CANCELLATION AGREEMENT
THIS AGREEMENT is made on February 20, 2002 (the "Effective Date"), by
and among FLAG Financial Corporation, a Georgia corporation ("FLAG"); FLAG Bank,
a bank subsidiary of FLAG (the "Bank") (collectively, the "Employer"), and XXXX
X. XXXXX, a resident of the State of Georgia (the "Employee").
R E C I T A L S:
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The Employer and the Employee entered into that certain employment
agreement dated as of January 1, 2001 (the "Employment Agreement").
The parties wish to cancel the provisions of the Employment Agreement
except for the restrictive covenants and the enforcement provisions thereof, and
the provisions related to notice and attorneys' fees.
In consideration of the above premises and the mutual agreements
hereinafter set forth, good and valuable consideration, the receipt and the
parties hereto agree as follows:
1. Cancellation of the Employment Agreement. The Employer and the
Employee agree to cancel all provisions of the Employment Agreement, except for
the Surviving Provisions (as defined in Section 5 of this Agreement). The
Employee will tender his resignation as Chairman of the Board of Directors of
FLAG and the Bank, with such resignation to be effective no later than the
Effective Date.
2. Consideration. In full and complete settlement of any and all
obligations of the Employer to the Employee under the Employment Agreement, the
Employer shall provide Employee with the following:
(a) Purchase Price for the Employment Agreement. For the
settlement of its obligations to the Employee under the Employment
Agreement, the Employer shall pay to the Employee a lump-sum cash
payment equal to $950,000, payable on the Effective Date or as soon as
practicable thereafter;
(b) Transfer of Automobile. The title to the automobile
currently made available by the Employer to the Employee for his use
shall be transferred to the Employee on the Effective Date or as soon
as practicable thereafter. The Employee acknowledges that the value of
the automobile at the time of transfer will constitute imputed income
to the Employee.
(c) Payment for Existing Stock Options. For a period of thirty
(30) days commencing with the Effective Date, the Employee may elect to
have FLAG cancel any of his options to purchase shares of FLAG's common
stock which are outstanding as of the Effective Date and for which the
exercise price is greater than the fair market value of FLAG common
stock as of the Effective Date (the "Old Options") in exchange for a
$2.00 (prior to the closing of the Plan of Recapitalization documented
in that certain agreement dated February 20, 2002 (the
"Recapitalization") per share cash payment. Any such transaction shall
be closed within thirty (30) days following the date the Employee
gives FLAG notice of his intent to exercise the cancellation right
provided herein.
(d) New Option. As of the Effective Date, FLAG will grant an
option to the Employee to purchase 20,000 (prior to the
Recapitalization) shares of FLAG common stock at an exercise price
equal to the selling price in the private offering for the sale of
FLAG's common stock which will be used to fund the Recapitalization
(the "New Option"); provided, however, that if the Employee elects to
have the Old Options cancelled as provided in Subsection (c) of this
Section, the grant date for the New Option shall be no earlier than six
(6) months and one day following the date the Old Options are cancelled
(the "Later Grant Date"). If the New Option is granted on the Later
Grant Date, the exercise price for the New Option will be equal to the
greater of (i) the fair market value of FLAG's common stock on such
Later Grant Date or (ii) $9.10.
(e) Success Fee. The Employee shall be entitled to a payment
equal to $250,000 for participating in the Recapitalization subject to
the following conditions: (i) the Employee's use of his best efforts to
effect the closing of the Recapitalization; (ii) the Employee's use of
reasonable efforts to secure the approval of the Recapitalization by
the shareholders of FLAG; (iii) the Employee's continued commitment to
business development and public relations for FLAG and the Bank in the
LaGrange, Georgia market; and (iv) the Employee's assistance in
supporting a new city president for the LaGrange, Georgia market.
Payment of the success fee will be made ten (10) days after the
Effective Date.
3. Continued Employment. The Employee will continue in the employ of
the Bank as the Chairman of the LaGrange, Georgia Advisory Board on an at-will
basis. The Employee will also continue to serve as a member of the Board of
Directors of the Bank. The Employee shall receive the following salary and
benefits while employed by the Bank:
(a) Base Salary. The Employee shall be compensated at a base
rate of One Hundred Twenty Thousand Dollars ($120,000) per year ("Base
Salary"). The Base Salary shall be payable in accordance with the
Bank's normal payroll practices.
