AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT
Exhibit
10.4
AMENDED
AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS
AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT is dated this
14th day of
December
2007, among First Federal Bancshares of Arkansas, Inc., a Texas corporation
(the
"Corporation"), First Federal Bank, a federally chartered savings bank (the
"Bank"), and Xxxxx Xxxx Xxxxxxxx (the "Executive"). The Corporation
and the Bank are collectively referred to as the "Employers".
WITNESSETH
WHEREAS,
the Bank was previously known
as First Federal Bank of Arkansas, F.A.;
WHEREAS,
the Executive is currently employed as the President/Western Division /Chief
Lending Officer of the Corporation and the Bank, and the Employers and the
Executive have previously entered into a change in control severance agreement
dated January 25, 2002, as amended on January 1, 2006 (the “Prior
Agreement”);
WHEREAS,
the Employers desire to amend
and restate the Prior Agreement in order to make changes to comply with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”), as well as
certain other changes;
WHEREAS,
the Employers desire to be ensured of the Executive's continued active
participation in the business of the Employers; and
WHEREAS,
in order to induce the Executive to remain in the employ of the Employers
and in
consideration of the Executive's agreeing to remain in the employ of the
Employers, the parties desire to specify the severance benefits which shall
be
due the Executive in the event that his employment with the Employers is
terminated under specified circumstances;
NOW
THEREFORE, in consideration of the mutual agreements herein contained, and
upon
the other terms and conditions hereinafter provided, the parties hereby agree
as
follows:
1. Definitions. The
following words and terms shall have the meanings set forth below for the
purposes of this Agreement:
(a) Annual
Compensation. The Executive's "Annual Compensation" for
purposes of this Agreement shall be deemed to mean the average level of
compensation paid to the Executive by the Employers or any subsidiary thereof
during the most recent five taxable years preceding the year in which the
Date
of Termination occurs (or such shorter period as the Executive was employed)
and
which was included in the Executive’s gross income for tax purposes, including
but not limited to the Executive’s salary, bonuses and all other amounts taxable
to the Executive pursuant to any employee benefit plans of
Employers.
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(b) Cause.
Termination of the Executive's employment for "Cause" shall mean termination
because of 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), final cease-and-desist order or material
breach
of any provision of this Agreement. For purposes of this paragraph,
no act or failure to act on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission was in
the
best interests of the Employers.
(c) Change
in Control. "Change in Control " shall mean a change in the
ownership of the Corporation or the Bank, a change in the effective control
of
the Corporation or the Bank or a change in the ownership of a substantial
portion of the assets of the Corporation or the Bank, in each case as provided
under Section 409A of the Code and the regulations thereunder.
(d) Date
of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause, the date on which the Notice
of
Termination is given, and (ii) if the Executive's employment is terminated
for
any other reason, the date specified in the Notice of Termination.
(e) Disability. “Disability”
shall mean the Executive (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected
to
result in death or can be expected to last for a continuous period of not
less
than 12 months, receiving income replacement benefits for a period of not
less
than three months under an accident and health plan covering employees of
the
Employers.
(f) Effective
Date. The Effective Date of this Agreement shall mean the
date first written above.
(g) Good
Reason. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a
Change in Control of the Corporation based on the occurrence of any of the
following events:
(i)
(A) a
material diminution in the Executive’s base compensation as in effect
immediately prior to the date of the Change in Control or as the same may
be
increased from time to time thereafter, (B) a material diminution in the
Executive’s authority, duties or responsibilities as in effect immediately prior
to the Change in Control, or (C) a material diminution in the authority,
duties
or responsibilities of the officer (as in effect immediately prior to the
date
of the Change in Control) to whom the Executive is required to report
immediately prior to the Change in Control,
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(ii)
any
material breach of this Agreement by the Employers, or
(iii)
any
material change in the geographic location at which the Executive must perform
his services under this Agreement immediately prior to the Change in
Control;
provided,
however, that prior to any termination of employment for Good Reason, the
Executive must first provide written notice to the Employers within ninety
(90)
days of the initial existence of the condition, describing the existence
of such
condition, and the Employers shall thereafter have the right to remedy the
condition within thirty (30) days of the date the Employers received the
written
notice from the Executive. If the Employers remedy the condition
within such thirty (30) day cure period, then no Good Reason shall be deemed
to
exist with respect to such condition. If the Employers do not remedy
the condition within such thirty (30) day cure period, then the Executive
may
deliver a Notice of Termination for Good Reason at any time within sixty
(60)
days following the expiration of such cure period.
