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EXHIBIT 10.1
FIRST FEDERAL BANCSHARES, INC.
X.X. XXX 0000
XXXXXXXXXXXXX, XXXXX XXXXXXXX
June 4, 1998
Xx. Xxxxxx Xxxxxxxx
Bennettsville, South Carolina
Dear Xxxxxx:
We are pleased to propose this LETTER OF AGREEMENT (this "Agreement")
dated as of June 4, 1998, to be entered into among First Federal Bancshares,
Inc., a South Carolina corporation (the "Company"), First Federal Bank
(Proposed), a proposed thrift (the "Thrift" and, together with the Company, the
"Employer") and Xxxxxx Xxxxxxxx, an individual resident of South Carolina (the
"Executive").
The Company is the proposed holding company for the Thrift and is in
the process of organizing the Thrift. The Executive has agreed to serve as
President and Chief Executive Officer of the Company and the Thrift. The
Employer recognizes that the Executive's contribution to the growth and success
of the Company and the Thrift during organization and the initial years of
operations will be a significant factor in the success of the Company and the
Thrift. The Employer desires to provide for the employment of the Executive in
a manner which will reinforce and encourage the dedication of the Executive to
the Company and the Thrift and promote the best interests of the Thrift and the
Company. The Executive is willing to serve the Employer on the terms and
conditions herein provided. Certain terms used in this Agreement are defined in
Section 14 hereof.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Employer shall employ the Executive, and the
Executive shall serve the Employer, as President and Chief Executive Officer of
the Company and the Thrift upon the terms and conditions set forth herein. The
Executive shall have such authority and responsibilities consistent with his
position as are set forth in the Company's and the Thrift's Bylaws or assigned
by the Company's and the Thrift's respective Boards of Directors (the "Boards")
from time to time. The Executive shall devote his full business time,
attention, skill and efforts to the performance of his duties hereunder, except
during periods of illness or periods of vacation and leaves of absence
consistent with Employer policy. The Executive may devote reasonable periods to
service as a director or advisor to other organizations, to charitable and
community activities, and to managing his personal investments, provided that
such activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company or the Thrift.
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2. Term. Unless earlier terminated as provided herein, the
Executive's employment under this Agreement shall commence on the date hereof
and be for a term (the "Term") of three years, with an annual review of
Executive's performance and written approval by the Boards for renewal, which
may be extended for additional time periods by mutual agreement of the
Executive and the Employer.
3. Compensation and Benefits.
(a) The Employer shall pay the Executive a salary at a rate of not
less than $60,000 per annum, which shall be increased to not less than $85,000
per annum on the date the Bank opens, in accordance with the salary payment
practices of the Employer.
(b) The Executive shall participate in any retirement, welfare,
deferred compensation, life and health insurance, and other benefit plans or
programs of the Employer now or hereafter applicable to the Executive or
applicable generally to employees of the Employer, provided that the Employer
shall pay 100% of the cost of health insurance benefits for the Executive and
his immediate family. The Employer shall provide to the Executive, at no cost
to the Executive, term life insurance in an amount equal to at least two times
the Executive's then-current base salary. If the Executive retires with the
consent of the Employer's board of directors before the age of 65, the Employer
shall continue to provide the health and life insurance benefits provided for
in this paragraph, at no cost to the Executive, at least until the Executive
reaches the age of 65.
(c) On the date of the closing of the stock offering for the initial
capitalization of the Thrift, or as soon thereafter as an appropriate stock
option plan is adopted by the Board, the Company shall grant to the Executive
an option to purchase 8,000 shares of Common Stock. The option will be
represented by a separate stock option agreement which will provide that the
option will have a ten-year term, will vest over a six-year period (1,000
shares on each of the first three anniversaries of the opening date of the
Bank, 1,667 shares on the fourth and fifth anniversaries, and 1,666 shares on
the sixth anniversary, so long as the Executive is still employed by the
Employer on each anniversary and provided that the performance goals for such
year described in Section 3(d) are achieved).