(b) Incentive Compensation. The Employee shall be eligible for
an annual bonus in an amount determined by the Board of Directors of
the Bank in its sole discretion based on the Employee's performance as
evaluated by the Board of Directors of the Bank and the Bank's
satisfaction of performance objectives as established by the Board of
Directors of the Bank
(c) Deferred Compensation. The Employee shall be entitled to
continue participation in the deferred compensation program currently
maintained for him by FLAG, subject to amendment by the Board of
Directors of FLAG.
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(d) Memberships. The Bank shall reimburse the Employee for the
annual dues associated with his membership in Highland Country Club
located in LaGrange, Georgia for a period of two (2) years following
the Effective Date.
(e) Business Expenses. The Bank shall reimburse the Employee
for reasonable business expenses (including travel expenses) incurred
by the Employee in performance of the Employee's duties for the Bank,
subject to the approval of the Board of Directors of the Bank;
provided, however, that the Employee, shall, as a condition of
reimbursement, submit verification of the nature and amount of such
expenses in accordance with reimbursement policies from time to time
adopted by the Bank and in sufficient detail to comply with the rules
and regulations promulgated by the Internal Revenue Service.
(f) Benefits. The Employee shall be entitled to such benefits
as may be available from time to time for employees of the Bank
similarly situated to the Employee. All such benefits shall be awarded
and administered in accordance with the Bank's standard policies and
practices. Such benefits may include, by way of example only, profit
sharing plans, retirement or investment funds, dental, health,
disability insurance and such other benefits as the Bank deems
appropriate.
(g) Vacation. On a non-cumulative basis, the Employee shall be
entitled to four (4) weeks of vacation annually during which the
Employee's compensation shall be paid in full.
4. Termination of Employment. The Employee's employment with the Bank
may be terminated for any reason at any time by any party. In the event that the
Employee's employment is terminated by the Bank without Cause (as defined in the
Employment Agreement) or voluntarily terminated by the Employee, the Bank shall
pay to the Employee a lump sum payment in an amount equal to the product of the
Employee's Base Salary and a fraction, the numerator of which is the number of
months remaining until the second (2nd) anniversary of the Effective Date and
the denominator of which is twenty-four (24). If the termination of employment
occurs after the second (2nd) anniversary of the Effective Date, the Employee
shall not receive any payment pursuant to this Section. If the Employee is
involuntarily terminated by the Bank for Cause, the Bank shall only be obligated
to pay the Employee for amounts earned (pursuant to Section 3) but which remain
unpaid as of the employment termination date.
5. Assignment. No party hereto may assign or delegate this Agreement or
any of its or his rights and obligations hereunder without the written consent
of the other parties hereto.
6. Entire Agreement. This Agreement, together with the Surviving
Provisions, embody the entire agreement of the parties hereto relating to the
subject matter hereof and supersede any and all prior agreements. No amendment
or modification of this Agreement shall be valid or binding upon the parties
unless made in writing and signed by the parties hereto. The definitional
provisions of the Employment Agreement corresponding to the defined terms used,
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but not otherwise defined, herein; and Sections 5, 6, 7, 8, 9, 12 and 16 thereof
are referred to herein as the "Surviving Provisions." Sections 6, 7 and 8 of the
Surviving Provisions shall be given effect only upon the Employee's voluntary
resignation as an employee of the Bank.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with any applicable federal law and the substantive laws of the State
of Georgia, without reference to its conflict of laws provisions.
8. Survival. The obligations of the parties as expressly set forth in
Section 2 hereof shall survive the Executive's termination of employment as an
at-will employee.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year set forth below.
FLAG FINANCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------
Title: Chairman and CEO
----------------
FLAG BANK
By: /s/ J. Xxxxxx Xxxxxxx, Xx.
--------------------------
Title: President
-------------------------
/s/ Xxxx X. Xxxxx
------------------
XXXX X. XXXXX
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Exhibit 10.2a
AMENDMENT
TO CANCELLATION AGREEMENT
THIS AMENDMENT is made on March 26, 2002, by and among FLAG Financial
Corporation, a Georgia corporation ("FLAG"), FLAG Bank, a bank subsidiary of
FLAG (the "Bank") (collectively, the "Employer"), and XXXX X. XXXXX (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Employer and the Executive entered into that certain
agreement dated as of February 20, 2002 (the "Agreement") for the cancellation
of the Executive's employment agreement with the Employer;
WHEREAS, the parties wish to amend the Agreement to modify the
provisions relating to stock options and to provide that a portion of the
consideration payable under the Agreement will be paid to the Employee in the
form of a deferred compensation benefit;
WHEREAS, the Employer will establish a trust (the "Trust") and
contribute to the Trust assets to fund the deferred compensation obligation for
the Employee, which amount shall be subject to the claims of the Employer's
creditors in the event of the Employer's insolvency until paid to the Employee
or his beneficiary in accordance with the Agreement;
WHEREAS, the parties intend that the Trust will constitute an unfunded
arrangement that has been individually negotiated with the Employee;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree to establish the Trust and amend the Agreement as follows:
1. By deleting the existing Sections 2(c), (d) and (e) in its
entirety.
