EXECUTIVE RECOGNITION AGREEMENT
EXHIBIT
10.1
THIS EXECUTIVE RECOGNITION AGREEMENT (this “Agreement”) between FIRST FINANCIAL BANKSHARES,
INC., a Texas corporation (the “Company”),
and ________________ (the “Employee”) is dated
effective July 1, 2008 (the “Effective Date”).
WITNESSETH:
WHEREAS, the Company considers it essential to the best interests of its stockholders to
xxxxxx the continuous employment of key executives of the Company; and
WHEREAS, the Employee is a key executive of the Company; and
WHEREAS, the parties recognize that, as is the case with many publicly-held corporations, the
possibility of a “Change in Control” (as such term is defined in Section 1 hereof) may exist and
that such possibility, and the uncertainty and questions which it may raise among management, may
result in the departure or distraction of a key executive at a critical time, and to the detriment
of the Company and its stockholders; and
WHEREAS, the Company recognizes that the Employee, as a key executive, could suffer financial
and professional detriments if a Change in Control of the Company were to occur; and
WHEREAS, in order to protect the Employee in the event of a Change in Control of the Company,
the Company agrees that the Employee shall receive the benefits set forth in this Agreement in the
event the Employee’s employment with the Company is terminated subsequent to a Change in Control of
the Company under the circumstances described below;
NOW, THEREFORE, the parties hereby agree as follows:
1. Employment in General; Change in Control. This Agreement does not affect the
Employee’s employment arrangements with the Company except for the conditions contained herein
pertaining to a Change in Control of the Company. Absent a Change in Control of the Company, the
Employee’s continued employment with the Company shall at all times be subject to the will of the
Board of Directors of the Company (the “Board”). For purposes of this Agreement, a “Change in
Control” of the Company shall be deemed to have occurred at the time (a) a report on
Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) disclosing that any Person (as
hereinafter defined) is the beneficial owner (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities of the Company representing more than fifty
percent (50%) of the combined voting power entitled to vote generally in the election of directors
of the then outstanding securities of the Company; or (b) any Person shall purchase securities
pursuant to a tender offer or exchange offer to acquire any common stock of the Company (or
securities convertible into common stock) for cash, securities or any other consideration, provided
that after consummation of the offer, the person in question is the beneficial owner (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power entitled to vote
generally in the election of directors of the then outstanding securities of the Company; or (c)
the stockholders of the Company shall approve a reorganization, merger, consolidation,
recapitalization, exchange offer, purchase of assets or other transaction, in each case, with
respect to which the persons who were the beneficial owners of the Company immediately prior to
such a transaction do not, immediately after consummation thereof, own more than fifty percent
(50%) of the combined voting power entitled to vote generally in the election of directors of the
reorganized, merged, recapitalized or resulting company’s then outstanding securities; or (d) the
stockholders of the Company shall approve a liquidation or dissolution of the Company; or (e) the
Company shall sell or otherwise transfer (or one or more of its subsidiaries shall sell or
otherwise transfer), in one or more related transactions, assets aggregating fifty percent (50%) or
more of the book value of the assets of the Company and its subsidiaries (taken as a whole). For
purposes of this Agreement, “Person” shall mean and include any individual, corporation,
partnership, group, association or other “person”, as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company, a wholly owned subsidiary of the Company or any
employee benefit plan(s) sponsored by the Company or a subsidiary of the Company.
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2. Term of Agreement. Unless extended pursuant to the provisions of this Section 2,
the term of this Agreement shall be for the period commencing as of the Effective Date and
continuing thereafter until the earliest to occur of (a) the Employee’s death, Disability (as
defined in Subsection 3(i) hereof) or Retirement (as defined in Subsection 3(ii) hereof), (b) the
termination of the Employee’s employment with the Company prior to a Change in Control of the
Company, or (c) the second anniversary of this Agreement. The foregoing notwithstanding, if a
Change in Control of the Company shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for a period of two (2) years from the date of any such Change
in Control of the Company; and further, if a second Change in Control occurs within a period of two
(2) years from the date of the first Change in Control, this Agreement shall continue in effect for
a period of two (2) years from the date of the second Change in Control of the Company; and if any
benefit accrues and remains unpaid at the time this Agreement would otherwise have terminated, this
Agreement shall remain in effect until such benefit is paid in full solely for the purpose of
permitting the Employee to enforce the full payment of such benefit.