(d) The Board of Directors agrees to set performance goals for the
Company and the Thrift for each fiscal year, and the Board may, in its
discretion, grant to the Executive a cash bonus, in an amount to be determined
by the Board, at the end of each fiscal year in which the Company and the
Thrift achieve such performance goals.
(e) Beginning on the date the Bank opens, the Company shall provide
the Executive with a leased automobile of the Executive's choice, with a lease
rate not to exceed $400 per month, provided that the Executive shall be
responsible for all fuel costs and any maintenance costs that are not covered
by warranty. The Employer shall fully insure the automobile at no cost to the
Executive. In addition, the Employer shall pay the dues for the Executive's
membership in the Rotary Club and an area country club in an amount to be
agreed upon by the parties.
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(f) Beginning on the date of this Agreement, the Employer shall
reimburse the Executive for reasonable travel and other expenses related to the
Executive's duties which are incurred and accounted for in accordance with the
normal practices of the Employer.
(g) The Employer shall provide the Executive with appropriate
directors' and officers' liability insurance coverage at no cost to the
Executive.
(h) The Executive shall be entitled to three weeks of paid vacation
per year.
4. Termination.
(a) Notwithstanding the Term of this Agreement, the Employer has the
right to terminate this Agreement at any time in accordance with this Section
4.
(b) If the Employer terminates the Executive's employment under this
Agreement prior to the end of the Term for any reason other than (i) Cause or
(ii) because the Bank fails to open, the Employer shall pay to the Executive
severance compensation in an amount equal to 100% of his then current monthly
base salary each month for six months from the date of termination, plus any
bonus earned or accrued through the date of termination, and shall also
continue providing the health insurance benefits for the Executive and his
immediate family described in Section 3(b). The Employer may terminate this
Agreement at any time, but any termination by the Employer other than
termination for Cause or because the Bank fails to open shall not prejudice the
Executive's right to severance compensation or other benefits under this
Agreement.
(c) If the Executive's employment is terminated because of the
Executive's death, the Executive's estate shall receive any sums due him as
base salary and reimbursement of expenses through the end of the month during
which death occurred, plus any bonus earned or accrued under the through the
date of death.
(d) If the Executive's employment is terminated for Cause or because
the Bank fails to open, or if the Executive resigns, the Executive shall
receive any sums due him as base salary and reimbursement of expenses through
the date of such termination. The Executive shall have no right to receive
severance compensation or other benefits for any period after termination for
Cause or if the Bank fails to open. For purposes of this Agreement, termination
for Cause shall include termination because of the Executive'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
uncured breach of any provision of this Agreement.
(e) If the Executive is suspended or temporarily prohibited from
participating in the conduct of the Employer'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 Employer's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Employer may in its discretion
(i)
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pay the Executive all or part of the compensation withheld while the
obligations under this Agreement were suspended and (ii) reinstate (in whole or
in part) any of such obligations which were suspended.
(f) If the Executive is removed or permanently prohibited from
participating in the conduct of the Employer'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 Executive under this Agreement shall
terminate as of the effective date of the order, but any vested rights of the
parties hereto shall not be affected.
(g) If the Employer is in default (as defined in section 3(x)(1) of
the Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (4)(g) shall not affect
any vested rights of the parties hereto.
(h) All obligations under this Agreement shall be terminated, except
to the extent determined that continuation of this Agreement is necessary of
the continued operation of the Employer, in the following cases:
(i) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance
to or on behalf of the Employer under the authority contained in 13(c)
of the Federal Deposit Insurance Act; or
(ii) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to
resolve problems related to operation of the Employer or when the
Employer is determined by the Director to be in an unsafe or unsound
condition.
(i) With the exceptions of the provisions of this Section 4, and the
express terms of any benefit plan under which the Executive is a participant,
it is agreed that, upon termination of the Executive's employment, the Employer
shall have no obligation to the Executive for, and the Executive waives and
relinquishes, any further compensation or benefits (exclusive of COBRA
benefits). At the time of termination of employment, the Employer and the
Executive shall enter into a mutually satisfactory form of release
acknowledging such remaining obligations and discharging both parties, as well
as the Employer's officers, directors and employees with respect to their
actions for or on behalf of the Employer, from any other claims or obligations
arising out of or in connection with the Executive's employment by the
Employer, including the circumstances of such termination.
