UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from to
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Commission File Number: 0-22445
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FIRSTSPARTAN FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)
Delaware 56-2015272
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
380 East Main Street, Spartanburg, South Carolina 29302
(Address of principal executive office)
(864) 582-2391
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock Outstanding: 3,746,270 shares as of May 5, 2000.
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FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
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Table of Contents
Page
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Part I. Financial Information
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Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at March 31, 2000 and June 30, 1999 1
Consolidated Statements of Income for the Three- and Nine-Month Periods
Ended March 31, 2000 and 1999 2
Consolidated Statements of Stockholders' Equity for the Nine-Month Periods
Ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for the Nine-Month Periods Ended
March 31, 2000 and 1999 4-5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Part II. Other Information
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Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Default Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14-15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
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ITEM 1. FINANCIAL STATEMENTS
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(Dollars In Thousands)
(Unaudited)
March 31, June 30,
Assets 2000 1999
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Cash $ 13,881 $ 14,638
Federal funds sold and overnight interest-bearing deposits 6,062 43,782
---------------- ---------------
Total cash and cash equivalents 19,943 58,420
Investment securities available-for-sale - at fair value (amortized cost:
$33,976 and $23,489 at March 31, 2000 and June 30, 1999, respectively) 33,527 23,344
Mortgage-backed securities held-to-maturity - at amortized cost (fair value:
$31 and $55 at March 31, 2000 and June 30, 1999, respectively) 30 54
Loans receivable, net 491,836 435,181
Loans held-for-sale - at lower of cost or market (market value: $1,704
and $9,089 at March 31, 2000 and June 30 1999, respectively) 1,685 8,984
Office properties and equipment, net 10,310 10,370
Federal Home Loan Bank of Atlanta stock - at cost 3,612 3,612
Accrued interest receivable 4,121 3,203
Real estate acquired in settlement of loans 213 348
Other assets 7,310 2,209
---------------- ---------------
Total Assets $ 572,587 $ 545,725
================ ===============
Liabilities and Stockholders' Equity
Liabilities:
Deposit accounts $ 417,832 $ 406,011
Advances from borrowers for taxes and insurance 734 1,004
Advances from Federal Home Loan Bank of Atlanta 70,000 34,000
Other borrowings 9,079 35,000
Other liabilities 5,583 3,669
---------------- ---------------
Total liabilities 503,228 479,684
---------------- ---------------
Stockholders' Equity:
Preferred stock, $0.01 par value:
Authorized - 250,000 shares; none issued or outstanding
at March 31, 2000 and June 30, 1999 -- --
Common stock, $0.01 par value:
Authorized - 12,000,000 shares; issued: 4,430,375 at March 31,
2000 and June 30, 1999; outstanding: 3,787,970
at March 31, 2000 and June 30, 1999 44 44
Additional paid-in capital 42,850 42,648
Retained earnings 56,899 54,905
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Treasury stock - at cost (642,405 shares at
March 31, 2000 and June 30, 1999) (20,955) (20,955)
Unearned restricted stock (3,792) (4,660)
Unallocated ESOP stock (5,408) (5,851)
Accumulated other comprehensive loss (279) (90)
---------------- ---------------
Total stockholders' equity 69,359 66,041
---------------- ---------------
Total Liabilities and Stockholders' Equity $ 572,587 $ 545,725
================ ===============
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See accompanying notes to consolidated financial statements.
1
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Income
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------- -------------------------------
2000 1999 2000 1999
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Investment Income:
Interest on loans $ 9,520 $ 8,751 $ 27,523 $ 26,079
Interest and dividends on investment securities,
mortgage-backed securities, and other 713 796 2,546 2,780
--------------- -------------- -------------- --------------
Total investment income 10,233 9,547 30,069 28,859
--------------- -------------- -------------- --------------
Interest Expense:
Deposit accounts 4,285 4,138 12,652 12,726
Other borrowings 137 -- 368 --
Federal Home Loan Bank of Atlanta advances 869 357 2,374 1,004
--------------- -------------- -------------- --------------
Total interest expense 5,291 4,495 15,394 13,730
--------------- -------------- -------------- --------------
Net Interest Income 4,942 5,052 14,675 15,129
Provision for Loan Losses 200 200 467 600
--------------- -------------- -------------- --------------
Net Interest Income After Provision for Loan Losses 4,742 4,852 14,208 14,529
--------------- -------------- -------------- --------------
Non-interest Income:
Service charges and fees 761 537 2,227 1,503
Gain on sale of mortgage loans 40 366 218 1,025
Other, net 162 181 568 430
--------------- -------------- -------------- --------------
Total non-interest income, net 963 1,084 3,013 2,958
--------------- -------------- -------------- --------------
Non-interest Expense:
Employee compensation and benefits 1,882 1,780 5,649 5,274
Federal deposit insurance premium 48 82 218 245
Occupancy and equipment expense 392 378 1,171 1,105
Computer services 150 126 446 321
Advertising and promotions 125 143 374 429
Office supplies, postage, printing, etc. 217 208 574 570
Other 490 491 1,595 1,347
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Total non-interest expense 3,304 3,208 10,027 9,291
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Income Before Income Taxes 2,401 2,728 7,194 8,196
Provision for Income Taxes 964 1,117 2,862 3,303
--------------- -------------- -------------- --------------
Net Income $ 1,437 $ 1,611 $ 4,332 $ 4,893
=============== ============== ============== ==============
Basic and Diluted Earnings Per Share $ 0.43 $ 0.46 $ 1.29 $ 1.32
=============== ============== ============== ==============
Weighted Average Shares Outstanding 3,374,280 3,484,336 3,363,135 3,717,550
=============== ============== ============== ==============
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See accompanying notes to consolidated financial statements.
2
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For Nine Months Ended March 31, 2000 and 1999
(In Thousands Except Share Data)
Common Stock Additional Unearned
------------------------ Paid-In Retained Treasury Restricted
Shares Amount Capital Earnings Stock Stock
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Balance, June 30, 1998 4,253,160 $ 44 $ 87,624 $ 52,662 $ (8,113) $ --
------------ ---------- ------------ ---------- ------------ ------------
Net income -- -- -- 4,893 -- --
Unrealized loss on securities
available-for-sale, net of taxes -- -- -- -- -- --
------------ ---------- ------------ ---------- ------------ ------------
Total comprehensive income -- -- -- 4,893 -- --
------------ ---------- ------------ ---------- ------------ ------------
Issuance of treasury stock to MRDP 177,215 -- (670) -- 8,113 (7,443)
ESOP stock committed for release -- -- 279 -- -- --
Purchase of treasury stock (642,405) -- -- -- (20,955) --
Dividends ($0.55 per share) -- -- -- (2,035) -- --
Prorata vesting of restricted stock -- -- -- -- -- 1,081
------------ ---------- ------------ ---------- ------------ ------------
Balance, March 31, 1999 3,787,970 $ 44 $ 87,233 $ 55,520 $ (20,955) $ (6,362)
============ ========== ============ ========== ============ ============
Balance, June 30, 1999 3,787,970 $ 44 $ 42,648 $ 54,905 $ (20,955) $ (4,660)
------------ ---------- ------------ ---------- ------------ ------------
Net income -- -- -- 4,332 -- --
Unrealized loss on securities
available-for-sale, net of taxes -- -- -- -- -- --
------------ ---------- ------------ ---------- ------------ ------------
Total comprehensive income -- -- -- 4,332 -- --
------------ ---------- ------------ ---------- ------------ ------------
ESOP stock committed for release -- -- 202 -- -- --
Dividends ($0.70 per share) -- -- -- (2,338) -- --
Prorata vesting of restricted stock -- -- -- -- -- 868
------------ ---------- ------------ ---------- ------------ ------------
Balance, March 31, 2000 3,787,970 $ 44 $ 42,850 $ 56,899 $ (20,955) $ (3,792)
============ ========== ============ ========== ============ ============
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For Nine Months Ended March 31, 2000 and 1999
(In Thousands Except Share Data)
Accumulated
Other
Unallocated Comprehen- Total
ESOP sive Stockholders'
Stock Loss Equity
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Balance, June 30, 1998 $ (6,442) $ (14) $ 125,761
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Net income -- -- 4,893
Unrealized loss on securities
available-for-sale, net of taxes -- (22) (22)
------------- ------------ -----------
Total comprehensive income -- (22) 4,871
------------- ------------ -----------
Issuance of treasury stock to MRDP -- -- --
ESOP stock committed for release 443 -- 722
Purchase of treasury stock -- -- (20,955)
Dividends ($0.55 per share) -- -- (2,035)
Prorata vesting of restricted stock -- -- 1,081
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Balance, March 31, 1999 $ (5,999) $ (36) $ 109,445
============= ============ ===========
Balance, June 30, 1999 $ (5,851) $ (90) $ 66,041
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Net income -- -- 4,332
Unrealized loss on securities
available-for-sale, net of taxes -- (189) (189)
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Total comprehensive income -- (189) 4,143
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ESOP stock committed for release 443 -- 645
Dividends ($0.70 per share) -- -- (2,338)
Prorata vesting of restricted stock -- -- 868
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Balance, March 31, 2000 $ (5,408) $ (279) $ 69,359
============= ============ ===========
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3
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars In Thousands)
(Unaudited)
Nine Months Ended
March 31,
---------------------------
2000 1999
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Cash Flows from Operating Activities:
Net income $ 4,332 $ 4,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 467 600
Deferred income tax provision (benefit) 60 (443)
Amortization of deferred income (35) (419)
Amortization of loan servicing assets 143 87
(Accretion) amortization of (discounts) premiums on
investment and mortgage-backed securities (25) 5
Depreciation 619 588
Allocation of ESOP stock at fair value 645 722
Prorata vesting of restricted stock 868 1,081
Loss on disposal of property and equipment -- 13
Gain on sale of real estate acquired in settlement of loans (20) --
Decrease (increase) in loans held-for-sale 7,299 (4,054)
Increase in other assets (6,162) (1,292)
Increase (decrease) in other liabilities 1,699 (531)
------------ -----------
Net cash provided by operating activities 9,890 1,250
------------ -----------
Cash Flows from Investing Activities:
Net loan originations and principal collections (14,559) 31,387
Purchases of loans (42,742) (50,084)
Purchases of investment securities available-for-sale (10,463) (13,471)
Proceeds from maturities of investment securities available-for-sale -- 2,500
Principal repayments and proceeds from maturities of mortgage-
backed securities 25 28
Purchase of Federal Home Loan Bank of Atlanta stock -- (166)
Proceeds from sale of real estate acquired in settlement of loans 369 --
Purchases of property and equipment (562) (2,363)
Proceeds from sale of property and equipment 3 3
------------ -----------
Net cash used in investing activities (67,929) (32,166)
------------ -----------
Cash Flows from Financing Activities:
Net increase in deposits 11,821 30,860
Dividends paid (2,338) (2,035)
Advances from Federal Home Loan Bank of Atlanta 48,000 10,000
Repayment of advances from Federal Home Loan Bank of Atlanta (12,000) --
Other borrowings 9,158 --
Principal payments on other borrowings (35,079) --
Purchases of treasury stock -- (20,955)
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Net cash provided by financing activities $ 19,562 $ 17,870
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4
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FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars In Thousands)
(Unaudited)
Nine Months Ended
March 31,
2000 1999
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Net Decrease in Cash and Cash Equivalents $ (38,477) $ (13,046)
Cash and Cash Equivalents at Beginning of Period 58,420 48,968
---------------- --------------
Cash and Cash Equivalents at End of Period $ 19,943 $ 35,922
================ ==============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 15,364 $ 13,449
================ ==============
Income taxes $ 1,872 $ 4,609
================ ==============
Transfers from loans to real estate acquired in settlement of loans $ 214 $ 2
================ ==============
Change in unrealized loss on investment securities available-for-sale $ (304) $ (34)
================ ==============
Change in deferred taxes related to unrealized loss on investment
securities available-for-sale $ 115 $ 12
================ ==============
Issuance of common stock to MRDP $ -- $ 7,443
================ ==============
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See accompanying notes to consolidated financial statements.
5
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FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
FirstSpartan Financial Corp. ("FirstSpartan" or the "Company"), a
Delaware corporation, is the holding company for First Federal
Bank ("First Federal" or the "Bank"), a federally chartered stock
savings bank.
The accompanying consolidated financial statements of the Company
have been prepared in accordance with instructions to Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary
for a fair statement of results for the interim periods. Also,
certain June 30, 1999 balance sheet amounts have been
reclassified to conform to the March 31, 2000 presentation.
The results of operations for the three- and nine-month periods
ended March 31, 2000 are not necessarily indicative of the
results to be expected for the year ending June 30, 2000. The
consolidated financial statements and notes thereto should be
read in conjunction with the audited financial statements and
notes thereto contained in the Annual Report to Stockholders for
the year ended June 30, 1999.
2. Earnings Per Share
Earnings per share ("EPS") has been computed based upon weighted
average common shares outstanding of 3,374,280 and 3,484,336,
respectively, for the three months ended March 31, 2000 and 1999
and weighted average common shares outstanding of 3,363,135 and
3,717,550, respectively, for the nine months ended March 31, 2000
and 1999. The Company had no dilutive securities outstanding
during the three- and nine-month periods ended March 31, 2000 and
1999; therefore, diluted EPS is the same as basic EPS for all
periods presented.
