Document:

EXHIBIT 10.7

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT, dated this 25th day of April 2002, between First

Federal Bancshares of Arkansas, Inc., a Texas chartered corporation (the

“Corporation”), First Federal Bank of Arkansas, FA, a federally chartered savings

and loan association and a wholly owned subsidiary of the Corporation (the

“Association”), and Tommy Richardson (the “Executive”).

 

WITNESSETH

 

WHEREAS, the Executive is presently an officer of the Corporation and

the Association (together the “Employers”); and

 

WHEREAS, the Employers desire to be ensured of the Executive’s

continued active participation in the business of the Employers; and

 

WHEREAS, in order to induce the Executive to remain in the employ of

the Employers and in consideration of the Executive’s agreeing to remain in the

employ of the Employers, the parties desire to specify the severance benefits

which shall be due the Executive in the event that his employment with the

Employers is terminated under specified circumstances;

 

NOW THEREFORE, in consideration of the premises and the mutual

agreements herein contained, the parties hereby agree as follows:

 

1.             Definitions.  The

following words and terms shall have the meanings set forth below for the

purposes of this Agreement:

 

(a)           Average

Annual Compensation.  The

Executive’s “Average Annual Compensation” for purposes of this Agreement shall

be deemed to mean the average level of compensation paid to the Executive by

the Employers or any subsidiary thereof during the most recent five taxable

years preceding the Date of Termination (or such shorter period as the

Executive was employed), and which was included in the Executive’s gross income

for tax purposes including but not limited to Base Salary, bonuses, director’s

fees, if applicable, and all other amounts taxable to the Executive pursuant to

any employee benefit plans of the Employers.

 

(b)           Base

Salary.  “Base Salary” shall

have the meaning set forth in Section 3(a) hereof.

 

(c)           Cause.

Termination of the Executive’s employment for “Cause” shall mean termination

because of personal dishonesty, incompetence, willful misconduct, breach of

fiduciary duty involving personal profit, intentional failure to perform stated

duties, willful violation of any law, rule or regulation (other than traffic

violations or similar offenses) or final cease-and-desist order or material

breach of any provision of this Agreement. 

For purposes of this paragraph, no act or failure to act on the

Executive’s part shall be considered “willful” unless done, or omitted to be

done, by the Executive not in good faith and without reasonable belief that the

Executive’s action or omission was in the best interest of the Employers.

 

(d)           Change

in Control of the Corporation. 

“Change in Control of the Corporation” shall mean a change in control of

a nature that would be required to be reported in response to Item 6(e) of

Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of

1934, as amended (“Exchange Act”), or any successor thereto, whether or not the

Corporation is registered under the Exchange Act; provided that, without

limitation, such a change in control shall be deemed to have occurred if (i)

any “person” (as such 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 Corporation

representing 25% or more of the combined voting power of the Corporation’s then

outstanding securities; or (ii) during any period of two consecutive years,

individuals who at the beginning of such period constitute the Board of

Directors of the Corporation cease for any reason to constitute at least a

majority thereof unless the election, or the nomination for election by

stockholders, of each new director was approved by a vote of at least two-thirds

of the directors then still in office who were directors at the beginning of

the period.

 

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(e)           Code.  “Code” shall mean the Internal Revenue Code

of 1986, as amended.

 

(f)            Date

of Termination.  “Date of

Termination” shall mean (i) if the Executive’s employment is terminated for

Cause or for Disability, the date specified in the Notice of Termination, and

(ii) if the Executive’s employment is terminated for any other reason, the date

on which a Notice of Termination is given or as specified in such Notice.

 

(g)           Disability.  Termination by the Employers of the

Executive’s employment based on “Disability” shall mean termination because of

any physical or mental impairment which qualifies the Executive for disability

benefits under the applicable long-term disability plan maintained by the

Employers or any subsidiary or, if no such plan applies, which would qualify

the Executive for disability benefits under the Federal Social Security System.

 

(h)           Good

Reason.  Termination by the

Executive of the Executive’s employment for “Good Reason” shall mean

termination by the Executive within one year following a Change in Control of

the Corporation based on:

 

(i)                                     Without the Executive’s express written consent,

the failure to elect or to re-elect or to appoint or to re-appoint the

Executive to the office of Executive Vice President and Chief Operating Officer

of the Employers or a material adverse change made by the Employers in the

Executive’s functions, duties or responsibilities as Executive Vice President

and Chief Operating Officer of the Employers;

 

(ii)                                  Without the Executive’s express written consent,

a material reduction by the Employers in the Executive’s Base Salary as the

same may be increased from time to time or, except to the extent permitted by

Section 3(b) hereof, a material reduction in the package of fringe benefits

provided to the Executive, taken as a whole;

 

(iii)                               Without the Executive’s express written consent,

the Employers require the Executive to work in an office which is more than 30

miles from the location of the Employers’ current principal executive office,

except for required travel on business of the Employers to an extent substantially

consistent with the Executive’s present business travel obligations;

 

(iv)                              Any purported termination of the Executive’s

employment for Cause, Disability or Retirement which is not effected pursuant

to a Notice of Termination satisfying the requirements of paragraph (j) below;

or

 

(v)                                 The failure by the Employers to obtain the

assumption of and agreement to perform this Agreement by any successor as

contemplated in Section 9 hereof.

