EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is effective as of the 1st day of January, 2000 (the
"Effective Date"), and is made by and between United Security BancShares, Inc.,
a Delaware corporation ("USBC); First United Security Bank, an Alabama banking
corporation ("FUSB"; USB and FUSB are hereinafter collectively referred to as
the "Company"); and R. Terry Phillips (the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
President and Chief Executive Officer of USB and FUSB; and
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel and operations; and
WHEREAS, the Company recognizes that the Executive's contributions have been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacities, and the Executive is desirous of
having such assurance;
WHEREAS, the Executive and the Company previously entered into an employment
agreement effective as of the 1st day of January, 1999 (the "1999 Agreement"),
and the Executive and the Company now desire to amend and restate the 1999
Agreement hereby;
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements of the parties set forth in this Agreement, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1
Term of Employment
(a) The Company hereby agrees to employ the Executive and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date; provided, however, immediately upon a
Change in Control, the initial period shall automatically extend to five
(5) years.
(b) (i) Until a Change in Control occurs, upon each new day of the three (3)
year period of employment from the Effective Date until the Executive's
sixty-fourth (64th) birthday, the term of this Agreement automatically
shall be extended for one (1) additional day, to be added to the end of the
then-existing three (3) year term. Accordingly, at all times prior to (i)
the Executive's attaining age 64 and (ii) a notice of employment
termination (or an actual termination), the term of this Agreement shall be
three (3) full years.
(ii) After a Change in Control occurs, upon each new day of the five (5) year
period of employment from the date of such Change in Control until the
Executive's sixty-second (62nd) birthday, the term of this Agreement
automatically shall be extended for one (1) additional day, to be added to
the end of the then-existing five (5) year term. Accordingly, at all times
prior to (i) the Executive's attaining age 62 and (ii) a notice of
employment termination (or an actual termination), the term of this
Agreement shall be five (5) full years.
However, the automatic extensions of the term of this Agreement shall
immediately be suspended upon a termination of the Executive's employment in
accordance with the terms of this Agreement.
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ARTICLE 2
Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as President
and Chief Executive Officer of USB and FUSB and as a member of the respective
Boards of Directors if so elected. In his capacity as President and Chief
Executive Officer, he shall have responsibility for all operations of the
Company. The Executive shall have the same status, privileges and
responsibilities normally inherent in such capacities in financial institutions
of similar size and character to the Company.
ARTICLE 3
Standard of Care
(a) During the term of this Agreement, the Executive agrees to devote
substantially his full time, attention and energies to the Company's business
and shall not be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage.
However, the Executive may serve as a director of other companies so long as
such service is not injurious to the Company, and provided that such service is
approved by the Board. The Executive covenants, warrants and represents that he
shall devote his full and best efforts to the fulfillment of his employment
obligations and exercise the highest degree of loyalty and the highest standards
of conduct in the performance of his duties.
(b) This Article 3 shall not be construed as preventing the Executive from
investing assets in such form or manner as will not require his services in the
daily operations of the affairs of the companies in which such investments are
made.
ARTICLE 4
Compensation
As remuneration for all services to be rendered by the Executive during the term
of this Agreement, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:
SECTION 1.1 Base Salary.
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(a) The Company shall pay the Executive a base salary in an amount which shall
be established from time to time by the Board of Directors of the Company or the
Board's designee; provided, however, that such base salary shall not be less
than $192,500 per year and if subsequently increased shall not be less than such
increased amount ("Base" Salary"). Base Salary shall be paid to the Executive in
equal bi-weekly installments throughout the year, consistent with the normal
payroll practices of the Company.
(b) Base Salary shall be reviewed at least annually during the term of this
Agreement to ascertain whether, in the judgment of the Board or the Board's
designee, such Base Salary should be increased, based primarily on the
performance of the Executive during the year.
SECTION 1.2 Annual Bonus. In addition to Base Salary, in the discretion of the
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Board, the Executive shall be entitled to an opportunity to earn a cash bonus
(the "Bonus") under the Executive Incentive Plan or any similar plan that may be
adopted in the future.
SECTION 1.3 Long-Term Incentives. During the term of this Agreement, the
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Executive shall be entitled to participate in any and all long-term incentive
programs at a level that is commensurate with his position with the Company.
