Exhibit 10.12

 

ELGIN FINANCIAL SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

THIS AGREEMENT is adopted this 28 day of June, 2002, by and between ELGIN
FINANCIAL SAVINGS BANK, a State/Stock Savings Bank located in Elgin, Illinois
(the “Company”), and LEO FLANAGAN (the “Executive”).

 

INTRODUCTION

 

To encourage the Executive to remain an employee of the Company, the Company is
willing to provide salary continuation benefits to the Executive.  The Company
will pay the benefits from its general assets.

 

AGREEMENT

 

The Company and the Executive agree as follows:

 

Article 1
Definitions

 

Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:

 

1.1           “Change of Control” means:

 

(a)           A change in the ownership of the capital stock of the Company,
whereby another corporation, person, or group acting in concert (hereinafter
this Agreement shall collectively refer to any combination of these three
[another corporation, person, or group acting in concert] as a “Person”) as
described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), acquires, directly or indirectly, beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a
number of shares of capital stock of the Company  which constitutes fifty
percent (50%) or more of the combined voting power of the Company’s then
outstanding capital stock then entitled to vote generally in the election of
directors; or

 

(b)           The persons who were members of the Board of Directors of the
Company immediately prior to a tender offer, exchange offer, contested election
or any combination of the foregoing, cease to constitute a majority of the Board
of Directors; or

 

(c)           The adoption by the Board of Directors of the Company of a merger,
consolidation or reorganization plan involving the Company in which the Company
is not the surviving entity, or a sale of all or substantially all of the assets
of the Company.  For purposes of this Agreement, a sale of all or substantially
all of the assets of the Company shall be deemed to occur if any Person

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acquires (or during the 12-month period ending on the date of the most recent
acquisition by such Person, has acquired) gross assets of the Company that have
an aggregate fair market value equal to fifty percent (50%) or more of the fair
market value of all of the respective gross assets of the Company immediately
prior to such acquisition or acquisitions; or

 

(d)           A tender offer or exchange offer is made by any Person which
results in such Person beneficially owning (within the meaning of Rule 13d-3
promulgated under the Exchange Act) either fifty percent (50%) or more of the
Company’s outstanding shares of Common Stock or shares of capital stock having
fifty percent (50%) or more the combined voting power of the Company’s then
outstanding capital stock (other than an offer made by the Company), and
sufficient shares are acquired under the offer to cause such person to own fifty
percent (50%) or more of the voting power; or

 

(e)           Any other transactions or series of related transactions occurring
which have substantially the same effect as the transactions specified in any of
the preceding clauses of this Section 1.1.

 

Notwithstanding the above, certain transfers are permitted within Section 318 of
the Code and such transfers shall not be deemed a Change of Control under this
Section 1.1.

 

1.2           “Code” means the Internal Revenue Code of 1986, as amended.

 

1.3           “Disability” means the Executive’s suffering a sickness, accident
or injury which has been determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled.  The Executive must submit proof to the Company of the
carrier’s or Social Security Administration’s determination upon the request of
the Company.

 

1.4           “Early Termination” means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability, Termination for
Cause or following a Change of Control.

 

1.5           “Early Termination Date” means the month, day and year in which
Early Termination occurs.

 

1.6           “Effective Date” means May 31, 2002.

 

1.7           “Normal Retirement Age” means the Executive’s 65th birthday.

 

1.8           “Normal Retirement Date” means the later of the Normal Retirement
Age or Termination of Employment.

 

1.9           “Plan Year” means a twelve-month period commencing on January 1
and ending on December 31 of each year.  The initial Plan Year shall commence on
the effective date

 

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of this Agreement.

 

1.10         “Termination for Cause” See Article 5.

 

1.11         “Termination of Employment” means that the Executive ceases to be
employed by the Company for any reason, voluntary or involuntary, other than by
reason of a leave of absence approved by the Company.

 

1.12         “Years of Employment” means the total number of twelve-month
periods during which the Executive has been employed by the Company.  The
Executive was hired by the Company in June, 1996.

