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Exhibit 10.4
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made and entered into
by and among EICKHOFF, PIEPER, & XXXXXXXXXX, INC., a Florida corporation,
("EPW"), XXXXXXX X. XXXXXXXX, ("WAE"), XXXX X. XXXXXXXXXX ("JPW"), XXXX X.
XXXXXX ("JHP"), XXXX X. XXXXXX, XX. ("WJC"), XXXXXXX X. XXXX ("COL"), XXXXX X.
XXXXXXXXXX ("SSM"), UNITED BANK AND TRUST COMPANY, (the "Subsidiary") and
PINELLAS BANCSHARES CORPORATION, now known as UNITED FINANCIAL HOLDINGS, INC.
("PARENT CORPORATION").
RECITALS
A. On or about September 29, 1995, Fiduciary Services Corporation
merged into UNITED BANK AND TRUST COMPANY, and in connection with such merger,
the following documents (collectively the "Merger Documents") were executed:
1. Agreement and Plan of Reorganization Forward Triangular
Merger, dated July 18, 1995, as amended by that certain Amendment to Plan of
Agreement and Plan of Reorganization Forward Triangular Merger (the
"Amendment"), dated September, 1995, by and between WJC, COL, SSM, FSC, and
Subsidiary (collectively the "Merger Agreement");
2. Employment Agreement, dated September 28, 1995, by and
between Subsidiary and WJC;
3. Employment Agreement, dated September 29, 1995, by and
between Subsidiary and COL;
4. Employment Agreement, dated September 29, 1995, by and
between Subsidiary and SSM;
5. Parent corporation adopted a Trust Department Stock Option
Plan (the "FSC Stock Option Plan") on September 16, 1995, as part of its
approval of the merger, which are attached to the Employment Agreements of WJC,
COL and SSM;
6. A First Right of Refusal Agreement, dated September 29,
1995, between WJC, COL, SSM, Subsidiary and Parent Corporation (collectively the
"FSC Right of First Refusal Agreement").
B. Parent Corporation acquired all of the stock of EPW effective
January 31, 1996, and in accordance therewith executed the following documents
(collectively the "Stock Sale Documents"):
1. Sale of Stock Agreement dated October 24, 1995, by and
among Parent, WAE, JHP, JPW, THE XXXXXX X. XXXXXX TRUST, and EPW;
2. Addendum to Sale of Stock Agreement executed by the same
parties executing the Stock Sale Agreement and joined in by XXXXXXXX and XXXXXX,
a Florida General Partnership ("the Partnership") dated December 29, 1995;
3. Employment Agreement dated December 28, 1995, by and
between EPW and WAE;
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4. Employment Agreement dated December 28, 1995, by and
between EPW and JPW;
5. Employment Agreement dated December 28, 1995, by and
between EPW and JHP;
6. First Right of Refusal Agreement dated December 28, 1995,
by and between WAE, JHP, JPW, Subsidiary, and Parent (the "EPW Right of First
Refusal Agreement");
7. Parent Corporation adopted the EPW Stock Option Plan, which
are attached as exhibits to the Employment Agreements of WAE, JPW, and JHP.
C. The parties (excluding the Xxxxxx X. Xxxxxx Trust) to the Merger
Documents and the Stock Sale Documents (collectively the "Closing Documents")
wish to modify, amend, and revise the Closing Documents and to modify, amend and
revise the stock option/bonus plan.
D. Unless otherwise defined herein, defined terms shall have the same
meaning as set forth in the Closing Documents.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as follows:
PARAGRAPH 1: TERMINATION OF RIGHT OF FIRST REFUSAL AGREEMENTS
The parties to the FSC Right of First Refusal Agreement and the EPW
Right of First Refusal Agreement hereby revoke and terminate in its entirety the
EPW Right of First Refusal Agreement and the FSC Right of First Refusal
Agreement.