Such programs include the United Security BancShares, Inc. Long Term Incentive
Compensation Plan, or any successors thereto, as amended from time to time.
SECTION 1.4 Retirement Benefits. The Company shall provide to the Executive
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participation in all Company qualified defined benefit and defined contribution
retirement plans, if any, subject to the eligibility and participation
requirements of such plans.
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SECTION 1.5 Life Insurance. The Company shall provide a policy of "term-life"
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insurance (in addition to any insurance described in Section 4.6) on the
Executive's life in the face amount of Two Hundred Fifty Thousand Dollars
($250,000), of which the Executive will be the owner. All of the premiums on
such policy shall be paid by the Employer during the Executive's employment
hereunder.
SECTION 1.6 Employee Benefits. The Company shall provide to the Executive all
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benefits to which other executives and employees of the Company are entitled to
receive, as are commensurate with the Executive's position, subject to the
eligibility requirements and other provisions of such plans or arrangements.
SECTION 1.7 Perquisites. The Company shall provide to the Executive, at the
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Company cost, all perquisites to which other senior executives are entitled to
receive and such other perquisites which are suitable to the character of the
Executive's position with the Company and adequate for the performance of his
duties hereunder, including, but not limited to the use of a Chevrolet Tahoe
automobile, or its equivalent, plus an amount equal to the costs of maintenance,
repairs, insurance and all other costs incident thereto.
SECTION 1.8 Right to Change Plans. By reason of Sections 4.6 and 4.7 herein,
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the Company shall not be obligated to institute, maintain or refrain from
changing, amending or discontinuing any benefit plan, program or perquisite, so
long as such changes are similarly applicable to executive employees generally.
ARTICLE 5
Expenses
The Company shall pay or reimburse the Executive for all ordinary and necessary
expenses, in a reasonable amount, which the Executive incurs in performing his
duties under this Agreement including, but not limited to, (a) travel, (b)
entertainment, (c) professional dues and subscriptions and (d) dues incurred by
the Executive for membership in all local private or civic clubs of which he may
become a member and which are deemed by the Executive to be beneficial to his
role with the Company.
ARTICLE 6
Employment Terminations
SECTION 1.9 Termination Due to Retirement or Death. In the event the
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Executive's employment is terminated while this Agreement is in force by reason
of Retirement or death, the following terms and conditions shall apply:
(a) The Company's obligation under this Agreement to pay and provide to the
Executive the elements of pay described in Sections 4.1, 4.2 and 4.3 shall
immediately expire.
(b) Upon the effective date of any such termination, the Executive's benefits
including, without limitation, benefits under Section 4.4, 4.5, 4.6 and
4.7, shall be determined in accordance with the Company's retirement,
survirors'' benefits, insurance and other applicable programs of the
Company then in effect; provided, however, that the Executive shall receive
all rights and benefits that he is vested in, pursuant to plans and
programs of the Company.
(c) Subject to any conflicting terms of any short-term incentive program which
would provide for greater benefits following such termination, the Company
shall, within sixty (60) days of the effective date of employment
termination, pay to the Executive (or the Executive's beneficiaries or
estate, as the case may be) a Pro Rata share of the Bonus Opportunity.
(d) All unvested stock awards (including, but not limited to, any stock options
and restricted stock) will vest in full on the date of any such
termination.
SECTION 1.10 Termination Due to Disability. In the event that the Executive is
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determined to have a Disability during the term of this Agreement, the Company
shall have the right to terminate the Executive's active employment as provided
in this Agreement. However, the Board shall deliver written notice to the
Executive of the Company's intent to terminate the Executive's employment for
Disability at least thirty (30) calendar days prior to the effective date of
such termination and only after any period or process for determining the
Disability has been satisfied and completed. Upon a termination of employment
for Disability, the following terms and conditions shall apply:
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(a) The Company's obligation to pay and provide to the Executive the element of
pay described in Sections 4.1, 4.2 and 4.3 shall immediately expire;
provided, however, that, during the period beginning on the effective date
of such termination and ending six (6) months thereafter, the Company shall
continue to make bi-weekly payments equal to one hundred percent (100%) of
the Base Salary then in effect to the Executive pursuant to Section 4.1;
provided, further, that each such bi-weekly payment during such period
shall be reduced by a pro rata portion of the aggregate amount of any and
all insurance benefits payable to the Executive during such period.
