(a) General. A mutual holding company may enter into an employment
contract with its officers and other employees only in accordance
with the requirements of this section. All employment contracts shall
be in writing and shall be approved specifically by the respective
mutual holding company’s board of directors. A mutual holding company
shall not enter into an employment contract with any of its officers
or other employees if such contract would constitute an unsafe or
unsound practice. The making of such an employment contract would
be an unsafe or unsound practice if such contract could lead to material
financial loss or damage to the mutual holding company or could interfere
materially with the exercise by the members of its board of directors
of their duty or discretion provided by law, charter, bylaw or regulation
as to the employment or termination of employment of an officer or
employee of the mutual holding company. This may occur, depending
upon the circumstances of the case, where an employment contract provides
for an excessive term.
(b) Required provisions. Each employment contract shall provide
that:
(1) The mutual holding
company’s board of directors may terminate the officer or employee’s
employment at any time, but any termination by the mutual holding
company’s board of directors other than termination for cause, shall
not prejudice the officer or employee’s right to compensation or other
benefits under the contract. The officer or employee shall have no
right to receive compensation or other benefits for any period after
termination for cause. Termination for cause shall include termination
because of the officer or employee’s personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of
any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any
provision of the contract.
(2) If the officer or employee is suspended
and/or temporarily prohibited from participating in the conduct of
the mutual holding company’s affairs by a notice served under section
8 (e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)) the mutual holding company’s obligations under
the contract shall be suspended as of the date of service unless stayed
by appropriate proceedings. If the charges in the notice are dismissed,
the mutual holding company may in its discretion:
(i) Pay the
officer or employee all or part of the compensation withheld while
its contract obligations were suspended, and
(ii) Reinstate (in whole or in part)
any of its obligations which were suspended.
(3) If the officer or employee
is removed and/or permanently prohibited from participating in the conduct
of the mutual holding company’s affairs by an order issued under section
8 (e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818 (e)(4) or (g)(1)), all obligations of the mutual holding company
under the contract shall terminate as of the effective date of the
order, but vested rights of the contracting parties shall not be affected.
(4) If
the subsidiary savings association is in default (as defined in section
3(x)(1) of the Federal Deposit Insurance Act), all obligations under
the contract shall terminate as of the date of default, but this paragraph
(b) shall not affect any vested rights of the contracting parties: Provided, that this paragraph (b) need not be included in an
employment contract if prior written approval is secured from the
Board.
(5) If the mutual
holding company is subject to bankruptcy proceedings under title 11
of the United States Code, all obligations of the mutual holding company
under the contract shall terminate as of the date that the petition
is filed, but vested rights of the contracting parties shall not be
affected: Provided, that this paragraph (b) need not be included
in an employment contract if prior written approval is secured from
the Board.
(6) All obligations
under the contract shall be terminated, except to the extent determined
that continuation of the contract is necessary to the continued operation
of the mutual holding company—
(i) By the Board, at the
time the Federal Deposit Insurance Corporation enters into an agreement
to provide assistance to or on behalf of the subsidiary savings association
under the authority contained in 13(c) of the Federal Deposit Insurance
Act; or
(ii) By
the Board, at the time the Board approves a supervisory merger to
resolve problems related to operation of the mutual holding company
or when the mutual holding company is determined by the Board to be
in an unsafe or unsound condition.
