EMPLOYMENT AGREEMENT

 

 

 

THIS AGREEMENT is entered into as of January 1, 2011 (the “Effective Date”) between the FEDERAL HOME LOAN BANK OF CHICAGO (the “Bank”) and Matthew R. Feldman (the “Executive”).

 

A.    The Bank and the Executive have previously entered into an Employment Agreement dated as of May 5, 2008, which is scheduled to expire on May 31, 2011 (the “Current Agreement”), and the Bank wishes to revise and extend the employment of the Executive in a manner that closely aligns the interests of the Executive with the interests of the members of the Bank and that provides appropriate incentives to the Executive for the successful performance of his duties; and

 

B.    The Bank and the Executive wish to confirm the employment of the Executive by the Bank on the terms and conditions hereinafter set forth; and

C.    The Bank recognizes the valuable services that the Executive has rendered and desires to be assured that the Executive will continue his active participation in the business of the Bank, subject to the terms of this Agreement, and desires to assure Executive that his employment will continue subject to the terms of this Agreement.

D.    The parties wish to replace the Current Agreement with this Agreement, to become effective on the Effective Date.

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained in this Agreement, it is agreed as follows:

 

 

As used in this Agreement, unless the context otherwise requires a different meaning, the following terms shall have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof and words in the masculine gender being deemed to be feminine as may be applicable):

 

Cause means any of the following activities by the Executive: (i) the conviction of the Executive for a felony, or a crime involving moral turpitude; (ii) the commission of any act involving dishonesty, disloyalty, or fraud with respect to the Bank or any of its members; (iii) willful and continued failure to perform material duties which are reasonably directed by the Board which are consistent with the terms of this Agreement and the position of President and CEO; (iv) gross negligence or willful misconduct with respect to the Bank or any of its members; (v) any violation of Bank policies regarding sexual harassment, discrimination, substance abuse or the Bank's Code of Ethics to the extent such acts would provide grounds for a termination for cause with respect to other employees; or (vi) a material breach by the Executive of a material provision of this Agreement. No act or failure to act on the part of the Executive shall be consider ed “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that his action or omission was in the best interests of the Bank.

Confidential Information means: (a) financial information, including but not limited to earnings, assets, debts, prices, fee structures, volumes of purchases or sales, or other financial data, whether relating to the Bank generally, or to particular products or services offered by the Bank; (b) customer or member information, including but not limited to information concerning the products or services utilized or purchased by members, the names and addresses of members, terms of funding or loan agreements, or of particular transactions, or rel ated information about potential members; (c) marketing information, including but not limited to details about ongoing or proposed marketing programs or agreements by or on behalf of the Bank, marketing forecasts, results of marketing efforts or information about impending transactions, and pricing strategies; (d) personnel information, including but not limited to employees' personal or medical histories, employment agreements, commission and bonus plans, compensation or other terms of employment, actual or proposed promotions, hiring, resignations, disciplinary actions, terminations, training methods, performance or other employee information; (e) information contained in any computer files, including, but not limited to reports of examination issued by the Bank's regulator, current and historical information regarding the Bank's borrowing and other relationships with its members and other borrowers, and to the results of the Bank's internal ratings of its members and other borrowers, confidential informa tion of third parties provided to the Bank under an agreement requiring the Bank to maintain the confidentiality of such information except for specified permitted uses, or other proprietary operating software systems, and any associated passwords; (f) procedures manuals, policy manuals, sales training materials, brochures, funding agreements, license agreements, minutes of board meetings, minutes of manager's meetings, sales meetings; and (g) contacts, including but not limited to any compilations of past, existing or prospective sources of business, proposals or agreements between members and the Bank, any sales or borrowing histories or other revenue information by member or customer, status of member or customer accounts or credit, or related information about actual or prospective members or contacts.

 

Determination Date means the date of termination of the Executive's employment with the Bank for any reason whatsoever or any earlier date (during the Restricted Period) of an alleged breach of the Restrictive Covenants by the Executive.

 

Disability means that the Executive (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined under the Bank's short- or long-term disability program; or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined under the Bank's short- or long-term disability program, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Bank's employees.

Good Reason means any of the following:

(a)    a reduction by the Bank in the Executive's base salary; or

(b)    a material change in the geographic location of the Executive's principal office assignment;

(c)    a material breach of thi s Agreement by the Bank;

(d)    a material diminution in the Executive's authority, duties, or responsibilities as an Executive of the Bank; or

(e)    the Executive is prevented, by factors outside of the Executive's control, from (i) fulfilling his responsibilities as President and CEO of the Bank, (ii) achieving progress in improving the profitability of the Bank, or (iii) achieving the strategic goals and objectives established by the Board, such acts of prevention being defined as a material breach of this Agreement by the Bank; provided, however, that “prevention” does not include the Board's lawful authority to exercise control over the affairs of the Bank.

