HARVARD SAVINGS BANK EMPLOYMENT AGREEMENT

Exhibit 10.3

HARVARD SAVINGS BANK

EMPLOYMENT AGREEMENT

This Agreement is made effective as of the      day of             , 2009, by and between Harvard Savings Bank (the “Bank”), an Illinois chartered savings institution, with its principal administrative office at 58 North Ayer Street, Harvard, Illinois 60033 and Donn L. Claussen (“Executive”). Any reference to “Company” shall refer to Harvard Illinois Bancorp, Inc., the holding company of the Bank.

WHEREAS , the Bank wishes to retain the services of Executive as an Executive Vice President of the Bank for the period provided in this Agreement; and

WHEREAS , Executive is willing to serve in the employ of the Bank on a full-time basis for said period; and

WHEREAS , Executive is presently a party to an employment agreement with the Bank, effective January 1, 2008, which employment agreement shall be superseded by this Agreement; and

WHEREAS , in order to induce Executive to remain in the employ of the Bank and to provide further incentive to achieve the financial and performance objectives of the Bank, the parties desire to specify the severance benefits which shall be due to Executive in the event that his employment with the Bank is terminated under specified circumstances.

NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

During the period of his employment hereunder, Executive agrees to serve as Executive Vice President of the Bank. In such capacity, Executive shall be the senior executive officer responsible for all accounting and finance activities for the Bank, its holding companies and all other affiliates or subsidiaries of the Bank, as well as other duties that are customarily assigned to an Executive Vice President and Chief Financial Officer of a financial institution. Failure to reelect Executive as Executive Vice President without the consent of Executive during the term of this Agreement shall constitute a breach of this Agreement.

Executive also agrees to serve, if appointed or elected, as a director of the Bank or the Company, and as an officer and/or director of any subsidiary or affiliate of the Bank or the Company.

(a) The period of Executive’s employment under this Agreement shall begin as of the date first above written and shall continue for a period of thirty-six (36) full calendar months thereafter. Commencing on the first anniversary date of this Agreement, and continuing at each anniversary date thereafter, the Agreement shall renew for an additional year such that the remaining term shall be three (3) years unless written notice is provided to Executive at least thirty (30) days and not more than sixty (60) days prior to any such anniversary date, that his employment shall cease

at the end of twenty-four (24) months following such anniversary date. Prior to each notice period for non-renewal, the disinterested members of the Board of Directors of the Bank (“Board”) will conduct a comprehensive performance evaluation and review of Executive for purposes of determining whether to extend the Agreement, and the results thereof shall be included in the minutes of the Board’s meeting.

(b) During the period of his employment hereunder, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence, Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that, with the approval of the Board, as evidenced by a resolution of such Board, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in such Board’s judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executive’s duties pursuant to this Agreement. Nothing in this Section shall be construed as preventing Executive from serving from time to time on boards, committees, or holding positions of non-profit or governmental organizations, including religious and civic groups, without the need for Board approval.

(c) Nothing in this Agreement shall mandate or prohibit a continuation of Executive’s employment following the expiration of the term of this Agreement, upon such terms and conditions as the Bank and Executive may mutually agree.

(a) The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 2(b). The Bank shall pay Executive as compensation a salary of not less than $             per year (“Base Salary”). Such Base Salary shall be payable twice monthly, or in accordance with the Bank’s normal payroll practices. During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually; such review will be made no later than December 31 of each year during the term of this Agreement and shall be effective from the first day of said the following month through the end of the calendar year. Such review shall be conducted by the Board or a Committee designated by the Board, and the Board may increase, but not decrease, Executive’s Base Salary, other than a decrease that occurs pursuant to an employer-wide reduction of compensation of all officers of the Bank and provided that the reduction of Executive’s Base Salary is not in excess of the average percentage of the employer-wide reduction. Any increase in Executive’s Base Salary shall become the “Base Salary” for purposes of this Agreement. In addition to the Base Salary provided in this Section 3(a), the Bank shall provide Executive at no cost to Executive with all such other benefits as are provided uniformly to permanent full-time employees of the Bank. In the event Executive is elected to the Board, in addition to the foregoing, Executive shall be entitled to receive fees for serving as a director of the Bank in the same amount and on the same terms as fees are paid to other employee directors of the Bank.

