<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-----------
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
September 30, 1998
Commission file number: 0-11916
FIRST UNITED BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
Arkansas 71-0538646
(State of Incorporation) (I.R.S. Employer
Identification No.)
Main and Washington Streets
El Dorado, Arkansas 71730
(Address of principal executive offices) (Zip Code)
(870) 863-3181
(Registrant's telephone number, including area code)
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 periods 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[ ]
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at November 1, 1998 was 25,294,296.
===============================================================================
<PAGE> 2
FIRST UNITED BANCSHARES, INC.
FORM 10-Q
SEPTEMBER 30, 1998
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Statements of Condition, September 30,
1998 and December 31, 1997. 3
Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1998
and 1997. 4
Consolidated Statements of Cash Flow for the Nine
Months Ended September 30, 1998 and 1997. 5
Notes to Consolidated Financial Statements. 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7 - 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14-15
Signatures 16
</TABLE>
<PAGE> 3
Part I. FIRST UNITED BANCSHARES, INC.
Item 1 CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(In thousands, except per share data)
ASSETS
<S> <C> <C>
Cash and Due From Banks.................................................... $ 82,668 $ 83,291
Short-Term Investments.....................................................
Federal Funds Sold and Securities Purchased
Under Agreement to Resell.............................................. 54,860 58,117
Other Short-Term Investments............................................. 29,406 24,601
------------ ------------
Total Short-Term Investments............................................... 84,266 82,718
Securities Available-for-Sale.............................................. 619,073 664,482
Investment Securities...................................................... 228,260 237,424
Total Loans................................................................ 1,334,099 1,219,600
Unearned Discount........................................................ (6,224) (6,262)
Allowance for Possible Loan Losses....................................... (17,575) (17,694)
------------ ------------
Net Loans............................................................... 1,310,300 1,195,644
Premises and Equipment..................................................... 42,203 41,441
Goodwill................................................................... 10,132 10,938
Other Real Estate.......................................................... 1,178 983
Other Assets............................................................... 35,958 37,636
------------ ------------
Total Assets............................................................ $ 2,414,038 $ 2,354,557
============ ============
LIABILITIES
Deposits:
Demand................................................................... $ 300,840 $ 309,699
Savings and Interest-Bearing Demand...................................... 555,664 536,338
Time..................................................................... 1,196,760 1,144,122
------------ ------------
Total Deposits.......................................................... 2,053,264 1,990,159
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase................................................. 59,742 75,017
Other Liabilities.......................................................... 24,581 20,600
Notes Payable:
Unaffiliated Bank........................................................ 19,398 29,686
Affiliated Company....................................................... 5,000 5,000
------------ ------------
Total Liabilities....................................................... 2,161,985 2,120,462
------------ ------------
CAPITAL ACCOUNTS
Preferred Stock (Par value of $1.00; 500 shares authorized in 1998
and 1997; none outstanding).............................................. -0- -0-
Common Stock (Par value of $1.00; 50,000 shares authorized; 25,294
shares outstanding in 1998 and 1997).................................. 25,294 25,294
Surplus.................................................................... 26,610 25,758
Undivided Profits.......................................................... 195,632 180,629
Net Unrealized Gains on Securities Available-for- Sale..................... 4,517 2,524
------------ ------------
Total Capital Accounts.................................................. 252,053 234,095
------------ ------------
Total Liabilities and Capital Accounts.................................. $ 2,414,038 $ 2,354,557
============ ============
</TABLE>
3
<PAGE> 4
FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share data) 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans................................ $ 30,803 $ 28,342 $ 89,387 $ 80,897
Interest on Securities:
Taxable Securities...................................... 10,660 012,731 34,011 38,422
Nontaxable Securities................................... 1,934 1,559 5,253 4,771
Interest on Federal Funds Sold and
Securities Purchased Under
Agreements to Resell.................................... 1,144 571 3,086 2,055
Interest on Deposits in Banks............................. 241 189 792 724
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME................................. 44,782 43,392 132,529 126,869
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on Deposits...................................... 19,733 18,579 57,806 54,657
Interest on Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase................................ 894 1,129 2,879 2,998
Interest on Notes Payable................................. 294 288 1,006 1,104
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE................................ 20,921 19,996 61,691 58,759
---------- ---------- ---------- ----------
NET INTEREST INCOME................................... 23,861 23,396 70,838 68,110
Provision for Possible Loan Losses........................ 513 870 2,180 2,154
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES............................. 23,348 22,526 68,658 65,956
---------- ---------- ---------- ----------
OTHER INCOME
Service Charges on Deposit Accounts....................... 2,356 2,552 6,897 6,988
Trust Fee Income.......................................... 527 620 1,648 1,808
Security Gains (Losses)................................... 141 12 292 48
Other Operating Income.................................... 2,051 1,398 4,748 3,928
---------- ---------- ---------- ----------
TOTAL OTHER INCOME.................................... 5,075 4,582 13,585 12,772
---------- ---------- ---------- ----------
OTHER EXPENSE
Salaries.................................................. 6,756 6,420 19,914 18,878
Pension and Other Employee Benefits....................... 2,412 1,977 6,649 6,089
Net Occupancy Expense..................................... 1,351 1,353 3,872 3,874
Equipment Expense......................................... 991 1,162 2,916 3,081
Data Processing Expense................................... 1,659 704 3,666 2,419
Merger-related Costs...................................... 0 0 567 0
Other Operating Expenses.................................. 4,263 4,101 12,176 11,931
---------- ---------- ---------- ----------
TOTAL OTHER EXPENSE................................... 17,432 15,717 49,760 46,272
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES................................ 10,991 11,391 32,483 32,456
INCOME TAX EXPENSE........................................ 3,753 3,442 9,759 9,450
---------- ---------- ---------- ----------
NET INCOME............................................ $ 7,238 $ 7,949 $ 22,724 $ 23,006
========== ========== ========== ==========
EARNINGS PER SHARE........................................ $ 0.29 $ 0.31 $ .90 $ .91
========== ========= ========== ==========
BASIC $ 0.29 $ 0.31 $ .90 $ .91
========== ========= ========== ==========
DILUTED $ 0.29 $ 0.31 $ .90 $ .91
========== ========= ========== ==========
CASH DIVIDENDS PER SHARE.................................. $ 0.115 $ 0.10 $ 0.33 $ 0.285
========== ========= ========== ==========
AVERAGE SHARES ISSUED AND
OUTSTANDING............................................... 25,294 25,294 25,294 25,294
</TABLE>
4
<PAGE> 5
FIRST UNITED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1998 1997
---- ----
<S> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................. $ 22,724 $ 23,006
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation............................................................ 3,162 2,684
Amortization of Goodwill................................................ 898 884
Provision for Possible Loans Losses..................................... 2,180 2,154
Gain on Sales of Securities............................................. (292) (48)
Accretion of Bond Discount, Net......................................... (125) (3,681)
(Increase) Decrease in Other Assets..................................... 1,391 2,117
Increase (Decrease) in Other Liabilities................................ 3,981 8,462
----------- ----------
Net Cash Provided by Operating Activities.................................. 33,919 35,578
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Investment Securities......................... 62,290 51,196
Proceeds from Maturities of Securities Available-for-Sale................. 275,059 233,149
Proceeds from Sales of Securities Available-for-Sale...................... 19,014 8,564
Purchase of Investment Securities......................................... (48,299) (71,566)
Purchase of Available-for-Sale Securities................................. (259,780) (247,777)
(Increase) Decrease in Federal Funds, Net................................. (12,018) 7,148
(Increase) Decrease in Other Short-Term Investments....................... (4,805) 4,281
(Increase) Decrease in Loans.............................................. (116,836) 7,152
Capital Additions ........................................................ (3,924) (1,232)
----------- ----------
Net Cash Used in Investing Activities...................................... (89,299) (9,085)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Demand, Savings and Interest-bearing Demand Deposits.......... 10,467 9,001
Increase (Decrease) in Time Deposits...................................... 52,638 (17,167)
Repayment of Notes Payable................................................ (81) (2,045)
Dividends Paid............................................................ (8,267) (6,176)
----------- ----------
Net Cash Provided by (Used in) Financing Activities........................ 54,757 (16,387)
----------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents....................... (623) 10,106
Cash and Cash Equivalents, Beginning....................................... 83,291 83.610
----------- ----------
Cash and Cash Equivalents, Ending.......................................... $ 82,668 $ 93,716
=========== ==========
</TABLE>
5
<PAGE> 6
FIRST UNITED BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of First United Bancshares, Inc.
("First United") include the accounts of the parent company and its wholly-owned
subsidiaries, First United Trust Company, N.A., El Dorado, Arkansas, The First
National Bank of El Dorado, El Dorado, Arkansas, First National Bank of
Magnolia, Magnolia, Arkansas, Merchants and Planters Bank, N.A. of Camden,
Camden, Arkansas, City National Bank of Fort Smith, Fort Smith, Arkansas,
Commercial Bank at Alma, Alma, Arkansas, The Bank of North Arkansas, Melbourne,
Arkansas, FirstBank, Texarkana, Texas, First United Bank, Stuttgart, Arkansas,
Fredonia State Bank, Nacogdoches, Texas, City Bank and Trust, Shreveport,
Louisiana, Citizens National Bank, Hope, Arkansas, Peoples Bank and Trust Co.,
Lewisville, Arkansas, and First Republic Bank, Rayville, Louisiana. All material
intercompany transactions have been eliminated.
The consolidated statements of condition as of September 30, 1998 and
the related consolidated statements of income for the three and nine months
period ended September 30, 1998 and 1997 and the consolidated statements of cash
flows for the nine months periods ended September 30, 1998 and 1997 are
unaudited; in the opinion of management, all adjustments necessary for a fair
presentation of the financial statements are included.
2. BUSINESS COMBINATIONS
On August 30, 1997, First United acquired all of the issued and
outstanding common stock of Fredonia Bancshares, Inc., Nacogdoches, Texas,
through the issuance of approximately 1,600,000 shares of First United common
stock in a transaction accounted for as a pooling of interests.
On December 31, 1997, First United acquired by merger all of the issued
and outstanding common stock and unexercised stock options of City Bank & Trust
of Shreveport, Shreveport, Louisiana, through the issuance of 424,880 shares of
First United common stock in a transaction accounted for as a pooling of
interests. All 1997 results have been restated to include the results of
Fredonia and City Bank & Trust of Shreveport, Shreveport, Louisiana.
On March 30, 1998, First United acquired by merger all of the issued
and outstanding common stock of Citizens National Bancshares of Hope, Inc.,
Hope, Arkansas, through the issuance of 1,569,887 shares of First United common
stock in a transaction accounted for as a pooling of interests.
On March 30, 1998, First United also acquired by merger all of the
issued and outstanding common stock of First Republic Bancshares, Inc.,
Rayville, Louisiana ("Republic"), including shares issued to persons entitled to
receive performance shares and holders of Republic debentures, through the
issuance of 799,864 shares of First United common stock in a transaction
accounted for as a pooling of interests.
3. RESULTS OF OPERATIONS
The results for the three and nine months periods ended September 30,
1998 are not necessarily indicative of the results for the entire year of 1998.
This report should be read in conjunction with First United's 1997 Annual Report
to Shareholders for a complete understanding of First United's accounting
policies and their effect on the financial statements as a whole.
4. CAPITAL ACCOUNTS
On May 26, 1998, First United declared a two-for-one stock split. The
additional shares were issued on June 30, 1998 to shareholders of record on June
1, 1998. As a result, First United's current outstanding shares have been
increased to 25,294,296. All per share data and number of shares outstanding
have been retroactively restated to reflect the effect of this stock split.
6
<PAGE> 7
Basic EPS was computed by dividing net income by the weighted average
shares of common stock outstanding 25,294,296 for 1998 and 1997. Diluted EPS was
computed by dividing net income by the sum of the weighted average shares of
common stock outstanding and the effect of stock options outstanding. The effect
of the stock options was to increase the weighted average number of shares by
84,000 in 1998 and 74,000 in 1997.
