EXHIBIT 10(a)


 


Execution Copy


 


EMPLOYMENT AGREEMENT


 


WHEREAS, First Security Federal
Savings Bank (the “Association”), a wholly-owned subsidiary of First
SecurityFed Financial, Inc. (the “Holding Company”), and Julian E. Kulas (the
“Employee”) have previously entered into an employment agreement dated June 1,
2000 (the “Prior Agreement”); and


 


WHEREAS, the Board of Directors
of the Association (the “Board of Directors”) now believes it is in the best
interests of the Association to amend and restate the Prior Agreement in order
to provide Employee with benefits comparable to those offered to executives of
a similar level at other publicly held and similarly situated savings and loan
holding companies 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 or the Association, although no such change is now
contemplated; and


 


WHEREAS, the Board of Directors
has approved and authorized the execution of this Agreement with the Employee
to take effect on the Effective Date as stated in Section 2 hereof;


 


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 event of a nature that (i) results in a
change in control of the Association or the Holding Company 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 hereof; or (ii) 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 hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the “Exchange Act”); (2) 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 Association or the Holding Company representing 20% or more
of the Association’s or the Holding Company’s outstanding securities; (3)
individuals who are members of the board of directors of the Association or the
Holding Company on the Effective Date hereof (the “Incumbent Board”) cease for
any reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof 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 Holding Company’s
stockholders was approved by the nominating committee serving under an Incumbent
Board, shall be considered a member of the Incumbent Board; or (4) a plan of
reorganization, merger consolidation, sale of all or substantially all of the
assets of the Association or the Holding Company or a similar transaction in
which the Association or the Holding Company is not the resulting entity.  The term “change in control “ shall not
include an acquisition of securities by an


 

















 


employee benefit plan of the Association or the Holding Company or the
acquisition of securities of the Association by the Holding 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 OTS or its Director under such regulations
shall be made by the Board of Directors.


 


(b)           The
term “Date of Termination” means the earlier of (1) the date upon which the
Association gives notice to the Employee of the termination of his employment
with the Association or (2) the date upon which the Employee ceases to serve as
an Employee of the Association.


 


(c)           The
term “Effective Date” means January 1, 2003.


 


(d)           The
term “Involuntarily Termination” means termination of the employment of
Employee without his express written consent, and shall include a material
diminution of or interference with the Employee’s duties, responsibilities and
benefits as President and Chief Executive Officer of the Association, including
(without limitation) any of the following actions unless consented to in
writing by the Employee: (1) a 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 Effective Date hereof; (2) a material reduction in the number
or seniority of other Association 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 Association- or Holding Company-wide reduction in
staff; (3) a material adverse change in the Employee’s salary, bonus
opportunity, 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 Association or the Holding Company;
(4) a material permanent increase in the required hours of work or the workload
of the Employee; and (5) a material demotion of the Employee. The term
“Involuntary Termination” does not include Termination for Cause or termination
of employment due to retirement, death, disability or suspension or temporary
or permanent prohibition from participation in the conduct of the Association’s
affairs under Section 8 of the Federal Deposit Insurance Act (“FDIA”).


 


(e)           The
terms “Termination for Cause” and “Terminated for Cause” mean termination of
the employment of the Employee 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 material breach of any provision of this
Agreement. 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 has engaged in the conduct described in the preceding
sentence and specifying the particulars thereof in detail.


 


2.             Term.  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
first


 


2

















 


annual anniversary date following the Effective Date, and on each
annual anniversary date thereafter, the term of this Agreement shall be
extended for a period of one year in addition to the then-remaining term, provided
that (1) the Association has not given notice to the Employee in writing at
least 90 days prior to such renewal date that the term of this Agreement shall
not be extended further; and (2) prior to such renewal date, the Board of
Directors of the Association has explicitly reviewed and approved the
extension. The Association shall submit this Agreement to the Board of
Directors for review and approval of the extension on an annual basis and
promptly notify the Employee of the Board’s decision regarding such review and
approval. Reference herein to the term of this Agreement shall refer to both
such initial term and such extended terms.


 


3.             Employment.  The Employee is employed as the President
and Chief Executive Officer of the Association.  As President and Chief Executive Officer, Employee shall render
such administrative and management services as are customarily performed by
persons situated in similar executive capacities, and shall have such other
powers and duties of an officer of the Association as the Board of Directors
may prescribe from time to time.


