individual, are hereinafter referred to as the "Advisory
Firm"). The Advisory Firm shall within ten business days of the Date
of Termination, or at such earlier time as is requested by the
Company, provide to both the Company and the Employee an opinion (and
detailed supporting calculations) that the Company has substantial
authority to deduct for federal income tax purposes the full amount of
the Agreement Payments and that the Employee has substantial authority
not to report on his federal income tax return any excise tax imposed
by Section 4999 of the Code with respect to the Agreement Payments.
Any such determination and opinion by the Advisory Firm shall be
binding upon the Company and the Employee. The Employee shall
determine which and how much, if any, of the Agreement Payments shall
be eliminated or reduced consistent with the requirements of this
Section 4, provided that, if the Employee does not make such
determination within ten business days of the receipt of the
calculations made by the Advisory Firm, the Company shall elect which
and how much, if any, of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section 4 and shall
notify the Employee promptly of such election. Within five business
days of the earlier of (i) the Company's receipt of the Employee's
determination pursuant to the immediately preceding
sentence of this Agreement or (ii) the Company's election in lieu of
such determination, the Company shall pay to or distribute to or for
the benefit of the Employee such amounts as are then due the Employee
under this Agreement. The Company and the Employee shall cooperate
fully with the Advisory Firm, including without limitation providing
to the Advisory Firm all information and materials reasonably
requested by it, in connection with the making of the determinations
required under this Section 4.
(c) As a result of uncertainty in application of Section 280G of the Code
at the time of the initial determination by the Advisory Firm
hereunder, it is possible that Agreement Payments will have been made
by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments will not have been made by the Company
which should have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. In the event that
the Advisory Firm, based upon the assertion by the Internal Revenue
Service against the Employee of a deficiency which the Advisory Firm
believes has a high probability of success determines that an
Overpayment has been made, any such Overpayment paid or distributed by
the Company to or for the benefit of Employee shall be treated for all
purposes as a loan ab initio which the Employee shall repay to the
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Company together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no such
loan shall be deemed to have been made and no amount shall be payable
by the Employee to the Company if and to the extent such deemed loan
and payment would not either reduce the amount on which the Employee
is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Advisory Firm,
based upon controlling precedent or other substantial authority,
determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Company to or for the benefit of the
Employee together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code.
5. No Mitigation. The Employee shall not be required to mitigate the amount of
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any 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.
6. No Assignments
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(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 Company will 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 Company, 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 Company would be required to perform
it if no such succession or assignment had taken place. Failure
of the Company 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 Company 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 Section 6(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.
7. Notice. For the purposes of this Agreement, notices and all other
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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,
addressed to the respective addresses set forth on the first page of
this Agreement (provided that all notices to the Company shall be
directed to the attention of the Board of Directors of the Company
with a copy to the Secretary of the Company), or to such other address
as either party may have furnished to the other in writing in
accordance herewith.
8. Amendments. No amendments or additions to this Agreement shall be
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binding unless in writing and signed by both parties, except herein
otherwise provided. The parties hereto agree to amend this Agreement
to comply with any required provisions of 12 C.F.R. (S) 563.39(b),
as the same may be amended.
9. Paragraph Headings. The paragraph headings used in this Agreement are
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included solely for convenience and shall not affect, or be used in
connection with, the interpretation of this Agreement.
10. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
11. Governing Law. This Agreement shall be governed by the laws of the
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United States to the extent applicable and otherwise by the laws of
the State of Illinois.
12. Arbitration. Any dispute or controversy arising under or in connection
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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.
13. Regulatory Compliance. Any payments made to the Employee pursuant to
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this Agreement, or otherwise, are subject to and conditioned upon
their compliance with 12 U.S.C. (S) 1828(k) and any regulations
promulgated thereunder. Notwithstanding anything in this Agreement to
the contrary, no payments may be made pursuant to this Agreement
without the prior approval of the OTS if the Company is not in
compliance with its regulatory capital requirements, or if such
payment would cause the Company to fail its regulatory capital
requirements.
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.
AVONDALE FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
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Xxxxxx X. Xxxxxxxx, Xx.
President
EMPLOYEE
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
