EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this day of , 1997, by and between Avondale Financial Corp. (the
"Company") and Robert S. Engelman, Jr. (the "Employee").
WHEREAS, the Employee serves as the President and Chief Executive Officer of
the Company and as the President and Executive Officer of the Company's
wholly-owned subsidiary Avondale Federal Savings Bank (the "Bank");
WHEREAS, the Employee has an existing employment agreement with the Bank
(the "Prior Employment Agreement") which he is willing to terminate in
consideration of this Agreement's becoming effective;
WHEREAS, the board of directors of the Company (the "Board of Directors")
believes it is in the best interests of the Company and its subsidiaries for
the Company to enter into this Agreement with the Employee in order to assure
continuity of management of the Company and its subsidiaries; and
WHEREAS, the Board of Directors has approved and authorized the execution of
this Agreement with the Employee;
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 (1) an acquisition of securities of
the Company that is determined by the Board of Directors to constitute a
change in control of the Company or the Bank within the meaning of the Home
Owners' Loan Act of 1933 and 12 C.F.R. Part 574 as in effect on the Effective
Date (as defined below); (2) an event that would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the
Effective Date, pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"); (3) 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 Company or the Bank representing 25% or more of the combined
voting power of the Company's or the Bank's outstanding securities; (4)
individuals who are members of the Board of Directors on the Effective Date
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the
Effective Date 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 Company's stockholders was approved by the nominating
committee serving under an Incumbent Board, shall be considered a member of
the Incumbent Board; or (5) approval by the Company's stockholders of a plan
of reorganization, merger, consolidation, sale of all or substantially all of
the assets of the Company, a similar transaction in which the Company is not
the resulting entity, or a transaction at the completion of which the former
stockholders of the acquired corporation become the holders of more than 40%
of the outstanding common stock of the Company and the Company is the
resulting entity of such transaction; provided that the term "change in
control" shall not include an acquisition of securities by an employee benefit
plan of the Bank or the Company. In the application of 12 C.F.R. Part 574 to a
determination of a Change in Control, determinations to be made by the Office
of Thrift Supervision or its Director under such regulations shall be made by
the Board of Directors.
(b) The term "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company (or its successors) that are part of the
consolidated group of the Company (or its successors) for federal income tax
reporting.
(c) The term "Date of Termination" means the date upon which the Employee's
employment with the Company or the Bank or both ceases, as specified in a
notice of termination pursuant to Section 8 of this Agreement.
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(d) The term "Effective Date" means April 3, 1996.
(e) The term "Involuntarily Termination" means the termination of the
employment of Employee (i) by either the Company or the Bank or both without
his express written consent; or (ii) by the Employee by reason of a material
diminution of or interference with his duties, responsibilities or benefits,
including (without limitation) any of the following actions unless consented to
in writing by the Employee: (1) a requirement that the Employee be based at any
place other than Chicago, Illinois, or within a radius of 35 miles from the
location of the Company's office as of the date of this Agreement, except for
reasonable travel on Company or Bank business; (2) a material demotion of the
Employee; (3) a material reduction in the number or seniority of 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 Company-wide reduction
in staff; (4) a reduction in the Employee's salary or a material adverse change
in the Employee's perquisites, benefits, contingent benefits or vacation, other
than as part of an overall program applied uniformly and with equitable effect
to all members of the senior management of the Bank or the Company; (5) a
material permanent increase in the required hours of work or the workload of
the Employee; or (6) the failure of the Board of Directors (or a board of
directors of a successor of the Company) to elect him as Chief Executive
Officer of the Company (or a successor of the Company) or any action by the
Board of Directors (or a board of directors of a successor of the Company)
removing him from such office, or the failure of the board of directors of the
Bank (or any successor of the Bank) to elect him as Chief Executive Officer of
the Bank (or any successor of the Bank) or any action by such board (or board
of a successor of the Bank) removing him from such office. The term
"Involuntary Termination" does not include Termination for Cause, termination
of employment due to death or permanent disability pursuant to Section 7(g) of
this Agreement, retirement or suspension or temporary or permanent prohibition
from participation in the conduct of the Bank's affairs under Section 8 of the
Federal Deposit Insurance Act.
(f) The terms "Termination for Cause" and "Terminated For Cause" mean
termination of the employment of the Employee with either the Company or the
Bank, as the case may be, 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, or (except as provided below) 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 in the best interest of the Company. 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 duly 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 of Directors the Employee
has engaged in conduct described in the preceding sentence and specifying the
particulars thereof in detail.