 

(i)            IRS.  IRS shall mean the Internal Revenue Service.

 

(j)            Notice

of Termination.  Any

purported termination of the Executive’s employment by the Employers for any

reason, including without limitation for Cause, Disability or Retirement, or by

the Executive for any reason, including without limitation for Good Reason,

shall be communicated by written “Notice of Termination” to the other party

hereto.  For purposes of this Agreement,

a “Notice of Termination” shall mean a dated notice which (i) indicates the

specific termination provision in this Agreement relied upon, (ii) sets forth

in reasonable detail the facts and circumstances claimed to provide a basis for

termination of Executive’s employment under the provision so indicated, (iii)

specifies a Date of Termination, which shall be not less than thirty (30) nor more

than ninety (90) days after such Notice of Termination is given, except in the

case of the Employers’ termination of Executive’s employment for Cause; and

(iv) is given in the manner specified in Section 10 hereof.

 

(k)           Retirement.  “Retirement” shall mean voluntary

termination by the Executive in accordance with the Employers’ retirement

policies, including early retirement, generally applicable to the Employers’

salaried employees.

 

2

 

2.             Term of Employment.

 

(a)           The Employers hereby

employ the Executive as Executive Vice President and Chief Operating Officer

and Executive hereby accepts said employment and agrees to render such services

to the Employers on the terms and conditions set forth in this Agreement.

Unless extended as provided in this Section 2, this Agreement shall terminate

three (3) years after the date first above written.  Prior to the first annual anniversary of the date first above

written and each annual anniversary thereafter, the Boards of Directors of the

Employers shall consider, review (with appropriate corporate documentation

thereof, and after taking into account all relevant factors, including the

Executive’s performance) and, if appropriate, explicitly approve a one-year

extension of the remaining term of this Agreement.  The term of this Agreement shall continue to extend each year if

the Boards of Directors so approve such extension unless the Executive gives

written notice to the Employers of the Executive’s election not to extend the

term, with such notice to be given not less than thirty (30) days prior to any

such anniversary date.  If the Boards of

Directors elect not to extend the term, they shall give written notice of such

decision to the Executive not less than thirty (30) days prior to any such

anniversary date.  If any party gives

timely notice that the term will not be extended as of any annual anniversary

date, then this Agreement shall terminate at the conclusion of its remaining

term.  References herein to the term of

this Agreement shall refer both to the initial term and successive terms.

 

(b)           During the term of

this Agreement, the Executive shall perform such executive services for the

Employers as are consistent with his title of Executive Vice President and Chief

Operating Officer.

 

3.             Compensation and Benefits.

 

(a)           The Employers shall

compensate and pay Executive for his services during the term of this Agreement

at a minimum base salary of $156,000 per year (“Base Salary”), which may be

increased from time to time in such amounts as may be determined by the Boards

of Directors of the Employers.  In

addition to his Base Salary, the Executive shall be entitled to receive during

the term of this Agreement such bonus payments as may be determined by the

Boards of Directors of the Employers.

 

(b)           During the term of

the Agreement, Executive shall be entitled to participate in and receive the

benefits of any pension or other retirement benefit plan, profit sharing, stock

option, employee stock ownership, or other plans, benefits and privileges given

to employees and executives of the Employers, to the extent commensurate with

his then duties and responsibilities, as fixed by the Boards of Directors of

the Employers.  The Employers shall not

make any changes in such plans, benefits or privileges which would adversely

affect Executive’s rights or benefits thereunder, unless such change occurs

pursuant to a program applicable to all executive officers of the Employers and

does not result in a proportionately greater adverse change in the rights of or

benefits to Executive as compared with any other executive officer of the

Employers.  Nothing paid to Executive

under any plan or arrangement presently in effect or made available in the

future shall be deemed to be in lieu of the salary payable to Executive

pursuant to Section 3(a) hereof.

 

(c)           During the term of

this Agreement, Executive shall be entitled to paid annual vacation in

accordance with the policies as established from time to time by the Boards of

Directors of the Employers.  Executive

shall not be entitled to receive any additional compensation from the Employers

for failure to take a vacation, nor shall Executive be able to accumulate

unused vacation time from one year to the next, except to the extent authorized

by the Boards of Directors of the Employers.

 

(d)           During the term of

this Agreement, in keeping with past practices, the Employers shall continue to

provide the Executive with the automobile he presently drives. The Employers

shall be responsible and shall pay for all costs of insurance coverage,

repairs, maintenance and other incidental expenses, including license, fuel and

oil.  The Employers shall provide the

Executive with a replacement automobile of a similar type as selected by the

Executive at approximately the time that his present automobile reaches three

(3) years of age and approximately every three (3) years thereafter, upon the

same terms and conditions.

