FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
2006 RETENTION PAY PLAN
THIS RETENTION PAY PLAN is entered into this 10th day of October, 2006, by
First Federal Banc of the Southwest, Inc. (the "Company") for the benefit of
certain key employees of First Federal Bank (the "Bank") listed on Schedule A
hereto (each of whom shall be referred to herein as "Employee").
RECITALS
WHEREAS, the Company desires to be ensured of the Employees' continued
active participation in the business of the Bank and the Company in the event of
a Change in Control; and
WHEREAS, in order to induce the Employee to remain in the employ of the
Bank and the Company and any successors thereto, and to provide further
incentive to preserve and maintain the Bank's ongoing operations and project
stability and soundness to the Bank's customers and employees, the Company
desires to provide benefits which shall be due the Employee in the event his or
her employment with the Bank and Company and any successors thereto continues
for a specified period of time following a Change in Control.
NOW THEREFORE, the First Federal Banc of the Southwest, Inc. 2006 Retention
Pay Plan (the "Plan") provides as follows:
1. Purpose. The Plan provides a Retention Bonus to certain executive
officers and key employees who maintain their employment with the Bank and
Company, or any successor to the Bank or the Company, for a minimum specified
period following a Change in Control.
2. Term of Plan. The term of the Plan expires December 31, 2007 in the
event a Change in Control has not occurred in 2007.
3. Definitions. The following words and terms shall have the meanings set
forth below for the purposes of this Plan:
(a) Acquiror. Any company, bank or person that acquires 50% or more
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of the Company's outstanding common stock.
(b) Change in Control. "Change in Control" shall be deemed to have
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occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and l4(d) of the Securities Exchange Act of 1934
("Exchange Act")) is or becomes the "beneficial owner" (as
defined in Rule l3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Company's outstanding
securities except for any securities purchased by the Bank's
employee stock ownership plan or trust; 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, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or
(c) consummation of a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the
Bank or the Company or similar transaction unless, immediately
following such transaction, at least a majority of the members of
the board of directors or other governing body of the resulting
or surviving entity are individuals who were members of the Board
immediately prior to the transaction and equity interests
representing at least a majority of the voting power in the
election of directors or other members of the board of directors
or other governing board of the resulting or surviving entity are
owned, immediately following such transaction, by persons who
owned common stock of the Company immediately prior to such
transaction and in substantially the same relative proportions as
their ownership of common stock of the Company immediately prior
to such transaction; or (d) consummation of a tender offer
pursuant to which the shareholders owning beneficially or of
record 50% or more of the outstanding securities of the Company
have tendered their shares pursuant to such tender offer and such
tendered shares have been accepted by the tender offeror; or (e)
consummation of a dissolution or complete liquidation of the Bank
or the Company, or shareholder approval of a plan for the
dissolution or complete liquidation of the Bank or the Company.
(c) Cause. Cause means personal dishonesty, incompetence, willful
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misconduct, any breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or the
willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or final cease-and-desist
order, any of which results in a material loss to the Bank or the
Company.
(d) Bonus Employment Period. The period of time as set forth in the
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attached Schedule A in which an Employee must work for the Bank
and Company, or any successor thereto, following a Change in
Control, in order to receive the Retention Bonus under this Plan.
Notwithstanding the prior sentence, if the length of post-Change
in Control employment set forth in the attached Schedule A would
extend an Employee's Bonus Employment Period beyond April 30,
2007, such Employee's Bonus Employment Period will automatically
end on April 30, 2007 and the Retention Bonus will be paid on
such date.
(e) Retention Bonus. Retention Bonus means the bonus set forth in the
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attached Schedule A.
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4. Participation. Participation in the Plan shall be approved by the Board
of Directors of the Company ("Board") and limited to the Employees listed in the
attached Schedule A.
5. Eligibility for Benefits. An Employee listed on the attached Schedule A
shall be eligible to receive the Retention Bonus set forth thereunder as long as
such Employee remains employed with the Bank and Company, or any successor
thereto, for the full Bonus Employment Period, and performs his or her assigned
duties in a professional and satisfactory manner.
6. Timing and Method of Payment. The Employee shall receive his or her
Retention Bonus in a single lump sum payment by the earlier of (i) April 30,
2007, or (ii) the thirtieth (30th) day after the expiration of the Employee's
Bonus Employment Period.