5. COMPREHENSIVE INCOME (LOSS)
In January 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting comprehensive
income and its components. Comprehensive income is defined as all changes in the
equity of a business enterprise from transactions and other events and
circumstances, except those resulting from investments by owners and
distributions to owners. The Company's comprehensive income, which includes net
income and the change in unrealized gain(loss) on securities available for sale,
net of tax, was $9.35 million and $9.66 million, and $24.72 million and $24.59
million for the three months and nine months ended September 30, 1998 and 1997,
respectively.
6. SUPPLEMENTARY DATA FOR CASH FLOWS
Interest paid on notes payable during the nine months ended September
30, 1998 and 1997 amounted to $602,000 and $609,000 respectively.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and review of First United Bancshares, Inc.
("First United") and its subsidiaries, The First National Bank of El Dorado ("El
Dorado"), City National Bank of Fort Smith ("Ft. Smith"), First National Bank of
Magnolia ("Magnolia"), Merchants and Planters Bank, N.A. of Camden ("Camden"),
Commercial Bank at Alma ("Alma"), The Bank of North Arkansas ("Melbourne"),
FirstBank ("Texarkana"), First United Bank ("Stuttgart"), First United Trust
Company, N.A. ("FUTC"), Fredonia State Bank ("Nacogdoches"), City Bank and Trust
("Shreveport"), Citizens National Bank ("Hope"), Peoples Bank and Trust Co.
("Lewisville"), and First Republic Bank ("Republic"), focuses on the results
from operations which are not otherwise apparent from the consolidated financial
statements. Reference should be made to these financial statements and the notes
to the financial statements for an understanding of this review and discussion.
RESULTS OF OPERATIONS
Net income before merger-related costs for the three months ended
September 30, 1998 was $7.24 million, or $.29 per share compared with $7.95
million, or $.31 per share during the same period in 1997. Net income before
merger-related costs for the nine months ended September 30, 1998 was $23.29
million, or $.92 per share compared with $23.01 million, or $.91 per share for
the same period in 1997.
Including merger-related costs, net income for the three months ended
September 30, 1998 was $7.24 million, or $.29 per share compared with $7.95
million, or $.31 per share during the same period in 1997. Including
merger-related costs, net income for the nine months ended September 30, 1998
was $22.72 million, or $ .90 per share compared with $23.01 million or $.91 per
share during the same period in 1997. The annualized return on average assets
from continuing operations for the nine months ended September 30, 1998 and 1997
was 1.28% and 1.34% respectively, while the annualized return on average equity
was 12.84% and 13.75% respectively for the same periods.
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the
difference between the income generated by earning assets and the total interest
cost of the funds obtained to carry them. Net interest income, as referred to in
this discussion,
7
<PAGE> 8
is presented on a fully tax-equivalent basis, which adjusts for the tax-exempt
status of income earned on certain loans and investments. The reported interest
income for the tax-free assets is increased by the amount of tax savings less
the nondeductible portion of interest expense incurred to acquire the tax-free
assets. Net interest income is affected by variations in both interest rates and
the volume of interest-earning assets and interest-bearing liabilities.
On a tax equivalent basis, net interest income for the first nine
months of 1998 was $74.09 million compared with $70.92 million in the first nine
months of 1997. Net interest income also increased when compared with 1996. This
increase in net interest income was primarily the result of higher loan volumes.
The net interest margin through September 30, 1998 was 4.47% compared with 4.45%
and 4.31% for the years ended December 31, 1997 and 1996, respectively. First
United expects no material change in the net interest margin through the
remainder of 1998.
First United has debt of approximately $24.40 million at September 30,
1998 and interest expense associated with this debt totaled $1.01 million during
the first nine months of 1998 compared with $1.10 million during the same period
in 1997. First United will make a principal payment of $1.10 million on its
installment note payable to an unaffiliated bank in November of this year. These
borrowings contain financial covenants relating to the issuance of additional
debt and maintenance of minimum tangible net worth. First United's $ 5.00
million note payable to an affiliated company matures in August of 1999.
Interest is payable quarterly on both notes.
Pursuant to the Interest Rate Control Amendment to the Constitution of
the State of Arkansas, "consumer loans and credit sales" have a maximum
limitation of 17% per annum and all "general loans" have a maximum limitation of
5% over the Federal Reserve Discount Rate in effect at the time the loan was
made. The Arkansas Supreme Court has determined that "consumer loans and credit
sales" are "general loans" and are subject to the limitation of 5% over the
Federal Reserve Discount Rate as well as a Maximum limitation of 17% per annum.
As a general rule, the Company and its subsidiary banks are required to comply
with the Arkansas usury laws on loans made within the State of Arkansas.
The following table is a comparison of the net interest margin:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
Yield on Earning Assets 8.17 8.20 8.09
Break-even Yield 3.70 3.75 3.78
Net Interest Margin 4.47 4.45 4.31
Net Interest Spread 3.60 3.57 3.48
</TABLE>
LOANS AND LEASES
First United's gross loans and leases totaled $1.33 billion at
September 30, 1998 compared with $1.22 billion at December 31, 1997. The Company
has no foreign loans or leases and it is the policy of the Company to avoid out
of territory loans.
A sound credit policy combined with periodic and independent credit
reviews are the key factors of the credit risk management program. All affiliate
banks operate under written loan policies that help maintain a consistent
lending function and provide sound credit decisions. Credit decisions continue
to be based on the borrower's cash flow position and the value of the underlying
collateral, as well as other relevant factors. Each bank is responsible for
evaluating its loans to identify those credits beginning to show signs of
deterioration so that prompt corrective action may be taken. In addition, an
internal audit and loan review staff operate independently of the affiliate
banks. This review team performs periodic examinations of each bank's loans and
related documentation. Results of these examinations are reviewed with the
Chairman and Chief Executive Officer, the management and board of the respective
affiliate banks and the Audit Committees.
8
<PAGE> 9
Total loans increased 9.40% during the first nine months of this year
primarily as a result of above average economic conditions present in the
Company's market areas. First United is continuing to emphasize loan growth in
order to increase total revenues.
The following table lists those loans and leases by type which are on
non-accrual status; loans by type 90 days or more past due and still accruing;
renegotiated loans by type and loans transferred to other real estate:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
(In thousands) Non-performing loans:
Non-accrual loans:
Commercial & Financial $ 5,142 $1,437 $1,395
Real Estate 1,705 2,714 2,285
Consumer 413 406 386
-------- ------ ------
$ 7,260 $4,557 $4,066
-------- ------ ------
Past due 90 days or more:
Commercial $ 1,554 $1,268 $ 787
Real Estate 673 1,430 1,089
Consumer 326 507 500
-------- ------ ------
$ 2,553 $3,205 $2,376
-------- ------ ------
Renegotiated Commercial
Loans: $ 1,114 $1,008 $1,236
-------- ------ ------
Total non-performing Loans: $ 10,927 $8,770 $7,678
Other Real Estate, Net 1,539 1,069 1,292
-------- ------ ------
Total non-performing
Assets: $ 12,466 $9,839 $8,970
======== ====== ======
Non-Performing Loans as a %
of Outstanding Loans .82% .72% .73%
Non-Performing Assets as a
% of Equity Capital 5.04% 4.26% 4.31%
</TABLE>
All loans listed above as non-accrual, 90 days or more past due and
renegotiated were classified as either substandard, doubtful or loss as of
September 30, 1998.
Management remains committed to reducing the level of non-performing
assets and to minimize future risks by continuous review of the loan portfolio.
During the past year, First United has issued revised credit policies for real
estate lending in order to control loan risks.
ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The provision for possible loan losses represents management's
evaluation of the overall loan portfolio quality and loss experience. During
management's periodic review of the provision throughout each quarter, the
amount to be provided is determined by the level of net charge-offs, the size of
the loan portfolio, non-performing assets, anticipated and current economic
conditions and specific reviews of performing and non-performing loans.
9
<PAGE> 10
During the first nine months of 1998 First United made provisions for
possible loan losses of $2.18 million compared with $2.15 million for the same
period in 1997. Total non-performing loans increased $2.16 million from $8.77
million at December 31, 1997 to $10.93 million at September 30, 1998. Net
charge-offs through September 30, 1998 totaled $2.30 million.
<TABLE>
<CAPTION>
September 30, Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Allowance as a percentage of total
loans and leases 1.32% 1.45% 1.42%
</TABLE>
The reserve for possible loan losses as a percentage of non-performing
loans was approximately 161% at September 30, 1998 compared with 202% at
December 31, 1997.
The allocation of the allowance for possible loan losses by major
categories of loans is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
(In thousands)
Commercial & Financial $ 7,105 $ 5,356 $ 4,847
Real Estate 3,121 3,318 2,408
Consumer 2,228 2,578 2,610
Unallocated 5,121 6,442 5,086
-------- -------- --------
Total $ 17,575 $ 17,694 $ 14,951
======== ======== ========
</TABLE>
NON-INTEREST INCOME
Management continues to emphasize that growth of non-interest income in
providing new revenue to the income stream. Future profitability depends upon
income derived from providing loan and deposit services, discount brokerage
fees, trust service income, mortgage service fees and service charges on deposit
accounts.
The table represented below is a comparison of the dollar and
percentage change for each component of non-interest income:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Change
1998 1997 $ %
---- ---- --- --
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Service Charges on Deposit
Accounts $ 6,897 $ 6,988 $(91) (1.30)%
Trust Income 1,648 1,808 (160) (8.85)%
Security Gains (Losses) 292 48 244 508.33%
Other Income 4,748 3,928 820 20.88%
------- -------- ---- -------
Total Other Income $13,585 $12,772 $813 6.37%
======= ======= ==== ======
</TABLE>
Excluding security gains and losses, non-interest income increased approximately
$.57 million when comparing 1998 with 1997 results. First United is focusing on
non-interest income revenues and opportunities to increase fee income.
10
<PAGE> 11
INVESTMENT SECURITIES
During the first nine months of 1998, First United had security gains
of approximately $.29 million.
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Market Value $ 231,264 $ 239,766 $ 277,954
Amortized Cost 228,260 237,424 276,314
---------- ---------- ---------
Difference $ 3,004 $ 2,342 $ 1,640
========== ========== =========
</TABLE>
At September 30, 1998, First United's securities portfolio classified
as Investment Securities was composed primarily of municipal and short-term
fixed rate CMO securities.
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Market Value $ 619,073 $ 664,405 $ 612,336
Amortized Cost 612,143 660,975 611,937
---------- ---------- -----------
Difference $ 6,930 $ 3,430 $ 399
========== ========== ===========
</TABLE>
NON-INTEREST EXPENSE
Control of non-interest expenses continues to be one of First United's
major objectives. Non-interest expenses include salaries, employee benefits,
occupancy costs, equipment and other operating expenses:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Change
1998 1997 $ %
---- ---- --- --
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Salaries $19,914 $18,878 $1,036 5.49%
Pension and Employee Benefits 6,649 6,089 560 9.20%
Net Occupancy Expense 3,872 3,874 (2) (.05)%
Equipment Expense 2,916 3,081 (165) (5.36)%
Data Processing Expense 3,666 2,419 1,247 51.55%
Merger-related Costs 567 0 567 100.0%
Other Operating Expense 12,176 11,931 245 2.05%
------- ------- ------ ------
Total Non-Interest Expense $49,760 $46,272 $3,488 7.54%
======= ======= ====== ======
</TABLE>
Data Processing expense increased approximately 51.55% during the first
nine months of 1998 when compared with the same period in 1997 primarily as a
result of a computer conversion.
INCOME TAXES
The effective tax rate of First United for the nine month period ended
September 30, 1998 was 30.04% compared to 29.12% for the same period in 1997.
11
<PAGE> 12
CAPITAL AND LIQUIDITY
The assessment of capital adequacy depends primarily on a number of
factors which include asset quality, liquidity, stability of earnings, changing
competitive forces, economic conditions in the various markets served and
strength of management. Management of capital focuses on achieving a rate of
return for shareholders while following guidelines set forth by bank regulators.