 

Article 2
Lifetime Benefits

 

2.1           Normal Retirement Benefit.  Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.

 

2.1.1        Amount of Benefit.  The annual benefit under this Section 2.1 is
$41,900  (Forty-one thousand nine hundred dollars).  The Company’s Board of
Directors, in its sole discretion, may increase the annual benefit under this
Section 2.1.1; however, an increase shall require the recalculation of Schedule
A.

 

2.1.2        Payment of Benefit.  The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments commencing with the month
following the Executive’s Normal Retirement Date, paying the annual benefit to
the Executive for a period of 15 years.

 

2.1.3        Benefit Increases.  Commencing on the first anniversary of the
first benefit payment, and continuing on each subsequent anniversary, the
Company’s Board of Directors, at its sole discretion, may increase the benefit.

 

2.2           Early Termination Benefit.  Upon Early Termination, the Company
shall pay to the Executive the benefit described in this Section 2.2 in lieu of
any other benefit under this Agreement.

 

2.2.1        Amount of Benefit.  The benefit under this Section 2.2 is the Early
Termination annual Installment set forth on Schedule A for the Plan Year ending
immediately prior to the Early Termination Date, determined by one of the
following two methods:  a) if the Executive has completed ten (10) Years of
Employment upon the Effective Date of this Agreement, the Executive shall be
vested in 50 percent of the Accrual Balance set forth on Schedule A for the
first Plan Year and vest in the remaining 50 percent equally over the remaining
Plan Years until Normal Retirement Age, unless otherwise illustrated on Schedule
A; or b) if the Executive has completed less than ten (10) Years of Employment
upon the Effective Date of this Agreement, the Executive shall be zero percent
vested until completing five (5) Years of

 

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Employment and then vest equally over the remaining Plan Years Until Normal
Retirement Age.  An increase in the annual benefit under Section 2.1.1 shall
require the recalculation of this benefit on Schedule A.  This benefit is
determined by calculating a 15-year fixed annuity from the vested Accrual
Balance, crediting interest on the unpaid balance at an annual rate of 7.50
percent, compounded monthly.

 

2.2.2        Payment of Benefit.  The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments commencing with the month
following Termination of Employment, paying the annual benefit to the Executive
for a period of 15 years.

 

2.2.3        Benefit Increases.  Benefit payments may be increased as provided
in Section 2.1.3.

 

2.3           Disability Benefit.  If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.

 

2.3.1        Amount of Benefit.  The benefit under this Section 2.3 is the
Disability annual Installment set forth on Schedule A for the Plan Year ending
immediately prior to the date in which Termination of Employment occurs (except
during the first Plan Year, the benefit is the amount set forth for Plan Year
1), determined by one of the following two methods:  a) if the Executive has
completed ten (10) Years of Employment upon the Effective Date of this
Agreement, the Executive shall be vested in 50 percent of the Accrual Balance
set forth on Schedule A for the first Plan Year and vest in the remaining 50
percent equally over the remaining Plan Years until Normal Retirement Age,
unless otherwise illustrated on Schedule A; or b) if the Executive has completed
less than ten (10) Years of Employment upon the Effective Date of this
Agreement, the Executive shall be zero percent vested until completing five (5)
Years of Employment and then vest equally over the remaining Plan Years Until
Normal Retirement Age.  An increase in the annual benefit under Section 2.1.1
would require the recalculation of the Disability benefit on Schedule A.  This
benefit is determined by calculating a 15-year fixed annuity from the vested
Accrual Balance, crediting interest on the unpaid balance at an annual rate of
7.50 percent, compounded monthly.

 

2.3.2        Payment of Benefit.  The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments commencing with the month
following Termination of Employment, paying the annual benefit to the Executive
for a period of 15 years.

 

2.3.3        Benefit Increases.  Benefit payments may be increased as provided
in Section 2.1.3.

 

2.4           Change of Control Benefit.  Upon a Change of Control, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu of
any other benefit under this Agreement.

