FIRST FEDERAL BANKSHARES, INC. CHANGE IN CONTROL AGREEMENT
Exhibit
10.1
FIRST
FEDERAL BANKSHARES, INC.
This
Agreement is made effective as of the 2nd day of January, 2007, by and between
First Federal Bankshares, Inc., a Delaware corporation (the “Company”), with its
principal administrative office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
and
First Federal Bank, the federal stock savings bank subsidiary of the Company
(the “Bank”) and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇-Vali (“Executive”).
WHEREAS,
Executive is employed as the Retail Banking Manager of the Bank;
and
WHEREAS,
the
Company and the Bank recognize the substantial contribution that Executive
makes
or will make to the Company and the Bank; and
WHEREAS,
the
Company and the Bank wish to provide Executive with certain protections and
benefits in the event of a Change in Control of the Company or the Bank, as
provided in this Agreement
NOW,
THEREFORE,
in
consideration of Executive’s contributions to the Company and the Bank, and upon
the other terms and conditions hereinafter provided, the parties hereto agree
as
follows:
|
1.
|
TERM
OF AGREEMENT
|
The
“term” of this Agreement shall be twelve (12) full calendar months from the
effective date of this Agreement set forth above, and shall include any
extension or renewal made pursuant to this Section. Commencing on January 2,
2007, and continuing on January 2nd of each year thereafter (the “Anniversary
Date”), this Agreement shall renew for an additional year such that the
remaining term shall be one year unless written notice of non-renewal
(“Non-Renewal Notice”) is provided to Executive at least thirty (30) days and
not more than sixty (60) days prior to any such Anniversary Date, that this
Agreement shall terminate at the end of twelve (12) months following such
Anniversary Date.
|
2.
|
PAYMENTS
TO EXECUTIVE
|
(a) Upon
the
occurrence of either the Executive’s involuntary termination of employment or
the Executive’s voluntary termination of employment for “Good Reason” (as
defined below), either occurring within twelve (12) months following the
effective date of a “Change in Control” (as defined below) (“Termination of
Employment”), the Company or the Bank shall pay Executive (or in the event of
his subsequent death, his estate), his base salary in effect on the date of
Executive’s Termination of Employment (“Base Salary”) for twelve (12) months
following the date of such Termination of Employment, provided, however, (i)
that such Termination of Employment must qualify as a “Separation from Service”
as defined below; and (ii) to the extent that Executive is a “Specified
Employee” (as defined below), payments shall not begin hereunder until the first
day of the seventh month following Executive’s Separation from
Service
and the first payment owed to the Executive shall equal the first six (6) months
of accumulated payments owed to Executive hereunder, and thereafter regular
payments owed to Executive shall be made starting with the seventh month after
the Executive’s Separation from Service. To the extent amounts payable under
this Agreement are determined by the Bank, in good faith, to be subject to
federal, state or local income tax, the Bank may withhold from each such payment
an amount necessary to meet the Bank’s obligation to withhold amounts under the
applicable federal, state or local law.
(b) In
addition, upon the occurrence of Executive’s Termination of Employment,
Executive will have such rights as specified in any other employee benefit
plan
(including, but not limited to, equity compensation plans and COBRA rights
under
the Bank’s group health plan).
(c) Voluntary
Termination of Employment for “Good Reason” following a Change in Control shall
mean Executive’s resignation from the Bank’s employ within one hundred and
twenty (120) days after the occurrence of any of the following events, provided,
however, that Executive must give the Bank at least sixty (60) days prior
written notice of intent to terminate employment due to Good
Reason:
|
(i)
|
failure
to elect or reelect or to appoint or reappoint Executive to a position
or
substantially equivalent position as that held by the Executive prior
to
the effective date of the Change in
Control,
|
|
(ii)
|
material
change in Executive’s functions, duties, or responsibilities, which change
would cause Executive’s position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described
in
the opening paragraphs of this Agreement,
|
|
(iii)
|
relocation
of the Executive’s principal place of business with the Company or the
Bank to a location that is more than 50 miles from his current principal
place of business with the Company or the Bank, without the Executive’s
consent;
|
|
(iv)
|
liquidation
or dissolution of the Company or the Bank other than liquidations
or
dissolutions that are caused by reorganizations that do not affect
the
status of Executive, or
|
|
(v)
|
material
breach of this Agreement by the
Company.
