EXHIBIT 10.4
AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT ("Agreement") is
entered into by and between Mid-America Bancshares, Inc., a Tennessee
corporation (the "Company"), and Xxxxx X. Short ("Executive").
WITNESSETH:
WHEREAS, Executive has been effective in his service to Bank of the
South (sometimes herein called "Bank"); and
WHEREAS, Bank of the South, the Company and PrimeTrust Bank have
entered into an Agreement and Plan of Reorganization and Share Exchange
Agreement pursuant to which shareholders of the Bank and PrimeTrust Bank will
exchange their stock in Bank of the South and PrimeTrust Bank for stock in the
Company (the "Share Exchange") for the purpose of causing the Company to become
a two-bank holding company which owns the Bank and PrimeTrust Bank; and
WHEREAS, the Company recognizes the valuable services that Executive
has rendered to the Bank and desires to induce Executive to continue his active
participation in the business of the Bank and also to serve as a director and as
Executive Vice President and Chief Risk Officer of the Company; and
WHEREAS, Executive is willing to continue to serve both the Bank and
the Company but desires assurance that, in the event of any change of control of
the Company or the Bank after the consummation of the Share Exchange, he will
continue to have the responsibility and status he has earned.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the parties'
agreements herein contained, the Company and the Executive hereby agree that:
1. Executive's Right to A Change of Control Payment; Timing; Release.
Executive shall be entitled to a Change of Control Payment (as herein defined)
upon the occurrence of any of the following events:
(a) In the event of a Change of Control (as herein defined); or
(b) In the event of a Wrongful Termination (as herein defined).
Any Change of Control Payment due under this Agreement shall be made within ten
(10) business days of the effective date of the Change of Control or the date of
Wrongful Termination. If the Company fails to make the payment within the time
allowed for payment, then the Bank shall make the Change of Control Payment
within twenty (20) business days after the Change of Control Payment first
became due. The obligation of the Company, the Bank or any other person or party
to make a Change of Control Payment under this Agreement is expressly
conditioned upon Executive releasing, in a customary form reasonably
satisfactory to counsel for the Company, the Company, the Bank and all related
and affiliated entities and persons, from all liability and claims of any
nature, including claims of wrongful termination (including "Wrongful
Termination" as that term is defined in this Agreement) or discrimination under
federal, state or local laws, other than claims for monies due and owing to
Employee for all time worked, unused accrued leave time, expense reimbursement
and comparable matters.
2. Certain Definitions and Concepts. The following definitions and
concepts shall control the interpretation and enforcement of this Agreement:
2.1 Change of Control. For the purposes of this Agreement, a "Change of
Control" shall mean any of the following:
(a) a change in ownership (whether directly, indirectly,
beneficially or of record) within a two hundred seventy (270)
day period of shares in excess of 50% of the then-outstanding
shares of common stock of the Company or the Bank;
(b) a change in the membership of the board of directors of the
Company if:
(i) on or after the Effective Date (as herein defined)
but prior to May 1, 2008, a majority of the members
of the board of directors have not served
continuously on the Company's board of directors
since the Effective Date; and/or
(ii) on or after May 1, 2008, a majority of the members of
the board of directors have not served continuously
on the Company's board of directors for at least two
consecutive years before the date of the election of
one or more new members to the Company's board of
directors;
(c) a change in the membership of the board of directors of the
Bank if a majority of the members of the board of directors
have not served continuously on the Bank's board of directors
for at least two consecutive years before the date of the
election of one or more new members to the Bank's board of
directors;
(d) the sale or other disposition of all or substantially all of
the assets of the Company, Bank of the South, and/or
PrimeTrust Bank either (i) in one transaction or (ii) in a
series of transactions occurring during a period of eighteen
consecutive months or less;
(e) a change in control of a nature that would be required to be
reported by a company subject to the Securities Exchange Act
of 1934 (the "Exchange Act") in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange
Act (or any successor provision) as it may be amended from
time to time;
(f) any transaction that would be a change in control under any
federal banking law, rule or regulation; or
(g) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended, in effect
on the date first written above), other than any "person" who
on the date hereof is a director or officer of the Company,
the Bank, or PrimeTrust Bank, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities.
2
2.2 Bank. A merger of Bank of the South and PrimeTrust Bank under the
continued ownership of the Company, or the lawful transfer of assets between the
two banks, shall not be deemed a Change of Control.