(h) IRS. IRS
shall mean the Internal Revenue Service.
(i) Notice
of Termination. Any purported termination of the Executive's
employment by the Employers for any reason, including without limitation
for
Cause, Disability or Retirement, or by the Executive for any reason, including
without limitation for Good Reason, shall be communicated by a written "Notice
of Termination" to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a dated notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii)
sets forth in reasonable detail the facts and circumstances claimed to provide
a
basis for termination of the Executive's employment under the provision so
indicated, (iii) specifies a Date of Termination, which shall be not less
than
thirty (30) nor more than ninety (90) days after such Notice of Termination
is
given, except in the case of the Employers' termination of the Executive's
employment for Cause, which shall be effective immediately; and (iv) is given
in
the manner specified in Section 7 hereof.
(j) Retirement. "Retirement"
shall mean voluntary termination by the Executive in accordance with the
Employers' retirement policies, including early retirement, generally applicable
to the Employers=
salaried
employees.
2. Benefits
Upon Termination. If the Executive's employment by the
Employers shall be terminated subsequent to a Change in Control of the
Corporation by (i) the Employers for other than Cause, Disability,
Retirement or the Executive's death or (ii) the Executive for Good Reason,
then
the Employers shall, subject to the provisions of Section 3 hereof, if
applicable,
(A) pay
to the Executive, in a lump sum within ten (10) business days following the
Date
of Termination, a cash severance amount equal to three (3) times the Executive’s
Annual Compensation, and
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(B) maintain
and provide for a period ending at the earlier of (i) the expiration of the
remaining term of this Agreement as of the Date of Termination or (ii) the
date
of the Executive’s full-time employment by another employer (provided that the
Executive is entitled under the terms of such employment to benefits
substantially similar to those described in this subparagraph (B)), at no
cost
to the Executive, the Executive’s continued participation in all group
insurance, life insurance, health and accident insurance, and disability
insurance in which the Executive was participating immediately prior to the
Date
of Termination; provided that any insurance premiums payable by the Employers
or
any successors pursuant to this Section 5(c)(B) shall be payable at such
times
and in such amounts as if the Executive was still an employee of the Employers,
subject to any increases in such amounts imposed by the insurance company
or
COBRA, and the amount of insurance premiums required to be paid by the Employers
in any taxable year shall not affect the amount of insurance premiums required
to be paid by the Employers in any other taxable year; and provided further
that
if the Executive’s participation in any group insurance plan is barred, the
Employers shall either arrange to provide the Executive with insurance benefits
substantially similar to those which the Executive was entitled to receive
under
such group insurance plan or, if such coverage cannot be obtained, pay a
lump
sum cash equivalency amount within thirty (30) days following the Date of
Termination based on the annualized rate of premiums being paid by the Employers
as of the Date of Termination; and
(C) pay
to the Executive, in a lump sum within thirty (30) days following the Date
of
Termination, a cash amount equal to the projected cost to the Employers of
providing benefits to the Executive for the remaining term of employment
under
this Agreement (prior to giving effect to the Notice of Termination) pursuant
to
any other employee benefit plans, programs or arrangements offered by the
Employers in which the Executive was entitled to participate immediately
prior
to the Date of Termination (excluding (y) stock option plans, restricted
stock
plans and employee stock ownership plans of the Employers and (z) bonuses
and
other items of cash compensation), with the projected cost to the Employers
to
be based on the costs incurred for the calendar year immediately preceding
the
year in which the Date of Termination occurs and with any automobile-related
costs to exclude any depreciation on Bank-owned automobiles.