3. Termination Following Change in Control. If a Change in Control of the Company
occurs, the Employee shall be entitled to the benefits provided in Subsection 4(iii) hereof upon
the subsequent termination of the Employee’s employment during the term of this Agreement, unless
such termination is (a) because of the Employee’s death, Disability or Retirement, (b) by the
Company for Cause, or (c) by the Employee other than for Good Reason. The parties hereto expressly
acknowledge and agree that notwithstanding anything contained in this Agreement to the contrary,
the Employee is entitled to any and all benefits due to the Employee as determined in accordance
with the terms of the Company’s benefit plans (without reference to this Agreement), including,
without limitation, all qualified and nonqualified deferred compensation plans, and all medical,
dental, disability, accident and insurance plans, then in effect whether the Employee is terminated
by the Company for Cause or for other than Cause, by the Employee for Good Reason or for other than
Good Reason, because of the Retirement, Disability or death of the Employee or for
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any other reason, and the benefits provided in Subsection 4(iii) hereof shall be determined in
accordance with this Agreement without any impact, impairment, reduction or other effect on the
Employee’s rights or benefits under such benefit plan(s). For purposes of this Agreement the
following definitions shall apply:
(i) Disability. Termination by the Company of the Employee’s
employment based on “Disability” shall mean termination because of the Employee’s
absence from his duties with the Company on a full-time basis for ninety (90)
consecutive days as a result of the Employee’s physical or mental incapacity due to
injury or illness, unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is given to the Employee following such absence the Employee
shall have returned to the full-time performance of his duties.
(ii) Retirement. Termination by the Employee of the Employee’s
employment based on “Retirement” shall mean termination on or after the normal
retirement date established under the terms of any qualified plan or plans of the
Company in effect prior to a Change in Control.
(iii) Cause. Termination by the Company of the Employee’s employment
for “Cause” shall mean termination upon (A) the willful and continued failure by the
Employee to substantially perform his duties with the Company (other than any such
failure resulting from the Employee’s physical or mental incapacity due to injury or
illness) after written demand for substantial performance is delivered to the
Employee by the Company, which demand specifically identifies the manner in which
the Employee has not substantially performed his duties, or (B) the willful engaging
by the Employee in conduct which is demonstrably injurious to the Company,
monetarily or otherwise. For purposes of this Subsection (iii), no act, or failure
to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to
be done, by the Employee in bad faith and without “reasonable belief” (as
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hereinafter defined) that his action or omission was in, or not opposed to, the best
interests of the Company. The phrase “reasonable belief” shall mean the belief that
a reasonable and prudent man would have had in the same or similar circumstances as
to the act or failure to act. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Employee in good faith, and in the best interests of the Company.
Notwithstanding the foregoing the Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Employee a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board at a meeting of the Board
called for such purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with counsel, to be heard before the Board), finding that
in the good faith opinion of the Board the Employee was guilty of the conduct set
forth above in (A) or (B) of this Subsection (iii) and specifying the particulars
thereof in detail.
(iv) Good Reason. Termination by the Employee of his employment for
“Good Reason” shall mean termination within a period of time not to exceed one (1)
year following the initial existence of one or more of the following conditions
arising without the consent of the Employee:
(A) a determination by the Employee, made in good faith and based on
the Employee’s reasonable belief, that there has been a materially adverse
change in his status or position as an executive officer of the Company as
in effect immediately prior to the Change in Control, including, without
limitation, any material change in the Employee’s status or position as a
result of a diminution in the Employee’s duties or responsibilities or the
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assignment to the Employee of any duties or responsibilities which are
inconsistent with such status or position(s), or any removal of the Employee
from or any failure to reappoint or reelect the Employee to such position(s)
(except in connection with the termination of the Employee’s employment for
Cause, Disability or Retirement or as a result of the Employee’s death or by
the Employee other than for Good Reason). The phrase “reasonable belief”
shall mean the belief that a reasonable and prudent man would have had in
the same or similar circumstances as to the change in status or position;
(B) a material reduction by the Company in the Employee’s annual base
salary in effect immediately prior to the Change in Control;
(C) the relocation of the Employee’s principal office outside of the
city or metropolitan area in which the Employee is residing at the time of
any Change in Control of the Company;
(D) a material reduction by the Company in the budget over which the
Employee retained authority immediately prior to the Change in Control;
(E) the failure by the Company to continue in effect any Plan (as
hereinafter defined) in which the Employee participates at the time of the
Change in Control of the Company (or Plans providing the Employee with at
least substantially similar benefits) other than as a result of the normal
expiration of any such Plan in accordance with its terms as in effect at the
time of the Change in Control. For purposes of this Agreement, “Plan” shall
mean any benefit plan, including, without limitation, all qualified and
nonqualified deferred compensation plans; all medical, dental, disability,
accident and life insurance plans; and any other material plan, program or
policy of the Company intended to benefit the Employee;
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(F) the failure by the Company to provide and credit the Employee with
the number of paid vacation days to which the Employee is then entitled in
accordance with the Company’s normal vacation policy as in effect
immediately prior to the Change in Control;
(G) any other action or inaction by the Company following any Change
in Control that constitutes a material breach by the Company of the
agreement under which the Employee provided service at the time of the
Change in Control of the Company;
(H) the failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by Section 5
hereof; or
(I) any purported termination by the Company of the Employee’s
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (v) below (and, if applicable,
Subsection (iii) above); and for purposes of this Agreement, no such
purported termination shall be effective.
