**EXHIBIT 10(a)**

 

**Execution Copy**

 

EMPLOYMENT AGREEMENT

 

WHEREAS, First Security FederalSavings Bank (the “Association”), a wholly-owned subsidiary of FirstSecurityFed 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 Directorsof the Association (the “Board of Directors”) now believes it is in the bestinterests of the Association to amend and restate the Prior Agreement in orderto provide Employee with benefits comparable to those offered to executives ofa similar level at other publicly held and similarly situated savings and loanholding companies to assure continuity of management of the Association and toreinforce and encourage the continued attention and dedication of the Employeeto his assigned duties without distraction in the face of potentiallydisruptive circumstances arising from the possibility of a change in control ofthe Holding Company or the Association, although no such change is nowcontemplated; and

 

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

 

NOW, THEREFORE, in considerationof the foregoing and of the respective covenants and agreements of the partiesherein, it is AGREED as follows:

 

1.             Definitions.

 

(a)           Theterm “Change in Control” means (1) an event of a nature that (i) results in achange in control of the Association or the Holding Company within the meaningof the Home Owners’ Loan Act of 1933 and 12 C.F.R. Part 574 as in effect on theEffective Date hereof; or (ii) would be required to be reported in response toItem 1 of the current report on Form 8-K, as in effect on the EffectiveDate hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934 (the “Exchange Act”); (2) any person (as the term is used in Sections13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (asdefined in Rule 13d-3 under the Exchange Act), directly or indirectly ofsecurities of the Association or the Holding Company representing 20% or moreof the Association’s or the Holding Company’s outstanding securities; (3)individuals who are members of the board of directors of the Association or theHolding Company on the Effective Date hereof (the “Incumbent Board”) cease forany reason to constitute at least a majority thereof, provided that any personbecoming a director subsequent to the date hereof whose election was approvedby a vote of at least three-quarters of the directors comprising theIncumbent Board, or whose nomination for election by the Holding Company’sstockholders was approved by the nominating committee serving under an IncumbentBoard, shall be considered a member of the Incumbent Board; or (4) a plan ofreorganization, merger consolidation, sale of all or substantially all of theassets of the Association or the Holding Company or a similar transaction inwhich the Association or the Holding Company is not the resulting entity.  The term “change in control “ shall notinclude an acquisition of securities by an

 

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employee benefit plan of the Association or the Holding Company or theacquisition of securities of the Association by the Holding Company. In theapplication 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 regulationsshall be made by the Board of Directors.

 

(b)           Theterm “Date of Termination” means the earlier of (1) the date upon which theAssociation gives notice to the Employee of the termination of his employmentwith the Association or (2) the date upon which the Employee ceases to serve asan Employee of the Association.

 

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

 

(d)           Theterm “Involuntarily Termination” means termination of the employment ofEmployee without his express written consent, and shall include a materialdiminution of or interference with the Employee’s duties, responsibilities andbenefits as President and Chief Executive Officer of the Association, including(without limitation) any of the following actions unless consented to inwriting by the Employee: (1) a change in the principal workplace of the Employeeto a location outside of a 30 mile radius from the Association’s headquartersoffice as of the Effective Date hereof; (2) a material reduction in the numberor seniority of other Association personnel reporting to the Employee or amaterial reduction in the frequency with which, or in the nature of the matterswith respect to which such personnel are to report to the Employee, other thanas part of a Association- or Holding Company-wide reduction instaff; (3) a material adverse change in the Employee’s salary, bonusopportunity, perquisites, benefits, contingent benefits or vacation, other thanas part of an overall program applied uniformly and with equitable effect toall 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 workloadof the Employee; and (5) a material demotion of the Employee. The term“Involuntary Termination” does not include Termination for Cause or terminationof employment due to retirement, death, disability or suspension or temporaryor permanent prohibition from participation in the conduct of the Association’saffairs under Section 8 of the Federal Deposit Insurance Act (“FDIA”).