 

(e)           During the term of

this Agreement, in keeping with past practices, the Employers shall continue to

pay the annual membership dues at the country clubs which the Executive is

currently a member of.

 

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(f)            The Employers shall

provide continued medical insurance in the Employers’ health plan for the

benefit of the Executive and his spouse until the Executive shall have attained

the age of 70, whether or not the Executive is employed full time by the

Employers, and such insurance shall be comparable to that which is provided to

the Executive as of the date of this Agreement notwithstanding anything to the

contrary in this Agreement and regardless of whether the Executive is eligible

to participate in the Employers’ health plan. 

In the event of the Executive’s death before he attains the age of 70,

the Employers shall provide the Executive’s spouse continued medical insurance

in the Employers’ health plan comparable to that which is being provided to the

Executive’s spouse at such time for three years from the date of the

Executive’s death.  This Section 3(f)

shall not apply if the Employee is employed full-time by an employer other than

the Corporation or the Association.

 

(g)           In the event of the

Executive’s death during the term of this Agreement, the Executive’s spouse,

estate, legal representative or named beneficiaries (as directed by the

Executive in writing) shall be paid on a monthly basis the Executive’s Base

Salary (as defined in Section 3(a) hereof) in effect at the time of the

Executive’s death for a period of twelve (12) months from the date of the

Executive’s death.

 

(h)           The Executive’s

compensation and expenses shall be paid by the Corporation and the Association

in the same proportion as the time and services actually expended by the

Executive on behalf of each respective Employer.

 

4.             Expenses.  The

Employers shall reimburse Executive or otherwise provide for or pay for all

reasonable expenses incurred by Executive in furtherance of, or in connection

with the business of the Employers, including, but not by way of limitation,

automobile and traveling expenses, and all reasonable entertainment expenses

(whether incurred at the Executive’s residence, while traveling or otherwise),

subject to such reasonable documentation and other limitations as may be

established by the Boards of Directors of the Employers.  If such expenses are paid in the first

instance by Executive, the Employers shall reimburse the Executive therefor.

 

5.             Termination.

 

(a)           The Employers shall

have the right, at any time upon prior Notice of Termination, to terminate the

Executive’s employment hereunder for any reason, including without limitation

termination for Cause, Disability or Retirement, and Executive shall have the

right, upon prior Notice of Termination, to terminate his employment hereunder

for any reason.

 

(b)           In the event that

(i) Executive’s employment is terminated by the Employers for Cause, or (ii)

Executive terminates his employment hereunder other than for Good Reason,

Executive shall have no right pursuant to this Agreement to compensation or

other benefits for any period after the applicable Date of Termination.  In the event that the Executive’s employment

is terminated due to Disability or Retirement, the Executive’s rights shall be

as provided in Section 3(f) hereof.  In

the event the Executive’s employment is terminated due to the Executive’s

death, the Executive’s rights shall be as provided in Section 3(g) hereof.

 

(c)           In the event that

(i) Executive’s employment is terminated by the Employers for other than Cause,

Disability, Retirement or the Executive’s death or (ii) such employment is

terminated by the Executive (a) due to a material breach of this Agreement by

the Employers, which breach has not been cured within fifteen (15) days after a

written notice of non-compliance has been given by the Executive to the

Employers, or (b) for Good Reason, then the Employers shall, subject to the

provisions of Section 6 hereof, if applicable,

 

(A)          Pay to the Executive,

in thirty-six (36) equal monthly installments beginning with the first business

day of the month following the Date of Termination, a cash severance amount

equal to three (3) times the Executive’s Average Annual Compensation over the

most recent five taxable years, and

 

(B)           Maintain and provide

for a period ending at the earlier of (i) the expiration of the remaining term

of employment pursuant hereto prior to the Notice of Termination or (ii) the

date of the Executive’s full-time employment by another employer (provided that

the Executive is entitled under the terms of such employment to benefits

substantially similar to those described in this subparagraph (B)), at no cost

to the Executive, the Executive’s continued participation in all group

insurance, life insurance, health and accident, disability and other employee

benefit plans, programs and arrangements

 

4

 

in which the Executive was

entitled to participate immediately prior to the Date of Termination (other

than stock option and restricted stock plans of the Employers), provided that

in the event that the Executive’s participation in any plan, program or

arrangement as provided in this subparagraph (B) is barred or during such

period any such plan, program or arrangement is discontinued or the benefits

thereunder are materially reduced, the Employers shall arrange to provide the

Executive with benefits substantially similar to those which the Executive was

entitled to receive under such plans, programs and arrangements immediately

prior to the Date of Termination.

 

6.             Limitation of Benefits under

Certain Circumstances.  If the payments and benefits

pursuant to Section 5 hereof, either alone or together with other payments and

benefits which Executive has the right to receive from the Employers, would

constitute a “parachute payment” under Section 280G of the Code, the payments

and benefits pursuant to Section 5 hereof shall be reduced, in the manner

determined by the Executive,  by the

amount, if any, which is the minimum necessary to result in no portion of the

payments and benefits under Section 5 being non-deductible to either of the

Employers pursuant to Section 280G of the Code and subject to the excise tax

imposed under Section 4999 of the Code. 

