Document:

EXHIBIT

10.15.1

 

FORM OF

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT (the “Agreement”), dated

this ______ day of ______________, ______, by and between Arden Group, Inc., a

Delaware corporation (the “Company”), and _____________________ (the “Option

Holder”), is made with reference to the following facts:

 

A.                                   The

Company is desirous of providing additional incentives to the Option Holder in

rendering services to and on behalf of the Company and, in order to accomplish

this result, has determined to grant the Option Holder the right and option to

purchase shares of the Class A Common Stock, $.25 par value per share, of the

Company pursuant to the Company’s Non-Officer and Non-Director Stock Option

Plan (the “Plan”) on the terms and conditions set forth herein.

 

B.                                     The

Option Holder is desirous of accepting said stock option on the terms and

conditions set forth herein.

 

NOW, THEREFORE, it is agreed as follows:

 

1.                                       Grant.  The Company grants to the Option Holder the

right and option to purchase, on the terms and conditions hereinafter set forth

(the “Option”), all or any part of an aggregate of _____________________

(____________) shares of the Class A Common Stock, $.25 par value per share, of

the Company (the “Class A Common Stock”) at a purchase price of

_________________ Dollars ($______) per share, exercisable from time to time in

accordance with the provisions of this Agreement and the Plan during a period

commencing on the date hereof and expiring at the close of business on the date

which is five years from the date of grant of this Option (the date of grant

being the date hereof) (the “Expiration Date”).  This Option will not be treated as an “incentive stock option” as

defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”),

or any regulations promulgated thereunder.

 

2.                                       Exercise

of Option.

 

(a)                                  The

Option Holder may exercise any then exercisable portion of this Option by

delivering or mailing to the Company, Attention: Chief Financial Officer, a

notice of exercise, in the form prescribed by the Company, specifying therein

the number of shares of Class A Common Stock he has elected to purchase,

accompanied by (i) payment (A) in cash or by check payable to the order of the

Company for the purchase price per share multiplied by the number of shares to

be purchased (the “Aggregate Purchase Price”) or (B) in whole or in part by

delivery by the Option Holder of shares of previously acquired Class A Common

Stock having a Fair Market Value (determined as of the date of such exercise of

this Option) equal to all or part of the Aggregate Purchase Price and, if and

to the extent applicable, cash or a check made payable to the Company for any

remaining portion of the Aggregate Exercise Price and (ii) if required, the

letter described in Paragraph 7.  No

partial exercise of this Option may be for less

 

 

than One Hundred (100) shares and in no event shall

the Company be required to issue fractional shares.  The exercise of this Option shall not be deemed effective unless

and until the Option Holder has complied with all of the provisions of this

Paragraph 2(a).  For purposes of this

Option, “Fair Market Value” shall mean (i) if the Class A Common Stock is then

listed on a national securities exchange, the closing sales price of the Class

A Common Stock on the day such value is determined on the principal securities

exchange on which such stock is then listed, or if there is no reported sale on

that day, the average of the bid and asked quotations on such exchange on that

day, or (ii) if the Class A Common Stock is then publicly traded in the NASDAQ

National Market System, the closing sales price of the Class A Common Stock as

reported by the NASDAQ National Market System on the day such value is

determined, or if there is no reported sale on that day, the average of the bid

and asked quotations on that day, or (iii) if the Class A Common Stock is then

publicly traded in the over-the-counter market (other than the NASDAQ National

Market System), the mean between the closing bid and asked prices of the Class

A Common Stock in the over-the-counter market on the day such value is

determined or, if no shares were traded that day, on the next preceding day on

which there was such a trade, or (iv) if the Class A Common Stock is not then

separately quoted or publicly traded, the fair market value on the date such

value is to be determined, as determined in good faith by the Compensation

Committee of the Board of Directors of the Company (the “Committee”).

 

(b)                                 This

Option shall not be exercisable during the first year from the date of grant

hereof and thereafter shall be exercisable in installments as to (i) no more

than twenty-five percent (25%) of the total number of shares subject to this

Option during the second year from the date hereof, (ii) no more than fifty

percent (50%) of the total number of shares subject to this Option during the

third year from the date hereof, (iii) no more than seventy-five percent (75%)

of the total number of shares subject to the option during the fourth year from

the date hereof, and (iv) all shares subject to this Option from and after the

fourth anniversary of the date hereof.