First United's equity capital totaled $252.05 million at September 30,
1998, compared to the December 31, 1997 level of $233.37 million. The growth and
retention of earnings continues to be First United's primary source of
additional capital. Currently, First United does not have any plans for issuing
subordinated notes and First United has not issued any new common or preferred
stock during the past twelve months.
The table presented below is a comparison of capital ratios:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
<S> <C> <C> <C>
Equity Capital to Total Assets 10.26% 9.81% 9.58%
Primary Capital to Total Assets 10.55% 10.09% 9.68%
</TABLE>
The table presented below is a comparison of First United's capital
position with regulatory capital requirements:
<TABLE>
<CAPTION>
September 30, Regulatory
1998 Requirements
<S> <C> <C>
Total Capital/Total Assets 10.26% 6.00%
Primary Capital/Total Assets 10.55% 5.50%
Total Risk Based Capital 17.78% 8.00%
Tier 1 Capital 16.53% 4.00%
Leverage Ratio 9.88% 3.00%
</TABLE>
Note: Unrealized gains on securities available-for-sale have been excluded when
computing capital ratios.
Liquidity management is concerned with meeting the cash requirements of
customers, including the withdrawal of funds by depositors or drawing down of
approved lines of credit and commitments by borrowers. First United is aided
significantly in meeting its short term liquidity needs by its strong capital
position, its high rate of internal capital generation and its level of loan
loss reserves.
DIVIDEND POLICY
First United strives to maintain a balance between the retention of
earnings for the support of growth and expansion and a dividend payout that
meets the required return for investors. First United anticipates continuing its
policy of regular cash dividends, although there is no assurance as to future
increases in dividends because they are dependent upon future earnings, capital
requirements and economic conditions.
12
<PAGE> 13
The following table sets forth the dividend payout ratio for the last
two years and for the nine months ended September 30, 1998:
<TABLE>
<CAPTION>
September 30, Year Ended,
1998 1997 1996
<S> <C> <C> <C>
Dividend payout ratio 36.38% 38.97% 26.15%
</TABLE>
ASSET - LIABILITY MANAGEMENT
First United, like most financial institutions, provides for the
relative stability in profits and the control in interest rate risk through
asset-liability management. An important element of asset-liability management
is the analysis and examination of the extent to which such assets and
liabilities are "interest rate sensitive" and by monitoring an institution's
interest rate sensitivity "gap." An asset or liability is said to be interest
rate sensitive within a specific time period if it will mature or reprice within
that time period. The interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets expected to mature or reprice
within a time period and the amount of interest-bearing liabilities expected to
mature or reprice within that same time period. A gap is considered negative
when the amount of interest rate sensitive liabilities maturing within a
specific time frame exceeds the amount of interest rate sensitive assets
maturing within that same time frame. During a period of falling interest rates,
a negative gap tends to result in an increase in net interest income. Whereas in
a rising interest rate environment, an institution with a negative gap could
experience the opposite results. At December 31, 1997, First United's
interest-bearing liabilities maturing or repricing within one year exceeded the
interest-bearing assets maturing or repricing within the same time period.
First United continually monitors its asset-liability position in order
to maximize profits and minimize interest rate risk. Additionally, First United
can reduce the impact that changing interest rates have on earnings and adapt to
changes in the economic environment by closely monitoring its Statement of
Condition. There have been no material changes in First United's asset-liability
position since December 31, 1997.
YEAR 2000 COMPLIANCE
First United has identified its systems, including computer-based
systems and applications and other systems with date sensitive embedded chips,
and assessed whether they will function properly in the year 2000. This
assessment is part of a comprehensive action plan approved by the Board of
Directors and Management documenting First United's approach to having all
systems and applications Year 2000 ready. First United does not anticipate that
it will need to replace any mission critical systems to achieve Year 2000
readiness.
Implementation of upgrades required to make mission critical system
Year 2000 ready and testing of mission critical systems are expected to be
completed by December 31, 1998, except for third party proccessors where testing
should be completed by March 31, 1999. While all mission critical systems are
currently expected to be Year 2000 ready, a contingency plan will be developed
prior to December 31, 1998, that will mitigate the risks associated with the
failure of any mission critical systems at critical Year 2000 dates.
Ultimately, the potential impact of the Year 2000 issue will depend not
only on the corrective measures First United undertakes, but also on the way in
which the Year 2000 issue is addressed by governmental agencies, businesses and
other entities who provide data to, or receive data from, First United, or whose
financial condition or operational capability is important to First United as
borrowers, vendors, customers or investment opportunities. Therefore
communications with these parties has commenced to heighten their awareness of
the Year 2000 issue. Over the next several months, the plans of such third
parties to address the Year 2000 issue will be monitored and any identified
impact on First United will be evaluated.
First United's preliminary estimate of the total cost of its Year 2000
compliance efforts will be completed in conjunction with the development of its
contingency plan.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
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
John Burns resigned his position as Senior Vice President, Chief
Financial Officer and Secretary of the Company effective July 28, 1998. Robert
L. Jones, President of First National Bank of Magnolia and Assistant Secretary
of the Company is serving as Chief Financial Officer and Secretary of the
Company on an interim basis.
The Company has entered into a letter of intent to acquire Mountain
Bancshares, Inc., Yellville, Arkansas, and its wholly owned subsidiary The Bank
of Yellville in exchange for 950,000 shares of the Company's common stock.
The Company entered into Executive Severance Agreements on July 27,
1998 with James V. Kelley, its Chairman, President and Chief Financial Officer,
and with Jim N. Harwood, and John Robert Graves, who are Regional Chairmen of
the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed with this report or are incorporated
by references to previously filed materials.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
2(a) Agreement and Plan of Reorganization between First United
Bancshares, Inc. and Citizens National Bancshares of Hope, Inc. and Plan of
Merger attached as Exhibit A thereto (previously filed by First United in its
Form S-4 Registration Statement under the Securities Act of 1933,
Registration No. 333-43637 as filed with the Securities and Exchange
Commission on December 31, 1997, and Amendment No. 1 thereto, filed on
February 3, 1998, which became effective February 6, 1998) incorporated
herein by reference.
2(b) Agreement and Plan of Reorganization between First United
Bancshares, Inc. and First Republic Bancshares, Inc. and Plan of Merger
attached as Exhibit A thereto (previously filed by First United in its Form S-4
Registration Statement under the Securities Act of 1933, Registration No.
333-44601 as filed with the Securities and Exchange Commission on January
21, 1998, and Amendment No. 1 thereto, filed on February 4, 1998, which
became effective February 6, 1998) incorporated herein by reference.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
10(a) Executive Severance Agreement between First United
Bancshares, Inc. and James V. Kelley, dated July 27, 1998.
10(b) Executive Severance Agreement between First United
Bancshares, Inc. and Jim N. Harwood, dated July 27, 1998.
10(c) Employment Agreement between Fredonia State Bank
and Gordon Lewis, dated effective September 2, 1997.
10(d) Executive Severance Agreement between First United
Bancshares, Inc. and John Robert Graves, dated July 27, 1998.
27 Financial Data Schedule.
</TABLE>
REPORTS ON FORM 8-K
First United did not file any reports on Form 8-K during the quarter for
which this report is filed.
15
<PAGE> 16
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.
FIRST UNITED BANCSHARES, INC.
BY /s/ James V. Kelley
----------------------------------
James V. Kelley
Chairman, President and Chief
Executive Officer
BY /s/ Robert L. Jones
----------------------------------
Robert L. Jones
Acting Chief Financial Officer and Principal
Accounting Officer
Date: November 13, 1998
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
2(a) Agreement and Plan of Reorganization between First United
Bancshares, Inc. and Citizens National Bancshares of Hope, Inc. and Plan of
Merger attached as Exhibit A thereto (previously filed by First United in its
Form S-4 Registration Statement under the Securities Act of 1933,
Registration No. 333-43637 as filed with the Securities and Exchange
Commission on December 31, 1997, and Amendment No. 1 thereto, filed on
February 3, 1998, which became effective February 6, 1998) incorporated
herein by reference.
2(b) Agreement and Plan of Reorganization between First United
Bancshares, Inc. and First Republic Bancshares, Inc. and Plan of Merger
attached as Exhibit A thereto (previously filed by First United in its Form S-4
Registration Statement under the Securities Act of 1933, Registration No.
333-44601 as filed with the Securities and Exchange Commission on January
21, 1998, and Amendment No. 1 thereto, filed on February 4, 1998, which
became effective February 6, 1998) incorporated herein by reference.
10(a) Executive Severance Agreement between First United Bancshares,
Inc. and James V. Kelley, dated July 27, 1998.
10(b) Executive Severance Agreement between First United Bancshares,
Inc. and Jim N. Harwood, dated July 27, 1998.
10(c) Employment Agreement between Fredonia State Bank
and Gordon Lewis, dated effective September 2, 1997.
10(d) Executive Severance Agreement between First United Bancshares,
Inc. and John Robert Graves, dated July 27, 1998.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10(a)
EXECUTIVE SEVERANCE AGREEMENT
BETWEEN
FIRST UNITED BANCSHARES, INC.
AND
JAMES V. KELLEY
<PAGE> 2
EXHIBIT 10(a)
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "Agreement"), made and entered
into on the 27th day of July , 1998, by and between First United Bancshares,
Inc. (the "Company"), a corporation organized and existing under the laws of the
State of Arkansas, and James V. Kelley (the "Executive").
R E C I T A L S:
The Company acknowledges that Executive's contributions to the past and
future growth and success of the Company have been and will continue to be
substantial. As a publicly held corporation, the Company recognizes that there
exists a possibility of a Change in Control of the Company. The Board of
Directors of the Company (the "Board") also recognizes that the possibility of
such a Change in Control may contribute to uncertainty on the part of senior
management and may result in the departure of senior management or distraction
of senior management from their operating responsibilities.
Outstanding management of the Company is always essential to advancing
the best interests of the Company and its shareholders. In the event of a threat
or occurrence of a bid to acquire or change control of the Company or to effect
a business combination, it is particularly important that the Company's business
be continued with a minimum of disruption. The Company believes that the
objective of securing and retaining outstanding management will be achieved if
the Company's key management employees are given assurances of employment
security so they will not be distracted by personal uncertainties and risks
created by such circumstances.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Company agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Executive agree
as follows:
ARTICLE 1
TERM OF AGREEMENT
1.1 Term. This Agreement shall become effective as of the date on which
it is executed by the Company (the "Effective Date"). The Agreement shall be
effective for thirty-six months (36) and will automatically be extended for
twelve (12) months as of each anniversary date of the Effective Date (the
"Agreement Term") unless the Agreement Term is terminated by the Company upon
written notification to the Executive, within thirty days before an anniversary
date of the Effective Date, that the Agreement will terminate as of last day of
the Agreement Term as in effect immediately prior to such anniversary date.
Unless the Company has effectively terminated this Agreement as
prescribed above in this Section 1.1, in the event of a Change in Control, the
Agreement Term shall be extended for an additional 12 months and shall then
expire at the end of such additional 12 month period.
1.2 Change in Control, means if: (i) after the date of the Agreement,
any person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, becomes the owner or beneficial owner of Company
securities having 20% or more of the combined voting power of the then
outstanding Company securities that may be cast for the election of the
Company's directors (other than as a result of an issuance of securities
initiated by the Company, or open market purchases approved by the Board, as
long as the majority of the Board approving the purchases are directors at the
time the purchases are made); or (ii) as the direct or indirect result of, or in
connection with, a cash tender or exchange offer, a merger or other business
combination, a sale of assets, a contested election of directors, or any
combination of these transactions, the persons who were directors of the Company
before such transactions cease to constitute a majority of the Board, or any
successor's board, within two years of the last of such transactions.
1
<PAGE> 3
1.3 Control Change Date, means the date on which an event described in
Section 1.2 occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
ARTICLE 2
TERMINATION OF EMPLOYMENT
2.1 General. The Executive shall have the right during an Agreement
Term to receive Termination Compensation without regard to the event or reason
for his termination of employment, provided he elects in writing in a manner
prescribed by the Company to receive such Termination Compensation within a 30
day period commencing as of the anniversary date of a Control Change Date.