 

2.4.1        Amount of Benefit.  The benefit under this Section 2.4 is the
Change of Control

 

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annual Installment set forth on Schedule A for the Plan Year ending immediately
prior to the date in which Termination of Employment occurs (except during the
first Plan Year, the benefit is the amount set forth for Plan Year 1),
determined by vesting the Executive in the Normal Retirement Benefit described
in Section 2.1.1.

 

2.4.2        Payment of Benefit.  The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments commencing with the month
following Normal Retirement Age, paying the annual benefit to the Executive for
a period of 15 years.

 

2.4.3        Benefit Increases.  Benefit payments may be increased as provided
in Section 2.1.3.

 

2.4.4        Excess Parachute Payment.  Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement to the extent the benefit would create an excise tax under the excess
parachute rules of Section 280G of the Code.

 

Article 3
Death Benefits

 

3.1           Death During Active Service.  If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive’s
beneficiary the benefit described in this Section 3.1.  This benefit shall be
paid in lieu of the benefits under Article 2.

 

3.1.1        Amount of Benefit.  The annual benefit under this Section 3.1 is
the Normal Retirement Benefit amount described in Section 2.1.1.

 

3.1.2        Payment of Benefit.  The Company shall pay the annual benefit to
the Executive’s beneficiary in 12 equal monthly installments commencing with the
month following the Executive’s death, paying the annual benefit to the
Executive’s beneficiary for a period of 15 years.

 

3.2           Death During Payment of a Lifetime Benefit.  If the Executive dies
after any Lifetime Benefit payments have commenced under this Agreement but
before receiving all such payments, the Company shall pay the remaining benefits
to the Executive’s beneficiary at the same time and in the same amounts they
would have been paid to the Executive had the Executive survived.

 

3.3           Death After Termination of Employment But Before Payment of a
Lifetime Benefit Commences.  If the Executive is entitled to a Lifetime Benefit
under this Agreement, but dies prior to the commencement of said benefit
payments, the Company shall pay the same benefit payments to the Executive’s
beneficiary that the Executive was entitled to prior to death except that the
benefit payments shall commence on the first day of the month following the date
of the Executive’s death.

 

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Article 4
Beneficiaries

 

4.1           Beneficiary Designations.  The Executive shall designate a
beneficiary by filing a written designation with the Company.  The Executive may
revoke or modify the designation at any time by filing a new designation. 
However, designations will only be effective if signed by the Executive and
received by the Company during the Executive’s lifetime.  The Executive’s
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved.  If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive’s estate.

 

4.2           Facility of Payment.  If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person.  The Company may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit.  Such distribution shall completely discharge the
Company from all liability with respect to such benefit.

 

Article 5
General Limitations

 

5.1           Termination for Cause.  Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement if the Company terminates the Executive’s employment for:

 

(a)           Conviction of a felony or of a gross misdemeanor involving moral
turpitude; or

(b)           Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive’s
employment and resulting in an adverse effect on the Company.

 

5.2           Suicide or Misstatement.  The Company shall not pay any benefit
under this Agreement if the Executive commits suicide within three years after
the date of this Agreement.  In addition, the Company shall not pay any benefit
under this Agreement if the Executive has made any material misstatement of fact
on an employment application or resume provided to the Company, or on any
application for any benefits provided by the Company to the Executive.

 

Article 6
Claims and Review Procedure

 

6.1           Claims Procedure.  Any person or entity (“claimant”) who has not
received benefits under this Agreement that he or she believes should be paid
shall make a claim for such benefits as

 

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follows:

 

6.1.1        Initiation – Written Claim.  The claimant initiates a claim by
submitting to the Company a written claim for the benefits.

 

6.1.2        Timing of Company Response.  The Company shall respond to such
claimant within 90 days after receiving the claim.  If the Company determines
that special circumstances require additional time for processing the claim, the
Company can extend the response period by an additional 90 days by notifying the
claimant in writing, prior to the end of the initial 90-day period, that an
additional period is required.  The notice of extension must set forth the
special circumstances and the date by which the Company expects to render its
decision.