2.3 Sale or Disposition of Assets. For the purposes of this
Agreement,(a) the sale of as much as fifty percent (50%) of the assets of the
Company or any bank controlled by the Company shall constitute the "sale or
other disposition of all or substantially all of the assets" of such entity and
(b) the sale of as much as twenty-five percent (25%) of the voting power of the
equity securities of any bank controlled by the Company shall constitute the
"sale or other disposition of all or substantially all of the assets" of the
Company.
2.4 Beneficial Ownership. For the purposes of this Agreement, the term
"beneficial ownership" shall include all shares directly or indirectly owned by
a person or group of persons or any affiliates or associates of such person or
group of persons, or shares which such person or group of persons, affiliates or
associates have the right to acquire through the exercise of any option, warrant
or right or otherwise and all shares as to which such person or group of
persons, affiliates or associates, directly or indirectly, have or share voting
power or investment power or both.
2.5 Board of Director Membership. For the purposes of this Agreement,
in determining whether there has been a sufficient change in the membership of
the Company's or the Bank's board of directors to be deemed a Change of Control,
and thus to require a Change of Control Payment to the Executive:
(a) Any director who replaces a director who has been removed for
cause, who has died, who has retired at or after age 65, or
who has retired due to physical or mental disability, shall be
deemed to have been a director from the commencement of the
term of the director who was replaced;
(b) Any director who is at the Effective Date a director of the
Company, the Bank or PrimeTrust Bank shall be deemed to have
been a director during the relevant time frame specified in
this Agreement; or
(c) Unless the Executive voted against her or his election, any
other director elected during the relevant period shall be
deemed to have been a director during the relevant time frame
specified in this Agreement.
Thus, the fact that new directors have been elected to the relevant board of
directors, or that directors have retired or otherwise left the board of
directors of an entity covered by this Agreement, shall be considered with
reference to the provisions of this paragraph 2.5.
2.6. Wrongful Termination. For the purposes of this Agreement, the term
"Wrongful Termination" means each of the following:
(a) Any termination or suspension of Executive's employment as an
executive officer of the Company and/or the Bank unless such termination or
suspension is "for cause."
3
(b) If the Executive is not elected to serve as a member of the board
of directors of the Company and as a member of the board of directors of the
Bank except in the instance when the Executive declines in writing to be
nominated or declines in writing to be named in the Company's or the Bank's
proxy materials.
(c) If the Executive is at any time not elected to serve as (or is
removed or suspended from serving as) executive vice president and chief risk
officer of the Company and president of the Bank with at least substantially the
same duties and authority, as in effect on the Effective Date, unless Executive
agrees to the change, removal, or suspension in a writing signed by him.
(d) Any reduction by either the Company or the Bank, or both, in the
combined salary or benefits to Executive from that in effect on the later of the
Effective Date or each anniversary date of this Agreement. (Thus, the Company
may assume all of Executive's salary or allocate it, in a proper manner, to
itself and/or the Bank without triggering a payment under this Agreement.)
(e) Any reduction by either the Company or the Bank, or both, in salary
or benefits to Executive from that in effect on the later of the Effective Date
or each anniversary date of this Agreement.
(f) A material violation of this Agreement by the Company and/or the
Bank that is not cured within thirty (30) days after written notice from the
Executive to the Company and the Bank.
(g) The Company's and/or the Bank's failure or refusal to advance
expenses for the defense of claims against the Executive as provided in the
Company's charter and/or bylaws.
(h) The Company's and/or the Bank's failure or refusal to indemnify the
Executive to the fullest extent provided by Tennessee law; provided, however,
that insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the Executive pursuant to the Company's and the
Bank's charter or otherwise, Executive acknowledges that he has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company and/or the Bank,
as appropriate, of expenses incurred or paid by Executive in the successful
defense of any action, suit or proceeding) is asserted by Executive in
connection with the registration of securities under the Securities Act,
Executive agrees that the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
2.7. "For Cause" Described and Defined. For the purposes of this
Agreement, the term "for cause" means each and any of the following:
(a) Executive's demonstrable personal dishonesty or breach of fiduciary
duty involving non-trivial personal profit;
(b) Executive's clear and continuous incompetence in his job
performance, including his failure to achieve demonstrably reasonable or
agreed-upon budgetary goals for three consecutive years;
4
(c) Executive's willful misconduct, willful breach, or inexcusable
neglect of his duties as an employee of the Company and/or the Bank;
(d) Conviction of the Executive of a felony;
(e) Suspension or removal of the Executive from any office with the
Company or the Bank, or the prohibition of the Executive from participation in
the conduct of the Company's or the Bank's affairs, pursuant to a notice or
other action by any bank regulatory agency having jurisdiction;
(f) Executive's knowing and willful violation of any law, rule or
regulation or final cease-and-desist order that, in the reasonable judgment of
the board of directors of the Company or the Bank, will more likely than not
cause substantial economic damage to the Company and/or one of its subsidiary
banks;
(g) Executive's material breach of any material provision of this
Agreement; or
(h) Substantial damage to the Company's or the Bank's reputational
interest that is attributable to the Executive's misconduct, as described below.