2. Term; Termination of Prior Employment Agreement. The term of this
Agreement shall be a period of three years commencing on the Effective Date,
subject to earlier termination as provided herein. Beginning on the third
anniversary of the Effective 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 the Company has not given notice to the
Employee in writing at least 90 days prior to such anniversary that the term of
this Agreement shall not be extended further, and provided further that the
Employee has not received an unsatisfactory performance review by either the
Board of Directors or the board of directors of the Bank. The Employee's Prior
Employment Agreement shall terminate immediately prior to the commencement of
the term of this Agreement.
3. Employment. The Employee is employed as the President and Chief Executive
Officer of the Company and as the President and Chief Executive Officer of the
Bank. As such, the Employee shall have supervision and control over strategic
planning and daily operations of the Bank, shall render administrative and
management
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services as are customarily performed by persons situated in similar executive
capacities, and shall have such other powers and duties as the Board of
Directors or the board of directors of the Bank may prescribe from time to
time. The Employee shall also render services to any subsidiary or subsidiaries
of the Company or the Bank as requested by the Company or the Bank from time to
time consistent with his executive position. The Employee shall devote his best
efforts and reasonable time and attention to the business and affairs of the
Company and the Bank to the extent necessary to discharge his responsibilities
hereunder. The Employee may (i) serve on charitable boards or committees and,
in addition, on such corporate boards as are approved in a resolution adopted
by a majority of the Board of Directors, and (ii) manage personal investments,
so long as such activities do not interfere materially with performance of his
responsibilities hereunder.
4. Cash Compensation.
(a) Salary. The Company agrees to pay the Employee during the term of this
Agreement a base salary (the "Company Salary") the annualized amount of which
shall be not less than the annualized aggregate amount of the Employee's base
salary from the Company and any Consolidated Subsidiaries in effect at the
Effective Date; provided that any amounts of salary actually paid to the
Employee by any Consolidated Subsidiaries shall reduce the amount to be paid by
the Company to the Employee. The Company Salary shall be paid no less
frequently than monthly and shall be subject to customary tax withholding. The
amount of the Employee's Company Salary shall be increased (but shall not be
decreased) from time to time in accordance with the amounts of salary approved
by the Board of Directors or the board of directors of any of the Consolidated
Subsidiaries after the Effective Date. The amount of the Company Salary shall
be reviewed by the Board of Directors at least annually during the term of this
Agreement.
(b) Bonuses. The Employee shall be entitled to participate in an equitable
manner with all other executive officers of the Company and the Bank in such
performance-based and discretionary bonuses, if any, as are authorized and
declared by the Board of Directors for executive officers of the Company and by
the board of directors of the Bank for executive officers of the Bank.
(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 Company and the Bank, provided that the
Employee accounts for such expenses as required under such policies and
procedures.
5. Benefits.
(a) Participation in Benefit Plans. The Employee shall be entitled to
participate, to the same extent as executive officers of the Company and the
Bank generally, in all plans of the Company and the Bank relating to pension,
retirement, thrift, profit-sharing, savings, group or other life insurance,
hospitalization, medical and dental coverage, travel and accident insurance,
education, cash bonuses, and other retirement or employee benefits or
combinations thereof. In addition, the Employee shall be entitled to be
considered for benefits under all of the stock and stock option related plans
in which the Company's or the Bank's executive officers are eligible or become
eligible to participate.
(b) Fringe Benefits. The Employee shall be eligible to participate in, and
receive benefits under, any other fringe benefit plans or perquisites which are
or may become generally available to the Company's or the Bank's executive
officers, including but not limited to supplemental retirement, incentive
compensation, supplemental medical or life insurance plans, company cars, club
dues, physical examinations, financial planning and tax preparation services.
(c) Retirement Bonus. In the event the Employee retires from employment with
the Company and the Bank during the term of this Agreement, the Company shall
pay him a retirement bonus as established by the Compensation Policy Committee.
