Exhibit 10.6
CHESTERFIELD FINANCIAL CORP.
SUPPLEMENTAL EXECUTIVE AGREEMENT
WHEREAS, Xxxxxxx X. XxXxxx ("Executive") and Chesterfield Financial Corp.
(the "Company") desire to enter into this Supplemental Executive Agreement
("Supplemental Agreement") to supplement the Employment Agreement entered into
between the Executive and Chesterfield Federal Savings and Loan Association of
Chicago (the "Association"), the wholly owned subsidiary of the Company, on
March 20, 2001 (hereinafter referred to as the "Employment Agreement"); 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 and the Executive's supplemental executive retirement
plan as a result of a change in control of the Company or the Association; and
WHEREAS, the Board of Directors of the Company (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 Association, 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 Association 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 Section 4 of the Employment Agreement, which amount shall equal the
difference, if any, between (i) the amount that would be paid under the
Employment Agreement pursuant to Section 4 thereof without regard to any
reduction that may be required by reason of Section 4(d) thereof, 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 there under. 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:
(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
(ii) such additional amount (tax allowance) as may be necessary to compensate
Executive for the payment by Executive of state and federal income 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
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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 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, Chesterfield Financial Corp. has caused this
Supplemental Agreement to be executed and its seal to be affixed hereunto by its
duly authorized officer, and Executive has signed this Supplemental Agreement as
of the 18th day of February, 2003.
ATTEST: CHESTERFIELD FINANCIAL CORP.
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
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Secretary Director
WITNESS: EXECUTIVE
/s/ Xxxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. XxXxxx
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