 

(e)           Theterms “Termination for Cause” and “Terminated for Cause” mean termination ofthe employment of the Employee because of the Employee’s personal dishonesty,incompetence, willful misconduct, breach of a fiduciary duty involving personalprofit, intentional failure to perform stated duties, willful violation of anylaw, rule, or regulation (other than traffic, violations or similar offenses)or final cease-and-desist order, or material breach of any provision of thisAgreement. The Employee shall not be deemed to have been Terminated for Causeunless and until there shall have been delivered to the Employee a copy of aresolution, duly adopted by the affirmative vote of not less than a majority ofthe entire membership of the Board of Directors of the Association at a meetingof the Board called and held for such purpose (after reasonable notice to theEmployee and an opportunity for the Employee, together with the Employee’scounsel, to be heard before the Board), stating that in the good faith opinionof the Board the Employee has engaged in the conduct described in the precedingsentence and specifying the particulars thereof in detail.

 

2.             Term.  The term of this Agreement shall be a periodof three years commencing on the Effective Date, subject to earlier terminationas provided herein.  Beginning on thefirst

 

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

 

3.             Employment.  The Employee is employed as the Presidentand Chief Executive Officer of the Association.  As President and Chief Executive Officer, Employee shall rendersuch administrative and management services as are customarily performed bypersons situated in similar executive capacities, and shall have such otherpowers and duties of an officer of the Association as the Board of Directorsmay prescribe from time to time.

 

4.             Compensation.

 

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

 

(b)           DiscretionaryBonuses.  The Employee shall beentitled to participate in an equitable manner with all other executiveofficers of the Association in discretionary bonuses as authorized and declaredby the Board of Directors to its executive employees.  No other compensation provided for in this Agreement shall bedeemed a substitute for the Employee’s right to participate in such bonuseswhen and as declared by the Board of Directors.

 

(c)           Expenses.The Employee shall be entitled to receive prompt reimbursement for allreasonable expenses incurred by the Employee in performing services under thisAgreement in accordance with the policies and procedures applicable to theexecutive officers of the Association, provided that the Employeeaccounts for such expenses as required under such policies and procedures.

 

5.             Benefits.

 

(a)           Participationin Retirement and Employee Benefit Plans. The Employee shall be entitled to participate in all plans relating topension, thrift, profit-sharing, group life insurance, medical and dentalcoverage, education, cash bonuses, and other retirement or employee benefits orcombinations thereof, in which the Association’s executive officersparticipate. In addition, the Employee shall be entitled to be considered forbenefits under all of the stock and stock option related plans adopted for thebenefit of the Association’s executive or other employees.

 

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(b)           FringeBenefits.  The Employee shall beeligible to participate in, and receive benefits under, any other fringebenefit plans which are or may become applicable to the Association’s executiveofficers.

 

6.             Vacations;Leave.  The Employee shall beentitled to annual paid vacation in accordance with the policies established bythe Association’s Board of Directors for executive employees and to voluntaryleave of absence, with or without pay, from time to time at such times and uponsuch conditions as the Board of Directors of the Association may determine inits discretion.

 

7.             Terminationof Employment.

 

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

 

(i)                                     continuedsalary for the remaining term of this Agreement, at the rate in effectimmediately prior to the Date of Termination, payable in such manner and atsuch times as such salary would have been payable to the Employee under Section4(a) if the Employee had continued to be employed by the Association;

 

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

 

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

 

(iv)                              fullvesting in any stock options, restricted stock or other similar incentiveawards.

 

(b)           Terminationfor Cause.  In the event ofTermination for Cause, the Association shall pay the Employee his salarythrough the Date of Termination, and the Association shall have no furtherobligation to the Employee under this Agreement.

 

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

 

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

 

(d)           Changein Control.  In the event ofInvoluntary Termination in connection with, or within 12 months after a Changein Control, which occurs at any time while the Employee is employed under thisAgreement, 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 afterthe 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 healthbenefits, at the level maintained by the Association for the benefit of itsexecutive officers from time to time, for the remaining term of the Agreement.  Such continued health benefits shall be inaddition to, and not in lieu of, any COBRA continuation rights the Employee mayhave under Section 4980B of the Code.