 


4.             Compensation.


 


(a)           Salary.  The Association agrees to pay the Employee
during the term of this Agreement the salary established by the Board of
Directors, which shall be at least the Employee’s salary in effect as of the
Effective Date.  The amount of the
Employee’s salary shall be reviewed by the Board of Directors, beginning not
later than the first anniversary of the Effective Date.  Adjustments in salary or other compensation
shall not limit or reduce any other obligation of the Association under this
Agreement.  The Employee’s salary in
effect from time to time during the term of this Agreement shall not thereafter
be reduced.


 


(b)           Discretionary
Bonuses.  The Employee shall be
entitled to participate in an equitable manner with all other executive
officers of the Association in discretionary bonuses as authorized and declared
by the Board of Directors to its executive employees.  No other compensation provided for in this Agreement shall be
deemed a substitute for the Employee’s right to participate in such bonuses
when and as declared by the Board of Directors.


 


(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 Association, provided that the Employee
accounts for such expenses as required under such policies and procedures.


 


5.             Benefits.


 


(a)           Participation
in Retirement and Employee Benefit Plans. 
The Employee shall be entitled to participate in all plans relating to
pension, thrift, profit-sharing, group life insurance, medical and dental
coverage, education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Association’s executive officers
participate. In addition, the Employee shall be entitled to be considered for
benefits under all of the stock and stock option related plans adopted for the
benefit of the Association’s executive or other employees.


 


3

















 


(b)           Fringe
Benefits.  The Employee shall be
eligible to participate in, and receive benefits under, any other fringe
benefit plans which are or may become applicable to the Association’s executive
officers.


 


6.             Vacations;
Leave.  The Employee shall be
entitled to annual paid vacation in accordance with the policies established by
the Association’s Board of Directors for executive employees and to voluntary
leave of absence, with or without pay, from time to time at such times and upon
such conditions as the Board of Directors of the Association may determine in
its discretion.


 


7.             Termination
of Employment.


 


(a)           Involuntary
Termination.  The Board of Directors
may terminate the Employee’s employment at any time, but, except in the case of
Termination for Cause, termination of employment shall not prejudice the
Employee’s right to compensation or other benefits under this Agreement. In the
event of Involuntary Termination other than in connection with or within twelve
(12) months after a Change in Control, the Employee shall be entitled to the
following:


 


(i)                                     continued
salary for the remaining term of this Agreement, at the rate in effect
immediately prior to the Date of Termination, payable in such manner and at
such times as such salary would have been payable to the Employee under Section
4(a) if the Employee had continued to be employed by the Association;


 


(ii)                                  the
bonus that would have been earned by the Employee during the remaining term of
this Agreement, assuming for this purpose that the amount of such bonus would
equal the actual bonus earned by the Employee for the fiscal year preceding the
year in which the Involuntary Termination occurs or, if greater, the Employee’s
target bonus for the fiscal year in which the Involuntary Termination occurs,
payable in substantially equal installments at the same time salary payments
are made under clause (i) above;


 


(iii)                               continued
health benefits, at the level maintained by the Association for the benefit of
its executive officers from time to time, for the remaining term of the
Agreement.   The continued health
benefits under this Agreement shall be in addition to, and not in lieu of, any
COBRA continuation rights the Employee may have under Section 4980B of the
Internal Revenue Code of 1986, as amended (the “Code”); and


 


(iv)                              full
vesting in any stock options, restricted stock or other similar incentive
awards.


 


(b)           Termination
for Cause.  In the event of
Termination for Cause, the Association shall pay the Employee his salary
through the Date of Termination, and the Association shall have no further
obligation to the Employee under this Agreement.


 


(c)           Voluntary
Termination.  The Employee’s
employment may be voluntarily terminated by the Employee at any time upon 90
days written notice to the Association or upon


 


4

















 


such shorter period as may be agreed upon between the Employee and the
Board of Directors of the Association. In the event of such voluntary
termination, the Association shall be obligated to continue to pay the Employee
his salary and benefits only through the Date of Termination, at the time such
payments are due, and the Association shall have no further obligation to the
Employee under this Agreement.


 


(d)           Change
in Control.  In the event of
Involuntary Termination in connection with, or within 12 months after a Change
in Control, which occurs at any time while the Employee is employed under this
Agreement, subject to Section 8 of this Agreement, the Association shall (1)
pay to the Employee in a lump sum cash payment within 25 business days after
the Date of Termination an amount equal to 299% of the Employee’s “base amount”
within the meaning of Code Section 280G, and (2) provide continued health
benefits, at the level maintained by the Association for the benefit of its
executive officers from time to time, for the remaining term of the Agreement.  Such continued health benefits shall be in
addition to, and not in lieu of, any COBRA continuation rights the Employee may
have under Section 4980B of the Code.


