EXHIBIT 10.5
FORM OF
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made this _______ day of ________________, 200__, by
and between STATE BANK, a state chartered commercial bank, located in La Grange,
Texas (the "Bank"), and ________________ (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Bank, the Bank is
willing to provide to the Executive a deferred compensation opportunity. The
Bank will pay the Executive's benefits from the Bank's general assets.
AGREEMENT
The Executive and the Bank agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Change of Control" means:
(a) A change in the ownership of the capital stock of the Bank or Texas
United Bancshares, Inc. (the "Holding Company"), whereby another corporation,
person, or group acting in concert (hereinafter this Agreement shall
collectively refer to any combination of these three [another corporation,
person, or group acting in concert] as a "Person") as described in Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), acquires, directly or indirectly, beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of shares
of capital stock of the Bank or Holding Company which constitutes fifty percent
(50%) or more of the combined voting power of the Bank's or Holding Company's
then outstanding capital stock then entitled to vote generally in the election
of directors; or
(b) The persons who were members of the Board of Directors of the Bank or
Holding Company immediately prior to a tender offer, exchange offer, contested
election or any combination of the foregoing, cease to constitute a majority of
the Board of Directors; or
(c) The adoption by the Board of Directors of the Bank or the Holding
Company of a merger, consolidation or reorganization plan involving the Bank or
Holding Company in which the Bank or Holding Company is not the surviving
entity, or a sale of all or substantially all of the assets of the Bank or
Holding Company. For purposes of this Agreement, a sale of all or substantially
all of the assets of the Bank or Holding Company shall be deemed to occur if any
Person acquires (or during the 12-month period ending on the date of the most
recent acquisition by such Person, has acquired) gross assets of the Bank or
Holding Company that have an aggregate fair market value equal to fifty percent
(50%) or more of the fair market value of all of the respective gross assets of
the Bank or Holding Company immediately prior to such acquisition or
acquisitions; or
(d) A tender offer or exchange offer is made by any Person which, if
successfully completed, results in such Person beneficially owning (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) either fifty percent
(50%) or more of the Bank's or Holding Company's outstanding shares of Common
Stock or shares of capital stock having fifty percent (50%) or more the combined
voting power of the Bank's or Holding Company's then outstanding capital stock
(other than an offer made by the Bank or Holding Company), and sufficient shares
are acquired under the offer to cause such person to own fifty percent (50%) or
more of the voting power; or
(e) Any other transactions or series of related transactions occurring
which have substantially the same effect as the transactions specified in any of
the preceding clauses of this Section 1.1.
1.1.1 "Permitted Transfers" means a Shareholder may make the
following transfers, and such transfers shall not constitute a Change of
Control under Section 1.1:
(i) To any trust created solely for the benefit of any
Shareholder, any spouse of a Shareholder or any lineal descendent
of any Shareholder;
(ii) To any individual or entity by bona fide gift;
(iii) To any spouse or former spouse of a Shareholder
pursuant to the terms of a divorce decree;
(iv) To any officer or employee of the Bank Pursuant to
any incentive stock option plan established by the Shareholders;
(v) To any family member of a Shareholder; or
(vi) After receipt of any necessary regulatory approvals,
to any company or partnership of which a majority of the stock or
interests of the company or partnership are owned by any of the
Shareholders.
1.1 "Code" means the Internal Revenue Code of 1986, as amended.
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1.2 "Compensation" means the total annual base salary paid to the
Executive during a Plan Year.
1.3 "Deferral Account" means the Bank's accounting of the Executive's
accumulated Deferrals plus accrued interest.
1.4 "Deferrals" means the amount of the Executive's Compensation, which
the Executive elects to defer according to this Agreement.
1.5 "Disability" means the Executive's suffering a sickness, accident or
injury which has been determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled. The Executive must submit proof to the Bank of the
carrier's or Social Security Administration's determination upon the request of
the Bank.
1.6 "Effective Date" means __________________________.
1.7 "Election Form" means the Form attached as Exhibit 1.
1.8 "Normal Retirement Age" means the Executive's 60th birthday.
1.9 "Normal Retirement Date" means the later of the Normal Retirement Age
or Termination of Employment.
1.10 "Plan Year" means each consecutive twelve-month period commencing on
the Effective Date of this agreement.
1.11 "Shareholder" means the existing owners of all issued and
outstanding stock of the Bank and Holding Company as of the date this Agreement
is executed.
1.12 "Termination of Employment" means that the Executive ceases to be
employed by the Bank for any reason, voluntary or involuntary, other than by
reason of a leave of absence approved by the Bank.