3. Share Repurchases
On April 11, 2000, the Company announced its intention to
repurchase up to 10%, or 378,797 shares, of its common stock,
primarily through open market broker transactions. As of May 5,
2000, 41,700 shares had been purchased at an average price of
$17.04 per share.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Private Securities Litigation Reform Act Safe Harbor Statement
This Quarterly Report contains forward-looking statements within
the meaning of the federal securities laws. These statements are
not historical facts, rather statements based on the Company's
current expectations regarding its business strategies and their
intended results and its future performance. Forward-looking
statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future
performance. Numerous risks and uncertainties could cause the
Company's actual results, performance, and achievements to be
materially different from those expressed or implied by the
forward-looking statements. Factors that may cause or contribute
to these differences include, without limitation, general
economic conditions, including changes in market interest rates
and changes in monetary and fiscal policies of the federal
government; legislative and regulatory changes; and other factors
disclosed periodically in the Company's filings with the
Securities and Exchange Commission.
Because of the risks and uncertainties inherent in
forward-looking statements, readers are cautioned not to place
undue reliance on them, whether included in this report or made
elsewhere from time to time by the Company or on its behalf. The
Company assumes no obligation to update any forward- looking
statements.
Comparison of Financial Condition at March 31, 2000 and June 30, 1999
Total assets were $572.6 million at March 31, 2000 and $545.7
million at June 30,1999, an increase of $26.9 million or 5%. The
primary components of this increase are $56.6 million, or 13%, in
loans receivable, net, $10.2 million, or 44%, in investment
securities available-for-sale, and $5.1 million in other assets,
offset by decreases of $38.5 million, or 66%, in cash and cash
equivalents and $7.3 million in loans held-for-sale. The majority
of the decrease in cash and cash equivalents was attributable to
uses of cash in investing activities of $67.9 million. A more
detailed reconciliation may be found in the Consolidated
Statements of Cash Flows for the nine months ended March 31,
2000. Loans receivable, net, increased primarily as a result of
an increase of $39.5 million in mortgage loans since June 30,
1999. Included in the $39.5 million increase were increases of
$13.5 million in commercial mortgage loans, $14.5 million in one-
to four-family mortgage loans, $9.8 million in construction
loans, and $1.6 million in land development loans. Loans
receivable, net, also increased due to a $9.5 million increase in
non-mortgage commercial loans and a $7.3 million increase in home
equity loans.
Deposit accounts increased $11.8 million to $417.8 million at
March 31, 2000 from $406.0 million at June 30, 1999. Advances
from the FHLB of Atlanta increased $36.0 million to $70.0 million
at March 31, 2000 from $34.0 million at June 30, 1999 and were
used principally to fund repayment of other borrowings.
7
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Stockholders' equity increased by $3.4 million to $69.4 million
at March 31, 2000 from $66.0 million at June 30, 1999. Items that
increased stockholders' equity were the allocation of shares in
the amount of $1.5 million under the Bank's Employee Stock
Ownership Plan ("ESOP") and restricted stock plan and net income
of $4.3 million for the nine months ended March 31, 2000.
Offsetting these increases to stockholders' equity was the
payment of dividends of $2.3 million.
Non-performing assets increased by $2.4 million to $4.3 million,
or 0.75% of total assets, at March 31, 2000 from $1.9 million, or
0.34% of total assets, at June 30, 1999. The increase was due
primarily to the placement of $3.3 million in speculative
construction loans outstanding to several partnerships with a
common general partner/builder on non-accrual status in December
1999 after all of the partnerships declared chapter 11
bankruptcy. Legal proceedings are continuing (including filing of
bankruptcy plans and foreclosure, as applicable) with respect to
these partnerships. The principal balances ultimately collected
will depend on the sales price and cost to complete each of the
units in the housing developments. Due to the ongoing nature of
the legal proceedings as of the date of the filing of this
report, management is unable to estimate with precision the
amount of principal that will ultimately be collected on these
loans. However, based on information currently available, it
appears that an amount less than the total principal balance will
be collected. It is further believed any such loss will be
absorbed by the allowance for loan losses without any additional
loan loss provision.
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
March 31, 1999
Net Income. Net income decreased $200,000 to $1.4 million for the
three months ended March 31, 2000 from $1.6 million for the three
months ended March 31, 1999. The principal item decreasing
earnings for the quarter was the expected reduction in net
interest income on the funds used to pay the cash distribution of
$12.00 per share last June. Other items decreasing net income for
the quarter were a decrease in non-interest income and increased
non-interest expense. Earnings per share for the current quarter
did not decrease in the same proportion as net income due
principally to the effect of share purchases by the Company's
ESOP with $4.3 million it received from the $12.00 per share cash
distribution. Shares held in the ESOP but not yet awarded to
participants are not considered to be outstanding shares for
computation of earnings per share until awarded to participants.
Net Interest Income. Net interest income decreased to $4.9
million for the three months ended March 31, 2000 from $5.1
million for the three months ended March 31, 1999. As discussed
above, net interest income was reduced due to the payment of the
cash distribution in June. The total cash outlay for the
distribution was approximately $45.5 million and its effect is
estimated to have decreased net income by approximately $400,000,
or 25%, when comparing the current and prior year quarters.
The cash distribution was funded partially with cash equivalents
and also through borrowings. As described below, the average
balance of interest-earning assets increased even though a large
amount of interest-earning assets were used in the cash
distribution. Also described below, interest-bearing liabilities
increased in greater proportion than the increase in
interest-earning assets. This was due to the funding of a portion
of the cash distribution with borrowings. Since interest-earning
assets increased (principally an increase in loans receivable,
net) the spread earned on those assets served to offset the loss
of net interest income on the funds used for the cash
distribution.
8
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The average balance of interest-earning assets was $526.3 million
during the quarter ended March 31, 2000 compared to $508.5
million during the quarter ended March 31, 1999. The average
yield increased to 7.78% from 7.51% for the prior year quarter
due to higher market interest rates in recent quarters.
The average balance of interest-bearing liabilities increased to
$483.2 million during the three months ended March 31, 2000 from
$420.9 million during the three months ended March 31, 1999. The
average cost of interest-bearing liabilities increased to 4.39%
from 4.33% for the prior year quarter due to higher market
interest rates in recent quarters. The cost of interest-bearing
liabilities is expected to increase if current interest rates
prevail or increase. Due to the inability to predict interest
rates, the amount of increase in the cost of deposits and
borrowings, if any, cannot be quantified.
Net yield on interest-earning assets decreased to 3.76% for the
quarter ended March 31, 2000 from 3.97% for the quarter ended
March 31, 1999 due primarily to the above mentioned increase in
the average balance of interest-bearing liabilities as well as
the increase in the average cost.
Provision for Loan Losses. Provisions for loan losses are charges
to earnings to bring the total allowance for loan losses to a
level considered by management as adequate to provide for
estimated loan losses based on management's evaluation of the
collectibility of the loan portfolio. The allowance for loan
losses represents an amount that management believes will be
adequate to absorb estimated losses inherent in the total loan
portfolio which may become uncollectible. Factors considered in
assessing the adequacy of the allowance include historical loss
experience, delinquency trends, characteristics of specific loan
types, growth and composition of the loan portfolios, loans
classified under OTS regulations, and other factors. Management
also considers the level of problem assets that the Company
classifies in accordance with regulatory requirements. The
Company gives greater weight to the level of classified assets
than to the level of non-performing assets (non-accrual loans,
accruing loans contractually past due 90 days or more, and real
estate acquired in settlement of loans) because classified assets
include not only non-performing assets but also performing assets
that otherwise exhibit, in management's judgment, potential
credit weaknesses.
The provision for loan losses was $200,000 for both the three
months ended March 31, 2000 and 1999. Non-performing assets
increased primarily because of a related group of construction
loans, however, management did not believe that an increase in
the provision for loan losses was warranted for these loans. See
"Comparison of Financial Condition at March 31, 2000 and June 30,
1999." Management deemed the allowance for loan losses to be
adequate at March 31, 2000. Based on the uncertainty in the
estimation process, however, management's estimate of the
allowance for loan losses may change in the near term. Further,
the allowance for loan losses is subject to periodic evaluation
by various regulatory authorities and could be adjusted as a
result of their examinations.
The allowance for loan losses increased to $3.3 million at March
31, 2000 from $2.9 million at June 30, 1999 and was 0.62% of
gross loans receivable at March 31, 2000 compared to 0.61% at
June 30, 1999. Also, the ratio of allowance for loan losses to
non-performing loans decreased to 81.1% at March 31, 2000 from
190.4% at June 30, 1999 due primarily to the increase in
non-performing loans described above.
9
<PAGE>
Non-interest Income. Non-interest income decreased to $1.0
million for the three months ended March 31, 2000 from $1.1
million for the three months ended March 31, 1999. Fee income
increased to $761,000 from $537,000 principally due to the growth
in checking accounts. Gains from the sale of mortgage loans
decreased to $40,000 in the three months ended March 31, 2000
from $366,000 in the three months ended March 31, 1999, primarily
due to the larger number of loan refinancings occurring during
the period of lower market interest rates in the prior year
quarter. The loan refinancings resulted in a large amount of
fixed-rate (principally 30-year term) loans that were sold for
interest rate risk management. The Bank periodically sells
fixed-rate loans in response to interest rate changes, liquidity
needs, and other factors. Management cannot predict whether there
will be any such gains in the future.
Non-interest Expense. Non-interest expense was $3.3 million for
the three months ended March 31, 2000 compared to $3.2 million
for the same period in 1999. The increase consisted principally
of increased personnel costs and various other operating expenses
associated with the growth of the Company.
Income Taxes. The provision for income taxes decreased $153,000
to $964,000 for the three months ended March 31, 2000 compared to
the three months ended March 31, 1999, primarily as a result of
lower income before income taxes.
Comparison of Operating Results for the Nine Months Ended March 31, 2000 and
March 31, 1999
Net Income. Net income decreased $600,000 to $4.3 million for the
nine months ended March 31, 2000 from $4.9 million for the nine
months ended March 31, 1999. The principal item decreasing
earnings for the nine-month period was the expected reduction in
net interest income on the funds used to pay the cash
distribution of $12.00 per share last June. Other items affecting
net income for the nine-month period were a decrease in the
provision for loan losses, increased non-interest expense, and a
decrease in the provision for income taxes. Earnings per share
for the current nine- month period did not decrease in the same
proportion as net income due to a reduction in average shares
outstanding. Share repurchases in the prior year period decreased
average shares outstanding during the current year period by
approximately 245,000 shares. The remainder of the share
reduction was due principally to the effect of share purchases by
the Company's ESOP with $4.3 million it received from the $12.00
per share cash distribution. Shares held in the ESOP but not yet
awarded to participants are not considered to be outstanding
shares for computation of earnings per share until awarded to
participants.
Net Interest Income. Net interest income decreased $400,000 to
$14.7 million for the nine months ended March 31, 2000 from $15.1
million for the nine months ended March 31, 1999. As discussed
above, net interest income was reduced due to the payment of the
cash distribution in June and the repurchase of stock during the
first and second quarters of fiscal year 1999. The total cash
outlay for the distribution was approximately $45.5 million and
its effect is estimated to have decreased net income by
approximately $1.2 million, or 24%, when comparing the current
and prior year nine- month periods. The impact of the stock
repurchases is estimated to have decreased net income by
approximately $195,000, or 4%, when comparing the current and
prior year periods.
10
<PAGE>
The cash distribution and share repurchases were funded partially
with cash equivalents and also through borrowings. As described
below, the average balance of interest-earning assets did
increase even though a large amount of interest-earning assets
were used in the cash distribution and share repurchases. Also
described below, interest-bearing liabilities increased in
greater proportion than the increase in interest-earning assets.
This was due to the funding of a portion of the cash distribution
and share repurchases with borrowings. Since interest-earning
assets did increase (principally an increase in loans receivable,
net) the spread earned on those assets served to offset the loss
of net interest income on the funds used for the cash
distribution and the share repurchases.
The average balance of interest-earning assets was $521.6 million
during the nine months ended March 31, 2000 compared to $505.6
million during the nine months ended March 31, 1999. The average
yield increased to 7.69% from 7.61% for the prior year period due
to higher market interest rates in recent quarters.
The average balance of interest-bearing liabilities increased to
$478.2 million during the nine months ended March 31, 2000 from
$408.2 million during the nine months ended March 31, 1999, more
than offsetting a decrease in the average cost of
interest-bearing liabilities to 4.27% from 4.48%. The decrease in
the average cost is attributable to deposits that repriced during
lower market rates in late 1998 and throughout much of 1999.
Recent increases in market interest rates have not yet had a full
impact on deposits since a large portion of deposits have not yet
repriced at prevailing market interest rates as they have not yet
reached their contractual maturity. The cost of interest-bearing
liabilities is expected to increase if current interest rates
prevail or increase; however, the amount cannot be quantified.
Net yield on interest-earning assets decreased to 3.75% for the
nine months ended March 31, 2000 from 3.99% for the nine months
ended March 31, 1999 due primarily to the above mentioned
increase in the average balance of interest-bearing liabilities.
Provision for Loan Losses. The provision for loan losses was
$467,000 for the nine months ended March 31, 2000 compared to
$600,000 for the nine months ended March 31, 1999. See
"Comparison of Operating Results for the Three Months Ended March
31, 2000 and March 31, 1999 - Provision for Loan Losses" for a
discussion of management's process for determining the provision
for loan losses.
