SECOND AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
Exhibit 10.5
SECOND AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
THIS SECOND 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.
Xxxx (“Executive”).
WITNESSETH:
WHEREAS, Executive has been effective in his service to PrimeTrust Bank (sometimes referred to
herein as “Bank”) and has previously entered into a Change of Control Agreement with the Bank dated
January 31, 2005 (the “PrimeTrust Agreement”); and
WHEREAS, PrimeTrust Bank, Bank of the South and the Company have entered into a Share Exchange
Agreement pursuant to which shareholders of PrimeTrust Bank and Bank of the South will exchange
their stock in PrimeTrust Bank and Bank of the South for stock in the Company (the “Share
Exchange”) for the purpose of causing the Company to become a two-bank holding company that owns
the Bank and Bank of the South; and
WHEREAS, the Share Exchange would trigger the provisions of the PrimeTrust Agreement but the
parties to this Agreement desire to terminate the PrimeTrust Agreement and substitute in its place
this Agreement in the event the Share Exchange is consummated; and
WHEREAS, the Company recognizes the valuable services that Executive has rendered to
PrimeTrust Bank and desires to induce Executive to continue his active participation in the
business of PrimeTrust Bank and also to serve as a director and as Executive Vice President and
Chief Financial Officer of the Company; and
WHEREAS, Executive is willing to continue to serve both PrimeTrust Bank and the Company but
desires assurance that, in the event of any change of control of the Company or PrimeTrust 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. 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
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Exhibit 10.5
the Change of Control Payment within twenty (20) business days after the Change of Control Payment
first became due.
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, PrimeTrust Bank, and or Bank of the South 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 |
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Exhibit 10.5
| representing 25% or more of the combined voting power of the Company’s then outstanding securities. |
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) | 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 not be deemed to have been a director during the relevant time frame specified in this Agreement; | ||
| (b) | Any director who is at the Effective Date a director of the Company, the Bank or PrimeTrust Bank; 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.”
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Exhibit 10.5
(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 financial and accounting 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 violating 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;
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Exhibit 10.5
(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;
(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,
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Exhibit 10.5
seriously damage or besmirch the reputation of the Company and/or the Bank. Executive may,
in
extreme cases, be immediately terminated for 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.
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 terminable at will by either the
Company, the Bank, or the Executive. 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.
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Exhibit 10.5
8. PrimeTrust Bank Benefit. PrimeTrust Bank 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.
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.
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Exhibit 10.5
15. Tax Indemnity. In the event it shall be determined that any payment or benefits by
the Company to the Executive (a “Payment”) would subject the Executive to an excise tax under
Section
4999 of the Code and/or under the laws of the State of Tennessee, or any interest or penalties
are incurred or paid by the Executive with respect to such excise tax or state tax (any such excise
tax or state tax, together with any interest and penalties, are hereinafter collectively referred
to as the “Excise Tax”), then the Executive shall be entitled to an additional payment from the
Company as is necessary (after taking into account all federal, state and local taxes (regardless
of type, whether income, excise or otherwise) imposed upon the Executive as a result of the receipt
of the payment contemplated by this Agreement) and any reduction in such taxes of the Executive as
a result of the payment of the related Excise Tax) to place the Executive in the same after-tax
position the Executive would have been in had no Excise Tax been imposed upon or incurred or paid
by the Executive (the “Tax Indemnity”). The Company’s tax accountants shall determine, utilizing
such reasonable assumptions as it considers necessary, whether a Payment would subject the
Executive to the Excise Tax within thirty (30) days after receipt of a written request from the
Company or the Executive in which the requesting party verifies that a Payment has been made and
requests an appropriate determination. The requesting party shall provide the other party with a
copy of any such written request. The tax accountants shall determine whether a Tax Indemnity
obligation exists and, if so, the amount of the Tax Indemnity and shall provide supporting
documentation to both the Company and the Executive. The Company shall pay the Executive any Tax
Indemnity so determined in a lump sum in cash within thirty (30) days following the release of the
related determination by the outside auditor; provided, however, that any such payment may be
reduced by applicable legal withholdings. In the event that the Internal Revenue Service and/or a
state taxing authority subsequently assesses an Excise Tax that is greater than the tax previously
calculated by the outside auditor, the Company shall make an additional Tax Indemnity payment, as
calculated by the outside auditor in a manner consistent with the provisions of this Section 15, to
the Executive within thirty (30) days after the date of such assessment. It shall be Executive’s
obligation to notify the Company and the Bank of any such assessment.
16. 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 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.
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Exhibit 10.5
17. PrimeTrust Bank Agreement Terminated. It is agreed by Executive, the Company and
PrimeTrust Bank that, if this Agreement becomes effective by virtue of the occurrence of the Share
Exchange being completed, then this Agreement shall be deemed to have replaced the PrimeTrust
Agreement, which shall be deemed to be terminated immediately before the Effective Date and of
no further effect.
18. Effective Date. This Agreement is an amendment and restatement of an existing
Change of Control Agreement and shall be deemed to 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
became effective as a result of the filing of articles of share exchange with respect to the Share
Exchange, which occurred on September 1, 2006.
IN WITNESS WHEREOF, this Agreement has been executed on June 18, 2007, to be effective as set
forth in Section 18 of this Agreement.
| MID-AMERICA BANCSHARES, INC. |
||||
| By: | /s/ Xxxxx Xxxxx | |||
| Xxxxx Xxxxx, President | ||||
| /s/ Xxxxx X. Xxxx | ||||
| XXXXX X. XXXX, Individually | ||||
| PRIMETRUST BANK |
||||
| By: | /s/ Xxxx X. Xxxxx | |||
| Xxxx X. Xxxxx, Chairman | ||||
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