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6. Vacations; Leave. The Employee shall be entitled (i) to annual paid
vacation in accordance with the policies established by the Board of Directors
and the board of directors of the Bank for executive officers, and (ii) to
voluntary leaves 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. If the Employee experiences an Involuntary
Termination, such termination of employment shall be subject to the Company's
obligations under this Section 7. In the event of the Involuntary Termination
of the Employee, if the Employee has offered to continue to provide services as
contemplated by this Agreement and such offer has been declined, then, subject
to Section 7(b) of this Agreement, the Company shall, as liquidated damages (i)
during the remaining term of this Agreement, pay to the Employee monthly one-
twelfth of the Company Salary at the annual rate in effect immediately prior to
the Date of Termination and one-twelfth of the average annual amount of cash
bonus and cash incentive compensation of the Employee, based on the average
amounts of such compensation earned by the Employee for the two full fiscal
years preceding the Date of Termination; (ii) during the remaining term of this
Agreement, maintain substantially the same group life insurance,
hospitalization, medical, dental, prescription drug and other health benefits,
and long-term disability insurance (if any) for the benefit of the Employee and
his dependents and beneficiaries who would have been eligible for such benefits
if the Employee had not suffered Involuntary Termination and on terms
substantially as favorable to the Employee including amounts of coverage and
deductibles and other costs to him in effect immediately prior to such
Involuntary Termination (the "Employee's Health Coverage"), except to the
extent that the Consolidated Subsidiaries maintain the Employee's Health
Coverage during such period; and (iii) if the Employee is not fully vested
under the Avondale Federal Savings Bank Supplemental Executive Retirement Plan
(the "SERP") as of the Date of Termination, the Employee shall be deemed to
continue to be employed for purposes of the SERP until such time as he is fully
vested under the SERP and the Company shall guarantee that he shall receive
benefits under the SERP accordingly. The payments due under clause (i) of the
preceding sentence shall be reduced by the amounts of cash compensation, if
any, actually paid to the Employee by the Consolidated Subsidiaries for such
period.
(b) Reduction of the Company's Obligations Under Section 7(a).
(1) In the event that the Employee becomes entitled to liquidated damages
pursuant to Section 7(a), (i) the Company's obligation under clause (i) of
Section 7(a) with respect to cash damages shall be reduced by the amount of the
Employee's cash income, if any, earned from providing services other than to
the Company (or its successors) or the Consolidated Subsidiaries during the
remaining term of this Agreement or three years following the Date of
Termination; (ii) the Company's obligation to maintain Health Coverage shall be
reduced to the extent, if any, that the Employee receives such benefits, on no
less favorable terms, from another employer during such period; and (iii) the
Company's obligation under clause (iii) of Section 7(a) shall be reduced to the
extent, if any, that the Employee receives benefits under a supplemental
retirement plan of an employer other than the Company or the Bank. For purposes
of this Section 7(b), the term "cash income" shall include amounts of salary,
wages, bonuses, incentive compensation and fees paid to the Employee in cash
but shall not include shares of stock, stock options, stock appreciation rights
or other earned income not paid to the Employee in cash.
(2) The Employee agrees that in the event he becomes entitled to liquidated
damages pursuant to Section 7(a), throughout the period during which he is so
entitled, he shall promptly inform the Company of the nature and amounts of
cash income and other non-cash income and benefits which he earns from
providing services other than to the Company (or its successors) or the
Consolidated Subsidiaries, and shall provide such documentation of such cash
and non-cash income and benefits as the Company may request. In the event of
changes to such cash and non-cash income and benefits from time to time, the
Employee shall inform the Company of such changes, in each case within fifteen
days after the change occurs, and shall provide such documentation concerning
the change as the Company may request.
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(c) Change in Control. In the event that the Employee experiences an
Involuntary Termination within the 12 months following a Change in Control, in
addition to the Company's obligation under Section 7(a) of this Agreement, the
Company shall pay to the Employee in cash, within 25 days after the later of
the date of such Change in Control or the Date of Termination, an amount equal
to 299% of the Employee's "base amount" as determined under Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), reduced by the present
value of payments to be made under clause (i) of Section 7(a) of this
Agreement. For this purpose, present value shall be determined as present value
of a payment is determined under Section 280G of the Code. Notwithstanding any
other provision of this Agreement, if the payment under this Section 7(c),
together with any other amounts and the value of benefits received or to be
received by the Employee in connection with the Change in Control would cause
any amount to be nondeductible by the Company for federal income tax purposes
pursuant to or by reason of Section 280G of the Code, then the payment under
this Section 7(c) shall be further reduced (not less than zero) to the extent
necessary so as to maximize amounts and the value of benefits to be received by
the Employee without causing any amount to become nondeductible pursuant to or
by reason of Section 280G of the Code. The Employee shall determine the
allocation of such reduction among payments and benefits to the Employee.
(d) Termination for Cause. In the event of Termination for Cause, the Company
shall have no further obligation to the Employee under this Agreement after the
Date of Termination.
(e) Voluntary Termination. The Employee may terminate his employment
voluntarily at any time by a notice pursuant to Section 8 of this Agreement. In
the event that the Employee voluntarily terminates his employment other than by
reason of any of the actions that constitute Involuntary Termination under
Section 1(e)(ii) of this Agreement ("Voluntary Termination"), the Company shall
be obligated to the Employee for the amount of his Company Salary and benefits
only through the Date of Termination, at the time such payments are due, and
the Company shall have no further obligation to the Employee under this
Agreement, except that in the event that the Employee voluntarily terminates
his employment by reason of retirement, he shall be entitled to (i) a
retirement bonus as provided for in Section 5(c) hereof, and (ii) a final
annual bonus in an amount consistent with the Company's and the Bank's year-end
bonus practices, provided that the Board of Directors shall determine the
amount of such bonus in good faith at the time of the Employee's retirement,
taking into consideration the portion of the year elapsed prior to retirement,
and the Company shall pay such bonus in cash upon the Employee's retirement.