PARAGRAPH 2: TRANSFER PRICING
The parties to the Merger Agreement, EPW Stock Option Plan, and the FSC
Stock Option Plan hereby modify, amend and revise such plans and agreements as
follows:
2.01 Accounting and Finance Services. In determining the Trust
Department Net Earnings, the Trust Department (as defined in such plans and
agreement) shall be charged the following amounts for the accounting services
and finance expenses incurred by the Subsidiary and Parent Corporation:
Year United Trust Division EPW Division
1997 7,200.00 $ 10,800.00
1998 9,600.00 10,800.00
1999 12,000.00 10,800.00
2000 14,400.00 10,800.00
2.02 Human Resources. The charges incurred by the Parent Corporation or
Subsidiary for Human Resources shall be charged to United Trust and EPW
Divisions of the Trust Department at the rate of $100.00 per month, per
employee.
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2.03 Occupancy Costs. The United Trust Division of the Trust Department
occupancy costs shall be charged at the rate of $11.00 per year per square foot,
which amount shall increase 4% per annum, effective January 1 of each applicable
year.
2.04 Goodwill/Debentures. In determining the Trust Department Net
Earnings, the Trust Department will not be charged for the amortization of any
goodwill or the payment of any interest on debentures issued in connection with
the acquisition of EPW.
2.05 Formation of New Trust Company. If a separate trust company is
organized, the Trust Department Net Earnings shall not be reduced for the
interest differential between the costs of funds to capitalize the new trust
company and the yield on the same funds earned by the Subsidiary or Parent
Corporation. Furthermore, no costs shall be allocated to the new trust company
or the existing Trust Department for the non operational expenses of such trust
company which shall include the formation and organizational costs of the new
trust company.
PARAGRAPH 3: CHANGE OF CONTROL
3.01 EPW Employment Contracts. WAE, JHP, JPW, and EPW hereby amend,
modify, and revise the applicable Employment Agreements to provide that if there
occurs a "Change of Control" (as defined in the EPW Right of First Refusal
Agreement) prior to December 31, 2000, WAE, JHP, and JPW shall be paid their
employment bonus which remains unearned in the amounts set forth pursuant to the
attached EPW budgeted income statement attached hereto as Exhibit "A". The
payment amount shall be limited to the remaining unearned bonus subsequent to
the Change in Control. For example, if a change in control occurs on October 31,
1999, payment would be $228,800.00. Payment shall be in cash and shall be
simultaneous with the closing of the Change of Control.
3.02 Modification of WAE and WJC Employment Agreements. The Employment
Agreements of WAE and WJC are further modified to provide that in the event of a
Change of Control (as defined in the EPW and FSC First Right of Refusal
Agreements), the acquirer shall have the option to do the following:
(a) Negotiate a new employment contract with each applicable
party;
(b) Terminate the employee, provided that upon such
termination, any and all non-compete provisions shall be null and void; or
(c) Terminate the employee and enforce the non-compete
provisions in the applicable Employment Agreement, provided a payment of
$150,000.00 is made in not more than 12 equal monthly payments.
3.03 Modification of SSM and COL Employment Agreements. The Employment
Agreements of SSM and COL are modified to provide that in the event of a Change
of Control (as defined in the FSC First Right of Refusal Agreement), the
acquirer shall have the option to do the following:
(a) Negotiate a new employment contract with each applicable
party; or
(b) Terminate the employee, provided that upon such
termination, any and all non-compete provisions shall be null and void; or
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(c) Terminate the employee and enforce the non-compete
provisions in the applicable Employment Agreement, provided a payment of
$50,000.00 is made in not more than 12 equal monthly payments.
3.04 Bonus Payment. The Employment Agreements executed by EPW, WAE,
JPW, and JHP are modified to provide that in the event any bonus is earned by
the employees for the year 2000, such bonus shall be paid in cash or in stock of
the Parent Corporation (at the most recent ESOP price) at the option of the
employee recipient.
3.05 Non Compete Buyout for WJC. Except in the event of a Change of
Control, WJC shall have the right to buy out the last year of his non-compete
agreement (January 1, 2001 - December 31, 2001) in exchange for a cash payment
of $125,000.
PARAGRAPH 4: PERFORMANCE AND REVENUE OPTIONS/SHARES
4.01 Grant of Options/Performance Shares. The following paragraphs of
the EPW Stock Option Plan, the FSC Stock Option Plan, and the Amendment are
hereby revised and modified:
(a) Paragraph 10(A) of the EPW Stock Option Plan is deleted in
its entirety and in lieu thereof, the sentence "Options shall not be granted for
the calendar years 1995 and 1996" shall be inserted.