7. Source of Benefits. The Acquiror shall pay the Employee's Retention
Bonus under the Plan from its general assets.
8. No Effect on Severance Plan. Any right to a Retention Bonus under this
Plan shall not affect an Employee's right, if any, to benefits under the First
Federal Banc of the Southwest, Inc. Severance Plan.
9. No Guarantee of Employment. Nothing contained in this Plan herein alters
any of the other terms of an Employee's employment. Accordingly, any benefits an
Employee would be entitled hereunder are in addition to such Employee's current
salary and other employee benefits and/or other compensation. Furthermore,
nothing contained herein shall be construed as a contract of employment. The
Bank and Company are free to terminate an Employee's employment at any time and
an Employee is free to terminate his or her employment at any time. Any
termination of Employee by the Bank or the Company prior to the effective date
of a Change in Control would not entitle the Employee to a payment hereunder. In
the event of termination of an Employee by an Acquiror, other than for Cause, on
the effective date of, or following a Change in Control but prior to the end of
the Bonus Employment Period, the Acquiror shall pay the Retention Bonus to the
Employee on the Employee's last day of employment.
10. Arbitration. Any dispute or controversy arising under or in connection
with this Plan shall be settled exclusively by arbitration, conducted by an
arbitrator selected jointly by the Bank or the Acquiror and the Employee, 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.
11. Required Provisions.
(a) The Bank may terminate the Employee's employment at any time. The
Employee shall not have the right to receive compensation or
other benefits for any period after termination for Cause as
defined hereinabove.
(b) If the Employee is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's
affairs by a notice served under Section 8(e)(3) (12 USC
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ss.1818(e)(3)) or 8(g)(1) (12 USC ss.1818(g)(1)) of the Federal
Deposit Insurance Act, the Company's obligations under the Plan
shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Employee
all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
(c) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) (12 USC ss.1818(e)(4)) or 8(g)(1)
(12 USC ss.1818(g)(1)) of the Federal Deposit Insurance Act, all
obligations of the Bank, if any, under the Plan shall terminate
as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x)(1)(12 USC
ss.1813(x)(1)) of the Federal Deposit Insurance Act, all
obligations of the Bank, if any, under this Plan shall terminate
as of the date of default, but this paragraph shall not affect
any vested rights of the Plan participants.
(e) All obligations of the Bank, if any, under this contract shall be
terminated, except to the extent determined that continuation of
the contract is necessary for the continued operation of the
Bank, (i) by the Director of the OTS or his or her designee at
the time the FDIC enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in
Section 13(c) (12 USC ss.1823(c)) of the Federal Deposit
Insurance Act; or (ii) by the Director or his or her designee at
the time the Director or his or her designee approves a
supervisory merger to resolve problems related to operation of
the Bank or when the Bank is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such
action.
(f) Notwithstanding anything herein contained to the contrary, any
payments to the Employee by the Bank or the Company, whether
pursuant to this Plan or otherwise, 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.
(g) Following a Change in Control, the foregoing paragraphs of this
Section 11, shall be read by substituting the term "Acquiror" for
the term "Bank" wherever the latter appears herein.
12. Amendment. The Company reserves the right to amend the Plan at any
time, with or without advance notice, provided such amendment does not reduce
the benefits to any Employee under the Plan.
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13. Governing Law. This validity, interpretation, construction and
performance of the Plan shall be governed by the laws of the State of New
Mexico, except to the extent that such laws contravene or are inconsistent with
Federal laws.
14. Successors and Assigns. The provisions of this Plan shall bind and
inure to the benefit of the Bank and Company and their successors and assigns.
The term "successors" as used herein shall include an Acquiror or any corporate
or other business entity which shall, whether by merger, consolidation, purchase
or otherwise acquire all or substantially all of the business and assets of the
Bank and Company, and successors of any such corporations or other business
entities.
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IN WITNESS WHEREOF, the Bank has caused the Plan to be executed by its duly
authorized officers and the corporate seal to be affixed and duly attested, as
of the 10th day of October, 2006.
Effective Date: October 10, 2006.
ATTEST: FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
/s/ George A. Rosenbaum, Jr. /s/ Aubrey L. Dunn, Jr.
____________________________ _____________________________________________
Secretary President and Chief Executive Officer
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SCHEDULE A
Employee Bonus Employment Period Retention Bonus
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