Non-interest Income. Non-interest income was $3.0 million for
both the three months ended March 31, 2000 and 1999. Although
total non-interest income was unchanged there were changes in the
components of non-interest income. Fee income increased to $2.2
million from $1.5 million principally due to the growth in
checking accounts. The growth in fee income, however, was offset
by a decrease in gains from the sale of mortgage loans to
$218,000 in the nine months ended March 31, 2000 from $1.0
million in the nine months ended March 31, 1999 which was due
primarily to the larger number of loan refinancings occurring
during the period of lower market interest rates in the prior
year period. The Bank periodically sells fixed-rate loans in
response to interest rate changes, liquidity needs, and other
factors. Management cannot predict whether there will be any such
gains in the future.
Non-interest Expense. Non-interest expense was $10.0 million for
the nine months ended March 31, 2000 compared to $9.3 million for
the same period in 1999. The increase consisted principally of
increased personnel costs and various other operating expenses
associated with the growth of the Company.
11
<PAGE>
Income Taxes. The provision for income taxes decreased $441,000
to $2.9 million for the nine months ended March 31, 2000 compared
to the nine months ended March 31, 1999, primarily as a result of
lower income before income taxes.
Liquidity and Capital Resources
The Company's primary sources of funds are customer deposits,
proceeds from principal and interest payments from loans, the
sale of loans, maturing securities, FHLB of Atlanta advances, and
other borrowings. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and
mortgage prepayments are influenced greatly by general interest
rates, other economic conditions, and competition. Federal
regulations require the Bank to maintain an adequate level of
liquidity to ensure the availability of sufficient funds to fund
loan originations, deposit withdrawals and to satisfy other
financial commitments. Currently, the federal regulatory
liquidity requirement for the Bank is the maintenance of an
average daily balance of liquid assets (cash and eligible
investments) equal to at least 4% of the average daily balance of
net withdrawable deposits and short-term borrowings. This
liquidity requirement is subject to periodic change. The Company
and the Bank generally maintain sufficient cash and short-term
investments to meet short-term liquidity needs. At March 31,
2000, cash and cash equivalents totaled $19.9 million, or 3% of
total assets, and investment securities classified as
available-for-sale with maturities of one year or less totaled
$18.1 million, or 3% of total assets. At March 31, 2000, the Bank
also maintained an uncommitted credit facility with the FHLB of
Atlanta, which provides for immediately available advances up to
an aggregate amount of approximately $97.1 million of which $70.0
million had been advanced.
FirstSpartan is not subject to any separate regulatory capital
requirements. As of March 31, 2000, the Bank's regulatory capital
was in excess of all applicable regulatory requirements. At March
31, 2000, under applicable regulations, the Bank's actual
tangible, core and risk-based capital ratios were 10.9%, 10.9%
and 16.7%, respectively, compared to regulatory requirements of
1.5%, 3.0% and 8.0%, respectively.
At March 31, 2000, the Company had loan commitments (excluding
undisbursed portions of interim construction loans) of
approximately $7.1 million ($1.2 million at fixed rates ranging
from 8.25% to 9.25%). In addition, at March 31, 2000, the unused
portion of lines of credit (principally variable-rate home equity
lines of credit) extended by the Company was approximately $54.6
million. Furthermore, at March 31, 2000, the Company had
certificates of deposit scheduled to mature in one year or less
of $157.3 million. Based on historical experience, the Company
anticipates that a majority of such certificates of deposit will
be renewed at maturity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2000, there have been no material changes in the
quantitative and qualitative disclosures about market risks
presented in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999.
12
<PAGE>
FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
-----------------
The Company is not involved in any pending legal
proceedings other than routine legal proceedings
occurring in the ordinary course of business.
Management believes that such routine legal
proceedings, in the aggregate, are not material to
the Company's financial condition or results of
operations.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
Not applicable
13
<PAGE>
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Exhibits
<S> <C> <C>
(3) (a) Certificate of Incorporation of the Registrant*
(3) (b) Bylaws of the Registrant*
(10) (a) Employment Agreement with Billy L. Painter
(10) (b) Employment Agreement with Hugh H. Brantley
(10) (c) Employment Agreement with J. Stephen Sinclair
(10) (d) Employment Agreement with R. Lamar Simpson
(10) (e) Severance Agreement with Rand Peterson**
(10) (f) Severance Agreement with Thomas Bridgeman**
(10) (g) Severance Agreement with Katherine A. Dunleavy***
(10) (h) Employee Severance Compensation Plan**
(10) (i) Employee Stock Ownership Plan**
(10) (j) Registrant's 1997 Stock Option Plan****
(10) (k) Registrant's Management Recognition and Development Plan****
(10) (l) Severance Agreement with J. Timothy Camp*****
(21) Subsidiaries of the Registrant**
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None.
</TABLE>
- -------------------------
* Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (333-23015) and incorporated herein by reference.
** Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 and incorporated herein by reference.
*** Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1997 and incorporated herein by reference.
**** Filed as an exhibit to the Registrant's Annual Meeting Definitive Proxy
Statement dated December 12, 1997 and incorporated herein by reference.
***** Filed as an exhibit to the Registrant's Form 10-Q for the quarter ended
December 31, 1999 and incorporated herein by reference.
14
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
`
FirstSpartan Financial Corp.
Date: May 12, 2000 By: /S/ Billy L. Painter
--------------------- ----------------------------
Billy L. Painter
President and Chief Executive Officer
Date: May 12, 2000 By:/S/ R. Lamar Simpson
--------------------- -----------------------------
R. Lamar Simpson
Treasurer, Secretary and Chief Financial
Officer
15
EXHIBIT 10 (a)
FIRSTSPARTAN FINANCIAL CORP.
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made effective as of March 15, 2000, by
and between FirstSpartan Financial Corp. (the "Holding Company"), a corporation
organized under the laws of Delaware with its principal offices at 380 East Main
Street, Spartanburg, South Carolina, 29304, First Federal Bank and Billy L.
Painter ("Executive"). Any reference to "Institution" herein shall mean First
Federal Bank or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of Executive's employment hereunder, Executive agrees
to serve as President and Chief Executive Officer of the Holding Company. The
Executive shall render administrative and management services to the Holding
Company such as are customarily performed by persons in a similar executive
capacity. During said period, Executive also agrees to serve, if elected or
appointed, as an officer or director of any subsidiary of the Holding Company.
2. TERMS.
(a) The period of Executive's employment under this Agreement
shall be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the date of the execution of this Agreement, the term of this
Agreement shall be extended for one day each day until such time as the board of
directors of the Holding Company (the "Board") or Executive elects not to extend
the term of the Agreement by giving written notice to the other party in
accordance with Section 8 of this Agreement, in which case the term of this
Agreement shall be fixed and shall end on the third anniversary of the date of
such written notice.
(b) During the period of Executive's employment hereunder, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder, including activities and services related to the organization,
operation and management of the Holding Company and its direct or indirect
subsidiaries ("Subsidiaries") and participation in community, professional and
civic organizations; provided,
1
<PAGE>
however, that, with the approval of the Board, as evidenced by a resolution of
such Board, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict of
interest with the Holding Company or its Subsidiaries, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement. However, Executive shall not perform, in any
respect, directly or indirectly, during the pendency of his temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of his duties and
responsibilities as President and Chief Executive Officer of the Holding
Company.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall
constitute consideration paid by the Holding Company in exchange for the duties
described in Section 1 of this Agreement. The Holding Company shall pay
Executive, as compensation, a salary of not less than $165,000 ("Base Salary").
Base Salary shall include any amounts of compensation deferred by Executive
under any tax-qualified retirement or welfare benefit plan or any other deferred
compensation arrangement maintained by the Holding Company or its Subsidiaries.
Base Salary shall be payable in accordance with the Holding Company's payroll
practices. During the period of this Agreement, Executive's Base Salary shall be
reviewed at least annually; the first such review will be made no later than one
year from the date of this Agreement. Such review shall be conducted by the
Board or by a Committee of the Board delegated such responsibility by the Board.
The Committee or the Board may increase Executive's Base Salary at anytime. Any
increase in Base Salary shall become the "Base Salary" for purposes of this
Agreement. In addition to the Base Salary provided in this Section 3(a), the
Holding Company shall also provide Executive, at no premium cost to Executive,
with all such other benefits as provided uniformly to permanent full-time
employees of the Holding Company and its Subsidiaries. In addition, Executive
shall be entitled to incentive compensation and bonuses as provided for under
any plan or arrangement of the Holding Company or its Subsidiaries in which
Executive is eligible to participate.
(b) Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, or in which he begins to
participate in the future, and the Holding Company and its Subsidiaries will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder, except to the extent that such changes are made
applicable to all Holding Company and Institution employees eligible to
participate in such plans, arrangements and perquisites on a non-discriminatory
basis. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive shall be entitled to participate in or receive
benefits under all plans relating to stock options, restricted
2
<PAGE>
stock awards, stock purchases, pension, thrift, supplemental retirement,
profit-sharing, employee stock ownership, group life insurance, medical and
other health and welfare coverage, education, cash or stock bonuses that are now
or hereafter made available by the Holding Company or its Subsidiaries to its
senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive shall be entitled to incentive compensation and
bonuses as provided in any plan of the Holding Company and its Subsidiaries in
which Executive is eligible to participate. Nothing paid to Executive under any
such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.
(c) The Holding Company shall pay or reimburse Executive for all
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as defined
below) during Executive's term of employment under this Agreement, the
provisions of this Section 4 shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i) the
termination by the Holding Company of Executive's full-time employment hereunder
for any reason other than termination governed by Section 5(a) of this
Agreement, or for Termination for Cause, as defined in Section 7 of this
Agreement; or Retirement (as defined in paragraph (e) of this Section 4); (ii)
Executive's resignation from the Holding Company's employ, upon, any (A) failure
to elect or reelect or to appoint or reappoint Executive as President and Chief
Executive Officer, unless Executive so consents, (B) a material change in
Executive's function, duties, or responsibilities with the Holding Company or
its Subsidiaries, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, unless Executive so consents, (C) a
relocation of Executive's principal place of employment by more than 25 miles
from its location at the effective date of this Agreement, unless Executive so
consents, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless Executive so consents, (E) a liquidation or dissolution of the Holding
Company or the Institution, or (F) breach of this Agreement by the Holding
Company. Upon the occurrence of any event described in clauses (A), (B), (C),
(D), (E) or (F), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within six full calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date
of Termination, as defined in Section 8 of this Agreement, the Holding Company
shall be obligated to pay Executive, or, in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, the amount
of the remaining payments and benefits Executive would have earned if he had
continued his employment with the Holding Company during the remaining unexpired
term of this
3
<PAGE>
Agreement, based on Executive's Base Salary and benefits provided at the Date of
Termination, as set forth in Sections 3(a) and (b) of this Agreement, and the
amount still due Executive under any paragraphs of Section 3 of this Agreement
for services rendered through the Date of Termination. At the election of the
Executive, which election is to be made prior to an Event of Termination, such
payments shall be made in a lump sum. In the event that no election is made,
payment to the Executive will be made on a monthly basis in approximately equal
installments during the remaining term of the Agreement. Such payments shall not
be reduced in the event the Executive obtains other employment following
termination of employment.
(c) Upon the occurrence of an Event of Termination, Executive
will be entitled to receive benefits due him under or contributed by the Holding
Company or its Subsidiaries on his behalf pursuant to any retirement, incentive,
profit sharing, employee stock ownership, bonus, performance, disability or
other employee benefit plan maintained by the Holding Company or its
Subsidiaries to the extent such benefits are not otherwise paid to Executive
under a separate provision of this Agreement.
(d) To the extent that the Holding Company or its Subsidiaries
continue to offer any life, medical, health, disability or dental insurance plan
or arrangement in which Executive participates in on the last day of his
employment (each being a "Welfare Plan"), after an Event of Termination (as
herein defined), Executive and his dependents shall continue participating in
such Welfare Plans, subject to the same premium contributions on the part of
Executive as were required immediately prior to the Event of Termination until
the earlier of (i) his death (ii) his employment by another employer other than
one of which he is the majority owner or (iii) the end of the remaining term of
this Agreement. If the Holding Company or its Subsidiaries do not offer the
Welfare Plans after the Event of Termination, then the Holding Company shall
provide Executive with a payment equal to the actuarial value of the provision
of such benefit for the period which runs until the earlier of (i) his death;
(ii) his employment by another employer other than one of which he is the
majority owner; or (iii) the end of the remaining term of this Agreement.
(e) Termination of Executive based on "Retirement" shall mean
termination in accordance with the Holding Company's or the Institution's
retirement policy or in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive upon
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Holding Company or its Subsidiaries and other plans to which
Executive is a party or a participant in accordance with the terms of the plan
or arrangement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Institution shall mean an event of a nature that: (i)
would be required to be reported in response to Item 1(a) 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 (ii) results in a
Change in Control of the Institution or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, and the Rules and Regulations
4
<PAGE>
promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the OTS, the
Board shall substitute its judgment for that of the OTS); 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 voting securities of the
Institution or the Holding Company representing 20% or more of the Institution's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, 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 that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Institution or
the Holding Company or similar transaction occurs or is effectuated in which the
Institution or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Institution 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 Institution or
the Holding Company shall be distributed, or (E) a tender offer is made for 20%
or more of the voting securities of the Institution or Holding Company then
outstanding.