(b) The Executive shall receive all rights and benefits that he is vested in,
pursuant to plans and programs of the Company.
(c) Subject to any conflicting terms of any short-term incentive program which
would provide for greater benefits following such termination, the Company
shall, within sixty (60) days of the effective date of employment
termination, pay to the Executive a Pro Rata share of the Bonus
Opportunity.
(d) All unvested stock awards (including, but not limited to, any stock options
and restricted stock) will vest in full on the date of any such
termination.
SECTION 1.11 Voluntary Termination by the Executive. The Executive may
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terminate this Agreement at any time by giving the Board written notice of
intent to terminate, delivered at least ninety (90) calendar days prior to the
effective date of such termination. This Section 6.3 shall not apply if the
Executive terminates employment (i) because of Retirement, (ii) for Good Reason
or (iii) during the Window Period. In the event that the voluntary termination
is for Good Reason or during the Window Period, the terms of Section 6.6 or
Section 6.7, as the case may be, shall govern the parties' rights and
obligations hereunder. Otherwise, upon a voluntary termination by the
Executive, the following terms and conditions shall apply:
(a) The Company shall continue to pay the Executive's Base Salary, at the rate
then in effect as provided in Section 4.1 herein, through the effective
date of termination, plus all other benefits to which the Executive has a
vested right at that time; provided, however, that the Executive shall not
be paid any Bonus with respect to the fiscal year in which voluntary
termination under this Section 6.3 occurs.
(b) Other than as provided in this Section 6.3, a voluntary employment
termination by the Executive shall result in the termination of the rights
and obligations of the parties under this Agreement; provided, however,
that the terms and provisions of Article 8 shall continue to apply prior to
a Change in Control.
SECTION 1.12 Involuntary Termination by the Company Without Cause.
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(a) At any time during the term of this Agreement, the Board may terminate the
Executive's employment, as provided under this Agreement, for reasons other
than death, Disability, Retirement or for Cause, by notifying the Executive
in writing of the Company's intent to terminate at least ninety (90)
calendar days prior the effective date of such termination.
(b) Following the expiration of the ninety (90) day notice period, the Company
shall pay to the Executive a lump sum cash payment in an amount equal to
three(3) times the Base Salary currently in effect; provided, however, that
if (i) the notice of termination is provided on or after a Change in
Control, (ii) the effective date of such termination occurs on or after a
Change in Control or (iii) a Change in Control occurs within the period
beginning on the effective date of such termination and ending six (6)
months thereafter, the payment under this sub-section (b) shall be a lump
sum cash payment in an amount equal to five (5) times the Base Salary
currently in effect.
(c) Upon a termination pursuant or subject to this Section 6.4, the Executive
shall be entitled to a continuation of all benefits pursuant to any and all
welfare benefit plans under which the Executive and/or the Executive's
family is eligible to receive benefits and/or coverage as of the date of
termination or as the same may be increased from time to time. Such
benefits shall be provided to the Executive at the same premium cost to the
Executive, if any, and at the same coverage level, as in effect as of the
Executive's date of termination. The welfare benefits described in this
Subsection 6.4(c) shall continue following the date of termination for
three (3) years; provided, however, that such benefits shall be
discontinued prior to the end of such period in the event the Executive
receives substantially similar benefits from a subsequent employer.
(d) All unvested stock awards (including, but not limited to, any stock options
and restricted stock) will vest on the date of termination.
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(e) The Company shall transfer (or cause to be transferred) to the Executive
title to the Executive's company car, without cost to the Executive, and
shall pay to the Executive a lump sum cash payment in an amount necessary
to fully gross-up the state and federal income tax effects of said
transfer.
(f) Subject to the provisions of this Section 6.4, a termination pursuant to
this Section 6.4 shall result in the termination of all rights and
obligations of the parties under this Agreement; provided, however, that
the terms and provisions of Article 8 shall continue to apply. The payments
described in this Section 6.4 (as well as in Section 6.6 and Section 6.7)
shall be in part to compensate the Executive for being subject to the
provisions of Article 8 (if applicable) thereafter, even though the
Executive's employment has been terminated without Cause (or for Good
Reason as provided in Section 6.6 or during the Window Period as provided
in Section 6.7).
SECTION 1.13 Termination For Cause.