 

(c)                                  In

connection with the exercise of this Option and as a condition of delivery of

the shares issuable upon exercise thereof, the Option Holder shall remit when

due an amount sufficient to satisfy all current or estimated future federal,

state and local withholding tax requirements and any federal social security or

other employment tax or other tax requirements relating thereto.  Subject to the right of the Committee (or,

if applicable, the body or persons then administering the Plan) to disapprove

any such election and require Option Holder to pay all of the aggregate

withholding taxes in cash, the Option Holder may elect to satisfy, in whole or

in part, the foregoing withholding requirement by delivering a number of shares

of previously acquired Class A Common Stock having a Fair Market Value

(determined as of the date of exercise of this Option) equal to all or part of

the aggregate withholding taxes and, if applicable, cash or a check payable to

the Company for any remaining portion of the aggregate withholding taxes.  An election by Option Holder to pay any

portion of the aggregate withholding taxes with shares of previously acquired Class

A Common Stock must be made concurrently with the related exercise of this

Option and shall be irrevocable as to the Option Holder once such election is

made.

 

(d)                                 If

requested by the Committee, prior to the acceptance of shares of Class A Common

Stock as provided in subparagraph (a) or (c) of this Paragraph 2, the Option

Holder

 

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shall supply the Committee with written

representations and warranties, including without limitation a representation and

warranty that the Option Holder has good and marketable title to such shares

free and clear of liens and encumbrances.

 

3.                                       Termination.  The unexercised portion of this Option shall

automatically and without notice terminate and become null and void at the time

of the earliest to occur of the following:

 

(a)                                  The

Expiration Date;

 

(b)                                 The

expiration of thirty (30) days from the date of termination (other than a

termination described in subparagraph (d) and subparagraph (e) below or on

account of death) of the Option Holder’s employment with the Company or its

subsidiary corporations, provided that if the Option Holder shall die during

such thirty-day (or shorter) period, the provisions of subparagraph (c) below

shall apply; provided that no unvested portion of this Option shall vest or

become exercisable during such thirty (30) day period;

 

(c)                                  The

expiration of one (1) year following the date of the Option Holder’s death if

such death occurs during his employment with the Company or its subsidiary

corporations; provided that no unvested portion of this Option shall vest or

become exercisable during such one (1) year period;

 

(d)                                 The

expiration of one (1) year from the date of termination of the Option Holder’s

employment with the Company or its subsidiary corporations if such termination

is attributable to a disability of the Option Holder within the meaning of

Section 22(e)(3) of the Code (the Committee shall have the right to determine

whether the Grantee’s termination is attributable to a disability of the

Grantee within the meaning of Section 22(e)(3) of the Code, such determination

of the Committee to be final and conclusive); provided that no unvested portion

of this Option shall vest or become exercisable during such one (1) year

period; and

 

(e)                                  The

date of termination of the Option Holder’s employment with the Company or its

subsidiary corporations, if such termination constitutes or is attributable to

a breach by the Option Holder of an employment agreement with the Company or

its subsidiary corporations or if the Option Holder is discharged for cause

(the Committee shall have the right to determine whether the Option Holder has

been discharged for cause and the date of such discharge, such determination of

the Committee to be final and conclusive).

 

4.                                       Continued

Employment.  Nothing contained in

the Plan or in this Option shall obligate the Company or any of its subsidiary

corporations to continue to employ or engage the Option Holder as an employee

of the Company or in any other capacity with the Company or any of its

subsidiary corporations, nor confer upon the Option Holder any right to

continue in the employ or in any other capacity with the Company or its

subsidiary corporations, nor limit in any way the right of the Company or its

subsidiary corporations to amend, modify or terminate the Option Holder’s

compensation or employment agreement, if any, at any time.

 

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5.                                       Non-Assignability.  The Option Holder shall not transfer,

assign, pledge or hypothecate in any manner this Option or any of the rights

and privileges granted hereby other than by will or by the laws of descent and

distribution.  This Option is

exercisable during the Option Holder’s lifetime only by the Option Holder.  Upon any attempt by the Option Holder to

transfer this Option or any right or privilege granted hereby other than by

will or by the laws of descent and distribution and contrary to the provisions

hereof, this Option and said rights and privileges shall immediately become null

and void.