Notwithstanding the above, the Employee is required to provide notice to the Company of the
existence of any condition that would allow the Employee to terminate his employment for Good
Reason within a period not to exceed ninety (90) days of the initial existence of the condition,
upon the notice of which the Company shall have a period of no more than thirty (30) days to remedy
the condition and during which period the Employee may not terminate his employment for Good
Reason. It is the intent of the parties that this provision regarding termination by the Employee
of his employment for Good Reason comply with the requirements of Treasury Regulation Section
1.409A-1(n)(2) and this Agreement shall be construed accordingly.
(v) Notice of Termination. Any purported termination of the
Employee’s employment by the Company or by the Employee following a Change in
Control of
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the Company shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 9 hereof. For purposes of this Agreement, a
“Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and, if the termination
provision is claimed to relieve the Company of its obligation to pay the benefits
provided by this Agreement, the notice shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for the denial of the payment of
the benefits provided by this Agreement.
(vi) Date of Termination. “Date of Termination” following a Change in
Control shall mean (A) if the Employee’s employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that the
Employee shall not have returned to the performance of his duties on a full-time
basis during such thirty (30) day period), (B) if the Employee’s employment is to be
terminated by the Company for Cause or by the Employee for Good Reason, the date
specified in the Notice of Termination, or (C) if the Employee’s employment is to be
terminated by the Company for any reason other than Cause, the date specified in the
Notice of Termination, which in no event shall be a date earlier than sixty (60)
days after the date on which a Notice of Termination is given, unless an earlier
date has been expressly agreed to by the Employee in writing.
4. Compensation Upon Termination; Other Agreements.
(i) If the Employee’s employment shall be terminated for Disability following a
Change in Control of the Company, the Company shall pay the Employee’s salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards under any Plans which
pursuant to the terms of any Plans have been earned or become payable,
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but which have not been paid to the Employee. Thereafter, benefits shall be
determined in accordance with the Plans then in effect.
(ii) If the Employee’s employment shall be terminated for Cause following a
Change in Control of the Company, the Company shall pay the Employee’s salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both the cash
and stock components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to the Employee. Thereupon the
Company shall have no further obligations to the Employee under this Agreement.
(iii) Subject to Section 7 hereof, if, within twenty-four (24) months following
a Change in Control of the Company, employment by the Company shall be terminated by
the Company other than for Cause, death, Disability or Retirement, or shall be
terminated by the Employee for Good Reason, then the Company shall pay or provide to
the Employee, no later than the 15th day of the third month following the
Employee’s Date of Termination, without regard to any contrary provisions of any
Plan, the following:
(A) two hundred eight percent (208%) of the Employee’s annual base
salary payable by the Company immediately preceding the Date of Termination;
and
(B) a lump sum payment of Employee’s accrued vacation pay.
(iv) It is the intent of the parties that this Agreement not be subject to the
provisions of Section 409A of the Internal Revenue Code of 1986, as amended from
time to time (the “Code”). As such, this Agreement has been drafted to avoid the
requirements imposed by Section 409A of the Code. Provided however, in the event
this Agreement or any distribution under this Agreement is later determined to be
subject to the provisions of Section 409A of the Code, then if an employee is a Key
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Employee, pursuant to Section 409A (a)(2)(B)(i) of the Internal Revenue Code of
1986, as amended from time to time (the “Code”), such distributions to such Key
Employee upon termination of employment shall not commence earlier than six (6)
months following the Date of Termination. A “Key Employee” is defined in Section
416 (i) of the Code and includes officers of a publicly traded corporation having
annual compensation greater than $130,000 (as hereafter adjusted from year to year
by the Secretary of the Treasury), five percent owners, and one percent owners
having annual compensation from the publicly traded corporation greater than
$150,000.