2.2 Termination Compensation. Termination Compensation equal to 3.00
times Executive's Base Period Income shall be paid in a single sum payment in
cash or in common stock of the Company, at the election of the Executive.
Payment of Termination Compensation to Executive shall be made on the later of
the thirtieth business day after Executive's employment termination or the first
day of the month following his employment termination.
2.3 Base Period Income. Executive's Base Period Income equals his
annual base salary as of Executive's termination date, plus the greater of the
average of any incentive bonus payable to Executive for the Company's last two
completed fiscal years or the Executive's target bonus opportunity under the
Company's annual incentive plan.
ARTICLE 3
GROSS UP OF PAYMENTS
In the event that any amount required to be paid or distributed to the
Executive pursuant to this Agreement shall constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor statutory provision ("Excess Parachute Payments")
and the aggregate of such parachute payments and any other amounts otherwise
required to be paid or distributed to the Executive by the Company would cause
the Executive to be subject to the excise tax on excess parachute payments under
Section 4999 of the Code (the "Excise Tax"), or any successor or similar
provision thereof, the Company shall pay to the Executive such additional
amounts as are necessary so that, after taking into account any tax imposed by
such Section 4999 or any successor statutory provision, only on any Net Excess
Parachute Payments, as well as on payments made pursuant to this sentence, and
any federal or state income taxes payable as a result of any payments due to the
Executive pursuant to this sentence, the Executive is in the same after-tax
position the Executive would have been in if such Section 4999 or any successor
statutory provision did not apply and no payments were made pursuant to this
sentence.
ARTICLE 4
ATTORNEY'S FEES
In the event that the Executive incurs any attorney's fees in
protecting or enforcing his rights under this Agreement, the Company shall
reimburse the Executive for such reasonable attorneys' fees and for any other
reasonable expenses related thereto. Such reimbursement shall be made within
thirty (30) days following final resolution of the dispute or occurrence giving
rise to such fees and expenses.
ARTICLE 5
WELFARE BENEFIT PLAN EQUIVALENTS
If the Executive is entitled to receive Termination Compensation under
this Agreement the Company, at its sole expense, shall maintain in full force
and effect for the continued benefit of Executive and his eligible dependents,
for a period of thirty-six (36) months following the date of termination, each
Welfare Benefit Plan in which the Executive was entitled to participate
immediately prior to the date of termination, at the benefit levels then in
effect; provided, however, in the event that the Executive's continued
participation in any such plan is not permitted thereunder, then the Company, at
its sole expense, shall provide the Executive and his eligible dependents a
benefit substantially similar to and no less favorable than the benefit provided
under such plan immediately prior to such termination of coverage; provided
further, however, at the termination of any period of coverage provided above,
the Executive shall have the option to have assigned
2
<PAGE> 4
to him, at no cost and no apportionment of prepaid premiums, any assignable
insurance owned by the Company and relating specifically to the Executive. In
lieu of being provided with the benefits as described in the preceding sentence,
the Executive may, at the Executive's election and sole discretion, require the
Company to include in the Executive's Termination Compensation a lump sum amount
equal to the value of the benefits described in described in the preceding
sentence. The term Welfare Benefit Plan as used in this Article 5 refers to any
plan, fund or program as defined under Section 3 (1) of the Employee Retirement
Income Security Act (ERISA), which has been established and is maintained by the
Company for the purpose of providing its employees or their beneficiaries,
through the purchase of insurance or otherwise, medical, surgical, hospital care
or benefits, or benefits in the event of sickness, accident, disability or
death.
ARTICLE 6
MITIGATION OF PAYMENT
The Company and the Executive agree that, following the termination of
employment by the Executive with Company, the Executive has no obligation to
take any steps whatsoever to secure other employment and such failure by the
Executive to search for or to find other employment upon termination from
Company shall in no way impact the Executive's right to receive payment under
any of the provisions of this Agreement.
ARTICLE 7
DECISIONS BY COMPANY; FACILITY OF PAYMENT
Any powers granted to the Board hereunder may be exercised by a
committee, appointed by the Board, and such committee, if appointed, shall have
general responsibility for the administration and interpretation of this
Agreement. If the Board or the committee shall find that any person to whom any
amount is or was payable hereunder is unable to care for his affairs because of
illness or accident, or has died, then the Board or the committee, if it so
elects, may direct that any payment due him or his estate (unless a prior claim
therefore has been made by a duly appointed legal representative) or any part
thereof be paid or applied for the benefit of such person or to or for the
benefit of his spouse, children or other dependents, an institution maintaining
or having custody of such person, any other person deemed by the Board or
committee to be a proper recipient on behalf of such person otherwise entitled
to payment, or any of them, in such manner and proportion as the Board or
committee may deem proper. Any such payment shall be in complete discharge of
the liability of the Company therefore.
ARTICLE 8
INDEMNIFICATION
The Company shall indemnify the Executive during his employment and
thereafter to the maximum extent permitted by applicable law for any and all
liability of the Executive arising out of, or in connection with, his employment
by the Company or membership on the Board; provided, that in no event shall such
indemnity of the Executive at any time during the period of his employment by
the Company be less than the maximum indemnity provided by the Company at any
time during such period to any other officer or director under an
indemnification insurance policy or the bylaws or charter of the Company or by
agreement.
ARTICLE 9
SOURCE OF PAYMENTS; NO TRUST
The obligations of the Company to make payments hereunder shall
constitute a liability of the Company to the Executive. Such payments shall be
from the general funds of the Company, and the Company shall not be required to
establish or maintain any special or separate fund, or otherwise to segregate
assets to assure that such payments shall be made, and neither the Executive nor
his designated beneficiary shall have any interest in any particular asset of
the Company by reason of its obligations hereunder. Nothing contained in this
Agreement shall create or be construed as creating a trust of any kind or any
other fiduciary relationship between the Company and the Executive or any other
person. To the extent
3
<PAGE> 5
that any person acquires a right to receive payments from the Company hereunder,
such right shall be no greater than the right of an unsecured creditor of the
Company.
ARTICLE 10
SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein.
ARTICLE 11
ASSIGNMENT PROHIBITED
This Agreement is personal to each of the parties hereto, and neither
party may assign nor delegate any of his or its rights or obligations hereunder.
ARTICLE 12
NO ATTACHMENT
Except as otherwise provided in this Agreement or required by
applicable 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 effect any such action shall be null, void and of no effect.
ARTICLE 13
HEADINGS
The headings of articles, paragraphs and sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
ARTICLE 14
GOVERNING LAW
The parties intend that this Agreement and the performance hereunder
and all suits and special proceedings hereunder shall be construed in accordance
with and under and pursuant to the laws of the State of Arkansas, and that in
any action, special proceeding or other proceeding that may be brought arising
out of, in connection with, or by reason of this Agreement, the laws of the
State of Arkansas, shall be applicable and shall govern to the exclusion of the
law of any other forum, without regard to the jurisdiction in which any action
or special proceeding may be instituted.
ARTICLE 15
BINDING EFFECT
This Agreement shall be binding upon, and inure to the benefit of, the
Executive and his heirs, executors, administrators and legal representatives and
the Company and its permitted successors and assigns.
ARTICLE 16
MERGER OR CONSOLIDATION
The Company will not consolidate or merge into or with another
corporation, or transfer all or substantially all of its assets to another
corporation (the "Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, the Executive and the Successor
Corporation shall become obligated to perform the terms and conditions of this
Agreement.
4
<PAGE> 6
ARTICLE 17
COUNTERPARTS
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
ARTICLE 18
ENTIRE AGREEMENT
This Agreement expresses the whole and entire agreement between the
parties with referenced to the employment of the Executive and, as of the
effective date hereof, supersedes and replaces any prior employment agreement,
understanding or arrangement (whether written or oral) between the Company and
the Executive. Each of the parties hereto has relied on his or its own judgment
in entering into this Agreement.
ARTICLE 19
NOTICES
All notices, requests and other communications to any party under this
Agreement shall be in writing and shall be given to such party at its address
set forth below or such other address as such party may hereafter specify for
the purpose by notice to the other party:
(a) If to the Executive:
James V. Kelley
=================================
(b) If to the Company:
First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730
ATTN.:
Each such notice, request or other communication shall be effective (i)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means, when delivered at the address specified in this ARTICLE 19.
ARTICLE 20
MODIFICATION OF AGREEMENT
No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing and
duly executed by the party to be charged therewith. No evidence of any waiver of
modification shall be offered or received in evidence at any proceeding,
arbitration, or litigation between the parties hereto arising out of or
affecting this Agreement, or the rights or obligations of the parties hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The parties further agree that the provisions of this ARTICLE 20 may not be
waived except as herein set forth.
ARTICLE 21
TAXES
To the extent required by applicable law, the Company shall deduct and
withhold all necessary Social Security taxes and all necessary federal and state
withholding taxes and any other similar sums required by laws to be withheld
from any payments made pursuant to the terms of this Agreement.
5
<PAGE> 7
ARTICLE 22
RECITALS
The Recitals to this Agreement are incorporated herein and shall
constitute an integral part of this Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
EXECUTIVE:
/s/ James V. Kelley
FIRST UNITED BANCHSARES, INC.:
By: /s/ ROBERT C. NOLAN
------------------------------------
Name: Robert C. Nolan
---------------------------------
Title: Chairman, Compensation Committee
--------------------------------
6
<PAGE> 1
EXHIBIT 10(b)
EXECUTIVE SEVERANCE AGREEMENT
BETWEEN
FIRST UNITED BANCSHARES, INC.
AND
JIM N. HARWOOD
<PAGE> 2
EXHIBIT 10(b)
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "Agreement"), made and entered
into on the 27th day of July , 1998, by and between First United Bancshares,
Inc. (the "Company"), a corporation organized and existing under the laws of the
State of Arkansas, and Jim N. Harwood , (the "Executive").
R E C I T A L S:
The Company acknowledges that Executive's contributions to the past and
future growth and success of the Company have been and will continue to be
substantial. As a publicly held corporation, the Company recognizes that there
exists a possibility of a Change in Control of the Company. The Board of
Directors of the Company (the "Board") also recognizes that the possibility of
such a Change in Control may contribute to uncertainty on the part of senior
management and may result in the departure of senior management or distraction
of senior management from their operating responsibilities.
Outstanding management of the Company is always essential to advancing
the best interests of the Company and its shareholders. In the event of a threat
or occurrence of a bid to acquire or change control of the Company or to effect
a business combination, it is particularly important that the Company's business
be continued with a minimum of disruption. The Company believes that the
objective of securing and retaining outstanding management will be achieved if
the Company's key management employees are given assurances of employment
security so they will not be distracted by personal uncertainties and risks
created by such circumstances.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Company agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Executive agree
as follows:
ARTICLE 1
TERM OF AGREEMENT
1.1 Term. This Agreement shall become effective as of the date on which
it is executed by the Company (the "Effective Date"). The Agreement shall be
effective for twenty-four (24) months and will automatically be extended for
twelve (12) months as of each anniversary date of the Effective Date (the
"Agreement Term") unless the Agreement Term is terminated by the Company upon
written notification to the Executive, within thirty days before an anniversary
date of the Effective Date, that the Agreement will terminate as of last day of
the Agreement Term as in effect immediately prior to such anniversary date.
Unless the Company has effectively terminated this Agreement as
prescribed above in this Section 1.1, in the event of a Change in Control, the
Agreement Term shall be extended for an additional 12 months and shall then
expire at the end of such additional 12 month period.
1.2 Change in Control, means if: (i) after the date of the Agreement,
any person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, becomes the owner or beneficial owner of Company
securities having 20% or more of the combined voting power of the then
outstanding Company securities that may be cast for the election of the
Company's directors (other than as a result of an issuance of securities
initiated by the Company, or open market purchases approved by the Board, as
long as the majority of the Board approving the purchases are directors at the
time the purchases are made); or (ii) as the direct or indirect result of, or in
connection with, a cash tender or exchange offer, a merger or other business
combination, a sale of assets, a contested election of directors, or any
combination of these transactions, the persons who were directors of the Company
before such transactions cease to constitute a majority of the Board, or any
successor's board, within two years of the last of such transactions.