For purposes of this Agreement, Good Reason shall not be deemed to exist unless the Executive's termination of employment for Good Reason occurs within two (2) years following the initial existence of one of the conditions specified in clauses (a) through (e) above, the Executive provides the Board with written notice of the existence of such condition within ninety (90) days after the initial existence of the condition, and the Board fails to remedy the condition within thirty (30) days after the receipt of such notice by the Board.

Notwithstanding the foregoing, Good Reason will not exist if the Executive voluntarily agrees in writing to any of the changes listed above as constituting Good Reason.

Person means any individual or any corporation, partnership, joint venture, association, or other entity or enterprise.

Protected Employees means employees o f the Bank who were employed by the Bank at any time within six (6) months prior to the Determination Date.

Restricted Period means the period of the Executive's employment by the Bank under this Agreement plus a period extending two (2) years from the date of termination of employment.

Restrictive Covenants means the restrictive covenants contained in Section 9(b) and (c) hereof.

Retirement means the planned and voluntary termination by the Executive of his employment on or after reaching the earliest retirement age permitted by the Financial Institutions Retirement Fund.

Term of the Agreement means the period which commences on the Effective Date and, unless earlier terminated pursuant to Section 6, ends on December 31, 2014. The “Term of the Agreement” shall also include, as applicable, each subsequent one-year rene wal period following the automatic renewal of this Agreement pursuant to Section 3, to the extent such automatic renewals occur.

 

The Executive has been retained by the Bank as its President and Chief Executive Officer (“President and CEO”) with overall charge and responsibility for the business and affairs of the Bank. The Executive shall report directly to the Board and shall perform such duties as the Executive shall reasonably be directed to perform by the Board. The Executive shall devote his best efforts to the performance of his duties of his position with the Bank and shall devote substantially all of his business time and attention to the performance of his duties under this Agreement, excluding any periods of vacation and sick leave to which the Executive is entitled. The Executive may (a) serve on civic or charitable boards or committees and (b) deliver lectures and fulfill speaking engagements, so long as such activities do not in the view of the Board interfere, in any substantive respect, with the Executive's responsibilities hereunder or conflict in any material way with the business of the Bank or the Bank's Code of Ethics.

Unless terminated earlier as provided in Section 6, the Executive's employment as President and CEO under this Agreement will continue for the Term of the Agreement; provided, however, that the Term of the Agreement shall be automatically extended by one (1) year effective January 1, 2015 and each year thereafter until such date as either the Bank or the Executive shall have terminated this automatic extension provision by giving written notice to the other party at least three (3) months prior to the end of the initial Term of the Agreement or any extension thereof.

(a)    Salary. The Executive's base salary is $695,000, which base salary shall be effective as of the Effective Date and shall be payable in accordance with Bank's payroll payment dates. The Personnel & Compensation Committee of the Board (the “P&C Committee”) will review the performance of the Executive at least annually. Based on such reviews, the P&C Committee will review and, in its discretion, may recommend that the Board increase the Executive's base salary each year, and such increased amount shall thereafter constitute the Executive's “base salary” for all purposes under this Agreement. The P&C Committee will base its annual reviews and salary recommendations on its review of salaries of the other 11 Federal Home Loan Banks and similarly-situated financial institutions (the “comparator group”), such salary recommendations to the Board to be in the discretion of the P&C Committee, taking into account the salaries of the comparator group.

 

(b)    Incentive Programs.

(a)	Death. Upon the Executive's death, in which case this Agreement and the Term of the Agreement will terminate on the date of death;

(b)

Disability. Upon t he Executive's Disability, in which case the Executive may be eligible for leave under one or more of the Bank's medical leave and/or disability plans. If the Executive's Disability results in the Executive's inability to perform, with or without reasonable accommodation (as defined under the Americans with Disabilities Act), the Executive's duties under this Agreement, after the initial ninety- (90-) day period of Disability, the Bank may give the Executive thirty (30) days' written notice of termination of this Agreement. If the Executive does not return to the performance of the Executive's duties hereunder on a full-time basis by the end of the thirty day notice period, then the Bank may terminate the Executive's employment hereunder effective on the thirty-first (31st) day following the giving by the Bank of such written notice of terminati on. Although employment under the terms of this Agreement and the Term of the Agreement will end, the termination of this Agreement will not affect the Executive's employment and benefits under the Bank's medical leave and/or disability plans, if applicable;