|
(d) “Change
in Control” of the Bank or the Company shall mean a
change
in control of a nature that:
| (i) |
would
be required to be reported in response to Item 5.01 of the current
report
on Form 8-K, as in effect
on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the“Exchange
Act”); or
|
2
|
(ii)
|
results
in a Change in Control of the Bank or the Company within the meaning
of the Home Owners’ Loan Act and the Rules and Regulations promulgated by
the Office
of
Thrift Supervision (or its predecessor agency), as in effect on
the date
hereof; or
|
|
(iii)
|
without
limitation such a Change in Control shall
be
deemed to have occurred at such time as:
|
|
(a)
|
any
“Person”
(as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is
or becomes the“beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities
of the Bank or the Company representing 25% or more of the Bank’s or the
Company’s
outstanding securities; or
|
|
(b)
|
individuals
who constitute the Board on the date hereof (the “Incumbent Board”) cease
for any reason
to constitute at least a majority thereof, provided,
however, that
this subsection (b) shall not
apply if the Incumbent Board is replaced by the appointment by a
Federal
banking agency of a conservator or receiver for the Bank and, provided
further that
any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least two-thirds of the directors
comprising the Incumbent Board or whose nomination for election by
the
Company’s stockholders
was approved by the same Nominating Committee serving under an Incumbent
Board, shall
be, for purposes of this clause (b), considered as though he were
a member
of the Incumbent Board;
or
|
|
(c)
|
a
proxy statement soliciting proxies from stockholders of the Company,
by
someone
other than the current management
of
the Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Company or Bank or similar transaction
with
one or more
corporations as a result of which the outstanding shares of the class
of
securities then subject
to
such plan or transaction are exchanged for or converted into cash
or
property or securities not issued by the Bank or the Company shall
be
distributed and the requisite number of proxies approving
such plan of reorganization, merger or consolidation of the Company
or
Bank are received
and voted in favor of such transactions;
or
|
3
|
(d)
|
a
tender offer is made for 25% or more of the outstanding
securities of the Bank or Company and shareholders owning beneficially
or
of record 25%
or more of the outstanding securities of the Bank or Company have
tendered
or offered to sell their
shares pursuant to such tender offer and such tendered shares have
been
accepted by the tender
offeror.
|
(e) “Separation
from Service” shall mean the date of cessation of the employment relationship
(other than an approved leave of absence) between Executive and the Bank and
its
affiliates and subsidiaries (including any successor in interest, if
applicable), and shall be construed to comply with Code Section 409A and
Proposed Treasury Regulations Section 1.409A-1(h).
(f) “Specified
Employee” shall mean a key employee of the Bank within the meaning of Code
Section 416(i) without regard to paragraph 5 thereof, determined in accordance
with Code Section 409A and Proposed Treasury Regulations Section
1.409A-1(i).
(g)
“Base
Salary” as used in this Agreement shall carry its commonly-accepted meaning and
shall exclude all cash bonuses, equity bonuses, incentive pay, retirement
contributions, employee health and dental benefits, allowances, expense
reimbursements, and other non-salary-related payments.
|
3.
|
SOURCE
OF PAYMENTS
|
It
is
intended by the parties hereto that all payments provided in this Agreement
shall be paid in cash or check from the general funds of the Company or the
Bank, provided, however, that in the event that the payment of any amounts
due
under Section 3 above is made by the Bank, such payment shall offset the payment
due from the Company hereunder.
|
4.
|
POST
TERMINATION OBLIGATIONS
|
(a) General.
All
payments under this Agreement shall be subject to Executive’s compliance with
this Section 5.
(b) Litigation
Cooperation.
