CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 19th day of September 2000 ("Effective Date"), by and between BUCS Federal
(the "Savings Bank") and Xxxxx X. Xxxxxx (the "Employee").
WHEREAS, the Employee is currently employed by the Savings Bank as Vice
President, Member Services, and is experienced in certain phases of the business
of the Savings Bank; and
WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities of the Savings Bank and Employee if the Savings Bank should
undergo a change in control (as defined hereinafter in the Agreement) after the
Effective Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the Vice
President, Member Services, of the Savings Bank. The Employee shall render such
administrative and management service to the Savings Bank and any to-be-formed
parent savings and loan holding company ("Parent") as are currently rendered and
as are customarily performed by persons situated in a similar executive
capacity. The Employee's other duties shall be such as the Board of Directors
for the Savings Bank (the "Board of Directors" or "Board") may from time to time
reasonably direct, including normal duties as an officer of the Savings Bank and
the Parent.
2. Term of Agreement. The term of this Agreement shall be for the
period commencing on the Effective Date and ending thirty-six (36) months
thereafter ("Term"). Additionally, on, or before, each annual anniversary date
from the Effective Date, the Term of this Agreement may be extended for an
additional period beyond the then effective expiration date upon a determination
and resolution of the Board of Directors that the performance of the Employee
has met the requirements and standards of the Board, and that the Term of such
Agreement shall be extended.
3. Termination of Employment in Connection with or Subsequent to a
Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within 12 months after, any Change in
Control of the Savings Bank or Parent, Employee shall be paid an amount equal to
two (2) times the taxable compensation paid to the Employee by the Bank and the
Parent for the calendar year ending on or before the Employee's date of
termination of employment with the Bank (including sums that may have been
deferred under the Bank's 401(k) plan) (whether said amounts were received or
deferred by the Employee) and the costs associated with maintaining coverage
under the Savings Bank's medical and dental
1
insurance reimbursement plans similar to that in effect on the date of
termination of employment for a period of one and one-half years thereafter.
Said sum shall be paid in one (1) lump sum not later than the date of such
termination and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive. Notwithstanding the
forgoing, all sums payable hereunder shall be reduced in such manner and to such
extent so that no such payments made hereunder when aggregated with all other
payments to be made to the Employee by the Savings Bank or the Parent shall be
deemed an "excess parachute payment" in accordance with Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "Change in Control"
shall refer to (i) the control of voting proxies whether related to stockholders
or mutual members by any person, other than the Board of Directors of the
Savings Bank, to direct more than 25% of the outstanding votes of the Savings
Bank, the control of the election of a majority of the Savings Bank's directors,
or the exercise of a controlling influence over the management or policies of
the Savings Bank by any person or by persons acting as a group within the
meaning of Section 13(d) of the Exchange Act, (ii) an event whereby the OTS,
FDIC or any other department, agency or quasi-agency of the federal government
cause or bring about, without the consent of the Savings Bank, a change in the
corporate structure or organization of the Savings Bank; (iii) an event whereby
the OTS, FDIC or any other agency or quasi-agency of the federal government
cause or bring about, without the consent of the Savings Bank, a taxation or
involuntary distribution of retained earnings or proceeds from the sale of
securities to depositors, borrowers, any government agency or organization or
civic or charitable organization; or (iv) a merger or other business combination
between the Savings Bank and another corporate entity whereby the Savings Bank
is not the surviving entity. In the event that the Savings Bank shall convert in
the future from mutual-to-stock form, the term "Change in Control" shall also
refer to: (i) the sale of all, or a material portion, of the assets of the
Savings Bank or the Parent; (ii) the merger or recapitalization of the Savings
Bank or the Parent whereby the Savings Bank or the Parent is not the surviving
entity; (iii) a change in control of the Savings Bank or the Parent, as
otherwise defined or determined by the Office of Thrift Supervision or
regulations promulgated by it; or (iv) the acquisition, directly or indirectly,
of the beneficial ownership (within the meaning of that term as it is used in
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Savings Bank or the Parent by any person,
trust, entity or group. The term "person" means an individual other than the
Employee, or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The provisions of this Section
3(a) shall survive the expiration of this Agreement occurring after a Change in
Control.