(c)

Termination by the Board for Cause. The Board may terminate the Executive's employment at any time for Cause, such termination to be effective as of the date stated in a written notice of termination delivered to the Executive. Before proceeding with termination under subparts (iii) through (vi) of the definition of “Cause”, the Board will give the Executive written notice of the grounds for termination and thirty (30) days to cure, if curable. If the Executive fails or is unable to cure, the Executive's employment will terminate immediately;

(d)

Resignation by the Executive Other Than for Good Reason. The Executive may voluntarily resign his position with the Bank at any time for any reason or for no reason, other than under circumstances constituting Good Reason, upon thirty (30) days' prior written notice to the Bank. Such resignation will be effective as of the date stated in such written notice, unless otherwise mutually agreed by the parties;

(e)	Termination by the Bank Other Than for Cause. The B ank may terminate Executive's employment for any reason or for no reason, other than under circumstances constituting Cause, upon thirty (30) days' prior written notice to Executive. Such termination will be effective as of the date stated in a written notice of termination;

(f)

Termination by Executive With Good Reason. The Executive may resign the Executive's employment hereunder at any time for Good Reason. The Executive mus t give the Bank written notice explaining the reasoning for the Executive's determination that an event giving rise to Good Reason for termination has occurred and allow the Bank thirty (30) days to cure as further described in the definition of “Good Reason” in Section 1. If the Bank fails to cure, the Executive's employment under this Agreement will end on the date stated in the notice by the Executive (or such earlier date after the delivery of such notice as the Bank may elect); or

(g)	Non-Renewal of Agreement. The Bank may exercise its right not to renew this Agreement pursuant to Section 3. Such non-renewal shall be deemed to be a termination and will be effective as of the last day of the Term of the Agreement immediately following the Bank's notice to the Executive that this Agreement is not being renewed.

•	Section 6(c)            [By the Bank for Cause]

•	Section 6(d)            [By the Executive Other Than for Good Reason]

•	Section 6(a)            [Death]

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•	Section 6(b)            [Disability]

•	Section 6(e)            [By the Bank Other Than for Cause]

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•	Section 6(f)            [By the Executive for Good Reason]

•	Section 6(g)            [Non-Renewal by the Bank of the Agreement]

(i)	on the Bank's next scheduled pay date that occurs at least five (5) days after termination, all accrued and unpaid salary for time worked as of the date of termination;

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(ii)	on the Bank's next scheduled pay date that occurs at least five (5) days after termination, all accrued but unutilized vacation time as of the date of termination, determined in accordance with the Bank's employee handbook;

(iii)	salary continuation (at the base salary level in effect at the time of termination) pursuant to the Bank's normal payroll schedule for a period of time beginning on the date of termination and continuing for one (1) year;

(iv)	payment of an amount equal to the minimum total incentive compensation that the Executive would otherwise have been entitled to if all performance targets for the current calendar year had been met at a 100% level, such compensation to be paid in a lump sum within ten (10) days of when the release referred to in the last paragraph of this Section 7 becomes effective;

(v)

continued participation in the Bank's employee health care benefit plans in accordance with the terms of the Bank's Severance Plan that would be applicable to the Executive if his employment had been terminated pursuant to such plan, provided that the Bank will continue paying the employer's portion of the Executive's medical and/or dental insurance premiums, if the Executive participates in either or both pr ograms, for one (1) year from the date of termination; and

(vi)	an additional amount under the Bank's non-qualified Post-December 31, 2004 Benefit Equalization Plan (the “BEP”) equal to the additional annual benefit under Section 3.01 of the BEP with the benefit under Section 3.01 being calculated as if:

(2)	the Executive had three (3) additional years of service at the same annual rate of compensation (as defined in the Regulations Governing the Comprehensive Reti rement Program of the Financial Institutions Retirement Fund as from time to time amended, and as adopted by the Bank) in effect for the 12-month period ending on the December 31 which immediately precedes the Executive's termination; and

(3)	the BEP continued in effect without change in accordance with its terms as in effect on the date immediately preceding the Executive's termination.

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20. NOTICES.

 

Any notice required or permitted hereunder shall be in writing, and shall be deemed duly given when hand delivered, or when mailed, first class mail, postage prepaid, registered or certified, return receipt requested, to the addresses set forth below:

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

 

 

FEDERAL HOME LOAN BANK            EXECUTIVE

 

 

By:     /s/ P. David Kuhl                By: /s/ Matthew R. Feldman