Executive shall, upon reasonable notice, furnish such information and assistance
to the Bank or the Company as may reasonably be required by the Bank or the
Company in connection with any litigation in which it or any of its subsidiaries
or affiliates is, or may become, a party; provided, however, that Executive
shall not be required to provide information or assistance with respect to
any
litigation between Executive and the Bank or the Company or any of its
subsidiaries or affiliates.
(c) Confidentiality.
Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Bank and the Company and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the
4
business
of the Bank and the Company and affiliates thereof. Accordingly, Executive
will
not, for an twelve (12) month period following his Termination of Employment,
disclose any knowledge of the past, present, planned or considered business
activities, including, but not limited to, customer information, of the Bank
and
the Company and affiliates thereof to any person, firm, corporation, or other
entity for any reason or purpose whatsoever (except for such disclosure as
may
be required to be provided to any regulatory agency with jurisdiction over
the
Bank or the Company or any affiliate). Notwithstanding the foregoing, Executive
may disclose any knowledge of general banking, financial, and/or economic
principles, concepts or ideas which are not solely and exclusively derived
from
the business plans and activities of the Bank or the Company, and Executive
may
disclose any information regarding the Bank or the Company which is otherwise
publicly available or that he is otherwise legally required to disclose. In
the
event of a breach or threatened breach by Executive of the provisions of this
Section 5(c), the Bank and the Company will be entitled to an injunction
restraining Executive from disclosing, in whole or in part, his knowledge of
the
past, present, planned or considered business activities of the Bank or any
of
their affiliates, or from rendering any services to any person, firm,
corporation or other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Bank from pursuing any other remedies available
to
them for such breach or threatened breach, including the recovery of damages
from Executive.
(d) Non-Compete.
Executive agrees not to compete with the Bank and the Company and any affiliate
for a period of twelve (12) months following his Termination of Employment
within twenty-five (25) miles of any city, town or county in which, as of the
date of the Change in Control, the Bank has an office or has filed an
application for regulatory approval to establish an office, determined as of
the
date of his Termination of Employment, except as agreed to pursuant to a
resolution duly adopted by the Board. Executive agrees that during such period
and within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank or the Company. The parties hereto, recognizing
that irreparable injury will result to the Bank and the Company, their business
and property in the event of Executive’s breach of this Section 5(d), agree that
in the event of any such breach by Executive, the Bank and the Company shall
immediately cease all payments hereunder and shall also be entitled to any
other
remedies and damages available, to an injunction to restrain the violation
hereof by Executive, his partners, agents, servants, employers, employees and
all persons acting for or with him. Executive represents and admits that his
experience and capabilities are such that he can obtain employment in a business
engaged in other lines and/or of a different nature than the Bank and the
Company, and that the enforcement of a remedy by way of injunction will not
prevent Executive from earning a livelihood. Nothing herein will be construed
as
prohibiting the Bank and the Company from pursuing any other remedies available
to them for such breach or threatened breach, including the recovery of damages
from Executive.
(e) Non-Solicitation.
Executive further agrees that he will not, in any manner whatsoever, for a
period of twelve (12) months following his Termination of Employment, either
as
an individual or as a partner, stockholder, director, officer, principal,
employee, agent, consultant, or in any other relationship or capacity, with
any
person, firm, corporation or other business entity, either directly or
indirectly, solicit or induce or aid in the solicitation or
5
inducement
of (i) any employees of the Bank or the Company to leave their employment with
the Bank or the Company or (ii) any customers of the Bank to leave their
customer relationship with the Bank. Executive further agrees that he will
not,
in any manner whatsoever, for a period of twelve (12) months following the
his
Termination of Employment, either as an individual or as a partner, stockholder,
director, officer, principal, employee, agent, consultant or in any other
relationship or capacity with any person, firm, corporation or other business
entity, either directly or indirectly, solicit the business of any customers
or
clients of the Bank or the Company. Any breach of this subsection (e) shall
result in immediate cessation of any payments being made hereunder.
(f) Non-Disparagement.