 

6.                                       Anti-Dilution.

 

(a)                                  In

the event that the shares of Class A Common Stock subject to this Option shall

be changed into or exchanged for a different number or kind of shares of stock

or other securities of the Company or of another corporation (whether by reason

of merger, consolidation, recapitalization, reclassification, split-up,

combination of shares, or otherwise) or if the number of such shares of Class A

Common Stock shall be increased solely through the payment of a stock dividend,

then there shall be substituted for or added to, each share of stock of the

Company theretofore appropriated or thereafter subject to this Option the

number and kind of shares of stock or other securities into which each

outstanding share of stock of the Company shall be so changed, or for which

each such share shall be exchanged, or to which each such share shall be

entitled, as the case may be.  This

Option shall also be appropriately amended as to price and other terms as may

be necessary to reflect the foregoing events. 

In the event there shall be any other change in the number or kind of

the outstanding shares of stock of the Company subject to this Option, or of

any stock or other securities into which such stock shall have been changed, or

for which it shall have been exchanged, then if the Committee, in its sole

discretion, determines that such change equitably requires an adjustment in

this Option, such adjustments shall be made in accordance with such

determination.

 

(b)                                 Fractional

shares resulting from any adjustment in this Option pursuant to this Paragraph

6 shall be eliminated.  Notice of any

adjustment shall be given by the Company to the Option Holder and such

adjustment (whether or not such notice is given) shall be final and conclusive

for all purposes hereof.

 

7.                                       Securities

Law.

 

(a)                                  The

Option Holder agrees that the Committee may postpone any exercise of this

Option for such time as the Committee in its sole discretion may deem necessary

or condition the exercise thereof in such manner as the Committee may determine

in order to permit the Company with reasonable diligence (i) to effect or

maintain the listing of such shares on any securities exchanges or in the

NASDAQ Stock Market, or (ii) to effect or maintain registration or

qualification under the Securities Act of 1933, as amended (the “Act”), or any

applicable state statute, of the shares issuable upon the exercise of this

Option, or (iii) to determine that such shares are exempt from registration or

qualification and in connection therewith to require (x) as a condition of the

issuance of shares upon exercise of the Option, that the Option Holder

represent and agree that the Option Holder is acquiring shares of Class A

Common Stock upon exercise of this Option for investment and without a view to

the distribution or resale thereof in violation of the Act and/or any

applicable state securities law and (y) that the certificates

 

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evidencing such shares bear a legend setting forth

such representation.  The Company shall

not be obligated by virtue of this Agreement or any provision of the Plan to

recognize the exercise of this Option or to sell or issue shares in violation

of the Act or of the law of any state having jurisdiction thereof.  Any such postponement shall not extend the

term of this Option; and neither the Company nor its directors or officers

shall have any obligation or liability to the Option Holder, or to the Option

Holder’s legal representative of his estate or the person(s) who acquire the

right to exercise this Option by bequest or inheritance or by reason of the

death of Option Holder, with respect to any shares as to which this Option

shall lapse because of such postponement.

 

(b)                                 If

upon the date hereof neither this Option or the shares of Class A Common Stock

issuable upon exercise hereof are registered under the Act and/or any

applicable state securities laws, the Option Holder represents that he is

acquiring this Option and shall acquire any shares of Class A Common Stock upon

the exercise hereof in good faith for purposes of investment and without a view

to any distribution thereof in violation of the Act and the rules and

regulations promulgated thereunder or of any applicable state securities laws.  Under such circumstances, the Option Holder

understands that the Company is and will be relying upon the truth and accuracy

of the foregoing representation in granting this Option and issuing the Class A

Common Stock without first registering the issuance thereof under the Act or

applicable state securities laws.  The

Option Holder acknowledges that, if the shares of Class A Common Stock issuable

upon exercise hereof are not so registered, then, until such shares have been

so registered (and the Company is not obligated to register such shares), such

shares must be held indefinitely or until such time, if any, as herein provided

and until such shares are either registered under the Act and/or applicable

state securities laws or transfers may be made pursuant to an exemption from such