1.3 Control Change Date, means the date on which an event described in
Section 1.2 occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
<PAGE> 3
ARTICLE 2
TERMINATION OF EMPLOYMENT
2.1 General. Executive is entitled to receive Termination Compensation,
as defined in Section 2.4, according to the remaining provisions of this section
if Executive's employment with the Company terminates because of an event
described in Sections 2.2 or 2.3 which occurs during an Agreement Term and (i)
on or after a Control Change Date, or (ii) within the 180 days immediately
preceding a Control Change Date. If Executive's employment terminates during an
Agreement Term and if an event described in Sections 2.2 or 2.3 has not
occurred, this Agreement terminates.
2.2 Termination by the Company. Executive is entitled to receive
Termination Compensation (as described in Section 2.4) if Executive's employment
is terminated by the Company without Cause. Cause, means, for purposes of this
Agreement, (i) willful and continued failure by the Executive to perform his
duties as established by the Board of Directors of the Company; (ii) a material
breach by the Executive of his fiduciary duties of loyalty or care to the
Company; (iii) conviction of a felony; or (iv) willful, flagrant, deliberate and
repeated infractions of material published policies and regulations of the
Company of which the Executive has actual knowledge (the "Cause Exception"). If
the Company desires to discharge the Executive under the Cause Exception, it
shall give notice to the Executive as provided in Section 2.6 and the Executive
shall have thirty (30) days after notice has been given to him in which to cure
the reason for the Company's exercise of the Cause Exception. If the reason for
the Company's exercise of the Cause Exception is timely cured by the Executive
(as determined by a committee appointed by the Board of Directors), the
Company's notice shall become null and void.
2.3 Voluntary Termination. Executive is entitled to receive Termination
Compensation if Executive voluntarily terminates employment with Good Reason.
Good Reason means, for purposes of this Agreement, the Executive's resignation
from the Company's employment within six (6) months following the occurrence of
any one of the following events:
(a) the failure by the Board to reelect the Executive to
a responsible executive position in the Company ;
(b) a material modification by the Board of the duties,
functions and responsibilities of the Executive
without his consent;
(c) the failure of the Company to permit the Executive to
exercise such responsibilities as are consistent with
the Executive's position and are of such a nature as
are usually associated with such office of a
corporation engaged in substantially the same
business as the Company;
(d) the Company requires the Executive to relocate his
employment more than fifty (50) miles from his place
of employment, without the consent of the Executive,
excluding reasonably required business travel or
temporary assignments for a reasonable period of
time;
(e) a reduction in Executive's compensation or benefits;
or
(f) the Company shall fail to make a payment when due to
the Executive.
2.4 Termination Compensation. Termination Compensation equal to 2.00
times Executive's Base Period Income shall be paid in a single sum payment in
cash or in common stock of the Company, at the election of the Executive.
Payment of Termination Compensation to Executive shall be made on the later of
the thirtieth business day after Executive's employment termination or the first
day of the month following his employment termination.
2.5 Base Period Income. Executive's Base Period Income equals his
annual base salary as of Executive's termination date, plus the greater of the
average of any incentive bonus payable to Executive for the Company's last two
completed fiscal years or the Executive's target bonus opportunity under the
Company's annual incentive plan.
2.6 Notice of Termination. Any termination by the Company under the
Cause Exception or by the Executive for Good Reason shall be communicated by
Notice of Termination to the other party hereto. For purposes of Sections 2.2
and 2.3, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this
<PAGE> 4
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the termination date is
other than the date of receipt of such notice, specifies the effective date of
termination.
ARTICLE 3
GROSS UP OF PAYMENTS
In the event that any amount required to be paid or distributed to the
Executive pursuant to this Agreement shall constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor statutory provision ("Excess Parachute Payments")
and the aggregate of such parachute payments and any other amounts otherwise
required to be paid or distributed to the Executive by the Company would cause
the Executive to be subject to the excise tax on excess parachute payments under
Section 4999 of the Code (the "Excise Tax"), or any successor or similar
provision thereof, the Company shall pay to the Executive such additional
amounts as are necessary so that, after taking into account any tax imposed by
such Section 4999 or any successor statutory provision, only on any Net Excess
Parachute Payments, as well as on payments made pursuant to this sentence, and
any federal or state income taxes payable as a result of any payments due to the
Executive pursuant to this sentence, the Executive is in the same after-tax
position the Executive would have been in if such Section 4999 or any successor
statutory provision did not apply and no payments were made pursuant to this
sentence.
ARTICLE 4
ATTORNEY'S FEES
In the event that the Executive incurs any attorney's fees in
protecting or enforcing his rights under this Agreement, the Company shall
reimburse the Executive for such reasonable attorneys' fees and for any other
reasonable expenses related thereto. Such reimbursement shall be made within
thirty (30) days following final resolution of the dispute or occurrence giving
rise to such fees and expenses.
ARTICLE 5
WELFARE BENEFIT PLAN EQUIVALENTS
If the Executive is entitled to receive Termination Compensation under
this Agreement the Company, at its sole expense, shall maintain in full force
and effect for the continued benefit of Executive and his eligible dependents,
for a period of twenty-four (24) months following the date of termination, each
Welfare Benefit Plan in which the Executive was entitled to participate
immediately prior to the date of termination, at the benefit levels then in
effect; provided, however, in the event that the Executive's continued
participation in any such plan is not permitted thereunder, then the Company, at
its sole expense, shall provide the Executive and his eligible dependents a
benefit substantially similar to and no less favorable than the benefit provided
under such plan immediately prior to such termination of coverage; provided
further, however, at the termination of any period of coverage provided above,
the Executive shall have the option to have assigned to him, at no cost and no
apportionment of prepaid premiums, any assignable insurance owned by the Company
and relating specifically to the Executive. In lieu of being provided with the
benefits as described in the preceding sentence, the Executive may, at the
Executive's election and sole discretion, require the Company to include in the
Executive's Termination Compensation a lump sum amount equal to the value of the
benefits described in described in the preceding sentence. The term Welfare
Benefit Plan as used in this Article 5 refers to any plan, fund or program as
defined under Section 3 (1) of the Employee Retirement Income Security Act
(ERISA), which has been established and is maintained by the Company for the
purpose of providing its employees or their beneficiaries, through the purchase
of insurance or otherwise, medical, surgical, hospital care or benefits, or
benefits in the event of sickness, accident, disability or death.
ARTICLE 6
MITIGATION OF PAYMENT
The Company and the Executive agree that, following the termination of
employment by the Executive with Company, the Executive has no obligation to
take any steps whatsoever to secure other employment and such failure by the
Executive to search for or to find other employment upon termination from
Company shall in no way impact the Executive's right to receive payment under
any of the provisions of this Agreement.
<PAGE> 5
ARTICLE 7
DECISIONS BY COMPANY; FACILITY OF PAYMENT
Any powers granted to the Board hereunder may be exercised by a
committee, appointed by the Board, and such committee, if appointed, shall have
general responsibility for the administration and interpretation of this
Agreement. If the Board or the committee shall find that any person to whom any
amount is or was payable hereunder is unable to care for his affairs because of
illness or accident, or has died, then the Board or the committee, if it so
elects, may direct that any payment due him or his estate (unless a prior claim
therefore has been made by a duly appointed legal representative) or any part
thereof be paid or applied for the benefit of such person or to or for the
benefit of his spouse, children or other dependents, an institution maintaining
or having custody of such person, any other person deemed by the Board or
committee to be a proper recipient on behalf of such person otherwise entitled
to payment, or any of them, in such manner and proportion as the Board or
committee may deem proper. Any such payment shall be in complete discharge of
the liability of the Company therefore.
ARTICLE 8
INDEMNIFICATION
The Company shall indemnify the Executive during his employment and
thereafter to the maximum extent permitted by applicable law for any and all
liability of the Executive arising out of, or in connection with, his employment
by the Company or membership on the Board; provided, that in no event shall such
indemnity of the Executive at any time during the period of his employment by
the Company be less than the maximum indemnity provided by the Company at any
time during such period to any other officer or director under an
indemnification insurance policy or the bylaws or charter of the Company or by
agreement.
ARTICLE 9
SOURCE OF PAYMENTS; NO TRUST
The obligations of the Company to make payments hereunder shall
constitute a liability of the Company to the Executive. Such payments shall be
from the general funds of the Company, and the Company shall not be required to
establish or maintain any special or separate fund, or otherwise to segregate
assets to assure that such payments shall be made, and neither the Executive nor
his designated beneficiary shall have any interest in any particular asset of
the Company by reason of its obligations hereunder. Nothing contained in this
Agreement shall create or be construed as creating a trust of any kind or any
other fiduciary relationship between the Company and the Executive or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
ARTICLE 10
SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein.
ARTICLE 11
ASSIGNMENT PROHIBITED
This Agreement is personal to each of the parties hereto, and neither
party may assign nor delegate any of his or its rights or obligations hereunder.
ARTICLE 12
NO ATTACHMENT
Except as otherwise provided in this Agreement or required by
applicable 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 effect any such action shall be null, void and of no effect.
<PAGE> 6
ARTICLE 13
HEADINGS
The headings of articles, paragraphs and sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
ARTICLE 14
GOVERNING LAW
The parties intend that this Agreement and the performance hereunder
and all suits and special proceedings hereunder shall be construed in accordance
with and under and pursuant to the laws of the State of Arkansas, and that in
any action, special proceeding or other proceeding that may be brought arising
out of, in connection with, or by reason of this Agreement, the laws of the
State of Arkansas, shall be applicable and shall govern to the exclusion of the
law of any other forum, without regard to the jurisdiction in which any action
or special proceeding may be instituted.
ARTICLE 15
BINDING EFFECT
This Agreement shall be binding upon, and inure to the benefit of, the
Executive and his heirs, executors, administrators and legal representatives and
the Company and its permitted successors and assigns.
ARTICLE 16
MERGER OR CONSOLIDATION
The Company will not consolidate or merge into or with another
corporation, or transfer all or substantially all of its assets to another
corporation (the "Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, the Executive and the Successor
Corporation shall become obligated to perform the terms and conditions of this
Agreement.
ARTICLE 17
COUNTERPARTS
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
ARTICLE 18
ENTIRE AGREEMENT
This Agreement expresses the whole and entire agreement between the
parties with referenced to the employment of the Executive and, as of the
effective date hereof, supersedes and replaces any prior employment agreement,
understanding or arrangement (whether written or oral) between the Company and
the Executive. Each of the parties hereto has relied on his or its own judgment
in entering into this Agreement.
ARTICLE 19
NOTICES
All notices, requests and other communications to any party under this
Agreement shall be in writing and shall be given to such party at its address
set forth below or such other address as such party may hereafter specify for
the purpose by notice to the other party:
(a) If to the Executive:
Jim N. Harwood
3109 Enid
Fort Smith, AR 72903
<PAGE> 7
(b) If to the Company:
First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730
ATTN.:
Each such notice, request or other communication shall be effective (i)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means, when delivered at the address specified in this ARTICLE 19.
ARTICLE 20
MODIFICATION OF AGREEMENT
No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing and
duly executed by the party to be charged therewith. No evidence of any waiver of
modification shall be offered or received in evidence at any proceeding,
arbitration, or litigation between the parties hereto arising out of or
affecting this Agreement, or the rights or obligations of the parties hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The parties further agree that the provisions of this ARTICLE 20 may not be
waived except as herein set forth.
ARTICLE 21
TAXES
To the extent required by applicable law, the Company shall deduct and
withhold all necessary Social Security taxes and all necessary federal and state
withholding taxes and any other similar sums required by laws to be withheld
from any payments made pursuant to the terms of this Agreement.