Executive and the Bank and the Company agree that they will engage in no conduct
which is either intended to or could reasonably be expected to harm each other
in the operation of their business. Both parties agree they will not take any
action, legal or otherwise, which might embarrass, harass, or adversely affect
each other or which might in any way work to the detriment of each other,
whether directly or indirectly. In particular and by way of illustration not
limitation, each party agrees that it will not directly or indirectly contact
customers or any entity that has a business relationship with the other, in
order to disparage the good morale or business reputation or business practices
of Executive or the Bank and the Company, or any of its current and former
officers, directors, managers or employees.
(g) Return
of Property.
Immediately upon his Termination of Employment, Executive shall return to the
Bank and/or the Company all of the property which belongs to the Bank and/or
the
Company, including, but not limited to, computers, keys, cell phones, credit
cards and other tangible property, as well as all original or copies of records,
notes, reports, proposals, lists, correspondence, materials or other
documents.
(h) Duty
to Mitigate.
In the
event the Executive becomes employed at a position where he earns less than
the
amount of his Base Salary as of the date of his Termination of Employment,
the
obligations of the Bank and/or the Company to pay benefits hereunder shall
be
reduced such that the combination of Executive’s Base Salary with the new
employer and the Bank’s or Company’s payments hereunder shall, when taken
together, approximate the amount of Executive’s Base Salary as of the date of
his Termination of Employment. If the Executive earns more than the Base Salary
as of the date of his Termination from his new employer, the Bank and/or the
Company’s payments hereunder shall cease. If the Executive fails to provide the
information necessary to determine the Executive’s Base Salary with the new
employer (including self-employment), all payments hereunder shall cease.
Furthermore, if the Base Salary paid by the Executive’s new employer is deemed
by the Bank or Company to be substantially below an amount that would be
considered reasonable in light of available market information for similar
positions, payments hereunder shall be reduced by the difference.
|
5.
|
AMENDMENT
AND TERMINATION.
|
(a) Amendment.
The
Bank or the Company may at any time amend the Agreement in whole or in part,
provided, however, that no amendment shall decrease or restrict the amount
accrued to the date of amendment.
6
(b) Termination.
The Bank
or the Company may at any time partially or completely terminate the Agreement,
if, in its judgment, the tax, accounting, or other effects of the continuance
of
the Agreement, or potential payments thereunder, would not be in the best
interests of the Bank or the Company.
(i) Partial
Termination.
In the
event of a partial termination, the Agreement shall continue to operate and
be
effective with regard to benefits accrued prior to the effective date of such
partial termination, but no further benefits shall accrue after the date of
such
partial termination.
(ii) Complete
Termination.
Subject
to the requirements of Code Section 409A, in the event of complete termination,
the Agreement shall cease to operate and the Bank shall pay the Executive any
benefits owed hereunder as a cash lump sum as of the effective date of the
complete termination. Such complete termination of the Agreement shall occur
only under the following circumstances and conditions.
(A) The
Bank
may terminate the Agreement within 12 months of a corporate dissolution taxed
under Code section 331, or with approval of a bankruptcy court pursuant to
11
U.S.C. §503(b)(1)(A), provided that the amounts accrued under the Agreement are
included in the Executive’s gross income in the latest of (i) the calendar year
in which the Agreement terminates; (ii) the calendar year in which the amount
is
no longer subject to a substantial risk of forfeiture; or (iii) the first
calendar year in which the payment is administratively practicable.
(B) The
Bank
may terminate the Agreement within the thirty (30) days preceding a Change
in
Control (but not following a Change in Control), provided that the Agreement
shall only be treated as terminated if all substantially similar arrangements
sponsored by the Bank are terminated so that the Executive and all participants
under substantially similar arrangements are required to receive all amounts
of
compensation deferred under the terminated arrangements within twelve (12)
months of the date of the termination of the arrangements.