(b) If any of the events described in Section 5(a) of this
Agreement constituting a Change in Control have occurred, or the Board has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his termination of employment on or after the date the Change in Control
occurs due to (i) Executive's dismissal at any time during the term of this
Agreement, (ii) Executive's voluntary resignation for any reason on or within a
sixty (60) day period following the date a Change in Control has occurred or
(iii) Executive's resignation following any demotion, loss of title, office or
significant authority or responsibility, reduction in the annual compensation or
reduction in benefits or relocation of his principal place of employment by more
than 25 miles from its location immediately prior to the change in control,
unless such termination is because of his death or Termination for Cause (as
defined herein), at any time during the term of this Agreement.
(c) Upon Executive's entitlement to benefits pursuant to Section
5(b) of this Agreement, the Holding Company shall pay Executive, or in the event
of his subsequent death, his beneficiary
5
<PAGE>
or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to three (3) times Executive's average
annual compensation for the most recently completed five (5) calendar years. In
determining Executive's average annual compensation, annual compensation shall
include Base Salary and any other taxable income, including but not limited to
amounts related to the granting, vesting or exercise of restricted stock or
stock option awards, commissions, bonuses, severance payments, retirement
benefits, director or committee fees and fringe benefits paid or to be paid to
Executive or paid for Executive's benefit during any such year, as well as
pension, profit sharing plan, employee stock ownership and other retirement
contributions or benefits (whether or not taxable) made or accrued on behalf of
Executive for such year. At the election of Executive, which election is to be
made prior to a Change in Control, such payment shall be made in a lump sum
(without discount for early payment) on or immediately following the Date of
Termination (which may be the date a Change in Control occurs) or paid in equal
monthly installments during the thirty-six (36) months following Executive's
termination. In the event that no election is made, payment to Executive will be
made on a monthly basis during the remaining thirty-six (36) month term of the
Agreement. Such payments shall not be reduced in the event Executive obtains
other employment following termination of employment.
(d) Upon the occurrence of a Change in Control followed by
Executive's termination of employment, Executive will be entitled to receive
benefits due him under or contributed by the Holding Company or its Subsidiaries
on his behalf pursuant to any retirement, incentive, profit sharing, employee
stock ownership, bonus, performance, disability or other employee benefit plan
or other arrangement maintained by the Institution or the Holding Company on
Executive's behalf to the extent such benefits are not otherwise paid to
Executive under a separate provision of this Agreement.
(e) Upon the occurrence of a Change in Control and Executive's
termination of employment in connection therewith, the Holding Company will
cause to be continued life, medical and disability coverage substantially
identical to the coverage maintained by the Holding Company or its Subsidiaries
for Executive and any of his dependents covered under such plans prior to the
Change in Control. Such coverage and payments shall cease upon the expiration of
thirty-six (36) full calendar months following the Date of Termination. In the
event Executive's participation in any such plan or program is barred, the
Holding Company shall arrange to provide Executive and his dependents with
benefits substantially similar to those Executive and his dependents would
otherwise have been entitled to receive under such plans and programs from which
their continued participation is barred or provide their economic equivalent.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding Section 5 of this Agreement, for any taxable year
in which the Executive shall be liable, as determined for the payment of an
excise tax under Section 4999 of the Code (or any successor provision thereto),
with respect to any payment in the nature of the compensation made by the
Holding Company or its Subsidiaries (or for the benefit of) Executive pursuant
to this Agreement or otherwise, the Holding Company shall pay to the Executive
an amount determined under the following formula:
6
<PAGE>
An amount equal to: (E x P) + X
WHERE:
X = E x P
----------------------
1 - [(FI x (1 - SLI)) + SLI + E + M + PO]
E = the rate at which the excise tax is assessed
under Section 4999 of the Code;
P = the amount with respect to which such excise
tax is assessed, determined without regard to
this Section 6;
FI = the highest marginal rate of federal income,
employment, and other taxes (other than taxes
imposed under Section 4999 of the Code)
applicable to Executive for the taxable year in
question (including any effective increase in
Executive's tax rate attributable to the
disallowance of any deduction); and
SLI = the sum of the highest marginal rates of
income and payroll tax applicable to Executive
under applicable state and local laws for the
taxable year in question (including any
effective increase in Executive's tax rate
attributable to the disallowance of any
deduction); and
M = highest marginal rate of Medicare tax; and
PO = adjustment for phase out of or loss of
deduction, personal exemption or other similar
items.
(a) With respect to any payment in the nature of compensation
that is made to (or for the benefit of) Executive under the terms of this
Section 6 or otherwise and on which an excise tax under Section 4999 of the Code
may or will be assessed, the payment determined under Section 6 shall be made to
Executive on the earliest of (i) the date the Holding Company is required to
withhold such tax, (ii) the date the tax is required to be paid by Executive, or
(iii) at the time of the Change in Control. It is the intention of the parties
that the Holding Company provide Executive with a full tax gross-up under the
provisions of this Section 6, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 (or any
successor provisions) of the Code had not been imposed. The tax gross-up may be
adjusted if alternative minimum tax rules are applicable to Executive.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the amount determined as "P", above (such greater amount being hereafter
referred to as the "Determinative Excess Parachute Payment"), then the Holding
Company's independent
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accountants shall determine the amount (the "Adjustment Amount"), the Holding
Company must pay to Executive, in order to put Executive (or the Holding
Company, as the case may be) in the same position as Executive (or the Holding
Company, as the case may be) would have been if the amount determined as "P"
above had been equal to the Determinative Excess Parachute Payment. In
determining the Adjustment Amount, the independent accountants shall take into
account any and all taxes (including any penalties and interest) paid by or for
Executive or refunded to Executive or for Executive's benefit. As soon as
practicable after the Adjustment Amount has been so determined, the Holding
Company shall pay the Adjustment Amount to Executive.
(c) In each calendar year that Executive receives payments or
benefits under this Agreement, Executive shall report on his state and federal
income tax returns such information as is consistent with the determination made
by the independent accountants of the Holding Company as described above. The
Holding Company shall indemnify and hold Executive harmless from any and all
losses, costs and expenses (including without limitation, reasonable attorney's
fees, interest, fines and penalties) which Executive incurs as a result of so
reporting such information. Executive shall promptly notify the Holding Company
in writing whenever Executive receives notice of the Institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Agreement is being reviewed or is in dispute. The Holding Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Holding
Company may have in connection therewith without prior consent to the Holding
Company.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses), final cease and desist order or material breach of any
provision of this Agreement. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by an affirmative vote of not less than a majority of
the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 of this Agreement
through the Date of Termination, stock options granted to Executive under any
stock option plan shall not be exercisable nor shall any unvested awards granted
to Executive under any
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stock benefit plan of the Holding Company or its Subsidiaries vest. At the Date
of Termination, such stock options and any such unvested stock awards shall
become null and void and shall not be exercisable by or delivered to Executive
at any time subsequent to such Termination for Cause.
8. NOTICE.
(a) Any purported termination by the Holding Company or by
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive in
which case the Date of Termination shall be the date specified in the Notice,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Holding Company will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.
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10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder
pursuant to Section 4 of this Agreement, Executive agrees not to compete with
the Holding Company or its Subsidiaries for a period of one (1) year following
such termination in any city, town or county in which the Executive's normal
business office is located and the Holding Company or any of its Subsidiaries
has an office or has filed an application for regulatory approval to establish
an office, determined as of the effective date of such termination, 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 Holding Company or its Subsidiaries.
The parties hereto, recognizing that irreparable injury will result to the
Holding Company or its Subsidiaries, its business and property in the event of
Executive's breach of this subsection 10(a) agree that in the event of any such
breach by Executive, the Holding Company or its Subsidiaries, will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employees and all persons acting for or under the direction of
Executive. Executive represents and admits that in the event of the termination
of his employment pursuant to Section 7 of this Agreement, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Holding
Company or its Subsidiaries, 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 Holding Company or its Subsidiaries from
pursuing any other remedies available to the Holding Company or its Subsidiaries
for such breach or threatened breach, including the recovery of damages from
Executive.
(b) Executive recognizes and acknowledges that the knowledge of
the business activities and plans for business activities of the Holding Company
and its Subsidiaries as it may exist from time to time, is a valuable, special
and unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of his employment, disclose any
knowledge of the past, present, planned or considered business activities of the
Holding Company and its Subsidiaries thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived from
the business plans and activities of the Holding Company. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Holding Company or its Subsidiaries or
from rendering any services to any person, firm, corporation, 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 Holding
Company from pursuing any other remedies available to the Holding Company for
such breach or threatened breach, including the recovery of damages from
Executive.
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11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid
in cash or check from the general funds of the Holding Company subject to
Section 11(b) of this Agreement.
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under an employment agreement in effect between Executive
and the Institution, such compensation payments and benefits paid by the
Institution will be subtracted from any amount due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Institution Agreement shall be allocated in proportion to the level of
activity and the time expended on such activities by the Executive as determined
by the Holding Company and the Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the
parties hereto and supersedes any prior employment agreement between the Holding
Company or any predecessor of the Holding Company and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the 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.
13. 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 and the Holding Company and their respective successors
and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) 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
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only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
15. 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.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Institution, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company, if Executive is successful pursuant to a
legal judgment, arbitration or settlement.
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20. INDEMNIFICATION.
(a) The Holding Company shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.
(b) Any payments made to Executive pursuant to this Section are
subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and 12
C.F.R. Part 359 and any rules or regulations promulgated thereunder.
21. SUCCESSOR TO THE HOLDING COMPANY.
The Holding Company 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 Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Holding Company's obligations under this Agreement, in the same manner and to
the same extent that the Holding Company would be required to perform if no such
succession or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, FirstSpartan Financial Corp. has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this Agreement,
on the 20th day of March, 2000.
ATTEST: FIRSTSPARTAN FINANCIAL CORP.
/s/ R. Lamar Simpson By: /s/ Robert R. Odom
- --------------------- ------------------
R. LAMAR SIMPSON ROBERT R. ODOM
For the Entire Board of Directors
[SEAL]
WITNESS: EXECUTIVE
/s/ Kelley Theus By: /s/ Billy L. Painter
- ----------------------------- --------------------
KELLEY THEUS BILLY L.PAINTER
President and Chief Executive Officer
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EXHIBIT 10(b)
FIRSTSPARTAN FINANCIAL CORP.
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made effective as of March 15, 2000, by
and between FirstSpartan Financial Corp. (the "Holding Company"), a corporation
organized under the laws of Delaware with its principal offices at 380 East Main
Street, Spartanburg, South Carolina, 29304, First Federal Bank and Hugh H.
Brantley ("Executive"). Any reference to "Institution" herein shall mean First
Federal Bank or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of Executive's employment hereunder, Executive agrees
to serve as Senior Vice President of the Holding Company. The Executive shall
render administrative and management services to the Holding Company such as are
customarily performed by persons in a similar executive capacity. During said
period, Executive also agrees to serve, if elected or appointed, as an officer
or director of any subsidiary of the Holding Company.
2. TERMS.
(a) The period of Executive's employment under this Agreement
shall be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the date of the execution of this Agreement, the term of this
Agreement shall be extended for one day each day until such time as the board of
directors of the Holding Company (the "Board") or Executive elects not to extend
the term of the Agreement by giving written notice to the other party in
accordance with Section 8 of this Agreement, in which case the term of this
Agreement shall be fixed and shall end on the third anniversary of the date of
such written notice.
(b) During the period of Executive's employment hereunder, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder, including activities and services related to the organization,
operation and management of the Holding Company and its direct or indirect
subsidiaries ("Subsidiaries") and participation in community, professional and
civic organizations; provided,
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however, that, with the approval of the Board, as evidenced by a resolution of
such Board, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict of
interest with the Holding Company or its Subsidiaries, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement. However, Executive shall not perform, in any
respect, directly or indirectly, during the pendency of his temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of his duties and
responsibilities as Senior Vice President of the Holding Company.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall
constitute consideration paid by the Holding Company in exchange for the duties
described in Section 1 of this Agreement. The Holding Company shall pay
Executive, as compensation, a salary of not less than $102,629 ("Base Salary").
Base Salary shall include any amounts of compensation deferred by Executive
under any tax-qualified retirement or welfare benefit plan or any other deferred
compensation arrangement maintained by the Holding Company or its Subsidiaries.
Base Salary shall be payable in accordance with the Holding Company's payroll
practices. During the period of this Agreement, Executive's Base Salary shall be
reviewed at least annually; the first such review will be made no later than one
year from the date of this Agreement. Such review shall be conducted by the
Board or by a Committee of the Board delegated such responsibility by the Board.
The Committee or the Board may increase Executive's Base Salary at anytime. Any
increase in Base Salary shall become the "Base Salary" for purposes of this
Agreement. In addition to the Base Salary provided in this Section 3(a), the
Holding Company shall also provide Executive, at no premium cost to Executive,
with all such other benefits as provided uniformly to permanent full-time
employees of the Holding Company and its Subsidiaries. In addition, Executive
shall be entitled to incentive compensation and bonuses as provided for under
any plan or arrangement of the Holding Company or its Subsidiaries in which
Executive is eligible to participate.
(b) Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, or in which he begins to
participate in the future, and the Holding Company and its Subsidiaries will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder, except to the extent that such changes are made
applicable to all Holding Company and Institution employees eligible to
participate in such plans, arrangements and perquisites on a non-discriminatory
basis. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive shall be entitled to participate in or receive
benefits under all plans relating to stock options, restricted
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stock awards, stock purchases, pension, thrift, supplemental retirement,
profit-sharing, employee stock ownership, group life insurance, medical and
other health and welfare coverage, education, cash or stock bonuses that are now
or hereafter made available by the Holding Company or its Subsidiaries to its
senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive shall be entitled to incentive compensation and
bonuses as provided in any plan of the Holding Company and its Subsidiaries in
which Executive is eligible to participate. Nothing paid to Executive under any
such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.
