Exhibit 10.6
Form of Change in Control Severance Agreement
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 PREFERRED SAVINGS BANK, a federally chartered savings institution
(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,
is hereinafter referred to as the "Association"), and __________________ (the
"Employee") whose residence address is _____________________.
WHEREAS, the Employee is currently serving as the ____________________
of the Association; and
WHEREAS, the Association has adopted a plan of conversion whereby the
Association will convert (the "Conversion") to capital stock form and become the
wholly owned subsidiary of PSB Holding Company (the "Holding Company"); and
WHEREAS, the Board of Directors of the Association 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 Association and its stockholder; and
WHEREAS, the Board of Directors of the Association believes it is in
the best interests of the Association to enter into this Agreement with the
Employee in order to assure continuity of management of the Association 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 contemplated; and
WHEREAS, the Board of Directors of the Association 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.
The term of this Agreement shall be deemed to have commenced as of the
date of the completion of the Association's conversion to stock form and shall
continue for a period of eighteen full calendar months thereafter. Commencing on
the first annual anniversary date of this Agreement and continuing at each
annual anniversary date thereafter, this Agreement shall be extended for a
period of one year in addition to the then-remaining term of employment under
this Agreement, unless either the Association 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 employment under this Agreement would otherwise be extended.
Notwithstanding any other statement or provision in this Agreement to
the contrary, beginning on the first annual anniversary date of the conversion,
this Agreement will not be automatically extended unless, prior thereto, the
Board of Directors of the Association reviews and approves such extension.
2. PAYMENTS TO THE EMPLOYEE UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a change in control (as herein defined) of
the Association or the Holding Company followed at any time during the term of
this Agreement by the involuntary termination of the Employee's employment,
other than for cause, as defined in Section 2(d) hereof, the provisions of
Section 3 shall apply.
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(b) A "change in control" of the Association or the Holding Company is
defined solely as any acquisition of control (other than 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. ss.
574.4, or any successor regulation, of the Association 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. ss. 574.3, or any
successor regulation.
(c) The Employee's employment under this Agreement may be terminated at
any time by the Board of Directors of the Association. The terms "involuntary
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 the Employee's benefits or a material
adverse change in the quality of the work environment which would hamper the
Employee's ability to perform his job effectively shall be deemed and shall
constitute an involuntary termination of employment to the same extent as
express notice of such involuntary termination. By way of example and not by way
of limitation, any of the following actions, if unreasonable or materially
adverse to the Employee, shall constitute such diminution or interference unless
consented to in writing by the Employee: (1) change in the principal workplace
of the Employee to a location outside of a 30 mile radius from the Association's
headquarters office as of the date hereof; (2) a material reduction or adverse
change in the scope or nature of the secretarial or other administrative support
of the Employee which would hamper his ability to perform his job effectively;
(3) a reduction or adverse change in the salary, perquisites, benefits,
contingent benefits or vacation time which had theretofore been provided to the
Employee, other than as part of an overall program applied uniformly and with
equitable effect to all members of the senior management of the Association or
the Holding Company; and
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(4) a material permanent increase in the required hours of work or the workload
of the Employee.
(d) The Employee shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon termination for cause. 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 material law, rule, or regulation (other than a law,
rule or regulation relating to a traffic violation or similar offense) 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 a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of the
Association 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.
3. TERMINATION BENEFITS.
(a) Upon the occurrence of a change in control, followed by the
involuntary termination of the Employee's employment, other than for cause, the
Association shall pay to the Employee in a lump sum in cash within 25 business
days after the date of severance of employment an amount equal to $40,000. At
the election of the Employee, such payment may be made, on a pro rata basis,
semi-monthly during the twelve (12) months following the Employee's termination.
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(b) Upon the occurrence of a change in control of the Association or
the Holding Company followed by the involuntary termination of the Employee's
employment, other than for cause, the Association shall cause life and health
insurance coverage (substantially similar to the coverage maintained by the
Association for the Employee prior to his severance) to be maintained for a
period of 12 months or for the remaining term of the agreement, whichever is
greater.