The determination of any reduction in the payments and benefits to be

made pursuant to Section 5 shall be based upon the opinion of independent tax

counsel selected by the Employers’ independent public accountants and paid by

the Employers.  Such counsel shall be

reasonably acceptable to the Employers and the Executive; shall promptly

prepare the foregoing opinion, but in no event later than thirty (30) days from

the Date of Termination; and may use such actuaries as such counsel deems

necessary or advisable for the purpose. 

In the event that the Employers and/or the Executive do not agree with

the opinion of such counsel, (i) the Employers shall pay to the Executive the

maximum amount of payments and benefits pursuant to Section 5, as selected by

the Executive, which such opinion indicates that there is a high probability do

not result in any of such payments and benefits being non-deductible to the

Employers and subject to the imposition of the excise tax imposed under Section

4999 of the Code and (ii) the Employers may request, and Executive shall have

the right to demand that the Employers request, a ruling from the IRS as to

whether the disputed payments and benefits pursuant to Section 5 hereof have

such consequences.  Any such request for

a ruling from the IRS shall be promptly prepared and filed by the Employers,

but in no event later than thirty (30) days from the date of the opinion of

counsel referred to above, and shall be subject to Executive’s approval prior

to filing, which shall not be unreasonably withheld.  The Employers and Executive agree to be bound by any ruling

received from the IRS and to make appropriate payments to each other to reflect

any such rulings, together with interest at the applicable federal rate

provided for in Section 7872(f)(2) of the Code.  Nothing contained herein shall result in a reduction of any

payments or benefits to which the Executive may be entitled upon termination of

employment under any circumstances other than as specified in this Section 6,

or a reduction in the payments and benefits specified in Section 5 below zero.

 

7.             Mitigation; Exclusivity of Benefits.

 

(a)           The Executive shall

not be required to mitigate the amount of any benefits hereunder by seeking

other employment or otherwise, nor shall the amount of any such benefits be

reduced by any compensation earned by the Executive as a result of employment

by another employer after the Date of Termination or otherwise.

 

(b)           The specific

arrangements referred to herein are not intended to exclude any other benefits

which may be available to the Executive upon a termination of employment with

the Employers pursuant to employee benefit plans of the Employers or otherwise.

 

8.             Withholding.  All

payments required to be made by the Employers hereunder to the Executive shall

be subject to the withholding of such amounts, if any, relating to tax and

other payroll deductions as the Employers may reasonably determine should be

withheld pursuant to any applicable law or regulation.

 

9.             Assignability.  The

Employers may assign this Agreement and its rights and obligations hereunder in

whole, but not in part, to any corporation, bank or other entity with or into

which the Employers may hereafter merge or consolidate or to which the

Employers may transfer all or substantially all of its assets, if in any such

case said corporation, bank or other entity shall by operation of law or

expressly in writing assume all obligations of the Employers hereunder as fully

as if it had been originally made a party hereto, but may not otherwise assign

this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer

this Agreement or any rights or obligations hereunder.

 

5

 

10.          Notice.  For the

purposes of this Agreement, notices and all other communications provided for

in this Agreement shall be in writing and shall be deemed to have been duly

given when delivered or mailed by certified or registered mail, return receipt

requested, postage prepaid, addressed to the respective addresses set forth

below:

 

	

  To the Employers:

  	

   

  	

  Board of Directors

  
	

   

  	

   

  	

  First Federal Bancshares of Arkansas, Inc.

  
	

   

  	

   

  	

  200 West

  Stephenson Avenue

  
	

   

  	

   

  	

  Harrison, Arkansas 72602-0550

  
	

   

  	

   

  	

   

  
	

  To the Executive:

  	

   

  	

  Tommy Richardson

  
	

   

  	

   

  	

  206 Oxford

  
	

   

  	

   

  	

  Harrison, Arkansas  72601

  

 

11.          Amendment; Waiver.  No

provisions of this Agreement may be modified, waived or discharged unless such

waiver, modification or discharge is agreed to in writing signed by the

Executive and such officer or officers as may be specifically designated by the

Boards of Directors of the Employers to sign on its behalf.  No waiver by any party hereto at any time of

any breach by any other party hereto of, or compliance with, any condition or

provision of this Agreement to be performed by such other party shall be deemed

a waiver of similar or dissimilar provisions or conditions at the same or at

any prior or subsequent time.

 

12.          Governing Law.  The

validity, interpretation, construction and performance of this Agreement shall

be governed by the laws of the United States where applicable and otherwise by

the substantive laws of the State of Arkansas.

 

13.          Nature of Obligations.  Nothing

contained herein shall create or require the Employers to create a trust of any

kind to fund any benefits which may be payable hereunder, and to the extent

that the Executive acquires a right to receive benefits from the Employers

hereunder, such right shall be no greater than the right of any unsecured

general creditor of the Employers.

