CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
Amended and Restated
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") entered into
this 22nd day of August 2003 ("Effective Date"), by and between Gallup Federal
Savings Bank, Gallup, New Mexico (the "Bank") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Employee").
WHEREAS, the Employee is currently employed by the Bank as President
and Chief Executive Officer and is experienced in certain phases of the business
of the Bank; and
WHEREAS, the parties have previously entered into a Change in Control Severance
Agreement, dated June 29, 1999; and
WHEREAS, the parties desire by this writing to set forth the continuing
rights and responsibilities of the Bank and Employee if the Bank should undergo
a change in control (as defined hereinafter in the Agreement) after the
Effective Date.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
----------
President and Chief Executive Officer of the Bank. The Employee shall render
such administrative and management services to the Bank and GFSB Bancorp, Inc.,
its parent savings and loan holding company ("Parent") as are currently rendered
and as are customarily performed by persons situated in a similar executive
capacity. The Employee's other duties shall be such as the Board of Directors
for the Bank (the "Board of Directors" or "Board") may from time to time
reasonably direct, including normal duties as an officer of the Bank and the
Parent.
2. Term of Agreement. The term of this Agreement shall be for the
------------------
period commencing on the Effective Date and ending thirty-six (36) months
thereafter ("Term").
3. Termination of Employment in Connection with or Subsequent to a
-------------------------------------------------------------------
Change in Control.
-----------------
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twenty-four (24) months after,
any Change in Control of the Bank or Parent, Employee shall be paid an amount
equal to 200% times the base annual salary in effect as of the end of the
calendar year prior to the date of termination of employment and the costs
associated with maintaining coverage under the Bank's medical and dental
insurance reimbursement plans similar to that in effect on the date of
termination of employment for a period of one year thereafter. Said sum shall be
paid in one (1) lump sum not later than the date of such termination of
employment and such payments shall be in lieu of any other future payments which
the Employee would be otherwise entitled to receive. Notwithstanding the
forgoing, all sums
1
payable hereunder shall be reduced in such manner and to such extent so that no
such payments made hereunder when aggregated with all other payments to be made
to the Employee by the Bank or the Parent shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") and be subject to the excise tax provided at Section
4999(a) of the Code. The term "Change in Control" shall refer to (i) the sale of
all, or a material portion, of the assets of the Bank or the Parent; (ii) the
merger or recapitalization of the Bank or the Parent whereby the Bank or the
Parent is not the surviving entity; (iii) a change in control of the Bank or the
Parent, as otherwise defined or determined by the Office of Thrift Supervision
or regulations promulgated by it; or (iv) the acquisition, directly or
indirectly, of the beneficial ownership (within the meaning of that term as it
is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder) of twenty-five percent (25%) or more of
the outstanding voting securities of the Bank or the Parent by any person,
trust, entity or group. The term "person" means an individual other than the
Employee, or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary except as provided at Sections 4 and 5, Employee may voluntarily
terminate his employment under this Agreement within twenty-four months
following a Change in Control of the Bank or Parent, and Employee shall
thereupon be entitled to receive the payment and benefits described in Section
3(a) of this Agreement, upon the occurrence, or within 120 day of any of the
following events, which have not been consented to in advance by the Employee in
writing: (i) if Employee would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Employee's primary office as of the signing of this Agreement; (ii) if the
Bank or Parent should fail to maintain the Employee's base compensation in
effect as of the date of the Change in Control and existing employee benefits
plans, including material fringe benefit, stock option and retirement plans,
except to the extent that such reduction in benefit programs is part of an
overall adjustment in benefits for all employees of the Bank or Parent and does
not disproportionately adversely impact the Employee; or (iii) if Employee would
be assigned duties and responsibilities other than those normally associated
with his position as referenced at Section 1, herein, or other comparable senior
management position.
4. Other Changes in Employment Status.
----------------------------------
Except as provided for at Section 3, herein, the Board of Directors may
terminate the Employee's employment at any time with or without Just Cause
within its sole discretion. This Agreement shall not be deemed to give Employee
any right to be retained in the employment or service of the Bank, or to
interfere with the right of the Bank to terminate the employment of the Employee
at any time. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. Termination for "Just
Cause" shall include termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform
2
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 the Agreement.
5. Regulatory Exclusions.
---------------------
(a) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank'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) and (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 contracting parties shall not be affected.
(b) If the Bank 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,
but this paragraph shall not affect any vested rights of the contracting
parties.
(c) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (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 Bank 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 operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(d) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), the
Bank's obligations under the Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may within its discretion (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.
(e) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
3
6. Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank 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 Parent.
(b) The Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
7. Amendments. No amendments or additions to this Agreement shall be
----------
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
8. Applicable Law. This agreement shall be governed by all respects
---------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of New Mexico, except to the extent that Federal law shall be
deemed to apply.
9. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Bank may include a provision for the reimbursement by the
Bank to the Employee for all reasonable costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, or the Board
of the Bank or the Parent may authorize such reimbursement of such reasonable
costs and expenses by separate action upon a written action and determination of
the Board following settlement of the dispute. Such reimbursement shall be paid
within ten (10) days of Employee furnishing to the Bank or Parent evidence,
which may be in the form, among other things, of a canceled check or receipt, of
any costs or expenses incurred by Employee.
11. Confidential Information. The Employee acknowledges that during his
------------------------
or her employment he or she will learn and have access to confidential
information regarding the Bank and the Parent and its customers and businesses
("Confidential Information"). The Employee agrees and covenants not to disclose
or use for his or her own benefit, or the benefit of any other person or entity,
any such Confidential Information, unless or until the Bank or tthe Parent
consents to such disclosure or use or such information becomes common knowledge
in the industry or is otherwise legally in the public domain. The Employee shall
not knowingly disclose or reveal to any unauthorized person any Confidential
Information relating to the Bank, the
4
Parent, or any subsidiaries or affiliates, or to any of the businesses operated
by them, and the Employee confirms that such information constitutes the
exclusive property of the Bank and the Parent. The Employee shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Bank or
the Parent, or its subsidiaries, or affiliates, or (b) in a manner which is
inimical or contrary to the interests of the Bank or the Parent. Employee
acknowledges and agrees that the existence of this Agreement and its terms and
conditions constitutes Confidential Information of the Bank, and the Employee
agrees not to disclose the Agreement or its contents without the prior written
consent of the Bank. Notwithstanding the foregoing, the Bank reserves the right
in its sole discretion to make disclosure of this Agreement as it deems
necessary or appropriate in compliance with its regulatory reporting
requirements. Notwithstanding anything herein to the contrary, failure by the
Employee to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the Bank,
disciplinary action against the Employee taken by the Bank, including but not
limited to the termination of employment of the Employee for breach of the
Agreement and the provisions of this Section, and other remedies that may be
available in law or in equity.
12. Entire Agreement. This Agreement together with any understanding or
----------------
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 first hereinabove written.
Gallup Federal Savings Bank
ATTEST: By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman
/s/▇.▇. ▇▇▇▇▇
------------------------------
▇.▇. ▇▇▇▇▇
Secretary
WITNESS:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Employee
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