Exhibit 10.1
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FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
EMPLOYMENT AGREEMENT
FOR
AUBREY L. DUNN, JR.
This Agreement (this "Agreement") is made effective as of the 18th day of
May, 2006 by and between First Federal Banc of the Southwest, Inc. (the
"Company"), a Delaware corporation, with its principal administrative office at
300 North Pennsylvania Avenue, Roswell, New Mexico 88201, and Aubrey L. Dunn,
Jr. ("Executive").
WHEREAS, Executive is currently employed as the President and Chief
Executive Officer of the Company and of First Federal Bank, Roswell, New Mexico
(the "Bank"), and the Company is the sole stockholder of the Bank;
WHEREAS, in consideration of Executive's outstanding service to the
Company, the Company and Executive desire to enter into this Agreement to
reflect the terms of Executive's employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
President and Chief Executive Officer of the Bank and the Company, respectively.
During said period, Executive also agrees to serve as a director of the Bank and
the Company and, if elected, as an officer and director of any subsidiary or
affiliate of the Company. Failure by the boards of directors of the Company and
the Bank to reelect Executive as President and Chief Executive Officer of the
Company and the Bank, respectively, without the consent of Executive or the
failure of the stockholders of the Company to reelect Executive as a director of
the Company during the term of this Agreement shall constitute a breach of this
Agreement.
2. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for twenty (20) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement ("Anniversary Date") and continuing on each Anniversary Date
thereafter, this Agreement shall renew for an additional year such that the
remaining term shall be twenty (20) months unless written notice of non-renewal
("Non-Renewal Notice") is provided to Executive at least thirty (30) days and
not more than sixty (60) days prior to any such Anniversary Date, in which case
his employment shall cease at the end of twenty (20) months following such
Anniversary Date. Prior to each notice period for non-renewal, the Board of
Directors of the Company ("Board") will conduct a performance review of
Executive for purposes of determining whether to provide notice of nonrenewal.
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(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence approved by the Board, Executive shall devote substantially
all his business time, attention, skill, and efforts to the faithful performance
of his duties hereunder including activities and services related to the
organization, operation and management of the Company and the Bank; provided,
however, that, with the approval of the Board of the Company or the Bank, as
evidenced by a resolution of such Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any other offices
or positions in, business companies or business organizations, which, in such
Board's judgment, will not present any conflict of interest with the Bank, or
materially affect the performance of Executive's duties pursuant to this
Agreement (it being understood that membership in and service on boards or
committees of social, religious, charitable or similar organizations does not
require Board approval pursuant to this Section 2(b)).
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Company
shall pay Executive as compensation a salary of not less than $241,500 per year
("Base Salary"). Such Base Salary shall be payable biweekly, or in accordance
with the normal payroll practices of the Bank. During the period of this
Agreement, Executive's Base Salary shall be reviewed at least annually. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase, but not decrease, Executive's Base Salary (any increase in Base
Salary shall become the "Base Salary" for purposes of this Agreement). In
addition to the Base Salary provided in this Section 3(a), the Company shall
provide Executive at no cost to Executive with all such other benefits as are
provided uniformly to permanent full-time employees of the Company and/or the
Bank. Base Salary shall include any amounts of compensation deferred by
Executive under qualified and nonqualified plans maintained by the Bank.
(b) The Company will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Company will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would adversely affect Executive's rights or
benefits thereunder. Without limiting the generality of the foregoing provisions
of this Section 3(b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans of the Bank or the Company including,
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, stock option and restricted stock plans,
health-and-accident plans, medical coverage and any other employee benefit plan
or arrangement made available by the Bank and/or the Company in the future to
its senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Company and/or the Bank in which
Executive is eligible to participate. Nothing paid to Executive under any such
plan or arrangement will be deemed to be in lieu of other compensation to which
Executive is entitled under this Agreement.
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(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank or the Company shall pay or reimburse Executive for all
reasonable travel and other reasonable expenses incurred by Executive performing
his obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine. Without limiting the foregoing, the Bank shall provide Executive with
an automobile suitable to the position of Chief Executive Officer and President,
and such automobile may be used by Executive in carrying out his duties under
this Agreement, including commuting between his residence and his principal
place of employment, and other personal use. The Bank shall reimburse Executive
for the cost of maintenance and servicing such automobile and for instance,
gasoline and oil for such automobile. The Bank or the Company shall reimburse
Executive for his ordinary and necessary business expenses, including, without
limitation, fees for memberships in such clubs and organizations as Executive
and the Board shall mutually agree are necessary and appropriate for business
purposes, and travel and entertainment expenses, incurred in connection with the
performance of his duties under this Agreement, upon presentation to the Bank of
an itemized account of such expenses in such form as the Bank may reasonably
require. Executive shall be responsible for the payment of any taxes on account
of his personal use of the automobile provided by the Bank or the Company and on
account of any other benefit provided herein.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 13.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during Executive's term of employment
under this Agreement. As used in this Agreement, an "Event of Termination" shall
mean and include any one or more of the following:
(i) the termination by the Bank or the Company of Executive's full-time
employment hereunder for any reason other than (A) Disability or Retirement, as
defined in Section 5 below, or (B) termination for Just Cause as defined in
Section 6 hereof; or
(ii) Executive's resignation from the Company's employ, upon any
(A) failure to elect or reelect or to appoint or reappoint Executive
as President and Chief Executive Officer of the Bank and/or the
Company,
(B) failure to elect or relect Executive as a director of the Company
and/or Bank,
(C) material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position
to become one of lesser responsibility, importance, or scope from
the position and attributes thereof described in Section 1 above,
(D) relocation of Executive's principal place of employment by more
than 30 miles from its location at the effective date of this
Agreement, except in connection with the relocation of the
Company's main office to Albuquerque, New Mexico,
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(E) liquidation or dissolution of the Bank or Company other than
liquidations or dissolutions that are caused by reorganizations
that do not affect the status of Executive, or
(F) breach of this Agreement by the Company.