 

6.1.3        Notice of Decision.  If the Company denies part or all of the
claim, the Company shall notify the claimant in writing of such denial.  The
Company shall write the notification in a manner calculated to be understood by
the claimant.  The notification shall set forth:

 

(a)           The specific reasons for the denial;

(b)           A reference to the specific provisions of the Agreement on which
the denial is based;

(c)           A description of any additional information or material necessary
for the claimant to perfect the claim and an explanation of why it is needed;

(d)           An explanation of the Agreement’s review procedures and the time
limits applicable to such procedures; and

(e)           A statement of the claimant’s right to bring a civil action under
ERISA Section 502(a) following an adverse benefit determination on review.

 

6.2           Review Procedure.  If the Company denies part or all of the claim,
the claimant shall have the opportunity for a full and fair review by the
Company of the denial, as follows:

 

6.2.1        Initiation – Written Request.  To initiate the review, the
claimant, within 60 days after receiving the Company’s notice of denial, must
file with the Company a written request for review.

 

6.2.2        Additional Submissions – Information Access.  The claimant shall
then have the opportunity to submit written comments, documents, records and
other information relating to the claim.  The Company shall also provide the
claimant, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

 

6.2.3        Considerations on Review.  In considering the review, the Company
shall take into account all materials and information the claimant submits
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.

 

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6.2.4        Timing of Company Response.  The Company shall respond in writing
to such claimant within 60 days after receiving the request for review.  If the
Company determines that special circumstances require additional time for
processing the claim, the Company can extend the response period by an
additional 60 days by notifying the claimant in writing, prior to the end of the
initial 60-day period, that an additional period is required.  The notice of
extension must set forth the special circumstances and the date by which the
Company expects to render its decision.

 

6.2.5        Notice of Decision.  The Company shall notify the claimant in
writing of its decision on review.  The Company shall write the notification in
a manner calculated to be understood by the claimant.  The notification shall
set forth:

 

(a)           The specific reasons for the denial;

(b)           A reference to the specific provisions of the Agreement on which
the denial is based;

(c)           A statement that the claimant is entitled to receive, upon request
and free of charge, reasonable access to, and copies of, all documents, records
and other information relevant (as defined in applicable ERISA regulations) to
the claimant’s claim for benefits; and

(d)           A statement of the claimant’s right to bring a civil action under
ERISA Section 502(a).

 

Article 7
Amendments and Termination

 

This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.

 

Notwithstanding the previous paragraph in this Article 7, the Company may amend
or terminate this Agreement at any time if, pursuant to legislative, judicial or
regulatory action, continuation of the Agreement would (i) cause benefits to be
taxable to the Executive prior to actual receipt, or (ii) result in significant
financial penalties or other significantly detrimental ramifications to the
Company (other than the financial impact of paying the benefits). However, in no
event shall this Agreement be terminated under this section without payment to
the Executive of any vested benefit.

 

Article 8
Miscellaneous

 

8.1           Binding Effect.  This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.

 

8.2           No Guarantee of Employment.  This Agreement is not an employment
policy or contract.  It does not give the Executive the right to remain an
employee of the Company, nor does it interfere

 

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with the Company’s right to discharge the Executive.  It also does not require
the Executive to remain an employee nor interfere with the Executive’s right to
terminate employment at any time.

 

8.3           Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

 

8.4           Reorganization.  The Company shall not merge or consolidate into
or with another company, or reorganize, or sell substantially all of its assets
to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of the
Company under this Agreement.  Upon the occurrence of such event, the term
“Company” as used in this Agreement shall be deemed to refer to the successor or
survivor company.

 

8.5           Tax Withholding.  The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.

 

8.6           Applicable Law.  The Agreement and all rights hereunder shall be
governed by the laws of the State of Illinois, except to the extent preempted by
the laws of the United States of America.