 

(e)           Death;Disability.  In the event of thedeath of the Employee while employed under this Agreement and prior to anytermination of employment, the Employee’s estate, or such person as theEmployee may have previously designated in writing, shall be entitled toreceive from the Association (1) the salary of the Employee through the lastday of the calendar month in which the Employee died, and (2) a lump sum cashpayment equal to twelve months of salary, at the rate in effect on the date ofthe Employee’s death.  If the Employeebecomes disabled as defined in the Association’s then current disability planor if the Employee is otherwise unable to serve in his present capacity, theEmployee shall be entitled to receive group and other disability incomebenefits of the type then provided by the Association for executive officers.  In the event of such disability, thisAgreement shall not be suspended. However, the Association shall be obligatedto pay the Employee compensation pursuant to Sections 4(a) and (b) hereof onlyto the extent the Employee’s salary, in the absence of such disability, wouldexceed (on an after tax basis) the disability income benefits received pursuantto this paragraph. In addition, the Association shall have the right, uponresolution of its Board, to discontinue paying cash compensation pursuant toSections 4(a) and (b) beginning six months following a determination thatEmployee qualifies for the foregoing disability income benefits.

 

(f)            TemporarySuspension or Prohibition.  If theEmployee is suspended and/or temporarily prohibited from participating in theconduct 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’sobligations 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 itsdiscretion (1) pay the Employee all or part of the compensation withheld whileits obligations under this Agreement were suspended and (ii) reinstate in wholeor in part any of its obligations which were suspended.

 

(g)           PermanentSuspension or Prohibition.  If theEmployee is removed and/or permanently prohibited from participating in theconduct 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 ofthe Association under this Agreement shall terminate as of the effective dateof the order, but vested rights of the contracting parties shall not beaffected.

 

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(h)           Defaultof the Association.  If theAssociation is in default (as defined in Section 3(x)(1) of the FDIA), allobligations under this Agreement shall terminate as of the date of default, butthis provision shall not affect any vested rights of the contracting parties.

 

(i)            Terminationby Regulators.  All obligationsunder this Agreement shall be terminated, except to the extent determined thatcontinuation of this Agreement is necessary for the continued operation of theAssociation: (1) by the Director of the Office of Thrift Supervision (the“Director”) or his or her designee, at the time the Federal Deposit InsuranceCorporation or the Resolution Trust Corporation enters into an agreement toprovide assistance to or on behalf of the Association under the authoritycontained in Section 13(c) of the FDIA; or (2) by the Director or his or herdesignee, at the time the Director or his or her designee approves asupervisory merger to resolve problems related to operation of the Associationor when the Association is determined by the Director to be in an unsafe orunsound condition.  Any rights of theparties that have already vested, however, shall not be affected by any suchaction.

 

(j)            Section563.39(b).  So long as 12 C.F.R. §563.39(b)(1995) remains in effect and applicable to the Association, in theevent that any of the termination provisions of this Agreement conflict with 12C.F.R. § 563.39(b)(1995), the latter shall prevail.

 

8.             CertainReduction of Payments by the Association.

 

(a)           Anypayments made to the Employee pursuant to this Agreement, or otherwise, aresubject to and conditioned upon their compliance with 12 U.S.C. 1828(k) and anyregulations promulgated thereunder.

 

(b)           ****Notwithstandingany other provision of this Agreement, if payments under this Agreement,together with any other payments received or to be received by the Employee inconnection with a Change in Control would cause any amount to be nondeductibleby the Association or the Holding Company for federal income tax purposespursuant to Section 280G of the Code, then benefits under this Agreement shallbe reduced (not less than zero) to the extent necessary so as to maximizepayments to the Employee without causing any amount to become nondeductible bythe Association or Holding Company.  TheEmployee shall determine the allocation of such reduction among payments to theEmployee.

