Exhibit 10.3
CITIZENS FEDERAL SAVINGS BANK
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Change-in-Control
Protective Agreement with
W. Xxxx XxXxxxx
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THIS AGREEMENT entered into this 14th day of December, 2000, by and between
Citizens Federal Savings Bank (the "Bank") and W. Xxxx XxXxxxx (the "Employee"),
effective on the date of execution of this agreement (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it in its best interests to enter into
this Agreement as additional incentive to the Employee to continue as an
executive employee of the Bank; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the event a
change of control occurs with respect to the Bank.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
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When used anywhere in the Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the Bank's
or the Company's voting stock, (ii) the acquisition of the ability to control
the election of a majority of the Bank's or the Company's Directors, (iii) the
acquisition of a controlling influence over the management or policies of the
Bank or the Company by any person or by persons acting as a "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (iv) during
any period of two consecutive years, individuals (the "Continuing Directors")
who at the beginning of such period constitute the Board of Directors of the
Bank or the Company (the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Existing Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director; and provided further, that a Change in Control
shall not be deemed to occur as the result of the acquisition of common stock of
the Bank or the Company by Xxxxx Xxxxxx, Xx. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
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herein. The decision of the Bank's or the Company's non-employee directors as to
whether or not a Change in Control has occurred shall be conclusive and binding.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and as interpreted through applicable rulings and regulations in
effect from time to time.
(c) "Code Section 280G Maximum" shall mean product of 2.99 and his "base
amount" as defined in Codess.280G(b)(3).
(d) "Company" shall mean CFS Bancshares, Inc., the holding company of the
Bank.
(e) "Good Reason" shall mean any of the following events, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than thirty (30) miles from his primary office as of
the date of the Change in Control; (ii) a material reduction in the Employee's
base compensation as in effect on the date of the Change in Control or as the
same may be increased from time to time; (iii) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
him under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by him at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(f) "Just Cause" shall mean, in the good faith determination of the Bank's
Board of Directors, the Employee'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 breach of any provision of this Agreement.
The Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause. No act, or failure to act, on the
Employee's part shall be considered "willful" unless he has acted, or failed to
act, with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Bank and the Company.
(g) "Protected Period" shall mean the period that begins on the date six
months before a Change in Control and ends on the later of the first annual
anniversary of the Change in Control or the expiration date of this Agreement.
(h) "Trust" shall mean a grantor trust designed in accordance with Revenue
Procedure 92-64 and having a trustee independent of the Bank and the Company.
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2. Trigger Events
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The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during the Protected
Period and constitutes Good Reason, or (iii) the Bank, the Company, or their
successor(s) in interest terminate the Employee's employment for any reason
other than Just Cause during the Protected Period.
3. Amount of Severance Benefit
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If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
the difference between the Code Section 280G Maximum and the sum of any other
"parachute payments" as defined under Code Section 280G(b)(2) that the Employee
receives on account of the Change in Control. Said sum shall be paid in one lump
sum within ten (10) days of the later of the date of the Change in Control and
the Employee's last day of employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code Section 280G Maximum, the parties may
jointly agree in writing that such excess shall be treated as a loan ab initio
which the Employee shall repay to the Bank, on terms and conditions mutually
agreeable to the parties, together with interest at the applicable federal rate
provided for in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
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Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code Section 280G Maximum, unless
the Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 15 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the tenth
(10th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the
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Bank provides the trustee with a written notice directing the trustee to
withhold such payment. In the latter event, the trustee shall submit the dispute
to non-appealable binding arbitration for a determination of the amount payable
to the Employee pursuant to this Agreement, and the costs of such arbitration
shall be paid by the Bank. The trustee shall choose the arbitrator to settle the
dispute, and such arbitrator shall be bound by the rules of the American
Arbitration Association in making his determination. The parties and the trustee
shall be bound by the results of the arbitration and, within three days of the
determination by the arbitrator, the trustee shall pay from the Trust the
amounts required to be paid to the Employee and/or the Bank, and in no event
shall the trustee be liable to either party for making the payments as
determined by the arbitrator.
5. Term of the Agreement. This Agreement shall remain in effect for the period
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commencing on the Effective Date and ending on the earlier of (i) the date 36
months after the Effective Date, and (ii) the date on which the Employee
terminates employment with the Bank; provided that the Employee's rights
hereunder shall continue following the termination of this employment with the
Bank under any of the circumstances described in Section 2 hereof. Additionally,
on each annual anniversary date from the Effective Date, the term of this
Agreement shall be extended for an additional one-year period beyond the then
effective expiration date provided the Board of Directors of the Bank determines
in a duly adopted resolution that the performance of the Employee has met the
requirements and standards of the Board, and that this Agreement shall be
extended.
6. Termination or Suspension Under Federal Law
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(a) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with both 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder, and
Regulatory Bulletin 27A, but only to the extent required thereunder on the date
any payment is required pursuant to this Agreement.
(b) If the Employee is removed and/or permanently prohibited form
participating in the conduct of the Board's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Board is in default (as defined in Section 3(x)(1) of FDIA), all
obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(d) All obligations under this Agreement shall terminate, except to the
extent that continuation of this Agreement is necessary for the continued
operation of the Board: (i) by the Director of the Office of Thrift Supervision
("Director of OTS"), or his or her designee, at the time that the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of the Board under the authority contained in Section
13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at
the time that the Director of the OTS, or his or her designee approves a
supervisory merger to resolve problems related to
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operation of the Bank or when the Bank is determined by the Director of the OTS
to be in an unsafe or unsound condition. Such action shall not affect any vested
rights of the parties.
(e) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank shall (i) pay the Employee all or part of the compensation withheld
while its contract obligations were suspended, and (ii) reinstate (in whole or
in part) any of its obligations which were suspended.
7. Expense Reimbursement.
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In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation of this Agreement, whether instituted by formal
legal proceedings or otherwise, including any action that the Employee takes to
enforce the terms of this Agreement or to defend against any action taken by the
Bank or the Company, the Employee shall be reimbursed for all costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, provided that the Employee shall obtain a final
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank and the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Successors and Assigns.
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(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Company.
(b) Since the Bank is contracting for the unique and personal skills of the
Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
9. Amendments. No amendments or additions to this Agreement shall be binding
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unless made in writing and signed by all of the parties, except as herein
otherwise specifically provided.
10. Applicable Law. Except to the extent preempted by Federal law, the laws of
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the State of Alabama shall govern this Agreement in all respects, whether as to
its validity, construction, capacity, performance or otherwise.
11. Severability. The provisions of this Agreement shall be deemed severable and
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the invalidity or unenforceability of any provision shall not effect the
validity or enforceability of the other provisions hereof.
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12. Entire Agreement. This Agreement, together with any understanding or
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modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: CITIZENS FEDERAL SAVINGS BANK
/s/ Xxxxxxx X. Heard By:/s/ Xxxxx Xxxxxx, Xx.
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Secretary Its President
WITNESS:
/s/ Xxxxxxx X. Xxxxx /s/ W. Xxxx XxXxxxx
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Employee
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