(b) The introductory clause of Paragraph 10(C) of the EPW
Stock Option Plan is deleted and in lieu thereof, the following is inserted,
"The aggregate number of Option Shares that can be optioned by all Participants
for calendar years 1997-2000 shall be determined in accordance with the
following formula:"
(c) Paragraph 11(a.) of the FSC Stock Option Plan is deleted
in its entirety and in lieu thereof, the following sentence is inserted,
"Options shall not be granted for the calendar years 1995 and 1996".
(d) Paragraph 11(c.) of the FSC Stock Option Plan is deleted
in its entirety and in lieu thereof, the following introductory clause is
inserted, "The aggregate number of Option Shares that can be optioned by all
Participants for the calendar years 1997-2000 (subject to the priority of the
Performance Shares) shall be determined in accordance with the following
formula":
(e) Paragraph 1 of the Amendment is revised to delete the
phrase, "1996 through 1999" and in lieu thereof inserting the phrase, "1997
through 2000". In addition, the last sentence of Paragraph 1 is deleted in it
entirety and in lieu thereof, the following sentence is inserted, "No
performance shares may be earned for 1995 or 1996."
(f) Paragraph 4 of the Amendment is revised by deleting the
phrase, "1996 through 1999" and in lieu thereof inserting the phrase, "1997
through 2000".
The parties recognize that making the above changes shall require
additional adjustments to the plans. Accordingly, all of the performance
standards and date of issuance of all of the applicable shares shall be pushed
back by one year. The parties further acknowledge that it is their intention to
simply
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delay by one year all of the performance standards and criteria of the FSC Stock
Option Plan, the EPW Stock Option Plan and the granting of Performance Shares
under the Amendment.
4.02 Vesting. If a Change of Control (as defined in the EPW and FSC
First Right of Refusal Agreements) occurs, then all of the shares that could be
granted under the EPW and FSC Stock Option Agreements or the Performance Shares
shall be vested in accordance with the following chart:
1997 1998 1999 2000 TOTAL
------ ----- -------- --------- ------
Budgeted Earn Out Shares -0- 5,657 10,800 14,469 30,926
Hypothetical Earn Out (97 & 98) -0- 3,000 *25,269 sh. 28,269
Hypothetical Earn Out (97 & 98) 2,000 8,000 *20,926 sh. 30,926
Hypothetical Earn Out (97 & 98) -0- -0- -0- **14,469 14,469
* Change of Control occurs in 1999
** Change of Control occurs in 2000
These "Earn Out" Shares are based on the Trust Department Five Year Budget, a
copy of which is attached hereto as Exhibit "A".
4.03 Grant of Revenue Options/Shares. The parties to the Merger
Agreement, FSC Stock Option Plan and EPW Stock Option Plan amend and supplement
the Merger Agreement, FSC Stock Option Plan and EPW Stock Option Plan to provide
that in addition to granting options or Performance Shares (as defined in the
Merger Agreement and 4.01 above) based on Trust Department Net Earnings, shares
or Options for up to 30,000 shares shall be granted based on the revenues of the
Trust Department (hereinafter the "Revenue Options" or "Shares") as follows:
(a) Issuance of Shares. The Revenue Options or Shares will be
issued by Parent Corporation upon the Trust Department achieving the following
revenue goals for any trailing twelve months:
Number of Shares Trailing 12 Months
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or Shares for which Revenue
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Options can be granted
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3,000 $2,100,000.00
6,000 $2,400,000.00
9,000 $2,700,000.00
12,000 $3,000,000.00
As used herein the "Trust Department" shall mean the
trust business operated by Subsidiary, EPW, and any new trust company that may
be formed by Parent Corporation or Subsidiary provided, however, that existing
revenues from any newly acquired operating company shall be excluded in
determining the Trust Departments revenues.
(b) Ratio of Participation. A participant shall participate in
the plan and any Performance Shares or Revenue Options issued hereunder shall be
in the ratios set forth in Exhibit "B" attached hereto and made part hereof.