 

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

 

9.             NoMitigation.  The Employee shall notbe required to mitigate the amount of any salary or other payment or benefitprovided for in this Agreement by seeking other employment or otherwise, norshall the amount of any payment or benefit provided for in this Agreement bereduced by any compensation earned by the Employee as the result of employmentby another employer, by retirement benefits after the date of termination orotherwise.

 

10.           AttorneysFees.  In the event the Associationexercises its right of Termination for Cause, but it is determined by a courtof competent jurisdiction or by an arbitrator pursuant to

 

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Section 17 that cause did not exist for such termination, or if in anyevent it is determined by any such court or arbitrator that the Association hasfailed to make timely payment of any amounts owed to the Employee under thisAgreement, the Employee shall be entitled to reimbursement for all reasonablecosts, including attorneys’ fees, incurred in challenging such termination orcollecting such amounts.  Suchreimbursement shall be in addition to all rights to which the Employee isotherwise entitled under this Agreement.

 

11.           NoAssignments.

 

(a)           ThisAgreement is personal to each of the parties hereto, and neither party mayassign or delegate any of its rights or obligations hereunder without firstobtaining, the written consent of the other party; provided, however, that theAssociation shall require any successor or assign (whether direct or indirect,by purchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Association, by an assumption agreement inform and substance satisfactory to the Employee, to expressly assume and agreeto perform this Agreement in the same manner and to the same extent that theAssociation would be required to perform it if no such succession or assignmenthad taken place. Failure of the Association to obtain such an assumptionagreement prior to the effectiveness of any such succession or assignment shallbe a breach of this Agreement and shall entitle the Employee to compensationfrom the Association in the same amount and on the same terms as thecompensation pursuant to Section 7(d) hereof. For purposes of implementing theprovisions of this Section 11(a), the date on which any such succession becomeseffective shall be deemed the Date of Termination.

 

(b)           ThisAgreement and all rights of the Employee hereunder shall inure to the benefitof and be enforceable by the Employee’s personal and legal representatives,executors, administrators, successors, heirs, distributees, devisees andlegatees. If the Employee should die while any amounts would still be payableto the Employee hereunder if the Employee had continued to live, all suchamounts, unless otherwise provided herein, shall be paid in accordance with theterms of this Agreement to the Employee’s devisee, legatee or other designee orif there is no such designee, to the Employee’s estate.

 

12.           Notice.  For the purposes of this Agreement, noticesand all other communications provided for in the Agreement shall be in writingand shall be deemed to have been duly given when personally delivered or sentby certified mail, return receipt requested, postage prepaid, to theAssociation at its home office the attention of the Board of Directors with acopy to the Secretary of the Association, or, if the Employee, to such home orother address as the Employee has most recently provided in writing to the Association.

 

13.           Amendments.  No amendments or additions to this Agreementshall be binding unless in writing and signed by both parties, except as hereinotherwise provided.

 

14.           ParagraphHeadings.  The paragraph headingsused in this Agreement are included solely for convenience and shall notaffect, or be used in connection with, the interpretation of this Agreement.

 

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15.           Severability.  The provisions of this Agreement shall bedeemed severable and the invalidity or unenforceability of any provision shallnot affect the validity or enforceability of the other provisions hereof.

 

16.           GoverningLaw.  This Agreement shall begoverned by the laws of the United States to the extent applicable andotherwise by the laws of the State of Illinois.

 

17.           Arbitration.  Any dispute or controversy arising under orin connection with this Agreement shall be settled exclusively by arbitrationin accordance with the rules of the American Arbitration Association then in effect.Judgment may be entered on the arbitrator’s award in any court havingjurisdiction.

 

18.           EntireAgreement.  This Agreementconstitutes the entire agreement between the parties concerning the subjectmatter hereof and supersedes all prior and contemporaneous agreements,including the Prior Agreement, relating to the subject matter hereof.

 

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

 

THIS AGREEMENT CONTAINS ABINDING 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 |   |
|                          |        |                                      |  |  |  |

 

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