(b) Notwithstanding any other provision of this Agreement to the
contrary except as provided at Sections 4 and 5, Employee may voluntarily
terminate his employment under this Agreement within 12 months following a
Change in Control of the Savings Bank or Parent, and upon the occurrence, or
within 120 days thereafter, of any of the following events, which have not been
consented to in advance by the Employee in writing: (i) if Employee would be
required to move his personal residence or perform his principal executive
functions more than thirty-five
2
(35) miles from the Employee's primary office as of the signing of this
Agreement; (ii) if in the organizational structure of the Savings Bank or
Parent, Employee would be required to report to a person or persons other than
the Board of the Savings Bank or Parent, or the President; (iii) if the Savings
Bank or Parent should fail to maintain the Employee's base compensation in
effect as of the date of the Change in Control and existing employee benefits
plans, including material fringe benefit, stock option and retirement plans,
except to the extent that such reduction in benefit programs is part of an
overall adjustment in benefits for all employees of the Savings Bank or Parent
and does not disproportionately adversely impact the Employee; (iv) if Employee
would be assigned duties and responsibilities other than those normally
associated with his position as referenced at Section 1, herein; or (v) if
Employee's responsibilities or authority have in any way been materially
diminished or reduced. Upon such voluntary termination of employment by the
Executive in accordance with this subsection, Executive shall thereupon be
entitled to receive the payments described in Section 3(a) of this Agreement.
The provisions of this Section 3(b) shall survive the expiration of this
Agreement occurring after a Change in Control.
4. Other Changes in Employment Status. Except as provided for at
Section 3, herein, the Board of Directors may terminate the Employee's
employment at any time with or without Just Cause within its sole discretion.
This Agreement shall not be deemed to give Employee any right to be retained in
the employment or service of the Bank, or to interfere with the right of the
Bank to terminate the employment of the Employee at any time. The Employee shall
have no right to receive compensation or other benefits for any period after
termination with or without Just Cause. Termination for "Just Cause" shall
include termination because of 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 the Agreement.
5. Regulatory Exclusions.
(a) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank'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) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate, as of the effective date of the order, but the
vested rights of the contracting parties shall not be affected.
(b) If the Savings Bank 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, but this paragraph shall not affect any vested rights of the
contracting parties.
(c) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the
3
Savings Bank: (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") enters into an agreement to provide assistance to or on
behalf of the Savings Bank 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 Savings Bank or when the
Savings Bank is determined by the Director of the OTS to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(d) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)),
the Savings Bank's obligations under the Agreement shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Savings Bank may within its discretion (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.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
(f) Notwithstanding anything herein to the contrary, in no event shall
payments to the Executive resulting from termination of employment for any
reason in accordance with the Agreement exceed the product of three (3) times
the Executives average annual compensation paid by the Savings Bank to the
Executive during the five most recent taxable years.
6. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Savings Bank which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Savings Bank or Parent.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Savings Bank.
7. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
4
8. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Maryland, except to the extent that Federal law shall be
deemed to apply.
9. 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.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled exclusively by
arbitration in accordance with the rules then in effect of the district office
of the American Arbitration Association ("AAA") nearest to the home office of
the Bank, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof, except to the extent that the parties may otherwise
reach a mutual settlement of such issue. Further, the settlement of the dispute
to be approved by the Board of the Bank may include a provision for the
reimbursement by the Bank to the Employee for all reasonable costs and expenses,
including reasonable attorneys' fees, arising from such dispute, proceedings or
actions, or the Board of the Bank or the Parent may authorize such reimbursement
of such reasonable costs and expenses by separate action upon a written action
and determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Employee furnishing to the
Bank or Parent evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by Employee. The
provisions of this Section 10 shall survive the expiration of this Agreement.
11. Confidential Information. The Employee acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Savings Bank and the Parent and its customers and
businesses ("Confidential Information"). The Employee agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Bank or the Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Employee shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Bank, the Parent, or
any subsidiaries or affiliates, or to any of the businesses operated by them,
and the Employee confirms that such information constitutes the exclusive
property of the Savings Bank and the Parent. The Employee shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Savings
Bank or the Parent, or its subsidiaries, or affiliates, or (b) in a manner which
is inimical or contrary to the interests of the Savings Bank or the Parent.
Employee acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Savings Bank,
and the Employee agrees not to disclose the Agreement or its contents without
the prior written consent of the Savings Bank. Notwithstanding the foregoing,
the Savings Bank reserves the right in its sole discretion to make disclosure of
this Agreement as it deems necessary or appropriate in compliance with its
regulatory reporting requirements. Notwithstanding anything herein to the
contrary, failure by the Employee to comply with the provisions of this Section
may result in the immediate termination of the
5
Agreement within the sole discretion of the Savings Bank, disciplinary action
against the Employee taken by the Savings Bank, including but not limited to the
termination of employment of the Employee for breach of the Agreement and the
provisions of this Section, and other remedies that may be available in law or
in equity.
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.
6