(v) The amount of any payment provided for in this Section 4 shall not be
reduced, offset or subject to recovery by the Company by reason of any compensation
earned by the Employee as the result of employment by another employer after the
Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(i) The Company will seek, by written request at least five (5) business days
prior to the time a Person becomes a Successor (as hereinafter defined), to have
such Person assent to the fulfillment of the Company’s obligations under this
Agreement. Failure of such Person to furnish such assent prior to the time such
Person becomes a Successor shall constitute a condition for termination by the
Employee of his employment for Good Reason under the provisions of Section 3(iv) of
this Agreement, if a Change in Control of the Company occurs or has occurred. For
purposes of this Agreement, “Successor” shall mean any Person that succeeds to, or
has the practical ability to control (either immediately or with the passage of
time), the Company’s business directly, by merger, consolidation or purchase of
assets, or indirectly, by purchase of the Company’s voting securities or otherwise.
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(ii) This Agreement shall inure to the benefit of and be enforceable by the
Employee’s personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If the Employee should die while any amount would still
be payable to him hereunder if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee’s legatee or other designee or, if there is no such
designee, to the Employee’s estate.
(iii) For purposes of this Agreement, the “Company” shall include any
corporation or other entity which is the surviving or continuing entity in respect
of any merger, consolidation or form of business combination in which the Company
ceases to exist.
6. Fees and Expenses. The Company shall reimburse the Employee for all reasonable
legal fees and related expenses, if any, incurred by the Employee in the successful enforcement of
any right or benefit provided by this Agreement.
7. Taxes.
(i) All payments to be made to the Employee under this Agreement will be
subject to required withholding of federal, state and local income and employment
taxes.
(ii) Notwithstanding anything in the foregoing to the contrary, if any of the
payments provided for in this Agreement, together with any other payments which the
Employee has the right to receive from the Company or any corporation which is a
member of an “affiliated group” (as defined in Section 1504(a) of the Code without
regard to Section 1504(b) of the Code) of which the Company is a member, would
constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), the
payments pursuant to this Agreement shall be reduced to the largest amount as will
result in no portion of such payments being subject to the excise tax imposed by
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Section 4999 of the Code; provided, however, that the determination as to whether
any reduction in the payments under this Agreement pursuant to this Subsection (ii)
is necessary shall be made by the Employee in good faith, and such determination
shall be conclusive and binding on the Company with respect to its treatment of the
payment for tax reporting purposes and, provided further that the Employee may
determine in his discretion what payment or payments provided for herein shall be
reduced.
8. Survival. The respective obligations of, and benefits afforded to, the Company and
the Employee as provided in Sections 4, 5, 6, 7, 11 and 15 of this Agreement shall survive
termination of this Agreement.
9. Notice. For 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 when
delivered or when mailed by United States registered mail, return receipt requested, postage
prepaid to the address set forth below:
Employee Address: |
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Company Address:
|
000 Xxxx Xxxxxx | |||
| Xxxxxxx, Xxxxx 00000 |
provided that all notices to the Company shall be directed to the attention of an executive officer
of the Company other than Employee, with a copy to the Secretary of the Company, or to such other
address as either party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
10. Employment with Subsidiaries. Employment with the Company for purposes of this
Agreement includes employment with any corporation in which the Company has a direct or
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indirect ownership interest of fifty percent (50%) or more of the total combined voting power of
all classes of stock in such corporation.
11. Confidential Information. The Employee shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses, which shall have
been obtained by the Employee during the Employee’s employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other than by acts by the
Employee or his representatives in violation of this Agreement). After termination of the
Employee’s employment with the Company, the Employee shall not, without the prior written consent
of the Company, communicate or divulge any such information, knowledge or data to anyone other than
the Company and those designated by it. In no event shall an asserted violation of the provisions
of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to
the Employee under this Agreement.
12. Miscellaneous; Governing Law. No provision of this Agreement may be amended,
waived or discharged following a Change in Control of the Company unless such amendment, waiver or
discharge is agreed to in writing and signed by all of the parties affected thereby. No waiver by
either party at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed to be
a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas.
13. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
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14. Headings. The headings of Sections of this Agreement are included solely for
convenience of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
15. Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled by arbitration, conducted by a panel of three arbitrators in a location
selected by the Employee within fifty (50) miles from the location of his job with the Company, in
accordance with the rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrators’ award in any court having jurisdiction; provided, however, that the
Employee shall be entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or in connection with
this Agreement.
16. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the
date first written above.
| FIRST FINANCIAL BANKSHARES, INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
“Company” |
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| ACCEPTED AND AGREED TO THIS DAY OF , 2008. |
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| By: | ||||
| Name: | ||||
| “Employee” | ||||
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