registration as is accorded by the Act or the rules and regulations promulgated

thereunder and/or applicable state securities laws.  If such shares are not so registered, the Option Holder agrees

that at the time of any exercise hereunder, he will provide the Company with a

letter embodying the aforementioned expressions of understanding and intent

(and any representations as may be required under federal or state law) and

agrees that any shares issued to him following the exercise of any option arising

hereunder may bear such restrictive legend as the Company may deem necessary to

reflect the status of such shares under the Act and/or applicable state

securities laws.  Before consenting to

the removal of such legend and the transfer of any such shares, the Company may

insist upon the delivery to it of an opinion from counsel, satisfactory to it,

that the contemplated transfer does not constitute a violation of the Act

and/or applicable state securities laws.

 

8.                                       Termination

and Acceleration upon Merger.  The

Committee shall have the power, in the event of any merger or consolidation of

the Company with or into any other corporation, the merger or consolidation of

any other corporation into the Company, or the sale of all or substantially all

of the assets and business of the Company to another corporation, to amend this

Option to permit the exercise of this Option prior to the effectiveness of such

merger, consolidation or sale of assets and to terminate this Option as of such

effectiveness.  In such event, the

Company shall give written notice of such amendment and termination to the

Option Holder and this Option shall terminate on such date as may be specified

by the Committee in its discretion, provided, however, that such date shall not

be less than fifteen (15) days after the date of such written notice.  If the Committee shall exercise such power,

this Option shall be deemed

 

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to have been amended to permit the exercise hereof in whole or in part

as determined by the Committee prior to the effectiveness of such merger,

consolidation or sale of assets and this Option shall be deemed to terminate as

specified in the preceding sentence.

 

9.                                       Rights

as a Stockholder.  Neither the

Option Holder nor any other person legally entitled to exercise this Option

shall be entitled to any of the rights or privileges of a stockholder of the

Company in respect to any shares issuable upon any exercise of this Option

unless and until a certificate or certificates representing such shares shall

have been actually issued and delivered to such person.

 

10.                                 Notices.  Whenever under this Agreement notice is

required to be given in writing, it shall be deemed to have been duly given

upon personal delivery, upon deposit with an air courier guaranteeing overnight

delivery, or two (2) days after deposit in mail if mailed by registered or

certified mail, postage prepaid, to the Company at the address set forth below

or to Option Holder at the address set forth on the last page hereof (or to

such other address as either party shall have indicated to the other party by

notice in accordance with this Paragraph):

 

Company:                                          Arden

Group, Inc.

2020 South Central Avenue

Compton, California 90220

Attention: Chief Financial Officer

 

11.                                 Benefit.  Except as otherwise specifically provided

herein, this Agreement shall be binding upon and shall operate for the benefit

of the Company and the Option Holder and his successors.

 

12.                                 Governing

Law.  This Agreement and any rights

and obligations arising hereunder shall be governed and construed in accordance

with the laws of the State of California.

 

13.                                 Entire

Agreement.  This Agreement

represents the entire agreement between the parties hereto regarding options on

the Company’s Class A Common Stock and supersedes any and all prior or

contemporaneous written or oral agreements or discussions between the parties

and any other person or legal entity concerning the transactions contemplated

herein.  Except as otherwise expressly

provided herein, this Agreement cannot be amended or modified except by a

written instrument executed by the parties hereto.

 

14.                                 Construction.  The headings of the Paragraphs are for

reference purposes only and shall not affect in any way the meaning or

interpretation of this Agreement.  If

any of the provisions of this Agreement shall be unlawful, void or for any

reason unenforceable, they shall be deemed separable from, and shall in no way

affect the validity or enforceability of, the remaining provisions of this

Agreement.

 

15.                                 Further

Acts.  The parties hereto agree to

execute and deliver such further instruments as may be reasonably necessary to

carry out the intent of this Option.

 

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IN WITNESS WHEREOF, the parties have executed this

Stock Option Agreement as of the day and year first above written.

 

	

  ARDEN GROUP, INC.

  	

  OPTION HOLDER:

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Address for Notice:

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
						

 

 

The undersigned, the

spouse of Option Holder, does hereby agree to be bound by the terms of the

foregoing Stock Option Agreement.