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(a) Nothing in this Agreement shall be construed to prevent the Board from
terminating the Executive's employment under this Agreement for Cause.
(b) After providing the Executive with notice of the reasons the Board believes
Cause may exist, and after giving the Executive the opportunity to respond
to the allegation that Cause exists, the Board, by majority vote, shall
make the determination of whether Cause exists.
(c) In the event this Agreement is terminated by the Board for Cause, the
Company shall continue to pay the Executive his Base Salary through the
effective date of the employment termination, and the Executive shall
immediately thereafter forfeit all rights and benefits (other than vested
benefits) he would otherwise have been entitled to receive under this
Agreement. The Company and the Executive thereafter shall have no further
obligations under this Agreement; provided, however, that the provisions of
Article 8 shall continue to apply.
(d) A termination for Cause shall be permitted hereunder only if the Company
provides the written notice of intent to terminate not later than six (6)
months after the date the Company first knew or should have reasonably
known of the act or omission to act or conviction giving rise to the
termination for Cause. The six (6)-month period shall be tolled during any
permitted period of correction or administrative procedure.
SECTION 1.14 Termination for Good Reason.
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(a) At any time during the term of this Agreement, the Executive may terminate
this Agreement for Good Reason by giving the Board ninety (90) calendar
days written notice of intent to terminate, which notice sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for such termination. The Executive's ability to terminate for Good Reason
is contingent upon his agreement to allow the Company to remedy, within
such ninety (90)-day period, the events constituting Good Reason.
(b) Upon the failure of the Company to remedy the events constituting Good
Reason prior to the expiration of the ninety (90)-day notice period, the
Good Reason termination shall become effective, and the Company shall pay
the Executive a lump sum cash payment in an amount equal to three (3) times
the Base Salary currently in effect; provided, however, that if (i) the
notice of termination is provided on or after a Change in Control, (ii) the
effective date of such termination occurs on or after a Change in Control
or (iii) a Change in Control occurs within the period beginning on the
effective date of such termination and ending six (6) months thereafter,
the payment under this sub-section (b) shall be a lump sum cash payment in
an amount equal to five (5) times the Base Salary currently in effect.
(c) Upon a termination for Good Reason, in addition to the payment provided for
in sub-section (b) above, the Executive shall be entitled to the same
payments (excluding those provided for in Section 6.4(b)), benefits and
rights as he is entitled to receive following an involuntary termination of
his employment by the Company without Cause, as specified in Section 6.4
herein (as if the termination were an involuntary termination without
Cause).
(d) A termination for Good Reason shall be permitted hereunder only if the
Executive provides the written notice to terminate not later than six (6)
months after the date the Employee first knew or should have known of the
act or omission to act giving rise to the termination for Good Reason. The
six (6)-month period shall be tolled during any permitted period of
correction or administrative procedure.
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SECTION 6.7 Termination During Window Period After Change in Control.
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(a) During the Window Period, the Executive may terminate his employment
without any reason; provided, however, that a termination for Good Reason,
whether during the Window Period or not, shall be governed by Section 6.6
above and not this Section 6.7.
(b) Upon the Executive's termination of employment during the Window Period
pursuant to this Section 6.7, the Company shall pay the Executive a lump
sum cash payment in an amount equal to three (3) times the Base Salary
currently in effect. In addition, the Executive shall be entitled to the
same payments (excluding those provided for in Section 6.4(b)), benefits
and rights as he is entitled to receive following an involuntary
termination of his employment by the Company without Cause, as specified in
Section 6.4 herein (as if the termination were an involuntary termination
without Cause).
ARTICLE 7
Excise Tax Gross-Up
SECTION 1.15 Equalization Payment. Anything in this Agreement to the contrary
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notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Article 7) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise tax"), the
Company shall make an additional payment to the Executive (a "Gross-Up Payment")
in an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
SECTION 1.16 Tax Computation.
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(a) Subject to the provisions of Section 7.2(c), all determinations required to
be made under this Article 7, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by an
accounting firm chosen by the Company in its sole discretion (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen (15) business days of
the receipt of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company. However, the Accounting
Firm chosen may not be the firm that is serving as accountant or auditor
for the individual, entity or group effecting a Change in Control. All fees
and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Article 7, shall be
paid by the Company to the Executive within thirty (30) days of the receipt
of the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 7.2(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(b) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period
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following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7.2(b), the Company
shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority
in respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited
to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(c) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 7.2(b), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7.2(b)) promptly pay
to the Company the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section
7.2(b), a determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
the Gross-Up Payment required to be paid.
