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EXHIBIT 10.4(a)
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
THIS AGREEMENT entered into this 13th day of June, 1996, by and
between First Federal Savings and Loan Association (the "Association") and Xx.
Xxxxxxx Xxxx (the "Employee"), effective on the date (the "Effective Date")
this agreement is executed.
WHEREAS, the Employee has recently been hired by the Association as an
executive officer, and the Association deems it to be in its best interest to
enter into this Agreement in order to provide the Employee with security in the
event of a Change in Control of the Association, and thereby to facilitate his
retention and insure an orderly transition following a Change in Control; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the event a
Change in Control occurs with respect to the Association.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall
have the meaning set forth herein.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Association, as the terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) When the Association is in the "mutual" form of organization,
a "Change in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange
offer, merger or other business combination, sale of assets or
contested election, any combination of the foregoing transactions, or
any similar transaction, the persons who were Directors of the
Association before such transaction cease to constitute a majority of
the Board of Directors of the Association or any successor to the
Association;
(ii) the Association transfers substantially all of its
assets to another corporation which is not an Affiliate of the
Association;
(iii) the Association sells substantially all of the assets
of an Affiliate which accounted for 50% or more of the controlled
group's assets immediately prior to such sale;
(iv) any "person" including a "group", exclusive of the Board
of Directors of the Association or any committee thereof, is or
becomes the "beneficial owner", directly
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or indirectly, of proxies of the Association representing twenty-five
percent (25%) or more of the combined voting power of the
Association's members; or
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding proxies relating to the
surviving or resulting corporation are given, in the aggregate, by the
former members of the Association.
(c) If the Association shall be in the "stock" form of
organization, a "Change in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any initial public
offering, tender offer or exchange offer, merger or other business
combination, sale of assets or contested election, any combination of
the foregoing transactions, or any similar transaction, the persons
who were Directors of the Association before such transaction cease to
constitute a majority of the Board of Directors of the Association or
any successor to the Association;
(ii) the Association transfers substantially all of its
assets to another corporation which is not an Affiliate of the
Association;
(iii) the Association sells substantially all of the assets
of an Affiliate which accounted for 50% or more of the controlled
group's assets immediately prior to such sale;
(iv) any "person" including a "group" is or becomes the
"beneficial owner", directly or indirectly, of securities of the
Association representing twenty-five percent (25%) or more of the
combined voting power of the Association's outstanding securities
(with the terms in quotation marks having the meaning set forth under
the federal securities laws); or
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding voting securities of the
surviving or resulting corporation is owned in the aggregate by the
former stockholders of the Association.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to occur solely by reason of a transaction in which the Association
converts to the stock form of organization, or creates an independent holding
company in connection therewith.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
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(e) "Code Section 280G Maximum" shall mean product of 2.99 and his
"base amount" as defined in Code Section 280G(b)(3).
(f) "Good Reason" shall mean any of the following events, which
has not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee move his personal residence, or perform his
principal executive functions, more than thirty (30) miles from his primary
office as of the date of the Change in Control; (ii) a material reduction in
the Employee's base compensation as in effect on the date of the Change in
Control or as the same may be increased from time to time; (iii) the failure by
the Association to continue to provide the Employee with compensation and
benefits provided for on the date of the Change in Control, as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by him at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Association, if the Employee is serving on such Board on the
date of the Change in Control; (vi) a material diminution or reduction in the
Employee's responsibilities or authority (including reporting responsibilities)
in connection with his employment with the Association; or (vii) a material
reduction in the secretarial or other administrative support of the Employee.
(g) "Just Cause" shall mean, in the good faith determination of
the Association's Board of Directors, the 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 this
Agreement. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure
to act, on the Employee's part shall be considered "willful" unless he has
acted, or failed to act, with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interest of the
Association.
(h) "Protected Period" shall mean the period that begins on the
date one year before the Change in Control and ends on the closing date of the
Change in Control.
(i) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Association.
2. Trigger Events
The Employee shall be entitled to collect the severance benefits set
forth in Section 3 of this Agreement in the event that (i) a Change in Control
occurs, or (ii) the Association or its successor(s) in interest terminate the
Employee's employment for any reason other than Just Cause during the Protected
Period.
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3. Amount of Severance Benefit
If the Employee becomes entitled to collect severance benefits
pursuant to Section 2 hereof, the Association shall pay the Employee a
severance benefit equal to the difference between the Code Section 280G Maximum
and the sum of any other "parachute payments" as defined under Code Section
280G(b)(2) that the Employee receives on account of the Change in Control.