Upon the occurrence of any event described in clauses (ii) (A), (B), (C), (D) or
(E) above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four (4) calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Company, Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Company and
is engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) or (E) above.
(iii) Executive's involuntary termination by the Company or voluntary
resignation from the Company's employ on the effective date of, or at any time
following, a Change in Control during the term of this Agreement, including
extensions thereof. For these purposes, a Change in Control of the Company shall
be deemed to have occurred at such time as (a) any "person" (as the term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
combined voting power of Company's outstanding securities, except for any
securities purchased by any employee benefit plan or trust maintained by the
Bank or the Company; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be considered, for purposes of this
clause (b), as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Company or similar transaction in which the Company is not the
surviving corporation occurs; or (d) a proxy statement soliciting proxies from
stockholders of the Company, by someone other than the then current Board of
Directors of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of
common stock of the Company are exchanged for or converted into cash or property
or securities not issued by the Company; or (e) a tender offer is made for 50%
or more of the voting securities of the Company and the shareholders owning
beneficially or of record 50% or more of the outstanding securities of the
Company have tendered or offered to sell their shares pursuant to such tender
offer and such tendered shares have been accepted by the tender offeror.
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(b) Upon the occurrence of an Event of Termination, as defined in Section
4(a)(i), (ii) or (iii), on the Date of Termination, as defined in Section 7(b)
or, if different, within the time frame set forth in any sub-paragraph below,
the Company shall pay Executive (or, in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be):
(i) his earned but unpaid salary as of the date of termination of
employment with the Company;
(ii) as severance pay or liquidated damages, or both, a cash amount equal
to $500,000. Payment to Executive will be made in a lump sum within sixty (60)
days of Executive's termination of employment (or if Section 409A of the
Internal Revenue Code ("Code") requires, on the first day of the seventh full
month) following Executive's "separation from service," as such term is defined
in Code Section 409A. Such payment shall not be reduced in the event Executive
obtains other employment following termination of employment;
(iii) at the Company's expense, continued medical, dental and life
insurance coverage substantially identical to the coverage maintained by the
Company or the Bank for Executive prior to his termination of employment. Such
coverage shall continue for each of Executive and his spouse and shall cease
twenty (20) months following the Event of Termination.
5. TERMINATION UPON RETIREMENT, DISABILITY OR DEATH
For purposes of this Agreement, termination by the Company of Executive's
employment based on "Retirement" shall mean termination in accordance with the
Company's and/or the Bank's retirement policy or in accordance with any
retirement arrangement established with Executive's consent with respect to him.
Upon termination of Executive upon Retirement, no amounts or benefits shall be
due Executive under this Agreement, and Executive shall be entitled to all
benefits under any retirement plan of the Company or the Bank and other plans to
which Executive is a party.
In the event Executive is unable to perform his duties under this Agreement
on a full-time basis for a period of six (6) consecutive months by reason of
illness or other physical or mental disability ("Disability"), the Company may
terminate this Agreement, provided that the Company shall continue to be
obligated to pay Executive his Base Salary for the remaining term of the
Agreement, or one year, whichever is the longer period of time, and provided
further that any amounts actually paid to Executive pursuant to any disability
insurance or other similar such program which the Company and/or the Bank has
provided or may provide on behalf of its employees generally or its senior
executives or pursuant to any workman's or social security disability program
shall reduce the compensation to be paid to Executive pursuant to this
paragraph.
In the event of Executive's death during the term of the Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive's Base Salary as defined in Section 3(a) at
the rate in effect at the time Executive's death for a period of one (1) year
from the date of Executive's death.