(f) Death. In the event of the death of the Employee while employed under
this Agreement and prior to any termination of employment, the Company shall
pay to the Employee's estate, or such person as the Employee may have
previously designated in writing, the Company Salary which was not previously
paid to the Employee and which he would have earned if he had continued to be
employed under this Agreement through the last day of the calendar month in
which the Employee died.
(g) Disability. If the Employee becomes entitled to benefits under the terms
of the then-current disability plan, if any, of the Company or the Bank (a
"Disability Plan") or becomes otherwise unable to fulfill his duties under this
Agreement, he shall be entitled to receive such group and other disability
benefits, if any, as are then provided by the Company or the Bank for executive
employees. In the event of such disability, this Agreement shall not be
suspended, except that (i) the Company's obligation to pay the Company Salary
to the Employee shall be reduced in accordance with the amount of disability
income benefits received by the Employee, if any, pursuant to this paragraph
such that, on an after-tax basis, the Employee shall realize from the sum of
disability income benefits and Company Salary the same amount as he would
realize on an after-tax basis from Company Salary if the Company's obligation
to pay salary were not reduced pursuant to this Section 7(g); and (ii) upon a
resolution adopted by a majority of the disinterested members of the Board of
Directors, the Company may discontinue payment of the Company Salary beginning
six months following a determination that the Employee has become entitled to
benefits under a Disability Plan or otherwise unable to fulfill his duties
under this Agreement.
(h) Regulatory Action. Notwithstanding any other provisions of this
Agreement:
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(1) 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 Federal Deposit Insurance Act ("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 contracting parties shall not be affected;
(2) If the Bank is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations of the Company under this Agreement shall terminate
as of the date of default, but this provision shall not affect any vested
rights of the contracting parties; and
(3) All obligations of the Company 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: (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 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 (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 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.
8. Notice of Termination. In the event that the Company or the Bank, or
both, desire to terminate the employment of the Employee during the term of
this Agreement, the Company or the Bank, or both, shall deliver to the
Employee a written notice of termination, stating whether such termination
constitutes Termination for Cause or Involuntary Termination, setting forth in
reasonable detail the facts and circumstances that are the basis for the
termination, and specifying the date upon which employment shall terminate,
which date shall be at least 30 days after the date upon which the notice is
delivered, except in the case of Termination for Cause. In the event that the
Employee determines in good faith that he has experienced an Involuntary
Termination of his employment, he shall send a written notice to the Company
stating the circumstances that constitute such Involuntary Termination and the
date upon which his employment shall have ceased due to such Involuntary
Termination. In the event that the Employee desires to effect a Voluntary
Termination, he shall deliver a written notice to the Company, stating the
date upon which employment shall terminate, which date shall be at least 90
days after the date upon which the notice is delivered, unless the parties
agree to a date sooner.
9. Attorneys' Fees. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
the Employee as a result of (i) the Employee's contesting or disputing any
termination of employment, or (ii) the Employee's seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company (or its successors) or the Consolidated
Subsidiaries under which the Employee is or may be entitled to receive
benefits; provided that the Company's obligation to pay such fees and expenses
is subject to the Employee's prevailing with respect to the matters in dispute
in any action initiated by the Employee or the Employee's having been
determined to have acted reasonably and in good faith with respect to any
action initiated by the Company or the Bank.
10. 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 Company shall require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) 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 and benefits from the Company in the same amount and
on the same terms as the compensation pursuant to Section 7(a)--(c) hereof.
For purposes of implementing the provisions of this Section 10(a), the date on
which any such succession becomes effective shall be deemed the Date of
Termination.
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(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.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this 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 Company at its home
office, to the attention of the Board of Directors with a copy to the Secretary
of the Company, or, if to the Employee, to such home or other address as the
Employee has most recently provided in writing to the Company.
12. Amendments. No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.
13. 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.
14. 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.
15. Governing Law. This Agreement shall be governed by the laws of the State
of Illinois.
16. 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.
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.
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By: R. Thomas Eiff
Attest: Its:Chairman of the Board
- ------------------------------------- -------------------------------------
Secretary By: Howard A. Jaffe
Its: Vice President and CFO
Employee
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Robert S. Engelman, Jr.
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