 

8.7           Unfunded Arrangement.  The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement.  The benefits represent the mere promise by the Company to pay such
benefits.  The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors.  Any insurance on the Executive’s life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.

 

8.8           Entire Agreement.  This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof.  No
rights are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

 

8.9           Administration.  The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:

 

(a)           Establishing and revising the method of accounting for the
Agreement;

(b)           Maintaining a record of benefit payments; and

(c)           Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.

 

8.10         Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under this Agreement.  It may delegate to others certain aspects
of the management and operational responsibilities including the employment of
advisors and the delegation of ministerial duties to qualified individuals.

 

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IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.

 

EXECUTIVE:

 

COMPANY:

 

 

 

 

 

ELGIN FINANCIAL SAVINGS BANK

 

 

 

/s/ Leo Flanagan

 

By

/s/ Barrett J. O'Connor

Leo Flanagan

 

 

 

 

Title

President/CEO

 

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BENEFICIARY DESIGNATION

 

ELGIN FINANCIAL SAVINGS BANK
 SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

LEO FLANAGAN

 

I designate the following as beneficiary of any death benefits under this
Agreement:

 

Primary: Carol M. Flanagan

 

 

Contingent: Ken Casroso and Sean Flanagan. Each as to undivided 50% interest.

 

 

Note:  To name a trust as beneficiary, please provide the name of the trustee(s)
and the exact name and date of the trust agreement.

 

I understand that I may change these beneficiary designations by filing a new
written designation with the Company.  I further understand that the
designations will be automatically revoked if the beneficiary predeceases me,
or, if I have named my spouse as beneficiary and our marriage is subsequently
dissolved.

 

 

Signature

/s/ Leo Flanagan

 

 

 

Date

 

 

 

 

Received by the Company this 28th day of June, 2002.

 

 

By

/s/ Barrett J. O'Connor

 

 

 

Title

President/CEO

 

 

 

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Clark/Bardes Consulting

 

 

Elgin Financial Savings Bank

Banking Practices

 

 

Supplemental Executive Retirement Agreement - Schedule A

 

Leo Flanagan

 

DOB: 10/4/1942
Plan Anniv Date: 1/1/2003
Retirement Age: 65
Payments: Monthly Installments

 

Early Termination

 

Disability

 

Change of Control

 

Preretirement Death Benefit

 

Installment

 

Installment

 

Installment

 

 

 

Payable Immediately

 

Payable Immediately

 

Payable at 65

 

Installment

Period
Ending
Dec of

 

Age

 

Benefit Level

 

Accrual Balance

 

Vesting

 

Based On Accrual

 

Vesting

 

Based On Accrual

 

Vesting

 

Based On Benefit

 

Based On Benefit

 

 

 

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

(7)

 

(8)

 

(9)

2002(1)

 

60

 

41,900

 

54,441

 

20

%

1,204

 

20

%

1,204

 

100

%

41,900

 

41,900

2003

 

61

 

41,900

 

113,108

 

40

%

5,002

 

40

%

5,002

 

100

%

41,900

 

41,900

2004

 

62

 

41,900

 

176,329

 

60

%

11,696

 

60

%

11,696

 

100

%

41,900

 

41,900

2005

 

63

 

41,900

 

244,459

 

80

%

21,620

 

80

%

21,620

 

100

%

41,900

 

41,900

2006

 

64

 

41,900

 

317,877

 

100

%

35,141

 

100

%

35,141

 

100

%

41,900

 

41,900

Oct 2007

 

 

 

41,900

 

379,012

 

100

%

41,900

 

100

%

41,900

 

100

%

41,900

 

41,900

First Payment Date of November 1, 2007

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(1) Assumes an implementation date of January 1, 2002.  The first line reflects
12 months of data, January 2002 through December 2002.

 

 

 

 

 

 

 

/s/ Barrett J. O'Connor

 

/s/ Leo Flanagan

 

June 28, 2002

 

Elgin Financial Savings Bank

 

Participant

 

Date

 

 

 

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