3. Limitation
of Benefits under Certain Circumstances. If the payments and
benefits pursuant to Section 2 hereof, either alone or together with other
payments and benefits which the Executive has the right to receive from the
Employers, would constitute a "parachute payment" under Section 280G of the
Code, then the payments and benefits payable by the Employers pursuant to
Section 2 hereof shall be reduced by the minimum amount necessary to result
in
no portion of the payments and benefits under Section 2 being non-deductible
to
either of the Employers pursuant to Section 280G of the Code and subject
to the
excise tax imposed under Section 4999 of the Code. If the payments
and benefits under Section 2 are required to be reduced, the cash severance
shall be reduced first, followed by a reduction in the fringe
benefits. The determination of any reduction in the payments and
benefits to be made pursuant to Section 2 shall be based upon the opinion
of
independent tax counsel selected by the Employers and paid by the
Employers. Such counsel shall promptly prepare the foregoing opinion,
but in no event later than thirty (30) days from the Date of Termination,
and
may use such actuaries as such counsel deems necessary or advisable for the
purpose. Nothing contained in this Section 3 shall result in a
reduction of any payments or benefits to which the Executive may be entitled
upon termination of employment under any circumstances other than as specified
in this Section 3, or a reduction in the payments and benefits specified
in
Section 2 below zero.
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4. Mitigation;
Exclusivity of Benefits.
(a) The
Executive shall not be required to mitigate the amount of any benefits hereunder
by seeking other employment or otherwise, nor shall the amount of any such
benefits be reduced by any compensation earned by the Executive as a result
of
employment by another employer after the Date of Termination or
otherwise.
(b) The
specific arrangements referred to herein are not intended to exclude any
other
benefits which may be available to the Executive upon a termination of
employment with the Employers pursuant to employee benefit plans of the
Employers or otherwise, except as set forth in Section 2(c)(B)(ii)
hereof.
5. Withholding. All
payments required to be made by the Employers hereunder to the Executive
shall
be subject to the withholding of such amounts, if any, relating to tax and
other
payroll deductions as the Employers may reasonably determine should be withheld
pursuant to any applicable law or regulation.
6. Assignability. The
Employers may assign this Agreement and their rights and obligations hereunder
in whole, but not in part, to any corporation, bank or other entity with
or into
which either of the Employers may hereafter merge or consolidate or to which
either of the Employers may transfer all or substantially all of its respective
assets, if in any such case said corporation, bank or other entity shall
by
operation of law or expressly in writing assume all obligations of the Employers
hereunder as fully as if it had been originally made a party hereto, but
may not
otherwise assign this Agreement or their rights and obligations
hereunder. The Executive may not assign or transfer this Agreement or
any rights or obligations hereunder.
7. Notice. For
the purposes of this Agreement, notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been
duly
given when delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
below:
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To the Employers: |
Board
of Directors
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First
Federal Bancshares of Arkansas, Inc.
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0000
Xxxxxxx 00-00 Xxxxx
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Xxxxxxxx,
Xxxxxxxx 00000
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To
the Executive:
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At
his last address on file with the
Employers
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8. Amendment;
Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to
in writing and signed by the Executive and such officer or officers as may
be
specifically designated by the Boards of Directors of the Employers to sign
on
their behalf. No waiver by any party hereto at any time of any breach
by any other party hereto of, or compliance with, any condition or provision
of
this Agreement to be performed by such other party shall be deemed a waiver
of
similar or dissimilar provisions or conditions at the same or at any prior
or
subsequent time. In addition, notwithstanding anything in this
Agreement to the contrary, the Employers may amend in good faith any terms
of
this Agreement, including retroactively, in order to comply with Section
409A of
the Code.
9. Governing
Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United
States
where applicable and otherwise by the substantive laws of the State of
Arkansas.
10. Nature
of Employment and Obligations.
(a) Nothing
contained herein shall be deemed to create other than a terminable at will
employment relationship between the Employers and the Executive, and the
Employers may terminate the Executive's employment at any time, subject to
providing any payments specified herein in accordance with the terms
hereof.
(b) Nothing
contained herein shall create or require the Employers to create a trust
of any
kind to fund any benefits which may be payable hereunder, and to the extent
that
the Executive acquires a right to receive benefits from the Employers hereunder,
such right shall be no greater than the right of any unsecured general creditor
of the Employers.