(j) In the event that the Executive's employment is terminated for any
reason, if requested by the Board the Executive shall (and does hereby) tender
his resignation as a director of the Company and the Thrift, effective as of
the date of termination.
(k) Any payments made to the Executive 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.
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5. Protection of Trade Secrets. The Executive agrees to maintain in
strict confidence and, except as necessary to perform his duties for the
Employer, the Executive agrees not to use or disclose any Trade Secrets of the
Employer during or at any time after his employment. As provided by South
Carolina statutes, "Trade Secret" means information, including a formula,
pattern, compilation, program, device, method, technique, process, drawing,
cost data or customer list, that: (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
6. Protection of Other Confidential Information. In addition, the
Executive agrees to maintain in strict confidence and, except as necessary to
perform his duties for the Employer, not to use or disclose any Confidential
Business Information of the Employer during his employment and for a period of
24 months following termination of the Executive's employment. "Confidential
Business Information" shall mean any internal, non-public information (other
than Trade Secrets already addressed above) concerning the Employer's financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans;
marketing plans and methods; training, educational and administrative manuals;
customer and supplier information and purchase histories; and employee lists.
The provisions of Sections 5 and 6 above shall also apply to protect Trade
Secrets and Confidential Business Information of third parties provided to the
Employer under an obligation of secrecy.
7. Return of Materials. The Executive shall surrender to the Employer,
promptly upon its request and in any event upon termination of the Executive's
employment, all media, documents, notebooks, computer programs, handbooks, data
files, models, samples, price lists, drawings, customer lists, prospect data,
or other material of any nature whatsoever (in tangible or electronic form) in
the Executive's possession or control, including all copies thereof, relating
to the Employer, its business, or its customers. Upon the request of the
Employer, employee shall certify in writing compliance with the foregoing
requirement.
8. Restrictive Covenants.
(a) No Solicitation of Customers. During the Executive's employment
with the Employer and for a period of 12 months thereafter, the Executive shall
not (except on behalf of or with the prior written consent of the Employer),
either directly or indirectly, on the Executive's own behalf or in the service
or on behalf of others, (A) solicit, divert, or appropriate to or for a
Competing Business, or (B) attempt to solicit, divert, or appropriate to or for
a Competing Business, any person or entity that was a customer of the Employer
or any of its Affiliates on the date of termination and is located in the
Territory and with whom the Executive has had material contact.
(b) No Recruitment of Personnel. During the Executive's employment
with the Employer and for a period of 12 months thereafter, the Executive shall
not, either directly or indirectly, on the Executive's own behalf or in the
service or on behalf of others, (A) solicit,
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divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any
Competing Business located in the Territory, any employee of or consultant to
the Employer or any of its Affiliates engaged or experienced in the Business,
regardless of whether the employee or consultant is full-time or temporary, the
employment or engagement is pursuant to written agreement, or the employment is
for a determined period or is at will.
(c) Non-Competition Agreement. During the Executive's employment with
the Employer and for a period of 12 months thereafter, the Executive shall not
(without the prior written consent of the Employer) compete with the Employer
or any of its Affiliates by, directly or indirectly, forming, serving as an
organizer, director or officer of, or consultant to, or acquiring or
maintaining more than a 1% passive investment in, a depository financial
institution or holding company therefor if such depository institution or
holding company has one or more offices or branches located in the Territory.
Notwithstanding the foregoing, the Executive may serve as an officer of or
consultant to a depository institution or holding company therefor even though
such institution operates one or more offices or branches in the Territory, if
the Executive's employment does not directly involve, in whole or in part, the
depository financial institution's or holding company's operations in the
Territory.