ARTICLE 2
DEFERRAL ELECTION
2.1 Initial Election. The Executive shall make an initial deferral
election under this Agreement by filing with the Bank a signed Election Form
within 30 days after the Effective Date of this Agreement. The Election Form
shall set forth the amount of Compensation to be deferred and shall be effective
to defer only Compensation earned after the date the Election Form is received
by the Bank. The Executive shall not be permitted to make any deferrals after
reaching Normal Retirement Age.
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2.2 Election Changes
2.2.1 Generally. Upon the Bank's approval, the Executive may
modify the amount of Compensation to be deferred annually by filing a new
Election Form with the Bank prior to the beginning of the Plan Year in
which the Compensation is to be deferred. The modified deferral election
shall not be effective until the calendar year following the year in
which the subsequent Election Form is received and approved by the Bank.
2.2.2 Hardship. If an unforeseeable financial emergency arising
from the death of a family member, divorce, sickness, injury, catastrophe
or similar event outside the control of the Executive occurs, the
Executive, by written instructions to the Bank, may reduce future
deferrals under this Agreement.
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishing and Crediting. The Bank shall establish a Deferral
Account on its books for the Executive and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Compensation deferred by the Executive as of
the time the Compensation would have otherwise been paid to the
Executive.
3.1.2 Interest. At the end of each Plan Year under this Agreement
and immediately prior to the payment of any benefits, but only until
commencement of the benefit payments under this Agreement, interest is to
be credited on the account balance at an annual rate equal to 10 percent,
compounded annually.
3.1.3 Vesting. The Executive shall always be 100 percent vested in
the Deferrals credited to his Deferral Account. The Executive shall vest
in 10 percent of the Interest credited under Section 3.1.2 during the
first Plan Year. During each subsequent Plan Year, the Executive shall
vest in an additional 10 percent of the Interest credited on the Deferral
Account, until the Executive is 100 percent vested in the Interest
credited to the Deferral Account at the end of Plan Year 10.
3.2 Statement of Accounts. The Bank shall provide to the Executive,
within 120 days after the end of each Plan Year, a statement setting forth the
Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Executive is a general unsecured creditor of the
Bank for the payment of benefits. The benefits represent the mere Bank promise
to pay such benefits.
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ARTICLE 4
BENEFITS DURING LIFETIME
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank
shall pay to the Executive the benefit described in this Section 4.1 in lieu of
any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the
Deferral Account balance at the Executive's Normal Retirement Date.
4.1.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in 180 equal monthly installments. Payments shall be made on
the last day of the month commencing with the month following the
Executive's Normal Retirement Date. The Bank shall credit interest at an
annual rate of 7.5 percent, compounded annually, on the remaining account
balance during any applicable installment period.
4.2 Early Termination Benefit. Upon Termination of Employment prior to
the Normal Retirement Age for reasons other than death, Change of Control or
Disability, the Bank shall pay to the Executive the benefit described in this
Section 4.2 in lieu of any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
vested portion of the Deferral Account balance at the Executive's
Termination of Employment.
4.2.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in a lump sum within 60 days following Termination of
Employment.
4.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Bank shall pay to the Executive
the benefit described in this Section 4.3 in lieu of any other benefit under
this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the
Deferral Account balance at the Executive's Termination of Employment,
without regard to any vesting limitations under Section 3.1.3.
4.3.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in a lump sum within 60 days following Termination of
Employment.
4.4 Change of Control Benefit. Upon a Change of Control, followed within
36 months by either (i) the Bank terminating the Executive's employment; or (ii)
the Executive terminating employment after either a material reduction in job
responsibilities or a reduction in the cash compensation paid annually the
Executive prior to his Normal Retirement Date, the Bank shall pay
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to the Executive the benefit described in this Section 4.4 in lieu of any other
benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 is the
Deferral Account balance on the Executive's Termination of Employment,
without regard to any vesting limitation under Section 3.1.3.
4.4.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in a lump sum within 60 days following Termination of
Employment.
4.4.3 Excess Parachute Payment. Notwithstanding any provision of
this Agreement to the contrary, the Bank shall not pay any benefit under
this Agreement to the extent the benefit would create an excise tax under
the excess parachute rules of Section 280G of the Code.
4.5 Hardship Distribution. Upon the Board of Director's determination
(following petition by the Executive) that the Executive has suffered an
unforeseeable financial emergency as described in Section 2.2.2, the Bank shall
distribute to the Executive all or a portion of the Deferral Account balance as
determined by the Bank, but in no event shall the distribution be greater than
is necessary to relieve the financial hardship. Upon such a distribution, the
Deferral Account Balance shall be reduced accordingly, and no further deferrals
shall be permitted for the remainder of that Plan Year.
ARTICLE 5
DEATH BENEFITS
5.1 Death During Active Service. If the Executive dies while in the
employment of the Bank, the Bank shall pay to the Executive's beneficiary the
benefit described in this Section 5.1 in lieu of any other benefit under this
Agreement.