(c) The Holding Company shall pay or reimburse Executive for all
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as defined
below) during Executive's term of employment under this Agreement, the
provisions of this Section 4 shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i) the
termination by the Holding Company of Executive's full-time employment hereunder
for any reason other than termination governed by Section 5(a) of this
Agreement, or for Termination for Cause, as defined in Section 7 of this
Agreement; or Retirement (as defined in paragraph (e) of this Section 4); (ii)
Executive's resignation from the Holding Company's employ, upon, any (A) failure
to elect or reelect or to appoint or reappoint Executive as Senior Vice
President, unless Executive so consents, (B) a material change in Executive's
function, duties, or responsibilities with the Holding Company or its
Subsidiaries, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, unless Executive so consents, (C) a
relocation of Executive's principal place of employment by more than 25 miles
from its location at the effective date of this Agreement, unless Executive so
consents, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless Executive so consents, (E) a liquidation or dissolution of the Holding
Company or the Institution, or (F) breach of this Agreement by the Holding
Company. Upon the occurrence of any event described in clauses (A), (B), (C),
(D), (E) or (F), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within six full calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date
of Termination, as defined in Section 8 of this Agreement, the Holding Company
shall be obligated to pay Executive, or, in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, the amount
of the remaining payments and benefits Executive would have earned if he had
continued his employment with the Holding Company during the remaining unexpired
term of this
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Agreement, based on Executive's Base Salary and benefits provided at the Date of
Termination, as set forth in Sections 3(a) and (b) of this Agreement, and the
amount still due Executive under any paragraphs of Section 3 of this Agreement
for services rendered through the Date of Termination. At the election of the
Executive, which election is to be made prior to an Event of Termination, such
payments shall be made in a lump sum. In the event that no election is made,
payment to the Executive will be made on a monthly basis in approximately equal
installments during the remaining term of the Agreement. Such payments shall not
be reduced in the event the Executive obtains other employment following
termination of employment.
(c) Upon the occurrence of an Event of Termination, Executive
will be entitled to receive benefits due him under or contributed by the Holding
Company or its Subsidiaries on his behalf pursuant to any retirement, incentive,
profit sharing, employee stock ownership, bonus, performance, disability or
other employee benefit plan maintained by the Holding Company or its
Subsidiaries to the extent such benefits are not otherwise paid to Executive
under a separate provision of this Agreement.
(d) To the extent that the Holding Company or its Subsidiaries
continue to offer any life, medical, health, disability or dental insurance plan
or arrangement in which Executive participates in on the last day of his
employment (each being a "Welfare Plan"), after an Event of Termination (as
herein defined), Executive and his dependents shall continue participating in
such Welfare Plans, subject to the same premium contributions on the part of
Executive as were required immediately prior to the Event of Termination until
the earlier of (i) his death (ii) his employment by another employer other than
one of which he is the majority owner or (iii) the end of the remaining term of
this Agreement. If the Holding Company or its Subsidiaries do not offer the
Welfare Plans after the Event of Termination, then the Holding Company shall
provide Executive with a payment equal to the actuarial value of the provision
of such benefit for the period which runs until the earlier of (i) his death;
(ii) his employment by another employer other than one of which he is the
majority owner; or (iii) the end of the remaining term of this Agreement.
(e) Termination of Executive based on "Retirement" shall mean
termination in accordance with the Holding Company's or the Institution's
retirement policy or in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive upon
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Holding Company or its Subsidiaries and other plans to which
Executive is a party or a participant in accordance with the terms of the plan
or arrangement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Institution shall mean an event of a nature that: (i)
would be required to be reported in response to Item 1(a) 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 (ii) results in a
Change in Control of the Institution or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, and the Rules and Regulations
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promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the OTS, the
Board shall substitute its judgment for that of the OTS); 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 voting securities of the
Institution or the Holding Company representing 20% or more of the Institution's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, 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 that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Institution or
the Holding Company or similar transaction occurs or is effectuated in which the
Institution or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Institution 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 Institution or
the Holding Company shall be distributed, or (E) a tender offer is made for 20%
or more of the voting securities of the Institution or Holding Company then
outstanding.
(b) If any of the events described in Section 5(a) of this
Agreement constituting a Change in Control have occurred, or the Board has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his termination of employment on or after the date the Change in Control
occurs due to (i) Executive's dismissal at any time during the term of this
Agreement, (ii) Executive's voluntary resignation for any reason on or within a
sixty (60) day period following the date a Change in Control has occurred or
(iii) Executive's resignation following any demotion, loss of title, office or
significant authority or responsibility, reduction in the annual compensation or
reduction in benefits or relocation of his principal place of employment by more
than 25 miles from its location immediately prior to the change in control,
unless such termination is because of his death or Termination for Cause (as
defined herein), at any time during the term of this Agreement.
(c) Upon Executive's entitlement to benefits pursuant to Section
5(b) of this Agreement, the Holding Company shall pay Executive, or in the event
of his subsequent death, his beneficiary
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or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to three (3) times Executive's average
annual compensation for the most recently completed five (5) calendar years. In
determining Executive's average annual compensation, annual compensation shall
include Base Salary and any other taxable income, including but not limited to
amounts related to the granting, vesting or exercise of restricted stock or
stock option awards, commissions, bonuses, severance payments, retirement
benefits, director or committee fees and fringe benefits paid or to be paid to
Executive or paid for Executive's benefit during any such year, as well as
pension, profit sharing plan, employee stock ownership and other retirement
contributions or benefits (whether or not taxable) made or accrued on behalf of
Executive for such year. At the election of Executive, which election is to be
made prior to a Change in Control, such payment shall be made in a lump sum
(without discount for early payment) on or immediately following the Date of
Termination (which may be the date a Change in Control occurs) or paid in equal
monthly installments during the thirty-six (36) months following Executive's
termination. In the event that no election is made, payment to Executive will be
made on a monthly basis during the remaining thirty-six (36) month term of the
Agreement. Such payments shall not be reduced in the event Executive obtains
other employment following termination of employment.
(d) Upon the occurrence of a Change in Control followed by
Executive's termination of employment, Executive will be entitled to receive
benefits due him under or contributed by the Holding Company or its Subsidiaries
on his behalf pursuant to any retirement, incentive, profit sharing, employee
stock ownership, bonus, performance, disability or other employee benefit plan
or other arrangement maintained by the Institution or the Holding Company on
Executive's behalf to the extent such benefits are not otherwise paid to
Executive under a separate provision of this Agreement.
(e) Upon the occurrence of a Change in Control and Executive's
termination of employment in connection therewith, the Holding Company will
cause to be continued life, medical and disability coverage substantially
identical to the coverage maintained by the Holding Company or its Subsidiaries
for Executive and any of his dependents covered under such plans prior to the
Change in Control. Such coverage and payments shall cease upon the expiration of
thirty-six (36) full calendar months following the Date of Termination. In the
event Executive's participation in any such plan or program is barred, the
Holding Company shall arrange to provide Executive and his dependents with
benefits substantially similar to those Executive and his dependents would
otherwise have been entitled to receive under such plans and programs from which
their continued participation is barred or provide their economic equivalent.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding Section 5 of this Agreement, for any taxable year in
which the Executive shall be liable, as determined for the payment of an excise
tax under Section 4999 of the Code (or any successor provision thereto), with
respect to any payment in the nature of the compensation made by the Holding
Company or its Subsidiaries (or for the benefit of) Executive pursuant to this
Agreement or otherwise, the Holding Company shall pay to the Executive an amount
determined under the following formula:
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An amount equal to: (E x P) + X
WHERE:
X = E x P
----------------------
1 - [(FI x (1 - SLI)) + SLI + E + M + PO]
E = the rate at which the excise tax is assessed
under Section 4999 of the Code;
P = the amount with respect to which such excise
tax is assessed, determined without regard to
this Section 6;
FI = the highest marginal rate of federal income,
employment, and other taxes (other than taxes
imposed under Section 4999 of the Code)
applicable to Executive for the taxable year in
question (including any effective increase in
Executive's tax rate attributable to the
disallowance of any deduction); and
SLI = the sum of the highest marginal rates of
income and payroll tax applicable to Executive
under applicable state and local laws for the
taxable year in question (including any
effective increase in Executive's tax rate
attributable to the disallowance of any
deduction); and
M = highest marginal rate of Medicare tax; and
PO = adjustment for phase out of or loss of
deduction, personal exemption or other similar
items.
(a) With respect to any payment in the nature of compensation
that is made to (or for the benefit of) Executive under the terms of this
Section 6 or otherwise and on which an excise tax under Section 4999 of the Code
may or will be assessed, the payment determined under Section 6 shall be made to
Executive on the earliest of (i) the date the Holding Company is required to
withhold such tax, (ii) the date the tax is required to be paid by Executive, or
(iii) at the time of the Change in Control. It is the intention of the parties
that the Holding Company provide Executive with a full tax gross-up under the
provisions of this Section 6, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 (or any
successor provisions) of the Code had not been imposed. The tax gross-up may be
adjusted if alternative minimum tax rules are applicable to Executive.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the amount determined as "P", above (such greater amount being hereafter
referred to as the "Determinative Excess Parachute Payment"), then the Holding
Company's independent
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accountants shall determine the amount (the "Adjustment Amount"), the Holding
Company must pay to Executive, in order to put Executive (or the Holding
Company, as the case may be) in the same position as Executive (or the Holding
Company, as the case may be) would have been if the amount determined as "P"
above had been equal to the Determinative Excess Parachute Payment. In
determining the Adjustment Amount, the independent accountants shall take into
account any and all taxes (including any penalties and interest) paid by or for
Executive or refunded to Executive or for Executive's benefit. As soon as
practicable after the Adjustment Amount has been so determined, the Holding
Company shall pay the Adjustment Amount to Executive.
(c) In each calendar year that Executive receives payments or
benefits under this Agreement, Executive shall report on his state and federal
income tax returns such information as is consistent with the determination made
by the independent accountants of the Holding Company as described above. The
Holding Company shall indemnify and hold Executive harmless from any and all
losses, costs and expenses (including without limitation, reasonable attorney's
fees, interest, fines and penalties) which Executive incurs as a result of so
reporting such information. Executive shall promptly notify the Holding Company
in writing whenever Executive receives notice of the Institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Agreement is being reviewed or is in dispute. The Holding Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Holding
Company may have in connection therewith without prior consent to the Holding
Company.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses), final cease and desist order or material breach of any
provision of this Agreement. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by an affirmative vote of not less than a majority of
the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 of this Agreement
through the Date of Termination, stock options granted to Executive under any
stock option plan shall not be exercisable nor shall any unvested awards granted
to Executive under any
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stock benefit plan of the Holding Company or its Subsidiaries vest. At the Date
of Termination, such stock options and any such unvested stock awards shall
become null and void and shall not be exercisable by or delivered to Executive
at any time subsequent to such Termination for Cause.
8. NOTICE.
(a) Any purported termination by the Holding Company or by
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive in
which case the Date of Termination shall be the date specified in the Notice,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Holding Company will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall
be subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.
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10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder
pursuant to Section 4 of this Agreement, Executive agrees not to compete with
the Holding Company or its Subsidiaries for a period of one (1) year following
such termination in any city, town or county in which the Executive's normal
business office is located and the Holding Company or any of its Subsidiaries
has an office or has filed an application for regulatory approval to establish
an office, determined as of the effective date of such termination, 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 Holding Company or its Subsidiaries.
The parties hereto, recognizing that irreparable injury will result to the
Holding Company or its Subsidiaries, its business and property in the event of
Executive's breach of this subsection 10(a) agree that in the event of any such
breach by Executive, the Holding Company or its Subsidiaries, will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employees and all persons acting for or under the direction of
Executive. Executive represents and admits that in the event of the termination
of his employment pursuant to Section 7 of this Agreement, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Holding
Company or its Subsidiaries, 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 Holding Company or its Subsidiaries from
pursuing any other remedies available to the Holding Company or its Subsidiaries
for such breach or threatened breach, including the recovery of damages from
Executive.
(b) Executive recognizes and acknowledges that the knowledge of
the business activities and plans for business activities of the Holding Company
and its Subsidiaries as it may exist from time to time, is a valuable, special
and unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of his employment, disclose any
knowledge of the past, present, planned or considered business activities of the
Holding Company and its Subsidiaries thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived from
the business plans and activities of the Holding Company. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Holding Company or its Subsidiaries or
from rendering any services to any person, firm, corporation, 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 Holding
Company from pursuing any other remedies available to the Holding Company for
such breach or threatened breach, including the recovery of damages from
Executive.
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11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid
in cash or check from the general funds of the Holding Company subject to
Section 11(b) of this Agreement.
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under an employment agreement in effect between Executive
and the Institution, such compensation payments and benefits paid by the
Institution will be subtracted from any amount due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Institution Agreement shall be allocated in proportion to the level of
activity and the time expended on such activities by the Executive as determined
by the Holding Company and the Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Holding Company
or any predecessor of the Holding Company and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the 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.
13. 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 and the Holding Company and their respective successors
and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) 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
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only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
15. 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.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Institution, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company, if Executive is successful pursuant to a
legal judgment, arbitration or settlement.
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20. INDEMNIFICATION.
(a) The Holding Company shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.