4. CERTAIN REDUCTION OF PAYMENTS BY THE ASSOCIATION.
(a) Notwithstanding any other provisions of this Agreement, if payments
and benefits under this Agreement, together with any other payments and 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 Association or the
Holding Company for federal income tax purposes pursuant to Section 280G of the
Code, then payments and benefits under this Agreement shall be reduced (not less
than zero) to the extent necessary so as to maximize payments and benefits to
the Employee without causing any amount to become nondeductible by the
Association or the Holding Company by reason of Section 280G of the Internal
Revenue Code of 1986 as amended. The Employee shall determine the allocation
of such reduction among payments and benefits to the Employee.
(b) Notwithstanding any other provisions of this Agreement, payments
under Section 3 of this Agreement shall not exceed three times the Employee's
average annual compensation based on the most recent five taxable years.
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(c) 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.
(d) So long as 12 C.F.R. ss. 563.39(b) (1995) remains in effect and
applicable to the Association, in the event that any of the termination
provisions of this Agreement conflict with 12 C.F.R. ss. 563.39(b) (1995), the
latter shall prevail.
5. REQUIRED REGULATORY PROVISIONS.
(a) The Association may terminate the Employee's employment at any
time, but any termination by the Association, other than a termination for
cause, shall not prejudice the Employee's right to compensation or other
benefits under this Agreement. The Employee shall not have the right to receive
compensation or other benefits for any period after a termination for cause as
defined in Section 2(d) hereinabove.
(b) If the Employee is suspended from office and/or temporarily
prohibited from participating in the conduct of the Association'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. ss. 1818(e)(3) and (g)(1), the Association'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
Association 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 the obligations which were
suspended.
(c) If the Employee is removed from office and/or permanently
prohibited from participating in the conduct of the Association'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) or (g)(1), all obligations of the Association under
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this Agreement shall terminate, as of the effective date of the order, but
vested rights of the parties shall not be affected.
(d) If the Association becomes 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 parties.
(e) All obligations under this Agreement may be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Association: (i) by the Director or his or her
designee, at the time the Federal Deposit Insurance Corporation ("FDIC") or the
Resolution Trust Corporation ("RTC") at the time the FDIC or the RTC enters into
an agreement to provide assistance to or on behalf of the Association under the
authority contained in Section 13(c) of the FDIA, or (ii) by the Director of the
Office of Thrift Supervision ("OTS") 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 Association or when the Association 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.
6. REINSTATEMENT OF BENEFITS UNDER Section 5(b).
In the event the Employee is suspended and/or temporarily prohibited
from participating in the conduct of the Association's affairs by a notice
described in Section 5(b) hereof (the "Notice") during the term of this
Agreement and a change in control occurs, the Association will assume its
obligation to pay and the Employee will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Association's receipt of a dismissal of charges in the Notice.
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7. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Association and the
Employee, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Employee of a kind elsewhere provided. No
provision of this Agreement shall be interpreted to mean that the Employee is
subject to receiving fewer benefits than those available to him without
reference to this Agreement.
8. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
the Employee, the Association and their respective successors and assigns.
9. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a
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waiver of such term or condition for the future or as to any act other than
that specifically waived.
10. NO MITIGATION.
The amount of any payment or benefit provided for in this Agreement
shall not 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.
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 Association 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 Association, 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 Association would be required to perform it if no such
succession or assignment had taken place. Failure of the Association to obtain
such an assumption agreement prior to the effectiveness of any such suc cession
or assignment shall be a breach of this Agreement and shall entitle the Employee
to com pensation from the Association in the same amount and on the same terms
as the compensation pursuant to Section 3 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, admin-
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istrators, 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, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Association shall be directed to the attention of the Board of
Directors of the Association with a copy to the Secretary of the Association),
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
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. PARAGRAPH HEADINGS.
The paragraph 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.
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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 Illinois.
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.
18. REIMBURSEMENT.
In the event the Association 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 any such court or arbitrator that the
Association 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 reason able 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
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THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
ATTEST: PREFERRED SAVINGS BANK
By:
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Xxxxxxxx X. Xxxx, Secretary Xxxxxxxx X. Xxxxxx, President and Chief
Executive Officer
WITNESS: EMPLOYEE
By:
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