 

14.          Interpretation and Headings.  This

agreement shall be interpreted in order to achieve the purposes for which it

was entered into.  The section headings

contained in this Agreement are for reference purposes only and shall not

affect in any way the meaning or interpretation of this Agreement.

 

15.          Validity.  The

invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceability of any other provisions of this

Agreement, which shall remain in full force and effect.

 

16.          Counterparts.  This

Agreement may be executed in one or more counterparts, each of which shall be

deemed to be an original but all of which together will constitute one and the

same instrument.

 

17.          Regulatory Actions.  The

following provisions shall be applicable to the parties to the extent that they

are required to be included in employment agreements between a savings

association and its employees pursuant to Section 563.39(b) of the Regulations

Applicable to all Savings Banks, 12 C.F.R. § 563.39(b), or any successor

thereto, and shall be controlling in the event of a conflict with any other

provision of this Agreement, including without limitation Section 5 hereof.

 

(a)           If Executive is

suspended from office and/or temporarily prohibited from participating in the

conduct of the Employers’ affairs pursuant to notice served under Section

8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12

U.S.C. §§1818(e)(3) and 1818(g)(1)), the Employers’ obligations under this

Agreement shall be suspended as of the date of service, unless stayed by

appropriate proceedings.  If the charges

in the notice are dismissed, the Employers may, in their discretion:  (i) pay Executive all or part of the

compensation withheld while its obligations under this Agreement were

suspended, and (ii) reinstate (in whole or in part) any of its obligations

which were suspended.

 

(b)           If Executive is

removed from office and/or permanently prohibited from participating in the

conduct of the Employers’ affairs by an order issued under Section 8(e)(4) or

Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and

 

6

 

(g)(1)), all obligations of the

Employers under this Agreement shall terminate as of the effective date of the

order, but vested rights of the Executive and the Employers as of the date of

termination shall not be affected.

 

(c)           If the Association

is in default, as defined in Section 3(x)(1) of the FDIA (12 U.S.C.

§1813(x)(1)), all obligations under this Agreement shall terminate as of the

date of default, but vested rights of the Executive and the Employers as of the

date of termination shall not be affected.

 

(d)           All obligations

under this Agreement shall be terminated pursuant to 12 C.F.R. §563.39(b)(5)

(except to the extent that it is determined that continuation of the Agreement

for the continued operation of the Employers is necessary): (i) by the Director

of the Office of Thrift Supervision (“OTS”), or his or her designee, at the

time the Federal Deposit Insurance Corporation (“FDIC”) or Resolution Trust

Corporation enters into an agreement to provide assistance to or on behalf of

the Association under the authority contained in Section 13(c) of the FDIA (12

U.S.C. §1823(c)); or (ii) by the Director of the OTS, 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 Association or when the

Association is determined by the Director of the OTS to be in an unsafe or

unsound condition, but vested rights of the Executive and the Employers as of

the date of termination shall not be affected.

 

18.          Regulatory Prohibition. 

Notwithstanding any other provision of this Agreement to the contrary,

any payments made to the Executive pursuant to this Agreement, or otherwise,

are subject to and conditioned upon their compliance with Section 18(k) of the

FDIA (12 U.S.C. §1828(k)) and any regulations promulgated thereunder.

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date

first above written.

 

	

  Attest:

  	

  FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

  
	

   

  	

   

  	

   

  
	

  /s/ Brenda Jackson

  	

   

  	

  By:

  	

  /s/ Larry J. Brandt

  	

   

  
	

   

  	

   

  	

  Larry J. Brandt

  
	

   

  	

   

  	

   

  
	

  Attest:

  	

  FIRST FEDERAL BANK 

  OF ARKANSAS, FA

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  /s/ Brenda Jackson

  	

   

  	

  By:

  	

  /s/ Larry J. Brandt

  	

   

  
	

   

  	

   

  	

  Larry J. Brandt

  
	

   

  	

   

  	

   

  
	

   

  	

  EXECUTIVE

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Tommy Richardson

  	

   

  
	

   

  	

   

  	

  Tommy Richardson

  

 

7EXHIBIT 10.8

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT, dated this 25th day of April 2002, between First

Federal Bancshares of Arkansas, Inc., a Texas chartered corporation (the

“Corporation”), First Federal Bank of Arkansas, FA, a federally chartered savings

and loan association and a wholly owned subsidiary of the Corporation (the

“Association”), and Sherri Billings (the “Executive”).