 


(e)           Death;
Disability.  In the event of the
death of the Employee while employed under this Agreement and prior to any
termination of employment, the Employee’s estate, or such person as the
Employee may have previously designated in writing, shall be entitled to
receive from the Association (1) the salary of the Employee through the last
day of the calendar month in which the Employee died, and (2) a lump sum cash
payment equal to twelve months of salary, at the rate in effect on the date of
the Employee’s death.  If the Employee
becomes disabled as defined in the Association’s then current disability plan
or if the Employee is otherwise unable to serve in his present capacity, the
Employee shall be entitled to receive group and other disability income
benefits of the type then provided by the Association for executive officers.  In the event of such disability, this
Agreement shall not be suspended. However, the Association shall be obligated
to pay the Employee compensation pursuant to Sections 4(a) and (b) hereof only
to the extent the Employee’s salary, in the absence of such disability, would
exceed (on an after tax basis) the disability income benefits received pursuant
to this paragraph. In addition, the Association shall have the right, upon
resolution of its Board, to discontinue paying cash compensation pursuant to
Sections 4(a) and (b) beginning six months following a determination that
Employee qualifies for the foregoing disability income benefits.


 


(f)            Temporary
Suspension or Prohibition.  If the
Employee is suspended 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 FDIA, 12 U.S.C. § 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 (1) 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 its obligations which were suspended.


 


(g)           Permanent
Suspension or Prohibition.  If the
Employee is removed 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. § 1818(e)(4) and (g)(1), all obligations of
the Association under this Agreement shall terminate as of the effective date
of the order, but vested rights of the contracting parties shall not be
affected.


 


5

















 


(h)           Default
of the Association.  If the
Association is 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 contracting parties.


 


(i)            Termination
by Regulators.  All obligations
under this Agreement shall be terminated, except to the extent determined that
continuation of this Agreement is necessary for the continued operation of the
Association: (1) by the Director of the Office of Thrift Supervision (the
“Director”) or his or her designee, at the time the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation 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 (2) 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 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.


 


(j)            Section
563.39(b).  So long as 12 C.F.R. §
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. § 563.39(b)(1995), the latter shall prevail.


 


8.             Certain
Reduction of Payments by the Association.


 


(a)           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.


 


(b)             Notwithstanding
any other provision of this Agreement, if payments under this Agreement,
together with any other payments 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 benefits under this Agreement shall
be reduced (not less than zero) to the extent necessary so as to maximize
payments to the Employee without causing any amount to become nondeductible by
the Association or Holding Company.  The
Employee shall determine the allocation of such reduction among payments to the
Employee.


 


(c)           The
Board of Directors, in it sole discretion, may limit the amount of any payments
to be made pursuant to Sections 7(a) and (d) of this Agreement to an amount
that does not exceed three times the Employee’s average annual compensation,
based on the most recent five taxable years, to the extent that it determines
such limitation is necessary or desirable to comply with OTS regulations or
other guidance.


 


9.             No
Mitigation.  The Employee shall not
be required to mitigate the amount of any salary or other payment or benefit
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Agreement 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.


 


10.           Attorneys
Fees.  In the event the Association
exercises its right of Termination for Cause, but it is determined by a court
of competent jurisdiction or by an arbitrator pursuant to


 


6

















 


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 reasonable
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.


 


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 shall 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 succession or assignment shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Association in the same amount and on the same terms as the
compensation pursuant to Section 7(d) 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, administrators, 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, to the
Association at its home office the attention of the Board of Directors with a
copy to the Secretary of the Association, or, if the Employee, to such home or
other address as the Employee has most recently provided in writing to the Association.


 


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.


 


7

















 


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.


 


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.           Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior and contemporaneous agreements,
including the Prior Agreement, relating to the subject matter hereof.


 


8

















 


IN WITNESS WHEREOF, the parties
have executed this Agreement as of the Effective Date.


 


THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.


 


	
  ATTEST:

  	
   

  	
  FIRST
  SECURITY FEDERAL SAVINGS BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Terry Gawryk

  	
   

  	
  By:

  	
   

  	
  /s/
  Paul Nadzikewycz

  	
   

  
	
  Terry
  Gawryk, Secretary

  	
   

  	
   

  	
  Paul
  Nadzikewycz

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chairman

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  EMPLOYEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Julian E. Kulas

  	
   

  
	
   

  	
   

  	
   

  	
  Julian
  E. Kulas

  	
   

  
						



 


9