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ARTICLE 8
Noncompetition
SECTION 1.17 Prohibition on Competition.
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(a) Without the prior written consent of the Company, during the term of this
Agreement, and for twelve (12) months following the expiration of this
Agreement, the Executive shall not, as an employee or an officer, engage
directly or indirectly in any business or enterprise which is "in
competition" with the Company or its successors or assigns. For purposes of
this Agreement, a business or enterprise will be deemed to be "in
competition" if it is a banking institution, the headquarters of which is
within two hundred (200) miles from the location of the Executive's
principal job location or office at the time of termination of employment.
(b) Notwithstanding this Article 8, the Executive shall be allowed to purchase
and hold for investment less than three percent (3%) of the shares of any
corporation whose shares are regularly traded on a national securities
exchange or in the over-the-counter market.
SECTION 1.18 Disclosure of Information. The Executive recognizes that he has
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access to and knowledge of certain confidential and proprietary information of
the Company which is essential to the performance of his duties under this
Agreement. The Executive will not, during or for a period of three (3) years
after the term of his employment by the Company, in whole or in part, disclose
such information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, nor shall he make use of any such
information for his own purposes.
SECTION 1.19 Specific Performance. The parties recognize that the Company will
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have no adequate remedy at law for breach by the Executive of the requirements
of this Article 8 and, in the event of such breach, the Company and the
Executive hereby agree that, in addition to the right to seek monetary damages,
the Company will be entitled to a decree of specific performance, mandamus or
other appropriate remedy to enforce performance of such requirements.
SECTION 1.20 Limitation. The provisions of this Article 8 shall be null and
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void and without any force or effect on and after the date of a Change in
Control.
ARTICLE 9
Indemnification
The Company hereby covenants and agrees to indemnify and hold harmless the
Executive in a manner consistent with the provisions of the Company's
Certificate of Incorporation, as in effect on the Effective Date.
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ARTICLE 10
Assignment
SECTION 1.21 Assignment by Company.
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(a) This Agreement may and shall be assigned or transferred to, and shall be
binding upon and shall inure to the benefit of, any successor of the
Company, and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As used in
this Agreement, the term "successor" shall mean any person, firm,
corporation or business entity which at any time, whether by merger,
purchase or otherwise, acquires all or substantially all of the assets or
the business of the Company. Notwithstanding such assignment, the Company
shall remain, with such successor, jointly and severally liable for all its
obligations hereunder.
(b) Failure of the Company to obtain the agreement of any successor to be bound
by the terms of this Agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall immediately
entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled in the event of an
termination of employment without Cause, as provided in Section 6.4 herein.
(c) Except as herein provided, this Agreement may not otherwise be assigned by
the Company (other than to a subsidiary or affiliate) without the prior
written consent of the Executive.
SECTION 1.22 Assignment by Executive. The services to be provided by the
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Executive to the Company hereunder are personal to the Executive, and the
Executive's duties may not be assigned by the Executive; provided, however that
this Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, and administrators,
successors, heirs, distributees, devisees and legatees. If the Executive dies
while any amounts payable to the Executive hereunder remain outstanding, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, in the absence of such designee, to the Executive's estate.
ARTICLE 11
Dispute Resolution and Notice
SECTION 1.23 Dispute Resolution.
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(a) The parties hereto agree that the subject matter of this Agreement involves
and affects interstate commerce within the meaning of the commerce clause
of the United States Constitution. This Agreement shall be irrevocable and
is binding upon the parties and is subject to being specifically enforced.
(b) Any action, dispute, claim, counterclaim or controversy ("Dispute" or
"Disputes"), between or among the parties, with respect to this Agreement,
including, without limitation, any claim based on, or arising from, an
alleged tort or contract, shall be resolved by arbitration as set forth
below. As used herein, Disputes shall include all actions, disputes,
claims, counterclaims or controversies arising in connection with any
extension of or commitment set forth in this Agreement or in any other
agreement entered by the parties in connection with this Agreement, and any
action taken (or any omission to take any action) in connection with any of
the foregoing. All Disputes shall be resolved by binding arbitration in
accordance with Title 9 of the U.S. Code and the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). Defenses based on
statutes of limitation, estoppel, waiver, laches and similar doctrines,
that would otherwise be applicable to an action brought by a party, shall
be applicable in any such arbitration proceeding, and the commencement of
an arbitration proceeding with respect to this Agreement shall be deemed
the commencement of an action for such purposes.