ARTICLE 22
RECITALS
The Recitals to this Agreement are incorporated herein and shall
constitute an integral part of this Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
EXECUTIVE:
/s/ Jim N. Harwood
-------------------------------
FIRST UNITED BANCHSARES, INC.:
By: /s/ James V. Kelley
----------------------------
Name: James V. Kelley
--------------------------
Title: Chairman and President
-------------------------
<PAGE> 1
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
BETWEEN
FREDONIA STATE BANK
AND
GORDON LEWIS
<PAGE> 2
EXHIBIT 10(C)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is by and between Fredonia
State Bank, a Texas banking corporation (the "Bank"), and Gordon R. Lewis, an
individual residing in Nacogdoches, Nacogdoches County, Texas (the "Employee"),
effective as of September 2, 1997 (the "Effective Date").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained in
this Agreement, the parties agree as follows:
1. Employment. On the terms and subject to the conditions of this
Agreement, the Bank hereby employs Employee, and engages the services of the
Employee to serve as Chairman of the Board of Directors and President (the
"Office") of the Bank, and Employee hereby accepts employment with the Bank
according to the terms set forth in this Agreement.
2. Duties. Employee is hereby employed and shall work at the location
of the Bank or at such other place or places as may be directed by the Bank. The
Employee shall have the position (including status, offices, titles and
reporting requirements), authority, duties, and responsibilities usually
associated with the Office of a bank having assets similar in nature and value
to the assets of the Bank.
2.1 The Employee shall devote his entire time and attention
during normal working hours to the Office during the term of this Agreement for
the profit and benefit of Bank. During the term of this Agreement, the Employee
shall not directly or indirectly render any services or be engaged in any
activity of a business, commercial, or professional nature to any other person
or organization, whether for compensation or otherwise, other than Bank, without
the prior written consent of the Bank.
3. Compensation and Benefits. The compensation and other benefits
payable to Employee under this Agreement shall constitute the full consideration
to be paid to Employee for all services to be rendered by Employee for the Bank.
3.1 The Bank will pay to Employee an annual salary as
determined by the Board of Directors of the Bank which is stated on Exhibit "A"
attached hereto. The Employee's annual salary shall be payable in accordance
with the Bank's customary policies, subject to payroll and withholding
deductions as may be required by law and other deductions applied generally to
employees of the Bank for insurance or other employee benefit plans.
3.2 Employee shall be reimbursed for any and all reasonable
costs and expenses incurred by Employee in performance of his services and
duties as specified in this Agreement or incurred by Employee on behalf of, or
in furtherance of the business of, the Bank, including, but not limited to
business expenses incurred in connection with travel and entertainment;
provided, however, that Employee shall submit to the Bank supporting receipts
and information satisfactory to the Bank with respect to such reasonable costs
and expenses.
3.3 During the term of Employee's employment, he shall be
entitled (i) to receive health insurance benefits with the same coverages and
deductibles as are currently in effect with respect to Employee (subject to the
availability of such benefits at a reasonable cost), (ii) to participate in the
Bank's other benefit plans to such extent as determined by the Board of
Directors of the Bank, (iii) to participate in the Bank's other policies,
including vacation and sick leave.
4. Conflicts of Interests; Covenant Not to Compete.
4.1 Employee shall, during the term of this Agreement, devote
his entire time, attention, energies and business efforts to his duties as an
employee of the Bank and to the business of the Bank. Employee shall not, during
the term of this Agreement, directly or indirectly, for and on behalf of himself
or any person, firm, partnership, corporation or other legal entity, own,
manage, operate, control, invest in, make loans on advances to, guarantee the
obligations of or participate in the ownership or management or operations of or
be employed by or otherwise engage in the operation of any business that is in
competition in any manner whatsoever with the business of the Bank.
<PAGE> 3
5. Confidential Information.
5.1 As used herein, "Confidential Information" means all
technical and business information (including financial statements and related
books and records, personnel records, customer lists, arrangements with
customers and suppliers, manuals and reports) of the Bank and its affiliates
(whether such information is owned by, licensed to or otherwise possessed by the
Bank or any affiliate), whether patentable or not, which is of a confidential,
trade secret and/or proprietary character and which is either developed by
Employee (alone or with others) or to which Employee has had access during his
employment. "Confidential Information" shall include but is not limited to
information of a technical or business nature such as ideas, discoveries,
inventions, improvements, trade secrets, know-how, manufacturing processes,
specifications, writings and other works of authorship, computer programs,
financial figures and reports, marketing plans, customer lists and data, and/or
business plans or data which relate to the actual or anticipated business of the
Bank or any affiliate or its actual or anticipated areas of research and
development. "Confidential Information" shall also include but is not limited to
confidential evaluations of, and the confidential use or non-use by Bank or any
affiliate of, technical or business information in the public domain.
5.2 Employee shall, both during and after his employment with
the Bank, protect and maintain the confidential, trade secret and/or proprietary
character of all Confidential Information. Employee shall not, during or after
termination of his employment, directly or indirectly, use (for himself or
another) or disclose any Confidential Information, for so long as it shall
remain proprietary or protectible as confidential or trade secret information,
except as may be necessary for the performance of his duties under this
Agreement.
5.3 Employee shall deliver promptly to the Bank, at the
termination of his employment, or at any other time at the Bank's request,
without retaining any copies, all documents and other material in his possession
relating, directly or indirectly, to any Confidential Information.
5.4 Each of Employee's obligations in this Section 5 shall
also apply to the confidential, trade secret and proprietary information learned
or acquired by him during his employment from others with whom the Bank or any
affiliate has a business relationship.
6. Term and Termination.
6.1 Term. The term of this Agreement shall be for two years
commencing on the Effective Date and shall automatically be extended each day
from the Effective Date.
6.2 Termination of Agreement. Except as may otherwise be
provided herein, this Agreement may terminate prior to the end of the Term upon
the occurrence of:
(a) Thirty (30) days after written notice of termination
is given by either party to the other; or
(b) Employees's death or, at the Bank's option, upon
Employee's becoming Disabled (as defined in Section 7.3 hereof).
Any notice of termination given by Employee to the Bank under Section 6.2(a)
above shall specify whether such termination is made with or without Good
Reason-Change in Control (as defined in Section 7.5 hereof). Any notice of
termination given by the Bank to Employee under Section 6.2(a) above shall
specify whether such termination is with or without Cause (as defined in Section
7.4 hereof).
7. Obligations of the Bank Upon Termination.
7.1 Cause and Other than for Good Reason-Change in Control. If
the Bank terminates this Agreement with Cause pursuant to Section 6.2(a) above,
or if Employee terminates this Agreement without Good Reason-Change in Control
pursuant to Section 6.2(a) hereof, this Agreement shall terminate without
further obligations to Employee, other than those obligations owing or accrued
to, vested in, or earned by Employee through the date of termination, including,
but not limited to:
<PAGE> 4
(a) to the extent not theretofore paid, Employee's
annual salary in effect at the time of such termination
through the date of termination; and
(b) in the case of compensation previously deferred
by Employee, all amounts previously deferred (together with
any accrued interest thereon) and not yet paid by the Bank and
any accrued vacation pay not yet paid by the Bank; and
(c) all other amounts or benefits owing or accrued
to, vested in, earned by Employee through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of Bank;
such obligations owing or accrued to, vested in, or earned by Employee through
the date of termination, including, but not limited to, such amounts and
benefits specified in clauses (a), (b), and (c) of this sentence, being
hereinafter collectively referred to as the "Accrued Obligations." The aggregate
amount of such obligations owing or accrued to, vested in, or earned by Employee
through the date of termination, including, but not limited to, the Accrued
Obligations, shall be paid by the Bank to Employee in cash in one lump sum
within thirty (30) days after the date of termination.
7.2 Good Reason-Change in Control; Other than for Cause Before
or After a Change in Control. If Employee terminates this Agreement with Good
Reason-Change in Control pursuant to Section 6.2(a) hereof, or if the Bank
terminates this Agreement without Cause before or after the occurrence of a
Change in Control pursuant to Section 6.2(a) hereof, the Bank shall pay to
Employee cash in one lump sum within thirty (30) days after the date of
termination the aggregate of the following amounts (the "Change in Control-Lump
Sum Payment"):
(i) to the extent not theretofore paid,
Employee's annual salary at the annual rate in effect
at the time of such termination through the date of
termination; and
(ii) to the extent not theretofore paid, any
bonus through the date of termination; and
(iii) in the case of compensation previously
deferred by Employee, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Bank, and any accrued vacation pay
not yet paid by the Bank; and
(iv) all other amounts or benefits owing or
accrued to, vested in, or earned by Employee through
the date of termination under the then existing or
applicable plans, programs, arrangements, and
policies of the Bank; and
(v) any and all other Accrued Obligations
not otherwise described in clause (i), (ii), (iii),
(iv) or (v) of this Section 7.2; and
(vi) an amount equal to two (2) times the
Employee's annual salary in effect at the time of
such termination.
7.3 Death or Disabilities. If Employee's employment is
terminated under Section 6.2(b) hereof by reason of Employee's death or
Disability, the Bank shall pay to Employee's legal representatives cash in one
lump sum within thirty (30) days after the date of Employee's death or
Disability the full amount of the obligations owing or accrued to, vested in, or
earned by Employee through the date of Employee's death or disability,
including, but not limited to, the Accrued Obligations. Anything in this
Agreement to the contrary notwithstanding, the Employee's legal representatives
or beneficiaries shall be entitled to receive benefits provided under the then
existing or applicable plans, programs, or arrangements and policies of the Bank
relating to death or disability. As used herein, "Disabled" shall have the
meanings as being disabled under the Fredonia Bancshares, Inc. Stock Option
Plan.
7.4 Cause. As used in this Agreement, the term "Cause" means
(i) willful misconduct by Employee, (ii) the gross neglect by Employee of his
duties as an employee, officer or director of the Bank which continues for more
than thirty (30) days after written notice from the Bank to Employee
specifically identifying the gross negligence of Employee and directing Employee
to discontinue same, (iii) the commission by Employee of an act, other than an
act taken in good faith within the course and scope of Employee's employment,
which is directly detrimental to the Bank and which act exposes the Bank to
material liability.
<PAGE> 5
7.5 Good Reason-Change in Control. As used in this Agreement,
the term "Good ReasonChange in Control" means after the occurrence of a Change
in Control and a determination by Employee that any one or more of the following
events has occurred:
(a) the assignment by the Bank to Employee of duties that are
inconsistent with the Office at the time of such assignment, or the
removal by the Bank from Employee of those duties usually appertaining
to the Office at the time of such removal; or
(b) a change by the Bank, without Employee's prior written
consent, in Employee's responsibilities to the Bank as such
responsibilities existed at the time of the occurrence of such Change
in Control (or as such responsibilities may thereafter exist from time
to time as a result of changes in such responsibilities made with
Employee's prior written consent); or
(c) any removal of Employee from, or any failure to elect or
reelect Employee to, the Office, except in connection with Employee's
promotion, with his prior written consent, to a higher office (if any)
with the Bank; or
(d) the Bank's direction that Employee discontinue service (or
not seek reelection or reappointment) as a director, officer or member
of any corporation or other entity of which Employee is a director,
officer or member at the time of the occurrence of such Change in
Control; or
(e) the failure of the Bank to continue to provide Employee
with office space, related facilities and support personnel (including,
but not limited to, administrative and secretarial assistance) that are
both commensurate with the Office and Employee's responsibilities to
and position with the Bank at the time of the occurrence of such Change
in Control and not materially dissimilar to the office space, related
facilities and support personnel provided to other key executive
officers of the Bank; or
(f) a reduction by the Bank in the amount of Employee's
minimum salary specified in Section 2.1(a) (or as subsequently
increased) and as in effect at the time of the occurrence of such
Change in Control, or a failure of the Bank to pay such minimum annual
salary to the Employee at the time and in the manner specified in
Section 3.1(a) of this Agreement; or
(g) Employee's principal office space or the related
facilities or support space or the related facilities or support
personnel referred to in paragraph (e) of this Section 7.5 cease to be
located within the Bank's principal executive offices, or for a period
of more than 45 consecutive days Employee is required by the Bank to
perform a majority of this duties outside the Bank's principal
executive offices; or
(h) the relocation, without Employee's prior written consent,
of the Bank's principal executive offices to a location outside the
county in which such offices are located at the time of the occurrence
of such Change in Control; or
(i) the failure of the Bank to obtain the assumption by any
successor to the Bank of the obligations imposed upon the Bank under
this Agreement, as required by Section 14 of this Agreement; or
(j) the employment of Employee under this Agreement is
terminated by the Bank without Cause; or
(k) the Bank notifies Employee of the Bank's intention not to
observe or perform one or more of the obligations of the Bank under
this Agreement; or
(l) the Bank breaches any provision of this Agreement.