5.1.1 Amount of Benefit. The benefit under this Section 5.1 is the
greater of: (i) the Deferral Account balance at the Executive's death; or
b) $_______.
5.1.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive's beneficiary in a lump sum within 60 days following the
Executive's death.
5.2 Death During Payment of a Benefit. If the Executive dies after any
benefit payments have commenced under this Agreement but before receiving all
such payments, the Bank shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
5.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Bank shall pay
the same benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.
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ARTICLE 6
BENEFICIARIES
6.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Bank. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and received by
the Bank during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive or if the Executive names a spouse as beneficiary and the marriage
is subsequently dissolved. If the Executive dies without a valid beneficiary
designation, all payments shall be made to the Executive's estate.
6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Bank may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Bank may require proof of incompetence, minority
or guardianship as it may deem appropriate prior to distribution of the benefit.
Such distribution shall completely discharge the Bank from all liability with
respect to such benefit.
ARTICLE 7
GENERAL LIMITATIONS
7.1 Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not pay any benefit under this
Agreement that is in excess of the Executive's Deferrals (i.e., the interest
earned on the Deferral Account) if the Bank terminates the Executive's
employment for:
(a) Gross negligence or gross neglect of duties to the Bank;
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude in connection with the Executive's employment with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Bank policy committed in connection with the Executive's
employment and resulting in an adverse effect on the Bank.
The Executive's Deferrals shall be paid to the Executive in a manner to be
determined by the Bank. No interest shall be credited to the Deferrals during
any applicable installment period.
7.2 Suicide or Misstatement. The Bank shall not pay any benefit under
this Agreement exceeding the Deferral Account if the Executive commits suicide
within three years after the date of
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this Agreement. In addition, the Bank shall not pay a benefit under this
Agreement exceeding the Deferral Account if the Executive has made any material
misstatement of fact on an employment application or resume provided to the
Bank, or on any application for any benefits provided by the Bank to the
Executive.
7.3 Golden Parachute Payment. Notwithstanding any provision of the
Agreement to the contrary, the Bank shall not be required to pay any benefit
under this Agreement if, upon the advice of counsel, the Bank determines the
payment of such benefit would be prohibited by 12 C.F.R. Part 359 or any
successor regulations regarding employee compensation promulgated by any
regulatory agency having jurisdiction over the Bank or its affiliates, or to the
extent the benefit would be a non-deductible parachute payment under Section
280G of the Code. To the extent possible, such benefit payment shall be
proportionately reduced to allow payment within the fullest extent permissible
under applicable law.
ARTICLE 8
CLAIMS AND REVIEW PROCEDURES
8.1 Claims Procedure. An Executive or beneficiary ("claimant") who has
not received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:
8.1.1 Initiation - Written Claim. The claimant initiates a claim
by submitting to the Bank a written claim for the benefits.
8.1.2 Timing of Bank Response. The Bank shall respond to such
claimant within 90 days after receiving the claim. If the Bank determines
that special circumstances require additional time for processing the
claim, the Bank can extend the response period by an additional 90 days
by notifying the claimant in writing, prior to the end of the initial
90-day period, that an additional period is required. The notice of
extension must set forth the special circumstances and the date by which
the Bank expects to render its decision.
8.1.3 Notice of Decision. If the Bank denies part or all of the
claim, the Bank shall notify the claimant in writing of such denial. The
Bank shall write the notification in a manner calculated to be understood
by the claimant. The notification shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of the Agreement
on which the denial is based,
(c) A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation
of why it is needed,
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(d) An explanation of the Agreement's review procedures and
the time limits applicable to such procedures, and
(e) A statement of the claimant's right to bring a civil
action under ERISA Section 502(a) following an adverse benefit
determination on review.
8.2 Review Procedure. If the Bank denies part or all of the claim, the
claimant shall have the opportunity for a full and fair review by the Bank of
the denial, as follows:
8.2.1 Initiation - Written Request. To initiate the review, the
claimant, within 60 days after receiving the Bank's notice of denial,
must file with the Bank a written request for review.
8.2.2 Additional Submissions - Information Access. The claimant
shall then have the opportunity to submit written comments, documents,
records and other information relating to the claim. The Bank shall also
provide the claimant, upon request and free of charge, reasonable access
to, and copies of, all documents, records and other information relevant
(as defined in applicable ERISA regulations) to the claimant's claim for
benefits.
8.2.3 Considerations on Review. In considering the review, the
Bank shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information
was submitted or considered in the initial benefit determination.
8.2.4 Timing of Bank Response. The Bank shall respond in writing
to such claimant within 60 days after receiving the request for review.