(c) Whenever an arbitration is required under subsection (b), the arbitrators
shall be selected, except as otherwise provided, in accordance with the
Commercial Arbitration rules of the AAA. The panel of arbitrators shall
determine the resolution of the Dispute.
(d) Whenever an arbitration is required under subsection (b), such arbitration
shall be conducted in Montgomery, Alabama. The arbitrators shall apply the
internal laws of the State of Alabama, without giving effect to any
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choice of law provision or rule that would cause the application of the
laws of any other jurisdiction. Each party consents to the exclusive
jurisdiction of the courts of the State of Alabama over any challenges to
arbitration hereunder. The prevailing party may enforce an arbitration
award in any court having jurisdiction over the matter and the parties
hereto. For purposes of this Agreement, both parties expressly consent to
the personal jurisdiction of the Alabama Circuit Court for the Fifteenth
Judicial Circuit (Montgomery) and the United States District Court for the
Middle District of Alabama and waive any defenses based on the lack of such
jurisdiction.
(e) Any arbitration questions arising under this Agreement shall be governed in
accordance with Title 9 of the U.S. Code. This Section constitutes the
entire agreement of the parties with respect to its subject matter and
supersedes all prior discussions, arrangements, negotiations and other
communications on dispute resolutions. The provisions of this Section shall
survive any termination, amendment or expiration of the Agreement in which
this Section is contained, unless the parties otherwise expressly agree in
writing. In the event of any Dispute governed by this Section, each of the
parties shall pay all of its own expenses, and, subject to the award of the
arbitrators, shall pay an equal share of the arbitrators' fees. The
arbitrators shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees and
court costs) to the prevailing party or that party which substantially
prevails. This Section may be amended, changed or modified only by the
express provisions of a writing which specifically refers to this Section
and which is signed by all the parties hereto.
SECTION 1.24 Notice. Any notices, requests, demands, or other communications
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provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, to an executive
officer of the Company, at the Company's principal offices.
ARTICLE 12
Miscellaneous
SECTION 1.25 Definitions. For purposes of this Agreement, the following
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capitalized terms shall have the following respective meanings:
(a) "Board" means the Board of Directors of USB.
(b) "Bonus Opportunity" means the Bonus that the Executive would have earned
under the Executive Incentive Plan for the fiscal year in which employment
termination occurs. This amount shall be determined in good faith at the
sole discretion of the Board. Wherever this Agreement provides for a
payment based on the Bonus Opportunity, the Board, in setting the amount
of the payment, shall presume that the Company's performance for such
fiscal year will satisfy or exceed the minimum threshold target(s)
contained in the Executive Incentive Plan.
(c) "Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment and shall be defined as:
(i) The conviction of the Executive for the commission of an act of
fraud, embezzlement, theft or other criminal act constituting a
felony under the generally enforceable laws of the State of Alabama;
(ii) The gross neglect of the Executive in the performance of any or all
material covenants under this Agreement, for reasons other than the
Executive's death, Disability or Retirement; or
(iii) Abuse of or addiction to intoxicating drugs (including alcohol).
(d) A "Change in Control" shall be deemed to have occurred as of the first day
that any one or more of the following conditions have been satisfied:
(i) Any Person (other than those Persons in control of USB as of the
Effective Date, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or a
corporation owned directly or indirectly by the stockholders of USB
in substantially the same proportions as their ownership of stock of
USB), who becomes the Beneficial Owner, directly or indirectly, of
securities of USB or FUSB representing thirty percent (30%) or more
of the combined voting power of USBOs or FUSBOs then outstanding
securities; or
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(ii) During any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning
of such period constitute the Board (and any new Director, whose
election by USBOs stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who either
were Directors at the beginning of the period or whose election or
nomination for election was so approved, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board) cease for any reason to constitute at
least sixty percent (60%) thereof; or
(iii) The stockholders of USB and/or FUSB approve: (A) a plan of complete
liquidation of USB or FUSB; or (B) an agreement for the sale or
disposition of all or substantially all the assets of USB or FUSB; or
(C) a merger, consolidation or reorganization of USB or FUSB with or
involving any other corporation, other than a merger, consolidation
or reorganization that would result in the voting securities of USB
or FUSB, as the case may be, outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) greater
than 50% of the combined voting power of the voting securities of USB
or FUSB, as the case may be (or the surviving entity, or an entity
which as a result of such transaction owns USB or FUSB, as the case
may be, or all or substantially all of such Company's assets either
directly or through one or more subsidiaries) outstanding immediately
after such merger, consolidation or reorganization.