2. By adding the following new Section 2(c):
"(c) New Options. As of the Effective Date, FLAG will grant an
option to the Employee pursuant to the terms of the FLAG Financial
Corporation 1994 Employee Stock Option Plan to purchase 20,000 shares
of FLAG common stock at an exercise price equal to $9.10 per share."
3. By adding the following new Section 2(d):
"(d) Success Fee. The Employee shall be entitled to a payment
equal to $250,000, adjusted for income, gains and losses as provided in
Section 9 below, subject to the following conditions: (i) the
Employee's cooperation with FLAG's transition to a new management team;
(ii) the Employee's commitment to business development and public
relations for FLAG and the Bank in the LaGrange, Georgia market during
the transition period; and (iii) the Employee's assistance in
supporting a new city president for the LaGrange, Georgia market.
Payment of the obligation described in this subsection (d) will be
earned by the Employee provided that the efforts described in clauses
(i), (ii), and (iii) of this subsection continue until the date which
is forty days (40) days following the date of the appointment of the
new management team by the Board of Directors of FLAG (the "Accrual
Date").Payment of this obligation shall be made in accordance with
Section 9 of this Agreement."
4. By adding the following new Section 9 to the Agreement:
"9. Payment of the Success Fee. As soon as practical following the
Accrual Date, FLAG shall establish a grantor trust, in substantially the form
approved by the Internal Revenue Service under Revenue Procedure 92-64 (the
"Trust") of which the Employee shall be the beneficiary. FLAG shall contribute
$250,000 to the Trust (the "Deposit"). Subject to the claims of FLAG's
creditors, which shall be given priority in the manner provided in the grantor
trust, payments shall be made from the Trust to the Employee in accordance with
the terms of this Section 9.
(a) Payment of Benefits. Beginning upon the Employee's
attainment of age 60, the Employee shall be entitled to begin receiving
payments from the Trust. The Deposit, as adjusted by the income, gains
and losses experienced under the Trust (which shall be referred to as
of any date of determination as the "Trust Amount"), shall be payable
to the Employee in annual installments over a period of five (5) years
beginning with the first annual payment made on the first day of the
month following the Employee's attainment of age 60 and subsequent
annual payments made on each anniversary of such date for a period of
four (4) years. The payment for each year shall be determined as
follows: one-fifth of the Trust Amount for the first year; one-fourth
of the Trust Amount for the second year; one-third of the Trust Amount
for the third year; one-half of the Trust Amount for the fourth year;
and the remaining Trust Amount for the fifth year. FLAG's obligation to
the Employee shall be governed by the terms of the Trust to the extent
not inconsistent with the provisions of this Section 9.
(b) Payment of Benefits Upon Employee's Death.
-----------------------------------------
(i) Prior to Receiving Any Payments. In the event of
the Employee's death prior to the time benefit payments have
commenced under Subsection (a), the Employee's Beneficiary
shall be entitled to receive the Employee's benefits under the
Trust. Such benefit payments shall be made on the same basis
as if the Employee had survived; for example, with the first
payment being made on the first day of the month after the
Executive would have attained age 60. For purposes of this
-2-
Agreement, the Executive's "Beneficiary" shall mean the
Executive's surviving spouse, and if there is no surviving
spouse, his estate.
(ii) While Receiving Payments. In the event of the
Employee's death prior to the completion of benefit payments
described in Subsection (a), the Employee's Beneficiary shall
be entitled to payment of the remaining Trust Amount, with the
remaining benefit payments to be made on the same payment
schedule as provided under Subsection (a)."
In all remaining respects, the terms of the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day and year first above written.
FLAG FINANCIAL CORPORATION:
By:/s/Xxxxxx X. Xxxxx
-----------------
Print Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
FLAG BANK:
By: /s/J. Xxxxxx Xxxxxxx, Xx.
Print Name: J. Xxxxxx Xxxxxxx, Xx.
Title: President and Director
EXECUTIVE:
/s/Xxxx X. Xxxxx
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XXXX X. XXXXX
