Contract
99.1
AJS
BANCORP, INC.
WHEREAS,
Xxxxxx
X. Xxxxxx (“Executive”) and AJS Bancorp, Inc. (the “Company”) desire to enter
into this Supplemental Executive Agreement (“Supplemental Agreement”) to
supplement the Employment Agreement entered into between the Executive and
the
X. X. Xxxxx Federal Savings Bank (the “Bank”), the wholly-owned subsidiary of
the Company, on June 21, 2005, and
WHEREAS,
tax law
provisions relating to “golden parachute payments” could have the effect of
reducing the benefits otherwise provided to Executive under the Employment
Agreement as a result of a change in control of the Company or the Bank;
and
WHEREAS,
the
Board believes that this Supplemental Agreement is in the best interests of
the
Company and its shareholders and will provide the benefits intended to be
provided to Executive in the event of a change in control of the Company or
the
Bank, without any reduction because of tax code “penalties” or excise taxes
relating to a change in control; and
WHEREAS,
the
Company and the Executive also desire to enter into this Supplemental Agreement
for the purpose of providing further incentive to the Executive to achieve
successful results in the management and operations of the Company.
NOW,
THEREFORE,
in
consideration of the mutual covenants herein contained, and upon the other
terms
and conditions hereinafter provided, the parties hereto hereby agree as
follows:
1. In
the
event of a Change in Control (as defined in the Employment Agreement) of the
Bank or the Company, the Executive shall be entitled to receive, pursuant to
this Supplemental Agreement, an amount, payable by the Company, in addition
to
any compensation or benefits payable by the Company pursuant to the Employment
Agreement, which amount shall equal the difference, if any, between (i) the
amount that would be paid under the Employment Agreement , and (ii) the amount
that is actually paid under the terms of the Employment Agreement.
2. In
addition, in each calendar year that Executive is entitled to receive payments
or benefits under the provisions of the Employment Agreement and this
Supplemental Agreement, the independent accountants of the Company shall
determine if an excess parachute payment (as defined in Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”)) exists. Such
determination shall be made after taking any reductions permitted pursuant
to
Section 280G of the Code and the regulations thereunder. Any amount determined
to be an excess parachute payment after taking into account such reductions
shall be hereafter referred to as the “Initial Excess Parachute Payment”. As
soon as practicable after a Change in Control, the Initial Excess Parachute
Payment shall be determined. Upon the Date of Termination following a Change
in
Control, the Company shall pay Executive, subject to applicable withholding
requirements under applicable state or federal law an amount equal
to:
99.1
| (i) | twenty (20) percent of the Initial Excess Parachute Payment (or such other amount equal to the tax imposed under Section 4999 of the Code), and |
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(ii)
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such
additional amount (tax allowance) as may be necessary to compensate
Executive for the payment by Executive of state and federal income,
employment and excise taxes on the payment provided under Clause
(i) and
on any payments under this Clause (ii). In computing such tax allowance,
the payment to be made under Clause (i) shall be multiplied by the
“gross
up percentage” (“GUP”). The GUP shall be determined as
follows:
|
Tax
Rate
GUP
= ---------------
1-
Tax
Rate
The
Tax
Rate for purposes of computing the GUP shall be the highest marginal federal
and
state income and employment-related tax rate, including any applicable excise
tax rate, applicable to the Executive in the year in which the payment under
Clause (i) is made.
3. Notwithstanding
the foregoing, if it shall subsequently be determined in a final judicial
determination or a final administrative settlement to which Executive is a
party
that the excess parachute payment as defined in Section 4999 of the Code,
reduced as described above, is different from the Initial Excess Parachute
Payment (such different amount being hereafter referred to as the “Determinative
Excess Parachute Payment”) then the Company's independent accountants shall
determine the amount (the “Adjustment Amount”) the Executive must pay to the
Company or the Company must pay to the Executive in order to put the Executive
(or the Company, as the case may be) in the same position as the Executive
(or
the Company, as the case may be) would have been if the Initial Excess Parachute
Payment had been equal to the Determinative Excess Parachute Payment. In
determining the Adjustment Amount, the independent accountants shall take into
account any and all taxes (including any penalties and interest) paid by or
for
Executive or refunded to Executive or for Executive's benefit. As soon as
practicable after the Adjustment Amount has been so determined, the Company
shall pay the Adjustment Amount to Executive or the Executive shall repay the
Adjustment Amount to the Company, as the case may be. The purpose of this
paragraph is to assure that (i) the Executive is not paid more as reimbursement
for the golden parachute excise tax than it may ultimately be determined is
necessary to make him whole, and (ii) if it is subsequently determined that
additional golden parachute excise tax is owed by him, additional reimbursement
payments will be made to him to make him whole for the additional excise
tax.
4. In
each
calendar year that Executive receives payments or benefits under the Employment
Agreement, Executive shall report on his state and federal income tax returns
such information as is consistent with the determination made by the independent
accountants of the Company as described above. The Company shall indemnify
and
hold Executive harmless from any and all losses, costs and expenses (including
without limitation, reasonable attorney's fees, interest, fines and penalties)
that Executive incurs as a result of so reporting such information. Executive
shall promptly notify the Company in writing whenever the Executive receives
notice of the
2
99.1
institution
of a judicial or administrative proceeding, formal or informal, in which the
federal tax treatment under Section 4999 of the Code of any amount paid or
payable under this Supplemental Agreement is being reviewed or is in dispute.
The Company shall assume control at its expense over all legal and accounting
matters pertaining to such federal tax treatment (except to the extent necessary
or appropriate for Executive to resolve any such proceeding with respect to
any
matter unrelated to amounts paid or payable pursuant to this contract). The
Executive shall cooperate fully with the Company in any such proceeding. The
Executive shall not enter into any compromise or settlement or otherwise
prejudice any rights the Company may have in connection therewith without prior
consent to the Company.
IN
WITNESS WHEREOF,
AJS
Bancorp, Inc. has caused this Supplemental Agreement to be executed by the
duly
authorized members of the board of directors, and Executive has signed this
Supplemental Agreement as of the 21st day of June, 2005.
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ATTEST:
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AJS
BANCORP, INC.
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/s/
Xxxxx Xxxxxx
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By:
/s/ Xxxxxxx Xxxxx
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Acting
Secretary
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Director
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By:
/s/ Xxxxx Xxxxxxx
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Director
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WITNESS:
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EXECUTIVE
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/s/
Xxxxxxxx Xxxxx
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By:
/s/ Xxxxxx X. Xxxxxx
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