 

WITNESSETH

 

WHEREAS, the Executive is presently an officer of the Corporation and

the Association (together the “Employers”); and

 

WHEREAS, the Employers desire to be ensured of the Executive’s

continued active participation in the business of the Employers; and

 

WHEREAS, in order to induce the Executive to remain in the employ of

the Employers and in consideration of the Executive’s agreeing to remain in the

employ of the Employers, the parties desire to specify the severance benefits

which shall be due the Executive in the event that her employment with the

Employers is terminated under specified circumstances;

 

NOW THEREFORE, in consideration of the premises and the mutual

agreements herein contained, the parties hereby agree as follows:

 

1.             Definitions.  The

following words and terms shall have the meanings set forth below for the

purposes of this Agreement:

 

(a)           Average

Annual Compensation.  The

Executive’s “Average Annual Compensation” for purposes of this Agreement shall

be deemed to mean the average level of compensation paid to the Executive by

the Employers or any subsidiary thereof during the most recent five taxable

years preceding the Date of Termination (or such shorter period as the

Executive was employed), and which was included in the Executive’s gross income

for tax purposes including but not limited to Base Salary, bonuses, director’s

fees, if applicable, and all other amounts taxable to the Executive pursuant to

any employee benefit plans of the Employers.

 

(b)           Base

Salary.  “Base Salary” shall

have the meaning set forth in Section 3(a) hereof.

 

(c)           Cause.

Termination of the Executive’s employment for “Cause” shall mean termination

because of personal dishonesty, incompetence, willful misconduct, breach of

fiduciary duty involving personal profit, intentional failure to perform stated

duties, willful violation of any law, rule or regulation (other than traffic

violations or similar offenses) or final cease-and-desist order or material

breach of any provision of this Agreement. 

For purposes of this paragraph, no act or failure to act on the

Executive’s part shall be considered “willful” unless done, or omitted to be

done, by the Executive not in good faith and without reasonable belief that the

Executive’s action or omission was in the best interest of the Employers.

 

(d)           Change

in Control of the Corporation. 

“Change in Control of the Corporation” shall mean a change in control of

a nature that would be required to be reported in response to Item 6(e) of

Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of

1934, as amended (“Exchange Act”), or any successor thereto, whether or not the

Corporation is registered under the Exchange Act; provided that, without

limitation, such a change in control shall be deemed to have occurred if (i)

any “person” (as such 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 Corporation

representing 25% or more of the combined voting power of the Corporation’s then

outstanding securities; or (ii) during any period of two consecutive years,

individuals who at the beginning of such period constitute the Board of

Directors of the Corporation cease for any reason to constitute at least a

majority thereof unless the election, or the nomination for election by

stockholders, of each new director was approved by a vote of at least

two-thirds of the directors then still in office who were directors at the

beginning of the period.

 

1

 

(e)           Code.  “Code” shall mean the Internal Revenue Code

of 1986, as amended.

 

(f)            Date

of Termination.  “Date of

Termination” shall mean (i) if the Executive’s employment is terminated for

Cause or for Disability, the date specified in the Notice of Termination, and

(ii) if the Executive’s employment is terminated for any other reason, the date

on which a Notice of Termination is given or as specified in such Notice.

 

(g)           Disability.  Termination by the Employers of the

Executive’s employment based on “Disability” shall mean termination because of

any physical or mental impairment which qualifies the Executive for disability

benefits under the applicable long-term disability plan maintained by the

Employers or any subsidiary or, if no such plan applies, which would qualify

the Executive for disability benefits under the Federal Social Security System.

 

(h)           Good

Reason.  Termination by the

Executive of the Executive’s employment for “Good Reason” shall mean

termination by the Executive within one year following a Change in Control of

the Corporation based on:

 

(i)                                      Without the Executive’s express written consent,

the failure to elect or to re-elect or to appoint or to re-appoint the

Executive to the office of Executive Vice President and Chief Financial Officer

of the Employers or a material adverse change made by the Employers in the

Executive’s functions, duties or responsibilities as Executive Vice President

and Chief Financial Officer of the Employers;

 

(ii)                                  Without the Executive’s express written consent,

a material reduction by the Employers in the Executive’s Base Salary as the

same may be increased from time to time or, except to the extent permitted by

Section 3(b) hereof, a material reduction in the package of fringe benefits

provided to the Executive, taken as a whole;

 

(iii)                               Without the Executive’s express written consent,

the Employers require the Executive to work in an office which is more than 30

miles from the location of the Employers’ current principal executive office,

except for required travel on business of the Employers to an extent substantially

consistent with the Executive’s present business travel obligations;

 

(iv)                              Any purported termination of the Executive’s

employment for Cause, Disability or Retirement which is not effected pursuant

to a Notice of Termination satisfying the requirements of paragraph (j) below;

or

 

(v)                                 The failure by the Employers to obtain the

assumption of and agreement to perform this Agreement by any successor as

contemplated in Section 9 hereof.

 

(i)            IRS.  IRS shall mean the Internal Revenue Service.

 

(j)            Notice

of Termination.  Any

purported termination of the Executive’s employment by the Employers for any

reason, including without limitation for Cause, Disability or Retirement, or by

the Executive for any reason, including without limitation for Good Reason,

shall be communicated by written “Notice of Termination” to the other party

hereto.  For purposes of this Agreement,

a “Notice of Termination” shall mean a dated notice which (i) indicates the

specific termination provision in this Agreement relied upon, (ii) sets forth

in reasonable detail the facts and circumstances claimed to provide a basis for

termination of Executive’s employment under the provision so indicated, (iii)

specifies a Date of Termination, which shall be not less than thirty (30) nor more

than ninety (90) days after such Notice of Termination is given, except in the

case of the Employers’ termination of Executive’s employment for Cause; and

(iv) is given in the manner specified in Section 10 hereof.