(b) Any payments made to Executive pursuant to this Section are
subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and 12
C.F.R. Part 359 and any rules or regulations promulgated thereunder.
21. SUCCESSOR TO THE HOLDING COMPANY.
The Holding Company 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 Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Holding Company's obligations under this Agreement, in the same manner and to
the same extent that the Holding Company would be required to perform if no such
succession or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, FirstSpartan Financial Corp. has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this Agreement,
on the 20th day of March, 2000.
ATTEST: FIRSTSPARTAN FINANCIAL CORP.
/s/ R. Lamar Simpson By: /s/ Billy L. Painter
- --------------------- --------------------
R.LAMAR SIMPSON BILLY L. PAINTER
For the Entire Board of Directors
[SEAL]
WITNESS: EXECUTIVE
/s/ R. Lamar Simpson By: /s/ Hugh H. Brantley
- --------------------- --------------------
R.LAMAR SIMPSON HUGH H. BRANTLEY
Senior Vice President
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<PAGE>
Exhibit 10 (c)
FIRSTSPARTAN FINANCIAL CORP.
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made effective as of March 15, 2000, by
and between FirstSpartan Financial Corp. (the "Holding Company"), a corporation
organized under the laws of Delaware with its principal offices at 380 East Main
Street, Spartanburg, South Carolina, 29304, First Federal Bank and J. Stephen
Sinclair ("Executive"). Any reference to "Institution" herein shall mean First
Federal Bank or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of Executive's employment hereunder, Executive
agrees to serve as Senior Vice President of the Holding Company. The Executive
shall render administrative and management services to the Holding Company such
as are customarily performed by persons in a similar executive capacity. During
said period, Executive also agrees to serve, if elected or appointed, as an
officer or director of any subsidiary of the Holding Company.
2. TERMS.
(a) The period of Executive's employment under this Agreement
shall be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the date of the execution of this Agreement, the term of this
Agreement shall be extended for one day each day until such time as the board of
directors of the Holding Company (the "Board") or Executive elects not to extend
the term of the Agreement by giving written notice to the other party in
accordance with Section 8 of this Agreement, in which case the term of this
Agreement shall be fixed and shall end on the third anniversary of the date of
such written notice.
(b) During the period of Executive's employment hereunder, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder, including activities and services related to the organization,
operation and management of the Holding Company and its direct or indirect
subsidiaries ("Subsidiaries") and participation in community, professional and
civic organizations; provided,
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however, that, with the approval of the Board, as evidenced by a resolution of
such Board, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict of
interest with the Holding Company or its Subsidiaries, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement. However, Executive shall not perform, in any
respect, directly or indirectly, during the pendency of his temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of his duties and
responsibilities as Senior Vice President of the Holding Company.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall
constitute consideration paid by the Holding Company in exchange for the duties
described in Section 1 of this Agreement. The Holding Company shall pay
Executive, as compensation, a salary of not less than $101,506 ("Base Salary").
Base Salary shall include any amounts of compensation deferred by Executive
under any tax-qualified retirement or welfare benefit plan or any other deferred
compensation arrangement maintained by the Holding Company or its Subsidiaries.
Base Salary shall be payable in accordance with the Holding Company's payroll
practices. During the period of this Agreement, Executive's Base Salary shall be
reviewed at least annually; the first such review will be made no later than one
year from the date of this Agreement. Such review shall be conducted by the
Board or by a Committee of the Board delegated such responsibility by the Board.
The Committee or the Board may increase Executive's Base Salary at anytime. Any
increase in Base Salary shall become the "Base Salary" for purposes of this
Agreement. In addition to the Base Salary provided in this Section 3(a), the
Holding Company shall also provide Executive, at no premium cost to Executive,
with all such other benefits as provided uniformly to permanent full-time
employees of the Holding Company and its Subsidiaries. In addition, Executive
shall be entitled to incentive compensation and bonuses as provided for under
any plan or arrangement of the Holding Company or its Subsidiaries in which
Executive is eligible to participate.
(b) Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, or in which he begins to
participate in the future, and the Holding Company and its Subsidiaries will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder, except to the extent that such changes are made
applicable to all Holding Company and Institution employees eligible to
participate in such plans, arrangements and perquisites on a non-discriminatory
basis. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive shall be entitled to participate in or receive
benefits under all plans relating to stock options, restricted
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stock awards, stock purchases, pension, thrift, supplemental retirement,
profit-sharing, employee stock ownership, group life insurance, medical and
other health and welfare coverage, education, cash or stock bonuses that are now
or hereafter made available by the Holding Company or its Subsidiaries to its
senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive shall be entitled to incentive compensation and
bonuses as provided in any plan of the Holding Company and its Subsidiaries in
which Executive is eligible to participate. Nothing paid to Executive under any
such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.
(c) The Holding Company shall pay or reimburse Executive for all
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as defined
below) during Executive's term of employment under this Agreement, the
provisions of this Section 4 shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i) the
termination by the Holding Company of Executive's full-time employment hereunder
for any reason other than termination governed by Section 5(a) of this
Agreement, or for Termination for Cause, as defined in Section 7 of this
Agreement; or Retirement (as defined in paragraph (e) of this Section 4); (ii)
Executive's resignation from the Holding Company's employ, upon, any (A) failure
to elect or reelect or to appoint or reappoint Executive as Senior Vice
President, unless Executive so consents, (B) a material change in Executive's
function, duties, or responsibilities with the Holding Company or its
Subsidiaries, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, unless Executive so consents, (C) a
relocation of Executive's principal place of employment by more than 25 miles
from its location at the effective date of this Agreement, unless Executive so
consents, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless Executive so consents, (E) a liquidation or dissolution of the Holding
Company or the Institution, or (F) breach of this Agreement by the Holding
Company. Upon the occurrence of any event described in clauses (A), (B), (C),
(D), (E) or (F), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within six full calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date
of Termination, as defined in Section 8 of this Agreement, the Holding Company
shall be obligated to pay Executive, or, in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, the amount
of the remaining payments and benefits Executive would have earned if he had
continued his employment with the Holding Company during the remaining unexpired
term of this
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Agreement, based on Executive's Base Salary and benefits provided at the Date of
Termination, as set forth in Sections 3(a) and (b) of this Agreement, and the
amount still due Executive under any paragraphs of Section 3 of this Agreement
for services rendered through the Date of Termination. At the election of the
Executive, which election is to be made prior to an Event of Termination, such
payments shall be made in a lump sum. In the event that no election is made,
payment to the Executive will be made on a monthly basis in approximately equal
installments during the remaining term of the Agreement. Such payments shall not
be reduced in the event the Executive obtains other employment following
termination of employment.
(c) Upon the occurrence of an Event of Termination, Executive
will be entitled to receive benefits due him under or contributed by the Holding
Company or its Subsidiaries on his behalf pursuant to any retirement, incentive,
profit sharing, employee stock ownership, bonus, performance, disability or
other employee benefit plan maintained by the Holding Company or its
Subsidiaries to the extent such benefits are not otherwise paid to Executive
under a separate provision of this Agreement.
(d) To the extent that the Holding Company or its Subsidiaries
continue to offer any life, medical, health, disability or dental insurance plan
or arrangement in which Executive participates in on the last day of his
employment (each being a "Welfare Plan"), after an Event of Termination (as
herein defined), Executive and his dependents shall continue participating in
such Welfare Plans, subject to the same premium contributions on the part of
Executive as were required immediately prior to the Event of Termination until
the earlier of (i) his death (ii) his employment by another employer other than
one of which he is the majority owner or (iii) the end of the remaining term of
this Agreement. If the Holding Company or its Subsidiaries do not offer the
Welfare Plans after the Event of Termination, then the Holding Company shall
provide Executive with a payment equal to the actuarial value of the provision
of such benefit for the period which runs until the earlier of (i) his death;
(ii) his employment by another employer other than one of which he is the
majority owner; or (iii) the end of the remaining term of this Agreement.
(e) Termination of Executive based on "Retirement" shall mean
termination in accordance with the Holding Company's or the Institution's
retirement policy or in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive upon
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Holding Company or its Subsidiaries and other plans to which
Executive is a party or a participant in accordance with the terms of the plan
or arrangement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Institution shall mean an event of a nature that: (i)
would be required to be reported in response to Item 1(a) 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 (ii) results in a
Change in Control of the Institution or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, and the Rules and Regulations
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promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the OTS, the
Board shall substitute its judgment for that of the OTS); 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 voting securities of the
Institution or the Holding Company representing 20% or more of the Institution's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, 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 that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Institution or
the Holding Company or similar transaction occurs or is effectuated in which the
Institution or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Institution 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 Institution or
the Holding Company shall be distributed, or (E) a tender offer is made for 20%
or more of the voting securities of the Institution or Holding Company then
outstanding.
(b) If any of the events described in Section 5(a) of this
Agreement constituting a Change in Control have occurred, or the Board has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his termination of employment on or after the date the Change in Control
occurs due to (i) Executive's dismissal at any time during the term of this
Agreement, (ii) Executive's voluntary resignation for any reason on or within a
sixty (60) day period following the date a Change in Control has occurred or
(iii) Executive's resignation following any demotion, loss of title, office or
significant authority or responsibility, reduction in the annual compensation or
reduction in benefits or relocation of his principal place of employment by more
than 25 miles from its location immediately prior to the change in control,
unless such termination is because of his death or Termination for Cause (as
defined herein), at any time during the term of this Agreement.
(c) Upon Executive's entitlement to benefits pursuant to Section
5(b) of this Agreement, the Holding Company shall pay Executive, or in the event
of his subsequent death, his beneficiary
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or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to three (3) times Executive's average
annual compensation for the most recently completed five (5) calendar years. In
determining Executive's average annual compensation, annual compensation shall
include Base Salary and any other taxable income, including but not limited to
amounts related to the granting, vesting or exercise of restricted stock or
stock option awards, commissions, bonuses, severance payments, retirement
benefits, director or committee fees and fringe benefits paid or to be paid to
Executive or paid for Executive's benefit during any such year, as well as
pension, profit sharing plan, employee stock ownership and other retirement
contributions or benefits (whether or not taxable) made or accrued on behalf of
Executive for such year. At the election of Executive, which election is to be
made prior to a Change in Control, such payment shall be made in a lump sum
(without discount for early payment) on or immediately following the Date of
Termination (which may be the date a Change in Control occurs) or paid in equal
monthly installments during the thirty-six (36) months following Executive's
termination. In the event that no election is made, payment to Executive will be
made on a monthly basis during the remaining thirty-six (36) month term of the
Agreement. Such payments shall not be reduced in the event Executive obtains
other employment following termination of employment.
(d) Upon the occurrence of a Change in Control followed by
Executive's termination of employment, Executive will be entitled to receive
benefits due him under or contributed by the Holding Company or its Subsidiaries
on his behalf pursuant to any retirement, incentive, profit sharing, employee
stock ownership, bonus, performance, disability or other employee benefit plan
or other arrangement maintained by the Institution or the Holding Company on
Executive's behalf to the extent such benefits are not otherwise paid to
Executive under a separate provision of this Agreement.
(e) Upon the occurrence of a Change in Control and Executive's
termination of employment in connection therewith, the Holding Company will
cause to be continued life, medical and disability coverage substantially
identical to the coverage maintained by the Holding Company or its Subsidiaries
for Executive and any of his dependents covered under such plans prior to the
Change in Control. Such coverage and payments shall cease upon the expiration of
thirty-six (36) full calendar months following the Date of Termination. In the
event Executive's participation in any such plan or program is barred, the
Holding Company shall arrange to provide Executive and his dependents with
benefits substantially similar to those Executive and his dependents would
otherwise have been entitled to receive under such plans and programs from which
their continued participation is barred or provide their economic equivalent.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding Section 5 of this Agreement, for any taxable year in
which the Executive shall be liable, as determined for the payment of an excise
tax under Section 4999 of the Code (or any successor provision thereto), with
respect to any payment in the nature of the compensation made by the Holding
Company or its Subsidiaries (or for the benefit of) Executive pursuant to this
Agreement or otherwise, the Holding Company shall pay to the Executive an amount
determined under the following formula:
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An amount equal to: (E x P) + X
WHERE:
X = E x P
----------------------
1 - [(FI x (1 - SLI)) + SLI + E + M + PO]
E = the rate at which the excise tax is assessed
under Section 4999 of the Code;
P = the amount with respect to which such excise
tax is assessed, determined without regard to
this Section 6;
FI = the highest marginal rate of federal income,
employment, and other taxes (other than taxes
imposed under Section 4999 of the Code)
applicable to Executive for the taxable year in
question (including any effective increase in
Executive's tax rate attributable to the
disallowance of any deduction); and
SLI = the sum of the highest marginal rates of
income and payroll tax applicable to Executive
under applicable state and local laws for the
taxable year in question (including any
effective increase in Executive's tax rate
attributable to the disallowance of any
deduction); and
M = highest marginal rate of Medicare tax; and
PO = adjustment for phase out of or loss of
deduction, personal exemption or other similar
items.