It is agreed between the parties that, for purposes of this Agreement,
no act, or failure to act on Executive's part shall be considered "willful"
unless done, or omitted to be done, by him without good faith and without a
colorable belief that this action or omission was at least not harmful to the
Bank or to the Company (taken on a consolidated basis); provided that any act or
omission to act by Executive in reliance upon a supporting opinion of counsel
(or, as appropriate, another professional advisor) to the Company, to the Bank
or to the Executive shall not be deemed to be willful or negligent. The terms
"negligence," "incompetence," and "misconduct" shall be defined with reference
to standards generally prevailing in the banking industry in the
Nashville-Davidson-Murfreesboro Metropolitan Statistical Area. No breach of
policy shall alone be the grounds for termination so long as it is not an
integral part of the type of misconduct enumerated above and so long as it does
not subject the Company and/or the Bank (or the board of directors thereof or
one or more members thereof) to unreasonable risk of loss or damage.
In determining negligence, incompetence and misconduct, the Company
and/or the Bank, as applicable, shall have the burden of proof with regard to
the acts or omission of Executive and the applicable standards prevailing in the
banking industry. No act or omission that would be accorded deference under the
business judgment rule applicable to directors of a corporation shall be deemed
to constitute "negligence," "incompetence," or "misconduct" or be grounds for a
termination "for cause."
The Executive acknowledges, however, that the Company and the Bank have
important reputational interests that the Executive is required to uphold.
Therefore, the Executive shall refrain from any type of consistent or habitual
intentional misconduct that could be expected to, or does, seriously damage or
besmirch the reputation of the Company and/or the Bank. Executive may, in
extreme cases, be terminated and no payment shall be due under this Agreement as
a result of conduct that is seriously damaging to the Company's and/or to Bank's
reputation(s); provided, that to the extent practicable, the Company and the
Bank undertake to work to preserve the Executive's employment if the Executive
acts responsibly to repair or rehabilitate such reputation(s) and to rectify his
own conduct.
5
3. Calculation of the Change of Control Payment. For the purposes of
this Agreement, the "Change of Control Payment" shall be a lump sum payment in
cash in the amount of $1.00 less than three times the Executive's base amount of
compensation (Internal Revenue Code Section 280G(b)(2)(A)(ii)). The term "base
amount," referred to in this provision, is the Executive's annualized includible
compensation for a base period, consisting of the most recent five tax years
ending before the date on which the Change of Control of the Company, the Bank,
or any other subsidiary bank controlled by the Company was completed, or the
portion of this period during which the Executive performed personal services
for or was an employee of the Company and/or the Bank (Code Section 280G(b)(3)
and (d)). "Annualized includible compensation" for the base period is the
average annual aggregate compensation that was payable by the Company and the
Bank and includible by the Executive in gross income for the tax years of the
base period (Code Section 280G(d)(1)).
4. Not At Will; No Duty to Mitigate; Liquidated Damages. This Agreement
may only be terminated "for cause" as set forth above. This Agreement is not an
"at will" contract or an "at will" employment. However, once a Change of Control
has occurred and the Change of Control Payment has been paid to the Executive,
then this Agreement shall be terminated. In the event of a Wrongful Termination,
without regard to whether or not a Change of Control has occurred, Executive
shall receive the Change of Control Payment as severance pay in consideration of
his past service, and pay in consideration of his continued service from the
date hereof. Executive's entitlement thereto shall not be governed or affected
by any duty to mitigate his damages by seeking further employment nor shall the
amount of such payment be offset by any compensation which he may receive from
future employment. Timely payment in full of the Change of Control Payment to
the Executive that is due hereunder shall be deemed to be liquidated damages to
the Executive for Wrongful Termination.
5. No Offset or Recoupment. Neither the Company nor the Bank shall have
the right of offset or recoupment against any sum due to Executive as a result
of a Change of Control, a Wrongful Termination, or a recovery of fees and costs
as provided in this Agreement.