 

(k)           Retirement.  “Retirement” shall mean voluntary

termination by the Executive in accordance with the Employers’ retirement

policies, including early retirement, generally applicable to the Employers’

salaried employees.

 

2

 

2.             Term of Employment.

 

(a)           The Employers hereby

employ the Executive as Executive Vice President and Chief Financial Officer

and Executive hereby accepts said employment and agrees to render such services

to the Employers on the terms and conditions set forth in this Agreement.

Unless extended as provided in this Section 2, this Agreement shall terminate

three (3) years after the date first above written.  Prior to the first annual anniversary of the date first above

written and each annual anniversary thereafter, the Boards of Directors of the

Employers shall consider, review (with appropriate corporate documentation

thereof, and after taking into account all relevant factors, including the

Executive’s performance) and, if appropriate, explicitly approve a one-year

extension of the remaining term of this Agreement.  The term of this Agreement shall continue to extend each year if

the Boards of Directors so approve such extension unless the Executive gives

written notice to the Employers of the Executive’s election not to extend the

term, with such notice to be given not less than thirty (30) days prior to any

such anniversary date.  If the Boards of

Directors elect not to extend the term, they shall give written notice of such

decision to the Executive not less than thirty (30) days prior to any such

anniversary date.  If any party gives

timely notice that the term will not be extended as of any annual anniversary

date, then this Agreement shall terminate at the conclusion of its remaining

term.  References herein to the term of

this Agreement shall refer both to the initial term and successive terms.

 

(b)           During the term of

this Agreement, the Executive shall perform such executive services for the

Employers as are consistent withher title of Executive Vice President and Chief

Financial Officer.

 

3.             Compensation and Benefits.

 

(a)           The Employers shall

compensate and pay Executive for her services during the term of this Agreement

at a minimum base salary of $150,000 per year (“Base Salary”), which may be

increased from time to time in such amounts as may be determined by the Boards

of Directors of the Employers.  In

addition to her Base Salary, the Executive shall be entitled to receive during

the term of this Agreement such bonus payments as may be determined by the

Boards of Directors of the Employers.

 

(b)           During the term of

the Agreement, Executive shall be entitled to participate in and receive the

benefits of any pension or other retirement benefit plan, profit sharing, stock

option, employee stock ownership, or other plans, benefits and privileges given

to employees and executives of the Employers, to the extent commensurate with

her then duties and responsibilities, as fixed by the Boards of Directors of

the Employers.  The Employers shall not

make any changes in such plans, benefits or privileges which would adversely

affect Executive’s rights or benefits thereunder, unless such change occurs

pursuant to a program applicable to all executive officers of the Employers and

does not result in a proportionately greater adverse change in the rights of or

benefits to Executive as compared with any other executive officer of the

Employers.  Nothing paid to Executive

under any plan or arrangement presently in effect or made available in the future

shall be deemed to be in lieu of the salary payable to Executive pursuant to

Section 3(a) hereof.

 

(c)           During the term of

this Agreement, Executive shall be entitled to paid annual vacation in

accordance with the policies as established from time to time by the Boards of

Directors of the Employers.  Executive

shall not be entitled to receive any additional compensation from the Employers

for failure to take a vacation, nor shall Executive be able to accumulate

unused vacation time from one year to the next, except to the extent authorized

by the Boards of Directors of the Employers.

 

(d)           During the term of

this Agreement, in keeping with past practices, the Employers shall continue to

provide the Executive with the automobile he presently drives. The Employers

shall be responsible and shall pay for all costs of insurance coverage,

repairs, maintenance and other incidental expenses, including license, fuel and

oil.  The Employers shall provide the

Executive with a replacement automobile of a similar type as selected by the

Executive at approximately the time that her present automobile reaches three

(3) years of age and approximately every three (3) years thereafter, upon the

same terms and conditions.

 

(e)           During the term of

this Agreement, in keeping with past practices, the Employers shall continue to

pay the annual membership dues at the country clubs which the Executive is

currently a member of.

 

3

 

(f)            The Employers shall

provide continued medical insurance in the Employers’ health plan for the

benefit of the Executive and her spouse until the Executive shall have attained

the age of 70, whether or not the Executive is employed full time by the

Employers, and such insurance shall be comparable to that which is provided to

the Executive as of the date of this Agreement notwithstanding anything to the

contrary in this Agreement and regardless of whether the Executive is eligible

to participate in the Employers’ health plan. 

In the event of the Executive’s death before he attains the age of 70, the

Employers shall provide the Executive’s spouse continued medical insurance in

the Employers’ health plan comparable to that which is being provided to the

Executive’s spouse at such time for three years from the date of the

Executive’s death.  This Section 3(f)

shall not apply if the Employee is employed full-time by an employer other than

the Corporation or the Association.