11. Term
of Agreement. This Agreement shall terminate three (3) years after
December 14, 2007; provided that on or prior to December 14, 2008 and each
subsequent December 14, the Boards of Directors of the Employers shall consider
(with appropriate corporate documentation thereof, and after taking into
account
all relevant factors, including the Executive’s performance as an employee)
renewal of the term of this Agreement for an additional one (1) year, and
the
term of this Agreement shall be so extended as of such December 14 unless
the
Boards of Directors of the Employers do not approve such renewal and provide
written notice to the Executive, or the Executive gives written notice to
the
Employers, at least thirty (30) days prior to such December 14, of such party’s
or parties’ election not to extend the term beyond its then scheduled expiration
date.
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12. Headings. The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any way the meaning or interpretation of this
Agreement.
13. Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
14. Changes
in Statutes or Regulations. If any statutory or regulation provision
referenced herein is subsequently changed or re-numbered, or is replaced
by a
separate provision, then the references in this Agreement to such statutory
or
regulatory provision shall be deemed to be a reference to such section as
amended, re-numbered or replaced.
15. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together will constitute one and
the
same instrument.
16. Regulatory
Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to
this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. '1828(k))
and
the regulations promulgated thereunder, including 12 C.F.R.
Part 359.
17. Regulatory
Actions. The following provisions shall be applicable to the
parties to the extent that they are required to be included in agreements
between a savings association and its employees pursuant to Section 563.39(b)
of
the Regulations Applicable to all Savings Banks, 12 C.F.R. §563.39(b), or any
successor thereto, and shall be controlling in the event of a conflict with
any
other provision of this Agreement, including without limitation Section 5
hereof.
(a)
If Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Employers’ affairs by a
notice served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit
Insurance Act (“FDIA”) (12 U.S.C. §§1818(e)(3) and 1818(g)(1)), the Employers’
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 Employers may, in their discretion: (i) pay
the Executive all or part of the compensation withheld while its obligations
under this Agreement were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(b) If
the Executive is removed from office and/or permanently prohibited from
participating in the conduct of the Employers’ affairs by an order issued under
Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and
(g)(1)), all obligations of the Employers under this Agreement shall terminate
as of the effective date of the order, but vested rights of the Executive
and
the Employers as of the date of termination shall not be affected.
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(c) If the Bank
is in default, as defined in Section 3(x)(1) of the FDIA (12 U.S.C.
§1813(x)(1)), all obligations under this Agreement shall terminate as of the
date of default, but vested rights of the Executive and the Employers as
of the
date of termination shall not be affected.
(d) All
obligations under this Agreement shall be terminated pursuant to 12 C.F.R.
§563.39(b)(5), except to the extent that it is determined that continuation
of
the Agreement for the continued operation of the Employers is necessary:
(i) by
the Director of the Office of Thrift Supervision (“OTS”), or his or her
designee, at the time the Federal Deposit Insurance Corporation (“FDIC”) enters
into an agreement to provide assistance to or on behalf of the Bank under
the
authority contained in Section 13(c) of the FDIA (12 U.S.C. §1823(c)); or (ii)
by the Director of the OTS, 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 Bank or when the Bank is determined by the Director of the
OTS
to be in an unsafe or unsound condition, but vested rights of the Executive
and
the Employers as of the date of termination shall not be affected.
18. Entire
Agreement. This Agreement embodies the entire agreement
between the Employers and the Executive with respect to the matters agreed
to
herein. All prior agreements between the Employers and the Executive
with respect to the matters agreed to herein, including without limitation
the
Prior Agreement, are hereby superseded and shall have no force or
effect.
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IN
WITNESS WHEREOF, this Agreement has been executed as of the date first above
written.
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Attest:
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FIRST
FEDERAL BANCSHARES OF ARKANSAS, INC.
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| /s/ Xxxxx X. Xxxxxxxxxx |
By:
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/s/ Xxxxx X. Xxxxxx | |
| Xxxxx X. Xxxxxxxxxx |
Xxxxx
X. Xxxxxx, President and Chief Executive Officer
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Attest:
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FIRST
FEDERAL BANK
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| /s/ Xxxxx X. Xxxxxxxxxx |
By:
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/s/ Xxxxx X. Xxxxxx | |
| Xxxxx X. Xxxxxxxxxx |
Xxxxx
X. Xxxxxx, Chief Executive Officer
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EXECUTIVE
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By:
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/s/ Xxxxx Xxxx Xxxxxxxx | ||
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Xxxxx
Xxxx Xxxxxxxx
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