(a) With respect to any payment in the nature of compensation
that is made to (or for the benefit of) Executive under the terms of this
Section 6 or otherwise and on which an excise tax under Section 4999 of the Code
may or will be assessed, the payment determined under Section 6 shall be made to
Executive on the earliest of (i) the date the Holding Company is required to
withhold such tax, (ii) the date the tax is required to be paid by Executive, or
(iii) at the time of the Change in Control. It is the intention of the parties
that the Holding Company provide Executive with a full tax gross-up under the
provisions of this Section 6, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 (or any
successor provisions) of the Code had not been imposed. The tax gross-up may be
adjusted if alternative minimum tax rules are applicable to Executive.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the amount determined as "P", above (such greater amount being hereafter
referred to as the "Determinative Excess Parachute Payment"), then the Holding
Company's independent
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accountants shall determine the amount (the "Adjustment Amount"), the Holding
Company must pay to Executive, in order to put Executive (or the Holding
Company, as the case may be) in the same position as Executive (or the Holding
Company, as the case may be) would have been if the amount determined as "P"
above had been equal to the Determinative Excess Parachute Payment. In
determining the Adjustment Amount, the independent accountants shall take into
account any and all taxes (including any penalties and interest) paid by or for
Executive or refunded to Executive or for Executive's benefit. As soon as
practicable after the Adjustment Amount has been so determined, the Holding
Company shall pay the Adjustment Amount to Executive.
(c) In each calendar year that Executive receives payments or
benefits under this Agreement, Executive shall report on his state and federal
income tax returns such information as is consistent with the determination made
by the independent accountants of the Holding Company as described above. The
Holding Company shall indemnify and hold Executive harmless from any and all
losses, costs and expenses (including without limitation, reasonable attorney's
fees, interest, fines and penalties) which Executive incurs as a result of so
reporting such information. Executive shall promptly notify the Holding Company
in writing whenever Executive receives notice of the Institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Agreement is being reviewed or is in dispute. The Holding Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Holding
Company may have in connection therewith without prior consent to the Holding
Company.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses), final cease and desist order or material breach of any
provision of this Agreement. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by an affirmative vote of not less than a majority of
the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 of this Agreement
through the Date of Termination, stock options granted to Executive under any
stock option plan shall not be exercisable nor shall any unvested awards granted
to Executive under any
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stock benefit plan of the Holding Company or its Subsidiaries vest. At the Date
of Termination, such stock options and any such unvested stock awards shall
become null and void and shall not be exercisable by or delivered to Executive
at any time subsequent to such Termination for Cause.
8. NOTICE.
(a) Any purported termination by the Holding Company or by
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive in
which case the Date of Termination shall be the date specified in the Notice,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Holding Company will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.
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10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder
pursuant to Section 4 of this Agreement, Executive agrees not to compete with
the Holding Company or its Subsidiaries for a period of one (1) year following
such termination in any city, town or county in which the Executive's normal
business office is located and the Holding Company or any of its Subsidiaries
has an office or has filed an application for regulatory approval to establish
an office, determined as of the effective date of such termination, 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 Holding Company or its Subsidiaries.
The parties hereto, recognizing that irreparable injury will result to the
Holding Company or its Subsidiaries, its business and property in the event of
Executive's breach of this subsection 10(a) agree that in the event of any such
breach by Executive, the Holding Company or its Subsidiaries, will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employees and all persons acting for or under the direction of
Executive. Executive represents and admits that in the event of the termination
of his employment pursuant to Section 7 of this Agreement, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Holding
Company or its Subsidiaries, 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 Holding Company or its Subsidiaries from
pursuing any other remedies available to the Holding Company or its Subsidiaries
for such breach or threatened breach, including the recovery of damages from
Executive.
(b) Executive recognizes and acknowledges that the knowledge of
the business activities and plans for business activities of the Holding Company
and its Subsidiaries as it may exist from time to time, is a valuable, special
and unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of his employment, disclose any
knowledge of the past, present, planned or considered business activities of the
Holding Company and its Subsidiaries thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived from
the business plans and activities of the Holding Company. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Holding Company or its Subsidiaries or
from rendering any services to any person, firm, corporation, 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 Holding
Company from pursuing any other remedies available to the Holding Company for
such breach or threatened breach, including the recovery of damages from
Executive.
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11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid
in cash or check from the general funds of the Holding Company subject to
Section 11(b) of this Agreement.
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under an employment agreement in effect between Executive
and the Institution, such compensation payments and benefits paid by the
Institution will be subtracted from any amount due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Institution Agreement shall be allocated in proportion to the level of
activity and the time expended on such activities by the Executive as determined
by the Holding Company and the Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Holding Company
or any predecessor of the Holding Company and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the 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.
13. 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 and the Holding Company and their respective successors
and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) 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
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only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
15. 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.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Institution, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive
under this Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company, if Executive is successful pursuant to a
legal judgment, arbitration or settlement.
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20. INDEMNIFICATION.
(a) The Holding Company shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.
(b) Any payments made to Executive pursuant to this Section are
subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and 12
C.F.R. Part 359 and any rules or regulations promulgated thereunder.
21. SUCCESSOR TO THE HOLDING COMPANY.
The Holding Company 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 Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Holding Company's obligations under this Agreement, in the same manner and to
the same extent that the Holding Company would be required to perform if no
such succession or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, FirstSpartan Financial Corp. has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this Agreement,
on the 20th day of March, 2000.
ATTEST: FIRSTSPARTAN FINANCIAL CORP.
/s/ R. Lamar Simpson By: /s/ Billy L. Painter
- ------------------------ --------------------
R. LAMAR SIMPSON BILLY L. PAINTER
For the Entire Board of Directors
[SEAL]
WITNESS: EXECUTIVE
/s/ R. Lamar Simpson By: /s/ J. Stephen Sinclair
- ------------------------ -----------------------
R. LAMAR SIMPSON J. STEPHEN SINCLAIR
Senior Vice President
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EXHIBIT 10 (d)
FIRSTSPARTAN FINANCIAL CORP.
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made effective as of March 15, 2000, by
and between FirstSpartan Financial Corp. (the "Holding Company"), a corporation
organized under the laws of Delaware with its principal offices at 380 East Main
Street, Spartanburg, South Carolina, 29304, First Federal Bank and R. Lamar
Simpson ("Executive"). Any reference to "Institution" herein shall mean First
Federal Bank or any successor thereto.
WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the Holding
Company on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of Executive's employment hereunder, Executive agrees
to serve as Treasurer, Secretary and Chief Financial Officer of the Holding
Company. The Executive shall render administrative and management services to
the Holding Company such as are customarily performed by persons in a similar
executive capacity. During said period, Executive also agrees to serve, if
elected or appointed, as an officer or director of any subsidiary of
the Holding Company.
2. TERMS.
(a) The period of Executive's employment under this Agreement
shall be deemed to have commenced as of the date first above written and shall
continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the date of the execution of this Agreement, the term of this
Agreement shall be extended for one day each day until such time as the board of
directors of the Holding Company (the "Board") or Executive elects not to extend
the term of the Agreement by giving written notice to the other party in
accordance with Section 8 of this Agreement, in which case the term of this
Agreement shall be fixed and shall end on the third anniversary of the date of
such written notice.
(b) During the period of Executive's employment hereunder, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder, including activities and services related to the organization,
operation and management of the Holding Company and its direct or indirect
subsidiaries ("Subsidiaries") and participation in community, professional and
civic organizations; provided,
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however, that, with the approval of the Board, as evidenced by a resolution of
such Board, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict of
interest with the Holding Company or its Subsidiaries, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary,
Executive's employment with the Holding Company may be terminated by the Holding
Company or Executive during the term of this Agreement, subject to the terms and
conditions of this Agreement. However, Executive shall not perform, in any
respect, directly or indirectly, during the pendency of his temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of his duties and
responsibilities as Treasurer, Secretary and Chief Financial Officer of the
Holding Company.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall
constitute consideration paid by the Holding Company in exchange for the duties
described in Section 1 of this Agreement. The Holding Company shall pay
Executive, as compensation, a salary of not less than $104,799 ("Base Salary").
Base Salary shall include any amounts of compensation deferred by Executive
under any tax-qualified retirement or welfare benefit plan or any other deferred
compensation arrangement maintained by the Holding Company or its Subsidiaries.
Base Salary shall be payable in accordance with the Holding Company's payroll
practices. During the period of this Agreement, Executive's Base Salary shall be
reviewed at least annually; the first such review will be made no later than one
year from the date of this Agreement. Such review shall be conducted by the
Board or by a Committee of the Board delegated such responsibility by the Board.
The Committee or the Board may increase Executive's Base Salary at anytime. Any
increase in Base Salary shall become the "Base Salary" for purposes of this
Agreement. In addition to the Base Salary provided in this Section 3(a), the
Holding Company shall also provide Executive, at no premium cost to Executive,
with all such other benefits as provided uniformly to permanent full-time
employees of the Holding Company and its Subsidiaries. In addition, Executive
shall be entitled to incentive compensation and bonuses as provided for under
any plan or arrangement of the Holding Company or its Subsidiaries in which
Executive is eligible to participate.
(b) Executive shall be entitled to participate in any employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, or in which he begins to
participate in the future, and the Holding Company and its Subsidiaries will
not, without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder, except to the extent that such changes are made
applicable to all Holding Company and Institution employees eligible to
participate in such plans, arrangements and perquisites on a non-discriminatory
basis. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive shall be entitled to participate in or receive
benefits under all plans relating to stock options, restricted
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stock awards, stock purchases, pension, thrift, supplemental retirement,
profit-sharing, employee stock ownership, group life insurance, medical and
other health and welfare coverage, education, cash or stock bonuses that are now
or hereafter made available by the Holding Company or its Subsidiaries to its
senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive shall be entitled to incentive compensation and
bonuses as provided in any plan of the Holding Company and its Subsidiaries in
which Executive is eligible to participate. Nothing paid to Executive under any
such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement.
(c) The Holding Company shall pay or reimburse Executive for all
reasonable expenses incurred in the performance of Executive's obligations under
this Agreement and may provide such additional compensation in such form and
such amounts as the Board may from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as defined
below) during Executive's term of employment under this Agreement, the
provisions of this Section 4 shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i) the
termination by the Holding Company of Executive's full-time employment hereunder
for any reason other than termination governed by Section 5(a) of this
Agreement, or for Termination for Cause, as defined in Section 7 of this
Agreement; or Retirement (as defined in paragraph (e) of this Section 4); (ii)
Executive's resignation from the Holding Company's employ, upon, any (A) failure
to elect or reelect or to appoint or reappoint Executive as Treasurer, Secretary
and Chief Financial Officer, unless Executive so consents, (B) a material change
in Executive's function, duties, or responsibilities with the Holding Company or
its Subsidiaries, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, unless Executive so consents, (C) a
relocation of Executive's principal place of employment by more than 25 miles
from its location at the effective date of this Agreement, unless Executive so
consents, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless Executive so consents, (E) a liquidation or dissolution of the Holding
Company or the Institution, or (F) breach of this Agreement by the Holding
Company. Upon the occurrence of any event described in clauses (A), (B), (C),
(D), (E) or (F), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within six full calendar months after the event
giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, on the Date
of Termination, as defined in Section 8 of this Agreement, the Holding Company
shall be obligated to pay Executive, or, in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, the amount
of the remaining payments and benefits Executive would have earned if he had
continued his employment with the Holding Company during the remaining unexpired
term of this
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Agreement, based on Executive's Base Salary and benefits provided at the Date of
Termination, as set forth in Sections 3(a) and (b) of this Agreement, and the
amount still due Executive under any paragraphs of Section 3 of this Agreement
for services rendered through the Date of Termination. At the election of the
Executive, which election is to be made prior to an Event of Termination, such
payments shall be made in a lump sum. In the event that no election is made,
payment to the Executive will be made on a monthly basis in approximately equal
installments during the remaining term of the Agreement. Such payments shall not
be reduced in the event the Executive obtains other employment following
termination of employment.
(c) Upon the occurrence of an Event of Termination, Executive
will be entitled to receive benefits due him under or contributed by the Holding
Company or its Subsidiaries on his behalf pursuant to any retirement, incentive,
profit sharing, employee stock ownership, bonus, performance, disability or
other employee benefit plan maintained by the Holding Company or its
Subsidiaries to the extent such benefits are not otherwise paid to Executive
under a separate provision of this Agreement.
(d) To the extent that the Holding Company or its Subsidiaries
continue to offer any life, medical, health, disability or dental insurance plan
or arrangement in which Executive participates in on the last day of his
employment (each being a "Welfare Plan"), after an Event of Termination (as
herein defined), Executive and his dependents shall continue participating in
such Welfare Plans, subject to the same premium contributions on the part of
Executive as were required immediately prior to the Event of Termination until
the earlier of (i) his death (ii) his employment by another employer other than
one of which he is the majority owner or (iii) the end of the remaining term of
this Agreement. If the Holding Company or its Subsidiaries do not offer the
Welfare Plans after the Event of Termination, then the Holding Company shall
provide Executive with a payment equal to the actuarial value of the provision
of such benefit for the period which runs until the earlier of (i) his death;
(ii) his employment by another employer other than one of which he is the
majority owner; or (iii) the end of the remaining term of this Agreement.
(e) Termination of Executive based on "Retirement" shall mean
termination in accordance with the Holding Company's or the Institution's
retirement policy or in accordance with any retirement arrangement established
with Executive's consent with respect to him. Upon termination of Executive upon
Retirement, Executive shall be entitled to all benefits under any retirement
plan of the Holding Company or its Subsidiaries and other plans to which
Executive is a party or a participant in accordance with the terms of the plan
or arrangement.