6. No Limiting Impact on Compensation and Benefits. The terms of this
Agreement are not intended to limit Executive's compensation or to exclude
Executive's participation in other benefits available to executive personnel
generally or to preclude other compensation or benefits as may be authorized by
the Board of Directors of either the Company or the Bank from time to time.
7. Discriminatory Treatment Prohibited. The Company and the Bank agree
not to discriminate against Executive in terms of compensation increases based
on performance, bonuses (if earned in accordance with the Company's or the
Bank's policies (as applicable)), benefits, staff and professional support, and
office size and location.
8. Bank of the South Benefit. Bank of the South expressly joins in this
Agreement for the purpose of inducing Executive to continue his employment as
the Bank's president. The Bank agrees that it shall be liable for the payment of
all amounts due under this Agreement in the event Company fails to pay such
amounts upon demand.
6
9. Successors, Etc. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee, or, if there be no such
designee, to Executive's estate.
10. Paperwork. Any payment or delivery required under this Agreement
shall be subject to all requirements of the law with regard to withholding,
filing, making of reports, and the like, and Company shall use its best efforts
to satisfy promptly all such requirements.
11. Limitations on the Obligation to Make the Change of Control
Payment. Neither the Company nor the Bank shall have the obligation to pay the
Change of Control Payment if, prior to the commencement of any transaction that
results in a Change of Control, Executive shall resign voluntarily.
12. Retirement, Etc. (a) If Executive retires after reaching age 65, or
(b) if Executive becomes substantially or completely disabled other than as a
result of reckless misconduct on his own part, or (c) if Executive dies on or
after December 31, 2007, then he (or his estate, as the case may be,) shall be
entitled to a lump-sum payment in an amount equal to one-half of the Change of
Control Payment, such payment to be due upon completion of the Change of
Control. However, if no Change of Control has occurred prior to January 1, 2017,
then no payment shall be due under this section.
13. Resignation. If Executive resigns due to a violation of this
Agreement by the Company and/or the Bank, subject to the cure period specified
in paragraph 2.6(f) above, then Executive shall be entitled to a lump-sum
payment equal to the Change of Control Payment within ten (10) days after he
delivers his written resignation to the Company and to the Bank. If Executive
resigns other than for the violation specified in the first sentence of this
section, or based on retirement or substantial or complete disability, then
Executive shall not be entitled to any Change of Control Payment.
14. Professional Fees, Expenses, and Costs. If the Executive is
successful in any litigation, the Company and the Bank shall pay to Executive
all reasonable legal fees and expenses incurred by the Executive as a result of
a termination of employment alleged by Executive to be a Wrongful Termination,
including but not limited to all such fees and expenses, if any, incurred in
good faith in contesting or disputing any such termination, or in seeking to
obtain or enforce any right or benefit provided by this Agreement, including a
declaratory action brought to declare his rights under this Agreement; provided,
that in all other actions related to or involving this Agreement the successful
party shall be entitled to recover its or his reasonable attorneys fees.
15. Governing Law; Amendment and Waiver; Notices; Captions. This
Agreement shall be governed by and interpreted and enforced pursuant the
internal laws of the State of Tennessee without giving effect to the conflict of
laws principles of any jurisdiction. This Agreement can only be amended by a
written document signed by all of the parties. No waiver of any provision of
this Agreement shall be effective unless signed by the party to be charged and
clearly applicable to this Agreement, nor shall this Agreement be amended in any
respect, nor any provision waived, by any course of dealing. Notices shall
7
be in writing and sent by courier or physically delivered by a party to the
party to be given notice at its last known principal executive office or
residence address. The Company and the Bank may use the Executive's last known
address in its personnel files as the operative address for the Executive unless
the Executive has provided them with a different address. Any party can, by
written notice sent in accordance with this section, change its or his address
for notice. Notices shall be effective when actually received by (a) Executive
or (b) an executive officer of the Company or the Bank.
16. Effective Date. This Agreement shall be effective as of the
Effective Date of the Share Exchange. As used herein, the term "Effective Date"
means the date that the Share Exchange becomes effective as a result of the
filing of articles of share exchange with respect to the Share Exchange.
IN WITNESS WHEREOF, this Agreement has been executed on July 11, 2006,
to be effective as set forth in Section 16 of this Agreement.
MID-AMERICA BANCSHARES, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx, Chairman
/s/ Xxxxx X. Short
------------------------------------
XXXXX X. SHORT, Individually
BANK OF THE SOUTH
By: /s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx, Chairman
8