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6. TERMINATION FOR JUST CAUSE
In the event that employment hereunder is terminated by the Company for
Just Cause, the Executive shall not be entitled to receive compensation or other
benefits for any period after such termination, except as provided by law. The
phrase "Just Cause" as used herein, shall exist when there has been a good faith
determination by the Board that there shall have occurred one or more of the
following events with respect to the Executive: (i) the conviction of the
Executive of a felony or of any lesser criminal offense involving moral
turpitude; (ii) the willful commission by the Executive of a criminal or other
act that, in the judgment of the Board will likely cause substantial economic
damage to the Company or the Bank or substantial injury to the business
reputation of the Company or Bank; (iii) the commission by the Executive of an
act of fraud in the performance of his duties on behalf of the Company or Bank;
(iv) the continuing willful failure of the Executive to perform his duties to
the Company or Bank (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after written notice thereof
(specifying the particulars thereof in reasonable detail) and a reasonable
opportunity to be heard and cure such failure are given to the Executive by the
Board; or (v) an order of a federal or state regulatory agency or a court of
competent jurisdiction requiring the termination of the Executive's employment
by the Company. Notwithstanding the foregoing, Just Cause shall not be deemed to
exist unless there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to the Executive and an opportunity for the
Executive to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct described above and specifying
the particulars thereof. Prior to holding a meeting at which the Board is to
make a final determination whether Just Cause exists, if the Board determines in
good faith at a meeting of the Board, by not less than a majority of its entire
membership, that there is probable cause for it to find that the Executive was
guilty of conduct constituting Just Cause as described above, the Board may
suspend the Executive from his duties hereunder for a reasonable period of time
not to exceed fourteen (14) days pending a further meeting at which the
Executive shall be given the opportunity to be heard before the Board. For
purposes of this subparagraph, no act or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith without reasonable believe that his action or omission was in the
best interest of the Company and the Bank. Upon a finding of Just Cause, the
Board shall deliver to the Executive a Notice of Termination, as more fully
described in Section 7 below. Any non-vested stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary or
affiliate thereof, shall become null and void effective upon Executive's receipt
of Notice of Termination for Just Cause pursuant to Section 7 hereof, and shall
not be exercisable by Executive at any time subsequent to such termination for
Just Cause.
7. NOTICE
(a) Any purported termination by the Company or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
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(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination for Just Cause, shall not be
less than thirty (30) days from the date such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the voluntary termination
by Executive, in which case the Date of Termination shall be the date specified
in the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal having expired and no appeal having
been perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within the term of this Agreement. If such
dispute is not resolved within the term of the Agreement, the Company shall not
be obligated, upon final resolution of such dispute, to pay Executive
compensation and other payments accruing beyond the term of the Agreement.
Amounts paid under this Section shall be offset against or reduce any other
amounts due under this Agreement.
8. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section during the
term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Company and/or the Bank as may reasonably be required by the
Company and/or the Bank in connection with any litigation in which it or any of
its subsidiaries or affiliates is, or may become, a party.
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9. SOURCE OF PAYMENTS
(a) All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Company.
(b) Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive from the Bank, such compensation payments and benefits
paid by the Bank will be subtracted from any amount due Executive under this
Agreement.
10. NO EFFECT ON EMPLOYEE BENEFITS PLANS OR PROGRAMS
The termination of Executive's employment during the term of this Agreement
or thereafter, whether by the Company or by Executive, shall have no effect on
the vested rights of Executive under the Company's or the Bank's qualified or
non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans, or other
employee benefit plans or programs, or compensation plans or programs in which
Executive was a participant.
11. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Company and their respective successors and assigns.
12. ENTIRE AGREEMENT; MODIFICATION AND WAIVER
(a) This Agreement contains the entire agreement between Executive and the
Company relating to the subject matter hereof, and supersedes in its entirety
any and all prior agreements, understandings or representations relating to the
subject matter hereof.
(b) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(c) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
13. REGULATORY PROVISIONS
Notwithstanding anything herein contained to the contrary, any payments to
Executive by the Company are subject to and conditioned upon their compliance
with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.
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14. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
15. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New Mexico but
only to the extent not superseded by federal law.
17. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within
twenty-five miles of Roswell, New Mexico, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
18. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Company, provided that the dispute or interpretation has
been settled by Executive and the Company or has been resolved in Executive's
favor.
19. INDEMNIFICATION
During the term of this Agreement and for a period of three (3) years
thereafter, the Company shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors and officers
liability insurance policy at its expense, and shall indemnify Executive (and
his heirs, executors and administrators) to the fullest extent permitted under
Delaware law against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director, officer or employee of the
Company (whether or not he continues to be a director, officer or employee at
the time of incurring such expenses or liabilities), such expenses and
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liabilities to include, but not be limited to, judgments, court costs and
attorneys fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Company).
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SIGNATURES
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and Executive has signed this Agreement, effective
as of the date first above written.
ATTEST: FIRST FEDERAL BANC OF THE
SOUTHWEST, INC.
/s/ George Rosenbaum, Jr. By: /s/ Edward K. David
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Secretary Edward K. David
Chairman of the Board
WITNESS: EXECUTIVE:
/s/ Connie Chesser By: /s/ Aubrey L. Dunn, Jr.
- ------------------------ ----------------------------------
Aubrey L. Dunn, Jr.
President and Chief Executive Officer
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