If the Bank determines that special circumstances require additional time
for processing the claim, the Bank can extend the response period by an
additional 60 days by notifying the claimant in writing, prior to the end
of the initial 60-day period, that an additional period is required. The
notice of extension must set forth the special circumstances and the date
by which the Bank expects to render its decision.
8.2.5 Notice of Decision. The Bank shall notify the claimant in
writing of its decision on review. The Bank shall write the notification
in a manner calculated to be understood by the claimant. The notification
shall set forth:
(a) The specific reasons for the denial,
(b) A reference to the specific provisions of the Agreement
on which the denial is based,
(c) A statement that the claimant is entitled to receive,
upon request and free of charge, reasonable access to, and copies
of, all documents, records and other information
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relevant (as defined in applicable ERISA regulations) to the
claimant's claim for benefits, and
(d) A statement of the claimant's right to bring a civil
action under ERISA Section 502(a).
ARTICLE 9
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Executive.
Notwithstanding the previous paragraph in this Article 9, the Bank may
amend or terminate this Agreement at any time if, pursuant to legislative,
judicial or regulatory action, continuation of the Agreement would (i) cause
benefits to be taxable to the Executive prior to actual receipt, or (ii) result
in significant financial penalties or other significantly detrimental
ramifications to the Bank (other than the financial impact of paying the
benefits). Unless otherwise agreed to in writing by the Executive and the Bank,
in no event shall this Agreement be terminated under this section without the
Bank's payment to the Executive of 100 percent of the Deferral Account balance.
Payment of proceeds under this Article 9 shall be made by the Bank to the
Executive within 60 days following formal termination of this Agreement
ARTICLE 10
MISCELLANEOUS
10.1 Binding Effect. This Agreement shall bind the Executive and the Bank
and their beneficiaries, survivors, executors, administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not a contract for
employment. It does not give the Executive the right to remain an employee of
the Bank, nor does it interfere with the Bank's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner, except in
accordance with Article 6 with respect to designation of beneficiaries.
10.4 Tax Withholding. The Bank shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
10.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of Texas, except to the extent preempted by the laws of the
United States of America.
10.6 Unfunded Arrangement. The Executive and the Executive's beneficiary
are general
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unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Bank to which the Executive and the Executive's beneficiary have no
preferred or secured claim.
10.7 Reorganization. The Bank shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Bank under
this Agreement. Upon the occurrence of such event, the term "Bank" as used in
this Agreement shall be deemed to refer to the successor or survivor company.
10.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Bank and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
10.9 Administration. The Bank shall have powers which are necessary to
administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting for the
Agreement;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
10.10 Named Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Bank shall be the named fiduciary and
plan administrator under this Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
10.11 Severability. Without limitation of any other Article contained
herein, in case any one or more provisions contained in this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any other respect,
such invalidity, illegality or unenforceability shall not affect the other
provisions of this Agreement. In the event any one or more of the provisions
found in the Agreement shall be held to be invalid, illegal or unenforceable by
any governmental regulatory agency or court of competent jurisdiction, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been a part of this Agreement, and such provision shall be
deemed substituted by such other provisions as will most nearly accomplish the
intent of the parties to the extent permitted by applicable law.
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IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have
signed this Agreement.
EXECUTIVE: BANK:
STATE BANK
------------------------------------ BY
[NAME] ------------------------------------
TITLE
---------------------------------
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EXHIBIT 1
TO
STATE BANK
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION
I elect to defer my Compensation pursuant to this Agreement with the Bank, as
follows:
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AMOUNT OF DEFERRAL DURATION
================================================================================
[INITIAL AND COMPLETE ONE] [INITIAL ONE]
____ I elect to defer ____% of my ____ One Year only
Compensation annually.
____ For ______ [INSERT
____ I elect to defer $______ of my NUMBER] Years
Compensation annually.
____ Until Termination
____ I elect not to defer any of my of Employment
Compensation.
____ Until ___________,
___________ (date)
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Upon the Bank's approval, I understand that I may change the amount and duration
of my deferrals by filing a new election form with the Bank; provided, however,
that any subsequent election will not be effective until the calendar year
following the year in which the new election is received by the Bank.
Signature
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Date
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Received by the Bank this ________ day of ___________________, 200__.
By
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Title
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BENEFICIARY DESIGNATION
STATE BANK
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
I designate the following as beneficiary of benefits under this Agreement
payable following my death:
Primary:
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Contingent:
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NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(S)
AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
DATE:
-------------------------------- --------------------------------------
[NAME]
CONSENTED TO BY EXECUTIVE'S SPOUSE:
DATE:
-------------------------------- --------------------------------------
SPOUSE'S SIGNATURE
Received by the Bank this ________ day of ___________________, 200__.
By
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Title
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