(b) The Bank will provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those generally provided to the Bank’s senior officers immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites

which would adversely affect Executive’s rights or benefits thereunder, other than a change that occurs pursuant to a reduction in benefits under such plans, arrangements or perquisites that similarly affects all senior officers of the Bank. Executive will be entitled to participate in all bonus and similar programs available to the Bank’s senior officers, with participation for any partial year being appropriately pro-rated. The Bank shall provide Executive with term life insurance with a death benefit at least equal to $350,000 and shall pay the same percentage of Executive’s family health insurance premiums as paid for other similarly situated senior officers of the Bank. Without limiting the generality of the foregoing provisions of this Subsection (b), Executive will be entitled to participate in or receive benefits under any employee benefit plan, including but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank in the future to its senior executives and key management employees, including stock benefit plans, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(c) Executive shall be entitled to a minimum of four (4) weeks of paid vacation time each year during the term of this Agreement, as well as sick leave, holidays, other paid absences and additional paid vacation in accordance with the Bank’s policies and procedures for senior officers. Any unused paid time off during an annual period shall be treated in accordance with the Bank’s personnel policies as in effect from time to time.

(d) The Bank shall pay or reimburse Executive for all reasonable travel and other reasonable expenses incurred by Executive performing his obligations under this Agreement and may provide such additional compensation in such form and such amounts as the Board may from time to time determine. The Bank shall reimburse Executive for his ordinary and necessary business expenses, including, without limitation, licensing and CPE fees associated with Executive’s Illinois CPA, Insurance, and Brokerage Licenses. Furthermore, the Bank shall reimburse Executive for the reasonable costs that are necessary in maintaining Executive’s membership to the Financial Managers Society, and incurred in providing Executive with a continuing education necessary to improve the required skills of a senior Bank executive and in sending Executive to commercial lending training. Notwithstanding anything to the contrary herein, all reimbursements under this Agreement shall occur no later than March 15 of the calendar year following the calendar year in which the expense is incurred.

(e) The Bank shall provide Executive with non-qualified deferred compensation on the same general terms as the deferred compensation arrangements of the Bank’s Chief Executive Officer on the date hereof. Such deferred compensation shall provide a benefit at retirement in the amount of at least $52,000 per year for a term of 15 years with a pro rata vesting schedule of not more than 10 years. Notwithstanding any other provision herein to the contrary, in the event that Executive’s employment is terminated in accordance with either Section 4(a) or Section 5(b) below, Executive shall be entitled to receive, regardless of whether or not vested, such portion of his deferred compensation which has already been accrued on the date of termination plus such additional amounts of deferred compensation as would have been accrued had Executive been employed for an additional three years following the date of termination.

The provisions of this Section shall in all respects be subject to the terms and conditions stated in Sections 8 and 15.

(a) The provisions of this Section shall apply upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement. As used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following:

Upon the occurrence of any event constituting Good Reason, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed 90 days) after the event giving rise to the right to elect, which

termination by Executive shall be an Event Termination. The Bank shall have at least 30 days to remedy the event constituting Good Reason, provided, however, the Bank shall be entitled to waive such period and make an immediate payment hereunder. In the event of Executive’s resignation for any reason other than as specifically set forth in this Section 4(a), Executive shall not be entitled to any benefits under this Agreement.

(b) Upon the occurrence of an Event of Termination, on the Date of Termination, as defined in Section 8, the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a sum equal to the Base Salary due to Executive for the remaining unexpired term of the Agreement; provided , however , that if the Bank is not in compliance with its minimum capital requirements or if such payments would cause the Bank’s capital to be reduced below its minimum capital requirements, such payments shall be deferred until such time as the Bank is in capital compliance. All amounts payable hereunder shall be made in a lump sum without reduction in the event Executive obtains employment following an Event of Termination, and shall commence within thirty (30) days following Executive’s Date of Termination, or if Executive is a Specified Employee (within the meaning of Treasury Regulation §1.409A-1(i)), shall commence on the first business day of the seventh month following Executive’s Date of Termination.

(c) Upon the occurrence of an Event of Termination, the Bank will cause to be continued life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained by the Bank for Executive prior to his termination, provided that such benefits shall not be provided in the event they should constitute an unsafe or unsound banking practice relating to executive compensation and employment contracts pursuant to applicable regulations, as is now or hereafter in effect. Such coverage shall cease upon the expiration of the remaining term of this Agreement.

(d) Execu