Said sum shall be paid in one lump sum within ten (10) days of the later of the
date of the Change in Control and the Employee's last day of employment with
the Association, provided that the Employee may elect at any time or before
becoming entitled to collect benefits hereunder, to have such benefits be paid
in substantially equal installments over a period of up to 10 years.
In the event that the Employee and the Association agree that the
Employee has collected an amount exceeding the Code Section 280G Maximum, the
parties may jointly agree in writing that such excess shall be treated as a
loan ab initio which the Employee shall repay to the Association, on terms and
conditions mutually agreeable to the parties, together with interest at the
applicable federal rate provided for in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
Not later than ten business days after a Change in Control, the
Association shall (i) deposit in a Trust an amount equal to the Code Section
280G Maximum, unless the Employee has previously provided a written release of
any claims under this Agreement, and (ii) provide the trustee of the Trust with
a written direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the later of the Trust's final payment of all amounts due
under the following paragraph or the date 12 months after the Change in
Control, the trustee of the Trust shall pay to the Association the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the Trust.
During the 12-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as
being payable pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Association via overnight and registered mail return receipt requested.
On the tenth (10th) business day after mailing said notice to the Association,
the trustee of the Trust shall pay the Employee the amount designated therein
in immediately available funds, unless prior thereto the Association provides
the trustee with a written notice directing the trustee to withhold such
payment. In the latter event, the trustee shall submit the dispute to
non-appealable binding arbitration for a determination of the amount payable to
the Employee pursuant to this Agreement, and the costs of such arbitration
shall be paid by the Association. The trustee shall choose the arbitrator to
settle the dispute, and such arbitrator shall be bound by the rules of the
American Arbitration Association in making his determination. The parties and
the trustee shall be bound by the results of the arbitration and, within 3 days
of the determination by the
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arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Association, and in no event shall the trustee
be liable to either party for making the payments as determined by the
arbitrator.
5. Term of the Agreement. This Agreement shall remain in effect
for the period commencing on the Effective Date and ending on the earlier of
(i) the date 36 months after the Effective Date, and (ii) the date on which the
Employee terminates employment with the Association; provided that the
Employee's rights hereunder shall continue following the termination of this
employment with the Association under any of the circumstances described in
Section 2 hereof. Additionally, on each annual anniversary date from the
Effective Date, the term of this Agreement shall be extended for an additional
one-year period beyond the then effective expiration date provided the Board of
Directors of the Association determines in a duly adopted resolutions that the
performance of the Employee has met the requirements and standards of the
respective Boards, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law.
(a) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently
prohibited from participating in the conduct of the Association's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA") (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the
Association under this Agreement shall terminate, as of the effective date of
the order, but the vested rights of the parties shall not be affected.
(c) If the Association is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate
as of the date of default; however, this Paragraph shall not affect the vested
rights of the parties.
(d) All obligations under this Agreement shall terminate,
except to the extent that continuation of this Agreement is necessary for the
continued operation of the Association: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time
that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Association or when the
Association is determined by the Director of the OTS to be in an unsafe or
unsound condition. Such action shall not affect any vested rights of the
parties.
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(e) If a notice served under Section 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily
prohibits the Employee from participating in the conduct of the Association's
affairs, the Association's obligations under this Agreement shall be suspended
as of the date of such service, unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Association shall (i) pay the
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.
7. Expense Reimbursement.
In the event that any dispute arises between the Employee and
the Association as to the terms or interpretation of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action that
the Employee takes to enforce the terms of this Agreement or to defend against
any action taken by the Association, the Employee shall be reimbursed for all
costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceedings or actions, provided that the Employee shall obtain a
final judgement in favor of the Employee in a court of competent jurisdiction
or in binding arbitration under the rules of the American Arbitration
Association. Such reimbursement shall be paid within ten (10) days of
Employee's furnishing to the Association written evidence, which may be in the
form, among other things, of a cancelled check or receipt, of any costs or
expenses incurred by the Employee.
8. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Since the Association is contracting for the unique
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Association.
9. Amendments. No amendments or additions to this Agreement
shall be binding unless made in writing and signed by all of the parties,
except as herein otherwise specifically provided.
10. Applicable Law. Except to the extent preempted by Federal
law, the laws of the State of Arkansas shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
11. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
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12. Entire Agreement. This Agreement, together with any
understanding or modifications thereof as agreed to in writing by the parties,
shall constitute the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first hereinabove written.
ATTEST: FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
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Secretary Its Chairman of the Board
WITNESS:
/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxxxx Xxxx
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Xxxxxxx Xxxx
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