 

	

  Dated 

  	

   

  	

   

  	

   

  	

  ,

  	

   

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  

 

7Exhibit 10.10

 

ELGIN FINANCIAL SAVINGS BANK

SUPPLEMENTAL
EXECUTIVE RETIREMENT AGREEMENT

 

THIS AGREEMENT is adopted this 28th day of June, 2002,
by and between ELGIN FINANCIAL SAVINGS BANK, a State/Stock Savings Bank located
in Elgin, Illinois (the “Company”), and BARRETT J. O’CONNOR (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

 

1

 

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 January 1, 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 each 12-month period from the
Effective Date.

 

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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 October, 1978.

 

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
$64,300  (Sixty-four thousand three
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 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 

 

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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 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 

 

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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.

 

5

 

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 follows:

 

6

 

 

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.

 

6.2.4        Timing of Company Response.  The Company shall respond in writing to such

 

7

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
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

 

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.

 

9

 

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

 

 

	
  EXECUTIVE:

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  ELGIN
  FINANCIAL SAVINGS BANK

  
	
   

  	
   

  
	
  /s/
  Barrett J. O'Connor

  	
   

  	
  By 

  	
  /s/
  James J. Kovac

  	
   

  
	
  BARRETT
  J. O’CONNOR

  	
   

  
	
   

  	
  Title  

  	
  Executive
  Vice President

  	
   

  
						

 

10

 

BENEFICIARY DESIGNATION

 

ELGIN FINANCIAL SAVINGS BANK

SUPPLEMENTAL
EXECUTIVE RETIREMENT AGREEMENT

 

BARRETT J. O’CONNOR

 

I designate the following
as beneficiary of any death benefits under this Agreement to be distributed as
follows:

 

	
  1.

  	
   

  	
  Fifty Five per cent
  (55%) to the Marital QTIP Trust established under my Declaration of Trust
  dated March 15, 2000, as amended from time to time.

  

 

	
  2.

  	
   

  	
  Nine per cent (9%) to
  Brian P. O'Connor, presently residing in San Diego.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Nine per cent (9%) to
  Kelly M. Lebedun, presently residing in Algonquin, Illinois.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Nine per cent (9%) to
  Sean B. O'Connor, presently residing in Algonquin, Illinois.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Nine per cent (9%) to
  Erin M. Madden, presently residing in Elgin, Illinois.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Nine per cent (9%) to
  Easter Seals Jayne Shover Center.

  

 

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/ Barrett J.
  O'Connor

  	
   

  
	
   

  
	
  Date

  	
  June 28, 2002

  	
   

  
				

 

 

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

 

 

	
  By

  	
  /s/ James J. Kovac

  	
   

  
	
   

  
	
  Title

  	
  Executive Vice
  President

  	
   

  
				

 

11

 

	
  Clark/Bardes
  Consulting

  	
   

  	
  Elgin
  Financial Savings Bank

  
	
  Banking Practice

  	
   

  	
  Supplemental
  Executive Retirement Agreement-Schedule A

  

 

Barrett J. O'Connor

 

	
  DOB: 12/11/1940 

  Plan Anniv Date: 5/1/2003 

  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 (2)

  	
   

  	
  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)

  	
   

  	
  62

  	
   

  	
  64,300

  	
   

  	
  131,894

  	
   

  	
  50

  	
  %

  	
  7,290

  	
   

  	
  50

  	
  %

  	
  7,290

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  64,300

  
	
  2003

  	
   

  	
  63

  	
   

  	
  64,300

  	
   

  	
  272,027

  	
   

  	
  100

  	
  %

  	
  30,294

  	
   

  	
  100

  	
  %

  	
  30,294

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  64,300

  
	
  2004

  	
   

  	
  64

  	
   

  	
  64,300

  	
   

  	
  427,195

  	
   

  	
  100

  	
  %

  	
  47,227

  	
   

  	
  100

  	
  %

  	
  47,227

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  64,300

  
	
  2005

  	
   

  	
  65

  	
   

  	
  64,300

  	
   

  	
  581,634

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  100

  	
  %

  	
  64,300

  	
   

  	
  64,300

  

(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/ James J. Kovac

  	
   

  	
  June 28, 2002

  
	
  Participant

  	
   

  	
  Elgin Financial Savings

  	
   

  	
  Date

  

 

12

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