7.6 Change in Control. As used herein, the term "Change in
Control" shall mean the occurrence with respect to the Bank or Fredonia
Bancshares, Inc. (the "Parent") of any of the following events:
(a) a report on Schedule 13D is filed with the Securities and
Exchange Commission (the "SEC") pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act),
<PAGE> 6
other than the Bank or the Parent (or one of its subsidiaries) or any
employee benefit plan sponsored by the Bank or the Parent (or one of
its subsidiaries), is the beneficial owner (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,
of 20 percent or more of the outstanding shares of common stock of the
Bank or the Parent or the combined voting power of the then-outstanding
securities of the Bank or the Parent;
(b) a report is filed by the Bank or the Parent disclosing a
response to either Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, or to Item 1 of Form 8-K
promulgated under the Exchange Act, or to any similar reporting
requirement hereafter promulgated by the SEC;
(c) any person, entity or group (within the meaning of Section
13(d) or 14(d) of the Exchange Act), other than the Bank or the Parent
(or one of its subsidiaries) or any employee benefit plan sponsored by
the Bank or the Parent (or one of its subsidiaries), shall purchase
securities pursuant to a tender offer or exchange offer to
acquire any common stock of the Bank or the Parent (or securities convertible
into common stock) for cash, securities or any other consideration, provided
that after consummation of the offer, the person, entity or group in question is
the beneficial owner (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of 20 percent or more of the combined
voting power of the then-outstanding securities of the Bank or the Parent (as
determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act,
in the case of rights to acquire common stock);
(d) the stockholders of the Bank or the Parent shall approve:
(i) any merger, consolidation, or reorganization
of the Bank or the Parent:
(A) in which the Bank or the Parent is
not the continuing or surviving corporation,
(B) pursuant to which shares of common stock
of the Bank or the Parent would be converted into
cash, securities or other property,
(C) with a corporation which prior to such
merger, consolidation, or reorganization owned 20
percent or more of the combined voting power of the
then-outstanding securities of the Bank or the
Parent, or
(D) in which the Bank or the Parent will not
survive as an independent corporation;
(ii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets of the Bank or the Parent, or
(iii) any liquidation or dissolution of the Bank or
the Parent;
(e) the stockholders of the Bank or the Parent shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, purchase of assets or other transaction after the consummation
of which any person, entity or group (as defined in accordance with
Section 13(d) or 14(d) of the Exchange Act) would own beneficially in
excess of 50% of the outstanding shares of common stock of the Bank or
the Parent or in excess of 50% of the combined voting power of the
then-outstanding securities of the Bank or the Parent; or
(f) during a period of two consecutive years, the individuals
who at the beginning of such period constituted the Board of Directors
of Bank or the Parent cease for any reason to constitute a majority of
such Board, unless the election or nomination for election by the Bank
or the Parent's stockholders of each new director during any such
two-year period was approved by the vote by two-thirds of the directors
then still in office who were directors at the beginning of such
two-year period.
<PAGE> 7
8. Parachute Payments.
8.1 General. For the purposes of the determinations to be made
pursuant to Paragraph 8.2 below, capitalized terms that are not defined in this
Agreement shall have the meanings set forth in Section 280G of the Internal
Revenue Code of 1986, as amended ("Code"). A "Change in Control" of the Bank or
the Parent shall have the meaning set forth in Section 7.6 above and shall refer
to an ownership change described in Section 280G(b)(2)(A)(i) of the Code with
respect to the Bank of the Parent. "Incentive Agreements" mean this Agreement
and all stock option agreements, incentive compensation unit agreements,
supplemental pension agreements or other arrangements or agreements, whether in
existence on the date hereof or hereafter entered into by the Employee and the
Bank or the Parent that entitled the Employee to receive payments or other
property from the Bank or the Parent.
8.2 Limitation. If the Aggregate Present Value of Parachute
Payments payable to or in respect of the Employee by reason of a Change in
Control of the Bank or the Parent under all Incentive Agreements then in effect
is greater than or equal to three times the Base Amount, then the Aggregate
Present Value of Parachute Payments made to the Employee shall be limited to an
amount equal to the greater of the portion of the Parachute Payments
constituting Reasonable Compensation or three times the Base Amount less one
dollar. Any amount required to be withheld from payments made to the Employee
pursuant to this Paragraph 8.2 shall be deducted from the Change in Control-Lump
Sum Payment referred to in Section 7.2 above.
9. Notices. Any notice under this Agreement must be in writing and may
be given by certified or registered mail, postage prepaid, addressed to the
party or parties to be notified with return receipt requested, or by delivering
the notice in person. For purposes of notice, the address of Employee or any
administrator, executor or legal representative of Employee or his estate, as
the case may be, shall be the last address of the Employee on the records of the
Bank. The address of the Bank shall be its principal business address.
10. Controlling Law. This Agreement shall be governed by the laws of
the State of Texas.
11. Entire Agreement. This Agreement contains the entire agreement of
the parties and may only be amended in writing signed by both parties; provided,
that no amendment to this Agreement shall be effective unless authorized by
resolution of the Board of Directors and signed on behalf of the Bank by a duly
authorized officer of the Bank other than Employee.
12. Remedies, Modification and Separability. Employee and the Bank
agree that Employee's breach of Sections 4 and 5 of this Agreement will result
in irreparable harm to the Bank, that no adequate remedy at law is available,
and that the Bank shall be entitled to injunctive relief; however, nothing
herein shall prevent the Bank from pursuing any other remedies at law or at
equity available to the Bank. Should a court of competent jurisdiction declare
any of the covenants set forth in Sections 4 or 5 unenforceable, the court shall
be empowered to modify or reform such covenants so as to provide relief
reasonably necessary to protect the interests of the Bank and Employee and to
award injunctive relief, or damages, or both, to which the Bank may be entitled.
If any provision of this Agreement is declared by a court of last resort to be
invalid, the Bank and Employee agree that such declaration shall not affect the
validity of the other provisions of this Agreement. If any provision of this
Agreement is capable to two constructions, one of which would render the
provision void and the other of which would render the provision valid, then the
provision shall have the construction which renders it valid.
13. Preservation of Business; Fiduciary Responsibility. Employee shall
use his best efforts to preserve the business and organization of the Bank, to
keep available to the Bank the services of its present employees and to preserve
the business relations of the Bank with suppliers, distributors, customers and
others. Employee shall not commit any act which would injure the Bank. Employee
shall observe and fulfill proper standards of fiduciary re sponsibility
attendant upon his Office.
14. Assignments. This Agreement is personal to Employee and without the
prior written consent of the Bank shall not be assignable by Employee other than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by Employee's legal representatives and heirs.
This Agreement shall inure to the benefit of and be binding upon the Bank and
its successors and assigns. The Bank shall require any corporation, entity,
individual or other person who is the successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization, or otherwise) to all or
substantially all of the business or assets of the Bank to expressly assume and
agree to perform, by a written agreement in form and substance satisfactory to
Employee, all of the obligations of the Bank under this Agreement. As used in
this Agreement, the term "Bank" shall mean the Bank as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, written agreement, or
otherwise.
<PAGE> 8
15. Waiver of Breach. The waiver by the Bank of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver by the Bank of any subsequent breach of Employee.
16. Revocation of Previous Employment Agreements. Any and all previous
employment agreements existing between the Bank and Employee are revoked and
canceled.
17. Headings. The section headings in this Agreement are for
convenience of reference and shall not be used in the interpretation or
construction of this Agreement.
18. Attorney's Fees. In the event Bank or Employee breaches any term or
provision of this Agreement and the other party employs an attorney or attorneys
to enforce the terms of this Agreement, then the breaching or defaulting party
agrees to pay the other party the reasonable attorney's fees and costs incurred
to enforce this Agreement.
19. Execution. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original and all of which shall constitute one
instrument.
Employee acknowledges that he has read this Agreement and understands
that signing this Agreement is a condition of employment.
IN WITNESS WHEREOF, this Agreement is executed as of the 29th day of
August , 1997.
"EMPLOYEE" "BANK"
Fredonia State Bank
/s/ Gordon R. Lewis By: /s/ J. R. Honea
- ----------------------- ---------------------------------------
Gordon R. Lewis Name: J. R. Honea
-------------------------------------
Title: Executive Vice President & Cashier
------------------------------------
<PAGE> 9
Exhibit "A"
Employment Agreement By and Between
Fredonia State Bank and Gordon R. Lewis
<TABLE>
<CAPTION>
Calendar Year Annual Salary Bank Initials Employee Initials
- ------------- ------------- ------------- -----------------
<S> <C> <C> <C>
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
</TABLE>
<PAGE> 1
EXHIBIT 10(d)
EXECUTIVE SEVERANCE AGREEMENT
BETWEEN
FIRST UNITED BANCSHARES, INC.
AND
JOHN ROBERT GRAVES
<PAGE> 2
EXHIBIT 10(d)
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "Agreement"), made and entered
into on the 27th day of July , 1998, by and between First United Bancshares,
Inc. (the "Company"), a corporation organized and existing under the laws of the
State of Arkansas, and John Robert Graves , (the "Executive").
R E C I T A L S:
The Company acknowledges that Executive's contributions to the past and
future growth and success of the Company have been and will continue to be
substantial. As a publicly held corporation, the Company recognizes that there
exists a possibility of a Change in Control of the Company. The Board of
Directors of the Company (the "Board") also recognizes that the possibility of
such a Change in Control may contribute to uncertainty on the part of senior
management and may result in the departure of senior management or distraction
of senior management from their operating responsibilities.
Outstanding management of the Company is always essential to advancing
the best interests of the Company and its shareholders. In the event of a threat
or occurrence of a bid to acquire or change control of the Company or to effect
a business combination, it is particularly important that the Company's business
be continued with a minimum of disruption. The Company believes that the
objective of securing and retaining outstanding management will be achieved if
the Company's key management employees are given assurances of employment
security so they will not be distracted by personal uncertainties and risks
created by such circumstances.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Company agrees herein to pay the
Executive, and of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Executive agree
as follows:
ARTICLE 1
TERM OF AGREEMENT
1.1 Term. This Agreement shall become effective as of the date on which
it is executed by the Company (the "Effective Date"). The Agreement shall be
effective for twenty-four (24) months and will automatically be extended for
twelve (12) months as of each anniversary date of the Effective Date (the
"Agreement Term") unless the Agreement Term is terminated by the Company upon
written notification to the Executive, within thirty days before an anniversary
date of the Effective Date, that the Agreement will terminate as of last day of
the Agreement Term as in effect immediately prior to such anniversary date.
Unless the Company has effectively terminated this Agreement as
prescribed above in this Section 1.1, in the event of a Change in Control, the
Agreement Term shall be extended for an additional 12 months and shall then
expire at the end of such additional 12 month period.
1.2 Change in Control, means if: (i) after the date of the Agreement,
any person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, becomes the owner or beneficial owner of Company
securities having 20% or more of the combined voting power of the then
outstanding Company securities that may be cast for the election of the
Company's directors (other than as a result of an issuance of securities
initiated by the Company, or open market purchases approved by the Board, as
long as the majority of the Board approving the purchases are directors at the
time the purchases are made); or (ii) as the direct or indirect result of, or in
connection with, a cash tender or exchange offer, a merger or other business
combination, a sale of assets, a contested election of directors, or any
combination of these transactions, the persons who were directors of the Company
before such transactions cease to constitute a majority of the Board, or any
successor's board, within two years of the last of such transactions.