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(c) Change of Control. In the event there is a "Change of
Control" as defined in the EPW and FSC First Right of Refusal Agreements, then
all Revenue Options or Shares to be issued under subparagraph 4.03(a) of this
Agreement that have not yet been issued shall be simultaneously issued to the
participants. For example, if the trailing twelve months revenues were
$2,527,00.00, Revenue Options and Shares for a total of 9,000 shares would have
been previously granted (3,000 for achieving the $2,100,000.00 goal and 6,000
for achieving the $2,400,000.00). Upon a closing of a Change of Control
transaction, the Revenue Options or Shares for 21,000 unearned Shares shall be
simultaneously issued to the participants. In order to qualify for the issuance
of the unearned shares under subparagraph 4.03(a), participants must be employed
at the time of the Change of Control.
4.04 Issuance and Delivery of Shares. Revenue Shares or Options, as the
case may be, shall be issued and delivered to the participants within 30 days
after the end of the month after the applicable goal was achieved. Performance
Shares or Options, as the case may be, shall be issued and delivered to the
participants in accordance with the original agreements except that the shares
or options for the year 2000 shall be escrowed for a period of one year and
issued by December 31, 2001, subject to any adjustments as outlined in the
original agreements.
PARAGRAPH 5: GENERAL PROVISIONS
5.01 Entire Agreement. This writing contains the entire agreement of
the parties with regard to the matters herein described, and no representations
or agreements, oral or otherwise, between the parties prior or subsequent to the
signing of this Agreement not embodied herein shall be of any force and effect.
5.02 Interpretation - No Presumption. It is acknowledged by the parties
that this Agreement is the result of negotiated suggestions of all parties and,
therefore, no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions herein or the modification, addition or
deletion of provisions in prior drafts hereof.
5.03 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.04 Exhibits/Recitals. The "Exhibits" attached hereto or delivered
pursuant to this Agreement, together with all documents which are incorporated
by reference therein, and the "Recitals" set forth in the beginning of this
Agreement:
(a) Form an integral part of this Agreement; and
(b) Are hereby incorporated into this Agreement wherever
reference is made to them to the same extent as if they were set out in full at
the point at which such reference is made.
5.05 Arbitration. The parties hereto shall meet and attempt to agree on
any disputes hereunder, failing same, such disputes shall be determined by
arbitration in the following manner:
(a) Each party shall attempt to agree upon a mutually
acceptable arbitrator.
b) If the parties to the dispute are unable to agree on an
arbitrator, each shall appoint an arbitrator, and the two arbitrators so
selected shall appoint a third.
c) The decision of any two of the aforesaid three
arbitrators shall be final and binding on all parties.
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(d) The parties shall split the cost of arbitration equally.
5.06 Termination. This Agreement and the Agreements referenced under
Recitals A.1-6 and B.1-7 and all modifications made herein shall terminate on
the later of December 31, 2001 or when all Revenue and Performance
Options/Shares are issued under paragraph 4.
IN WITNESS WHEREOF, the parties have executed this Modification
Agreement this ____ day of ______, 1997.
Witnesses: EICKHOFF, PIEPER, & XXXXXXXXXX,INC.,
A FLORIDA CORPORATION
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By:
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XXXXXXX X. XXXXXXXX, as its
Chairman
Attest:
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,as its Secretary
Witnesses:
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------------------------------(SEAL)
---------------------------------- XXXXXXX X. XXXXXXXX
Witnesses:
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------------------------------(SEAL)
XXXX X. XXXXXXXXXX
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Witnesses:
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------------------------------(SEAL)
---------------------------------- XXXX X. XXXXXX
Witnesses:
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------------------------------(SEAL)
---------------------------------- XXXX X. XXXXXX, XX.
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[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
Witnesses:
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------------------------------(SEAL)
---------------------------------- XXXXXXX X. XXXX
Witnesses:
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------------------------------(SEAL)
---------------------------------- XXXXX X. XXXXXXXXXX
Witnesses: UNITED BANK AND TRUST COMPANY
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By:
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XXXXXX WINNER, as its President
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Attest:
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,as its Secretary
Witnesses: UNITED FINANCIAL HOLDINGS, INC.
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By:
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XXXX X. XXXXXX, as its President
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Attest:
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,as its Secretary
Exhibits
A EPW and United Trust Combined ("Trust Department") Five Year Budgeted
Income Statements
B Revenue and Performance Bonus Share Plan Participation Ratios
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