(C) The
Bank
may terminate the Agreement provided that (i) all arrangements sponsored by
the
Bank that would be aggregated with this Agreement under Proposed Treasury
regulations section 1.409A-1(c) if any individual; covered by this Agreement
was
also covered by any of those other arrangements are also terminated; (ii) no
payments other than payments that would be payable under the terms of the
arrangement if the termination had not occurred are made within twelve (12)
months of the termination of the arrangement; (iii) all payments are made within
twenty-four (24) months of the termination of the arrangements; and (iv) the
Bank does not adopt a new arrangement that would be aggregated with any
terminated arrangement under Proposed Treasury regulations section 1.409A-1(c)
if the same individual participated in both arrangements, at any time within
five years following the date of termination of the arrangement.
(D) The
Bank
may terminate the Agreement pursuant to such other terms and conditions as
the
Internal Revenue Service may permit from time to time.
7
|
6.
|
EFFECT
ON PRIOR AGREEMENTS AND EXISTING BENEFIT
PLANS
|
This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior agreement between the Company, the Bank and Executive,
except that this Agreement shall not affect or operate to reduce any benefit
or
compensation inuring to Executive of a kind elsewhere provided. No provision
of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
|
7.
|
NO
ATTACHMENT
|
(a) Except
as
required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy, or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to affect any such action shall be null, void, and of no
effect.
(b) This
Agreement shall be binding upon, and inure to the benefit of, Executive, the
Company, the Bank and their respective successors and assigns.
|
8.
|
WAIVER
|
No
term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver
or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to
the
specific term or condition waived and shall not constitute a waiver of such
term
or condition for the future or as to any act other than that specifically
waived.
|
9.
|
REQUIRED
PROVISIONS
|
Notwithstanding
anything herein contained to the contrary, any payments to Executive by the
Company or the Bank, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations
promulgated thereunder in 12 C.F.R. Part 359.
|
10.
|
SEVERABILITY
|
If,
for
any reason, any provision of this Agreement, or any part of any provision,
is
held invalid, such invalidity shall not affect any other provision of this
Agreement or any part of such provision not held so invalid, and each such
other
provision and part thereof shall to the full extent consistent with law continue
in full force and effect.
|
11.
|
GOVERNING
LAW
|
(a) The
validity, interpretation, performance, and enforcement of this Agreement shall
be governed by the laws of the State of Iowa.
8
(b) Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a single arbitrator,
mutually agreed upon by the parties. Such arbitration shall be conducted in
a
location within fifty (50) miles from the location of the Company, in accordance
with the rules of the Judicial Mediation and Arbitration Systems (JAMS) then
in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction.
|
12.
|
SUCCESSOR
TO THE COMPANY OR BANK
|
The
Company and the Bank shall require any successor or assignee, whether direct
or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Company or the Bank, expressly
and unconditionally to assume and agree to perform the Company’s or the Bank’s
obligations under this Agreement, in the same manner and to the same extent
that
the Company or the Bank would be required to perform if no such succession
or
assignment had taken place.
|
13.
|
NOT
AN EMPLOYMENT AGREEMENT
|
This
Agreement does not guarantee employment with the Bank or the Company and the
Bank and the Company has not waived its rights to treat the Executive as an
“at
will” employee.
|
14.
|
SIGNATURES
|
IN
WITNESS WHEREOF,
the
Company and the Bank have caused this Agreement to be executed by its duly
authorized officers, and Executive has signed this Agreement, effective as
of
the date first above written.
|
FIRST
FEDERAL BANKSHARES, INC.
|
||
|
January
3, 2007
|
By:
|
/s/▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
Date
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
|
President
and Chief Executive Officer
|
||
|
FIRST
FEDERAL BANK
|
||
|
January
3, 2007
|
By:
|
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|
Date
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
|
President
and Chief Executive Officer
|
||
|
EXECUTIVE
|
||
|
January
3, 2007
|
/s/▇▇▇
▇. ▇▇▇▇▇▇▇▇-Vali
|
|
|
Date
|
▇▇▇
▇. ▇▇▇▇▇▇▇▇-Vali
|
|
9