1.3 Control Change Date, means the date on which an event described in
Section 1.2 occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
<PAGE> 3
ARTICLE 2
TERMINATION OF EMPLOYMENT
2.1 General. Executive is entitled to receive Termination Compensation,
as defined in Section 2.4, according to the remaining provisions of this section
if Executive's employment with the Company terminates because of an event
described in Sections 2.2 or 2.3 which occurs during an Agreement Term and (i)
on or after a Control Change Date, or (ii) within the 180 days immediately
preceding a Control Change Date. If Executive's employment terminates during an
Agreement Term and if an event described in Sections 2.2 or 2.3 has not
occurred, this Agreement terminates.
2.2 Termination by the Company. Executive is entitled to receive
Termination Compensation (as described in Section 2.4) if Executive's employment
is terminated by the Company without Cause. Cause, means, for purposes of this
Agreement, (i) willful and continued failure by the Executive to perform his
duties as established by the Board of Directors of the Company; (ii) a material
breach by the Executive of his fiduciary duties of loyalty or care to the
Company; (iii) conviction of a felony; or (iv) willful, flagrant, deliberate and
repeated infractions of material published policies and regulations of the
Company of which the Executive has actual knowledge (the "Cause Exception"). If
the Company desires to discharge the Executive under the Cause Exception, it
shall give notice to the Executive as provided in Section 2.6 and the Executive
shall have thirty (30) days after notice has been given to him in which to cure
the reason for the Company's exercise of the Cause Exception. If the reason for
the Company's exercise of the Cause Exception is timely cured by the Executive
(as determined by a committee appointed by the Board of Directors), the
Company's notice shall become null and void.
2.3 Voluntary Termination. Executive is entitled to receive Termination
Compensation if Executive voluntarily terminates employment with Good Reason.
Good Reason means, for purposes of this Agreement, the Executive's resignation
from the Company's employment within six (6) months following the occurrence of
any one of the following events:
(a) the failure by the Board to reelect the Executive to
a responsible executive position in the Company ;
(b) a material modification by the Board of the duties,
functions and responsibilities of the Executive
without his consent;
(c) the failure of the Company to permit the Executive to
exercise such responsibilities as are consistent with
the Executive's position and are of such a nature as
are usually associated with such office of a
corporation engaged in substantially the same
business as the Company;
(d) the Company requires the Executive to relocate his
employment more than fifty (50) miles from his place
of employment, without the consent of the Executive,
excluding reasonably required business travel or
temporary assignments for a reasonable period of
time;
(e) a reduction in Executive's compensation or benefits;
or
(f) the Company shall fail to make a payment when due to
the Executive.
2.4 Termination Compensation. Termination Compensation equal to 2.00
times Executive's Base Period Income shall be paid in a single sum payment in
cash or in common stock of the Company, at the election of the Executive.
Payment of Termination Compensation to Executive shall be made on the later of
the thirtieth business day after Executive's employment termination or the first
day of the month following his employment termination.
2.5 Base Period Income. Executive's Base Period Income equals his
annual base salary as of Executive's termination date, plus the greater of the
average of any incentive bonus payable to Executive for the Company's last two
completed fiscal years or the Executive's target bonus opportunity under the
Company's annual incentive plan.
2.6 Notice of Termination. Any termination by the Company under the
Cause Exception or by the Executive for Good Reason shall be communicated by
Notice of Termination to the other party hereto. For purposes of Sections 2.2
and 2.3, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this
<PAGE> 4
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the termination date is
other than the date of receipt of such notice, specifies the effective date of
termination.
ARTICLE 3
GROSS UP OF PAYMENTS
In the event that any amount required to be paid or distributed to the
Executive pursuant to this Agreement shall constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor statutory provision ("Excess Parachute Payments")
and the aggregate of such parachute payments and any other amounts otherwise
required to be paid or distributed to the Executive by the Company would cause
the Executive to be subject to the excise tax on excess parachute payments under
Section 4999 of the Code (the "Excise Tax"), or any successor or similar
provision thereof, the Company shall pay to the Executive such additional
amounts as are necessary so that, after taking into account any tax imposed by
such Section 4999 or any successor statutory provision, only on any Net Excess
Parachute Payments, as well as on payments made pursuant to this sentence, and
any federal or state income taxes payable as a result of any payments due to the
Executive pursuant to this sentence, the Executive is in the same after-tax
position the Executive would have been in if such Section 4999 or any successor
statutory provision did not apply and no payments were made pursuant to this
sentence.
ARTICLE 4
ATTORNEY'S FEES
In the event that the Executive incurs any attorney's fees in
protecting or enforcing his rights under this Agreement, the Company shall
reimburse the Executive for such reasonable attorneys' fees and for any other
reasonable expenses related thereto. Such reimbursement shall be made within
thirty (30) days following final resolution of the dispute or occurrence giving
rise to such fees and expenses.
ARTICLE 5
WELFARE BENEFIT PLAN EQUIVALENTS
If the Executive is entitled to receive Termination Compensation under
this Agreement the Company, at its sole expense, shall maintain in full force
and effect for the continued benefit of Executive and his eligible dependents,
for a period of twenty-four (24) months following the date of termination, each
Welfare Benefit Plan in which the Executive was entitled to participate
immediately prior to the date of termination, at the benefit levels then in
effect; provided, however, in the event that the Executive's continued
participation in any such plan is not permitted thereunder, then the Company, at
its sole expense, shall provide the Executive and his eligible dependents a
benefit substantially similar to and no less favorable than the benefit provided
under such plan immediately prior to such termination of coverage; provided
further, however, at the termination of any period of coverage provided above,
the Executive shall have the option to have assigned to him, at no cost and no
apportionment of prepaid premiums, any assignable insurance owned by the Company
and relating specifically to the Executive. In lieu of being provided with the
benefits as described in the preceding sentence, the Executive may, at the
Executive's election and sole discretion, require the Company to include in the
Executive's Termination Compensation a lump sum amount equal to the value of the
benefits described in described in the preceding sentence. The term Welfare
Benefit Plan as used in this Article 5 refers to any plan, fund or program as
defined under Section 3 (1) of the Employee Retirement Income Security Act
(ERISA), which has been established and is maintained by the Company for the
purpose of providing its employees or their beneficiaries, through the purchase
of insurance or otherwise, medical, surgical, hospital care or benefits, or
benefits in the event of sickness, accident, disability or death.
ARTICLE 6
MITIGATION OF PAYMENT
The Company and the Executive agree that, following the termination of
employment by the Executive with Company, the Executive has no obligation to
take any steps whatsoever to secure other employment and such failure by the
Executive to search for or to find other employment upon termination from
Company shall in no way impact the Executive's right to receive payment under
any of the provisions of this Agreement.
<PAGE> 5
ARTICLE 7
DECISIONS BY COMPANY; FACILITY OF PAYMENT
Any powers granted to the Board hereunder may be exercised by a
committee, appointed by the Board, and such committee, if appointed, shall have
general responsibility for the administration and interpretation of this
Agreement. If the Board or the committee shall find that any person to whom any
amount is or was payable hereunder is unable to care for his affairs because of
illness or accident, or has died, then the Board or the committee, if it so
elects, may direct that any payment due him or his estate (unless a prior claim
therefore has been made by a duly appointed legal representative) or any part
thereof be paid or applied for the benefit of such person or to or for the
benefit of his spouse, children or other dependents, an institution maintaining
or having custody of such person, any other person deemed by the Board or
committee to be a proper recipient on behalf of such person otherwise entitled
to payment, or any of them, in such manner and proportion as the Board or
committee may deem proper. Any such payment shall be in complete discharge of
the liability of the Company therefore.
ARTICLE 8
INDEMNIFICATION
The Company shall indemnify the Executive during his employment and
thereafter to the maximum extent permitted by applicable law for any and all
liability of the Executive arising out of, or in connection with, his employment
by the Company or membership on the Board; provided, that in no event shall such
indemnity of the Executive at any time during the period of his employment by
the Company be less than the maximum indemnity provided by the Company at any
time during such period to any other officer or director under an
indemnification insurance policy or the bylaws or charter of the Company or by
agreement.
ARTICLE 9
SOURCE OF PAYMENTS; NO TRUST
The obligations of the Company to make payments hereunder shall
constitute a liability of the Company to the Executive. Such payments shall be
from the general funds of the Company, and the Company shall not be required to
establish or maintain any special or separate fund, or otherwise to segregate
assets to assure that such payments shall be made, and neither the Executive nor
his designated beneficiary shall have any interest in any particular asset of
the Company by reason of its obligations hereunder. Nothing contained in this
Agreement shall create or be construed as creating a trust of any kind or any
other fiduciary relationship between the Company and the Executive or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
ARTICLE 10
SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any of them shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein.
ARTICLE 11
ASSIGNMENT PROHIBITED
This Agreement is personal to each of the parties hereto, and neither
party may assign nor delegate any of his or its rights or obligations hereunder.
ARTICLE 12
NO ATTACHMENT
Except as otherwise provided in this Agreement or required by
applicable 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 effect any such action shall be null, void and of no effect.
<PAGE> 6
ARTICLE 13
HEADINGS
The headings of articles, paragraphs and sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
ARTICLE 14
GOVERNING LAW
The parties intend that this Agreement and the performance hereunder
and all suits and special proceedings hereunder shall be construed in accordance
with and under and pursuant to the laws of the State of Arkansas, and that in
any action, special proceeding or other proceeding that may be brought arising
out of, in connection with, or by reason of this Agreement, the laws of the
State of Arkansas, shall be applicable and shall govern to the exclusion of the
law of any other forum, without regard to the jurisdiction in which any action
or special proceeding may be instituted.
ARTICLE 15
BINDING EFFECT
This Agreement shall be binding upon, and inure to the benefit of, the
Executive and his heirs, executors, administrators and legal representatives and
the Company and its permitted successors and assigns.
ARTICLE 16
MERGER OR CONSOLIDATION
The Company will not consolidate or merge into or with another
corporation, or transfer all or substantially all of its assets to another
corporation (the "Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, the Executive and the Successor
Corporation shall become obligated to perform the terms and conditions of this
Agreement.
ARTICLE 17
COUNTERPARTS
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
ARTICLE 18
ENTIRE AGREEMENT
This Agreement expresses the whole and entire agreement between the
parties with referenced to the employment of the Executive and, as of the
effective date hereof, supersedes and replaces any prior employment agreement,
understanding or arrangement (whether written or oral) between the Company and
the Executive. Each of the parties hereto has relied on his or its own judgment
in entering into this Agreement.
ARTICLE 19
NOTICES
All notices, requests and other communications to any party under this
Agreement shall be in writing and shall be given to such party at its address
set forth below or such other address as such party may hereafter specify for
the purpose by notice to the other party:
(a) If to the Executive:
John Robert Graves
1701 Sammy Circle
Hope, AR 71801
<PAGE> 7
(b) If to the Company:
First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730
ATTN.:
Each such notice, request or other communication shall be effective (i)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means, when delivered at the address specified in this ARTICLE 19.
ARTICLE 20
MODIFICATION OF AGREEMENT
No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in writing and
duly executed by the party to be charged therewith. No evidence of any waiver of
modification shall be offered or received in evidence at any proceeding,
arbitration, or litigation between the parties hereto arising out of or
affecting this Agreement, or the rights or obligations of the parties hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The parties further agree that the provisions of this ARTICLE 20 may not be
waived except as herein set forth.
ARTICLE 21
TAXES
To the extent required by applicable law, the Company shall deduct and
withhold all necessary Social Security taxes and all necessary federal and state
withholding taxes and any other similar sums required by laws to be withheld
from any payments made pursuant to the terms of this Agreement.
ARTICLE 22
RECITALS
The Recitals to this Agreement are incorporated herein and shall
constitute an integral part of this Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
EXECUTIVE:
/s/ John Robert Graves
------------------------------
FIRST UNITED BANCHSARES, INC.:
By: /s/ James V. Kelley
---------------------------
Name: James V. Kelley
-------------------------
Title: Chairman and President
------------------------
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