Provided, however, that in no event shall a Change in Control be deemed to have
occurred, with respect to the Executive, if the Executive is part of a
purchasing group which consummates the Change in Control transaction. The
Executive shall be deemed "part of a purchasing group" for purposes of the
preceding sentence if the Executive is an equity participant in the purchasing
company or group (except for: (i) passive ownership of less than three percent
(3%) of the stock of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a majority of the
non-employee Directors who were Directors prior to the transaction, and who
continue as Directors following the transaction).
For purposes of this definition of Change in Control, the following terms have
the following meanings:
"Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended ("Exchange Act").
"Person" shall have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
(e) "Disability" means the total and permanent incapacity of the Executive, due
to injury, illness, disease or bodily or mental infirmity, to engage in the
performance of substantially all of the usual duties of employment with the
Company as provided for in Article 2 hereof for more than six (6)
consecutive calendar months, such Disability to be determined by the Board
upon receipt and in reliance on competent medical advice from one or more
individuals selected by the Executive who are qualified to provide such
professional medical advice, and who are acceptable to the Board, which
acceptance shall not be unreasonably withheld.
(f) "Executive Incentive Plan" means the incentive compensation program adopted
by the Board of Directors of FUSB and/or USB and in effect as of the
Effective Date, including all subsequent modifications thereto.
(g) "Good Reason" means, without the Executive's express prior written consent,
the occurrence of any one or more of the following:
(i) The assignment of the Executive to duties materially inconsistent with
the Executive's authorities, duties, responsibilities and status
(including titles and reporting requirements) as an officer of the
Company, or a material reduction or alteration in the nature or status
of the Executive's authorities, duties or responsibilities from those
in effect as of the Effective Date (or as subsequently increased),
other than an insubstantial and inadvertent act that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive; or
(ii) A material breach of this Agreement by the Company, or any successor
thereto, that has remained uncured for thirty (30) days after notice
to the Company.
(h) "Pro Rata" means the number of days elapsed prior to the Executive's
termination date as a percentage of the number of days in the fiscal year.
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(i) "Retirement" means early or normal retirement, as defined under the then
established rules of the Company's retirement plan.
(j) "Window Period" means the 30 day period immediately following the first
anniversary of a Change in Control.
SECTION 1.26 Entire Agreement. This Agreement supersedes any prior agreements
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or understandings, oral or written, between the parties hereto, or between the
Executive and the Company, with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect thereto. Without
limiting the generality of the foregoing sentence, this Agreement completely
replaces and supersedes the terms of the 1999 Agreement.
SECTION 1.27 Modification. This Agreement shall not be varied, altered,
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modified, canceled, changed or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or their
legal representatives.
SECTION 1.28 Severability. In the event that any provision or portion of this
-------------
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
SECTION 1.29 Counterparts. This Agreement may be executed in one (1) or more
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counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
SECTION 1.30 Tax Withholding. The Company may withhold from any benefits
----------------
payable under this Agreement all Federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
SECTION 1.31 Beneficiaries. The Executive may designate one or more persons or
--------------
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee. The Executive may make
or change such designation at any time.
SECTION 1.32 Governing Law. To the extent not preempted by Federal law
--------------
(including Title 9 of the U.S. Code), the provisions of this Agreement shall be
construed and enforced in accordance with the laws of the State of Alabama.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date:
United Security BancShares, Inc.
By: /s/ Hardie B. Kimbrough
-----------------------------------
Its: Chairman of the Board of Directors
First United Security Bank
By: /s/ Hardie B. Kimbrough
-----------------------------------
Its: Chairman of the Board of Directors
/s/ R. Terry Phillips
-----------------------------------
R. Terry Phillips
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