9. Independent Provisions. 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. If
any provision or clause of this Agreement, or portion thereof, shall be held by
any court or other tribunal of competent jurisdiction to be illegal, void, or
unenforceable in such jurisdiction, the remainder of such provision shall not
be thereby affected and shall be given full effect, without regard to the
invalid portion. It is the intention of the parties that, if any court
construes any provision or clause of this Agreement, or any portion thereof, to
be illegal, void, or unenforceable because of the duration of such provision or
the area or matter covered thereby, such court shall reduce the duration, area,
or matter of such provision, and, in its reduced form, such provision shall
then be enforceable and shall be enforced. The Executive and the Employer
hereby agree that they will negotiate in good faith to amend this Agreement
from time to time to modify the terms of Sections 8(a), 8(b), and 8(c), the
definition of the term "Territory," and the definition of the term "Business,"
to reflect changes in the Employer's business and affairs so that the scope of
the limitations placed on the Executive's activities by Section 8 accomplishes
the parties' intent in relation to the then current facts and circumstances.
Any such amendment shall be effective only when completed in writing and signed
by the Executive and the Employer.
10. Successors; Binding Agreement. The rights and obligations of this
Agreement shall bind and inure to the benefit of the surviving corporation in
any merger or consolidation in which the Employer is a party, or any assignee
of all or substantially all of the Employer's business and properties. The
Executive's rights and obligations under this Agreement may not be assigned by
him, except that his right to receive accrued but unpaid compensation,
unreimbursed expenses and other rights, if any, provided under this Agreement
which survive termination of this Agreement shall pass after death to the
personal representatives of his estate.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given
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when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Employer shall be
directed to the attention of the Employer with a copy to the Secretary of the
Employer. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of South Carolina without
giving effect to the conflict of laws principles thereof. Any action brought by
any party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in State of South Carolina.
13. Enforcement. The Executive agrees that in the event of any breach
or threatened breach by the Executive of any covenant contained in Section
8(a), 8(b), or 8(c) hereof, the resulting injuries to the Employer would be
difficult or impossible to estimate accurately, even though irreparable injury
or damages would certainly result. Accordingly, an award of legal damages, if
without other relief, would be inadequate to protect the Employer. The
Executive, therefore, agrees that in the event of any such breach, the Employer
shall be entitled to obtain from a court of competent jurisdiction an
injunction to restrain the breach or anticipated breach of any such covenant,
and to obtain any other available legal, equitable, statutory, or contractual
relief. Should the Employer have cause to seek such relief, no bond shall be
required from the Employer, and the Executive shall pay all attorney's fees and
court costs which the Employer may incur to the extent the Employer prevails in
its enforcement action.
14. Certain Definitions.
(a) "Affiliate" shall mean any business entity controlled by,
controlling or under common control with the Employer.
(b) "Business" shall mean the operation of a depository financial
institution, including, without limitation, the solicitation and acceptance of
deposits of money and commercial paper, the solicitation and funding of loans
and the provision of other banking services, and any other related business
engaged in by the Employer or any of its Affiliates as of the date of
termination.
(c) "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
(d) "Territory" shall mean (a) during the Executive's employment with
the Employer and for a period of six months thereafter, a radius of (i) 50
miles from the main office of the Employer or (ii) 25 miles from any branch
office of the Employer, and (b) for a period commencing six months after
termination of the Executive's employment and continuing an additional six
months, Marlboro County, South Carolina.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof. Failure of the Employer to enforce
any of the provisions of this Agreement or any rights with respect
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thereto shall in no way be considered to be a waiver of such provisions or
rights, or in any way affect the validity of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. No Conflict with Laws. In the event there are any discrepancies
herein with any federal law or regulation, the federal law or regulation shall
control.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, effective
as of the date first above written.
ATTEST: FIRST FEDERAL BANCSHARES, INC.
/s/ Xxxx Xxxxxxxx /s/ Xxx X. Xxxxxx
------------------------------- -------------------------------------
Name: Xxxx Xxxxxxxx Name: Xxx X. Xxxxxx
Title: Organizer Title: Chairman
ATTEST: FIRST FEDERAL BANK (PROPOSED)
/s/ Xxxxx Xxxxx /s/ Xxxxxxxx Xxxxxx
------------------------------- -------------------------------------
Name: Xxxxx Xxxxx Name: Xxxxxxxx Xxxxxx
Title: Organizer Title: Secretary
(CORPORATE SEAL)
EXECUTIVE
/s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
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