5. CHANGE IN CONTROL.
(a) For purposes of this Agreement, a "Change in Control" of the
Holding Company or the Institution shall mean an event of a nature that: (i)
would be required to be reported in response to Item 1(a) 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 (ii) results in a
Change in Control of the Institution or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, and the Rules and Regulations
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promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the OTS, the
Board shall substitute its judgment for that of the OTS); 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 voting securities of the
Institution or the Holding Company representing 20% or more of the Institution's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Institution purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, 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 that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Institution or
the Holding Company or similar transaction occurs or is effectuated in which the
Institution or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Institution 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 Institution or
the Holding Company shall be distributed, or (E) a tender offer is made for 20%
or more of the voting securities of the Institution or Holding Company then
outstanding.
(b) If any of the events described in Section 5(a) of this
Agreement constituting a Change in Control have occurred, or the Board has
determined that a Change in Control has occurred, Executive shall be entitled to
the benefits provided in paragraphs (c), (d), (e), (f) and (g) of this Section 5
upon his termination of employment on or after the date the Change in Control
occurs due to (i) Executive's dismissal at any time during the term of this
Agreement, (ii) Executive's voluntary resignation for any reason on or within a
sixty (60) day period following the date a Change in Control has occurred or
(iii) Executive's resignation following any demotion, loss of title, office or
significant authority or responsibility, reduction in the annual compensation or
reduction in benefits or relocation of his principal place of employment by more
than 25 miles from its location immediately prior to the change in control,
unless such termination is because of his death or Termination for Cause (as
defined herein), at any time during the term of this Agreement.
(c) Upon Executive's entitlement to benefits pursuant to Section
5(b) of this Agreement, the Holding Company shall pay Executive, or in the event
of his subsequent death, his beneficiary
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or beneficiaries, or his estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to three (3) times Executive's average
annual compensation for the most recently completed five (5) calendar years. In
determining Executive's average annual compensation, annual compensation shall
include Base Salary and any other taxable income, including but not limited to
amounts related to the granting, vesting or exercise of restricted stock or
stock option awards, commissions, bonuses, severance payments, retirement
benefits, director or committee fees and fringe benefits paid or to be paid to
Executive or paid for Executive's benefit during any such year, as well as
pension, profit sharing plan, employee stock ownership and other retirement
contributions or benefits (whether or not taxable) made or accrued on behalf of
Executive for such year. At the election of Executive, which election is to be
made prior to a Change in Control, such payment shall be made in a lump sum
(without discount for early payment) on or immediately following the Date of
Termination (which may be the date a Change in Control occurs) or paid in equal
monthly installments during the thirty-six (36) months following Executive's
termination. In the event that no election is made, payment to Executive will be
made on a monthly basis during the remaining thirty-six (36) month term of the
Agreement. Such payments shall not be reduced in the event Executive obtains
other employment following termination of employment.
(d) Upon the occurrence of a Change in Control followed by
Executive's termination of employment, Executive will be entitled to receive
benefits due him under or contributed by the Holding Company or its Subsidiaries
on his behalf pursuant to any retirement, incentive, profit sharing, employee
stock ownership, bonus, performance, disability or other employee benefit plan
or other arrangement maintained by the Institution or the Holding Company on
Executive's behalf to the extent such benefits are not otherwise paid to
Executive under a separate provision of this Agreement.
(e) Upon the occurrence of a Change in Control and Executive's
termination of employment in connection therewith, the Holding Company will
cause to be continued life, medical and disability coverage substantially
identical to the coverage maintained by the Holding Company or its Subsidiaries
for Executive and any of his dependents covered under such plans prior to the
Change in Control. Such coverage and payments shall cease upon the expiration of
thirty-six (36) full calendar months following the Date of Termination. In the
event Executive's participation in any such plan or program is barred, the
Holding Company shall arrange to provide Executive and his dependents with
benefits substantially similar to those Executive and his dependents would
otherwise have been entitled to receive under such plans and programs from which
their continued participation is barred or provide their economic equivalent.
6. CHANGE OF CONTROL RELATED PROVISIONS.
Notwithstanding Section 5 of this Agreement, for any taxable year
in which the Executive shall be liable, as determined for the payment of an
excise tax under Section 4999 of the Code (or any successor provision thereto),
with respect to any payment in the nature of the compensation made by the
Holding Company or its Subsidiaries (or for the benefit of) Executive pursuant
to this Agreement or otherwise, the Holding Company shall pay to the Executive
an amount determined under the following formula:
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An amount equal to: (E x P) + X
WHERE:
X = E x P
----------------------
1 - [(FI x (1 - SLI)) + SLI + E + M + PO]
E = the rate at which the excise tax is assessed
under Section 4999 of the Code;
P = the amount with respect to which such excise
tax is assessed, determined without regard to
this Section 6;
FI = the highest marginal rate of federal income,
employment, and other taxes (other than taxes
imposed under Section 4999 of the Code)
applicable to Executive for the taxable year in
question (including any effective increase in
Executive's tax rate attributable to the
disallowance of any deduction); and
SLI = the sum of the highest marginal rates of
income and payroll tax applicable to Executive
under applicable state and local laws for the
taxable year in question (including any
effective increase in Executive's tax rate
attributable to the disallowance of any
deduction); and
M = highest marginal rate of Medicare tax; and
PO = adjustment for phase out of or loss of
deduction, personal exemption or other similar
items.
(a) With respect to any payment in the nature of compensation
that is made to (or for the benefit of) Executive under the terms of this
Section 6 or otherwise and on which an excise tax under Section 4999 of the Code
may or will be assessed, the payment determined under Section 6 shall be made to
Executive on the earliest of (i) the date the Holding Company is required to
withhold such tax, (ii) the date the tax is required to be paid by Executive, or
(iii) at the time of the Change in Control. It is the intention of the parties
that the Holding Company provide Executive with a full tax gross-up under the
provisions of this Section 6, so that on a net after-tax basis, the result to
Executive shall be the same as if the excise tax under Section 4999 (or any
successor provisions) of the Code had not been imposed. The tax gross-up may be
adjusted if alternative minimum tax rules are applicable to Executive.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which Executive is a party that the excess parachute payment as
defined in Section 4999 of the Code, reduced as described above, is more than
the amount determined as "P", above (such greater amount being hereafter
referred to as the "Determinative Excess Parachute Payment"), then the Holding
Company's independent
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accountants shall determine the amount (the "Adjustment Amount"), the Holding
Company must pay to Executive, in order to put Executive (or the Holding
Company, as the case may be) in the same position as Executive (or the Holding
Company, as the case may be) would have been if the amount determined as "P"
above had been equal to the Determinative Excess Parachute Payment. In
determining the Adjustment Amount, the independent accountants shall take into
account any and all taxes (including any penalties and interest) paid by or for
Executive or refunded to Executive or for Executive's benefit. As soon as
practicable after the Adjustment Amount has been so determined, the Holding
Company shall pay the Adjustment Amount to Executive.
(c) In each calendar year that Executive receives payments or
benefits under this Agreement, Executive shall report on his state and federal
income tax returns such information as is consistent with the determination made
by the independent accountants of the Holding Company as described above. The
Holding Company shall indemnify and hold Executive harmless from any and all
losses, costs and expenses (including without limitation, reasonable attorney's
fees, interest, fines and penalties) which Executive incurs as a result of so
reporting such information. Executive shall promptly notify the Holding Company
in writing whenever Executive receives notice of the Institution of a judicial
or administrative proceeding, formal or informal, in which the federal tax
treatment under Section 4999 of the Code of any amount paid or payable under
this Agreement is being reviewed or is in dispute. The Holding Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall cooperate
fully with the Holding Company in any such proceeding. Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Holding
Company may have in connection therewith without prior consent to the Holding
Company.
7. TERMINATION FOR CAUSE.
The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses), final cease and desist order or material breach of any
provision of this Agreement. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by an affirmative vote of not less than a majority of
the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 of this Agreement
through the Date of Termination, stock options granted to Executive under any
stock option plan shall not be exercisable nor shall any unvested awards granted
to Executive under any
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stock benefit plan of the Holding Company or its Subsidiaries vest. At the Date
of Termination, such stock options and any such unvested stock awards shall
become null and void and shall not be exercisable by or delivered to Executive
at any time subsequent to such Termination for Cause.
8. NOTICE.
(a) Any purported termination by the Holding Company or by
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall not
be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive in
which case the Date of Termination shall be the date specified in the Notice,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Holding Company will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, Base Salary) and continue him as a participant in all compensation, benefit
and insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS.
All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.
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10. NON-COMPETITION AND NON-DISCLOSURE.
(a) Upon any termination of Executive's employment hereunder
pursuant to Section 4 of this Agreement, Executive agrees not to compete with
the Holding Company or its Subsidiaries for a period of one (1) year following
such termination in any city, town or county in which the Executive's normal
business office is located and the Holding Company or any of its Subsidiaries
has an office or has filed an application for regulatory approval to establish
an office, determined as of the effective date of such termination, 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 Holding Company or its Subsidiaries.
The parties hereto, recognizing that irreparable injury will result to the
Holding Company or its Subsidiaries, its business and property in the event of
Executive's breach of this subsection 10(a) agree that in the event of any such
breach by Executive, the Holding Company or its Subsidiaries, will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employees and all persons acting for or under the direction of
Executive. Executive represents and admits that in the event of the termination
of his employment pursuant to Section 7 of this Agreement, Executive's
experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Holding
Company or its Subsidiaries, 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 Holding Company or its Subsidiaries from
pursuing any other remedies available to the Holding Company or its Subsidiaries
for such breach or threatened breach, including the recovery of damages from
Executive.
(b) Executive recognizes and acknowledges that the knowledge of
the business activities and plans for business activities of the Holding Company
and its Subsidiaries as it may exist from time to time, is a valuable, special
and unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of his employment, disclose any
knowledge of the past, present, planned or considered business activities of the
Holding Company and its Subsidiaries thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived from
the business plans and activities of the Holding Company. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Holding Company or its Subsidiaries or
from rendering any services to any person, firm, corporation, 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 Holding
Company from pursuing any other remedies available to the Holding Company for
such breach or threatened breach, including the recovery of damages from
Executive.
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11. SOURCE OF PAYMENTS.
(a) All payments provided in this Agreement shall be timely paid
in cash or check from the general funds of the Holding Company subject to
Section 11(b) of this Agreement.
(b) Notwithstanding any provision herein to the contrary, to the
extent that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under an employment agreement in effect between Executive
and the Institution, such compensation payments and benefits paid by the
Institution will be subtracted from any amount due simultaneously to Executive
under similar provisions of this Agreement. Payments pursuant to this Agreement
and the Institution Agreement shall be allocated in proportion to the level of
activity and the time expended on such activities by the Executive as determined
by the Holding Company and the Institution on a quarterly basis.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Holding Company
or any predecessor of the Holding Company and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the 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.
13. 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 and the Holding Company and their respective successors
and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) 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
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only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
15. 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.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
18. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of the Institution, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company, if Executive is successful pursuant to a
legal judgment, arbitration or settlement.
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20. INDEMNIFICATION.
(a) The Holding Company shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.
(b) Any payments made to Executive pursuant to this Section are
subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and 12
C.F.R. Part 359 and any rules or regulations promulgated thereunder.
21. SUCCESSOR TO THE HOLDING COMPANY.
The Holding Company 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 Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Holding Company's obligations under this Agreement, in the same manner and to
the same extent that the Holding Company would be required to perform if no such
succession or assignment had taken place.
13
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, FirstSpartan Financial Corp. has caused this
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer and its directors, and Executive has signed this Agreement,
on the 20th day of March, 2000.
ATTEST: FIRSTSPARTAN FINANCIAL CORP.
/s/ Robert R. Odom By: /s/ Billy L. Painter
- -------------------- --------------------
ROBERT R. ODOM BILLY L. PAINTER
For the Entire Board of Directors
[SEAL]
WITNESS: EXECUTIVE
/s/ Kelley Theus By: /s/ R. Lamar Simpson
- ----------------------------- --------------------
KELLEY THEUS R. LAMAR SIMPSON
Treasurer, Secretary and Chief
Financial Officer
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains financial information extracted from the consolidated
financial statements of FirstSpartan Financial Corp. as of or for the nine
months ended March 31, 2000 and is qualified in its entirety by reference to
such financial statements (dollars in thousands except per share data).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,881
<INT-BEARING-DEPOSITS> 5,782
<FED-FUNDS-SOLD> 280
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,527
<INVESTMENTS-CARRYING> 30
<INVESTMENTS-MARKET> 31
<LOANS> 493,521
<ALLOWANCE> 3,304
<TOTAL-ASSETS> 572,587
<DEPOSITS> 417,832
<SHORT-TERM> 9,079
<LIABILITIES-OTHER> 6,317
<LONG-TERM> 70,000
0
0
<COMMON> 44
<OTHER-SE> 69,359
<TOTAL-LIABILITIES-AND-EQUITY> 572,587
<INTEREST-LOAN> 27,523
<INTEREST-INVEST> 2,546
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 30,069
<INTEREST-DEPOSIT> 12,652
<INTEREST-EXPENSE> 15,394
<INTEREST-INCOME-NET> 14,675
<LOAN-LOSSES> 467
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,027
<INCOME-PRETAX> 7,194
<INCOME-PRE-EXTRAORDINARY> 7,194
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,332
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 3.75
<LOANS-NON> $4,049
<LOANS-PAST> 25
<LOANS-TROUBLED> 1,361
<LOANS-PROBLEM> 5,770
<ALLOWANCE-OPEN> 2,896
<CHARGE-OFFS> 67
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 3,304
<ALLOWANCE-DOMESTIC> 3,304
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