 

(g)           In the event of the

Executive’s death during the term of this Agreement, the Executive’s spouse,

estate, legal representative or named beneficiaries (as directed by the

Executive in writing) shall be paid on a monthly basis the Executive’s Base

Salary (as defined in Section 3(a) hereof) in effect at the time of the

Executive’s death for a period of twelve (12) months from the date of the

Executive’s death.

 

(h)           The Executive’s

compensation and expenses shall be paid by the Corporation and the Association

in the same proportion as the time and services actually expended by the

Executive on behalf of each respective Employer.

 

4.             Expenses.  The

Employers shall reimburse Executive or otherwise provide for or pay for all

reasonable expenses incurred by Executive in furtherance of, or in connection

with the business of the Employers, including, but not by way of limitation,

automobile and traveling expenses, and all reasonable entertainment expenses

(whether incurred at the Executive’s residence, while traveling or otherwise),

subject to such reasonable documentation and other limitations as may be

established by the Boards of Directors of the Employers.  If such expenses are paid in the first

instance by Executive, the Employers shall reimburse the Executive therefor.

 

5.             Termination.

 

(a)           The Employers shall

have the right, at any time upon prior Notice of Termination, to terminate the Executive’s

employment hereunder for any reason, including without limitation termination

for Cause, Disability or Retirement, and Executive shall have the right, upon

prior Notice of Termination, to terminate her employment hereunder for any

reason.

 

(b)           In the event that

(i) Executive’s employment is terminated by the Employers for Cause, or (ii)

Executive terminates her employment hereunder other than for Good Reason,

Executive shall have no right pursuant to this Agreement to compensation or

other benefits for any period after the applicable Date of Termination.  In the event that the Executive’s employment

is terminated due to Disability or Retirement, the Executive’s rights shall be

as provided in Section 3(f) hereof.  In

the event the Executive’s employment is terminated due to the Executive’s

death, the Executive’s rights shall be as provided in Section 3(g) hereof.

 

(c)           In the event that

(i) Executive’s employment is terminated by the Employers for other than Cause,

Disability, Retirement or the Executive’s death or (ii) such employment is

terminated by the Executive (a) due to a material breach of this Agreement by

the Employers, which breach has not been cured within fifteen (15) days after a

written notice of non-compliance has been given by the Executive to the

Employers, or (b) for Good Reason, then the Employers shall, subject to the

provisions of Section 6 hereof, if applicable,

 

(A)          Pay to the Executive,

in thirty-six (36) equal monthly installments beginning with the first business

day of the month following the Date of Termination, a cash severance amount

equal to three (3) times the Executive’s Average Annual Compensation over the

most recent five taxable years, and

 

(B)           Maintain and provide

for a period ending at the earlier of (i) the expiration of the remaining term

of employment pursuant hereto prior to the Notice of Termination or (ii) the

date of the Executive’s full-time employment by another employer (provided that

the Executive is entitled under the terms of such employment to benefits

substantially similar to those described in this subparagraph (B)), at no cost

to the Executive, the Executive’s continued participation in all group

insurance, life insurance, health and accident, disability and other employee

benefit plans, programs and arrangements

 

4

 

in which

the Executive was entitled to participate immediately prior to the Date of

Termination (other than stock option and restricted stock plans of the

Employers), provided that in the event that the Executive’s participation in

any plan, program or arrangement as provided in this subparagraph (B) is barred

or during such period any such plan, program or arrangement is discontinued or

the benefits thereunder are materially reduced, the Employers shall arrange to

provide the Executive with benefits substantially similar to those which the

Executive was entitled to receive under such plans, programs and arrangements

immediately prior to the Date of Termination.

 

6.             Limitation of Benefits under

Certain Circumstances.  If the payments and benefits

pursuant to Section 5 hereof, either alone or together with other payments and

benefits which Executive has the right to receive from the Employers, would

constitute a “parachute payment” under Section 280G of the Code, the payments

and benefits pursuant to Section 5 hereof shall be reduced, in the manner

determined by the Executive, by the amount, if any, which is the minimum

necessary to result in no portion of the payments and benefits under Section 5

being non-deductible to either of the Employers pursuant to Section 280G of the

Code and subject to the excise tax imposed under Section 4999 of the Code.  The determination of any reduction in the

payments and benefits to be made pursuant to Section 5 shall be based upon the

opinion of independent tax counsel selected by the Employers’ independent

public accountants and paid by the Employers. 

Such counsel shall be reasonably acceptable to the Employers and the Executive;

shall promptly prepare the foregoing opinion, but in no event later than thirty

(30) days from the Date of Termination; and may use such actuaries as such

counsel deems necessary or advisable for the purpose.  In the event that the Employers and/or the Executive do not agree

with the opinion of such counsel, (i) the Employers shall pay to the Executive

the maximum amount of payments and benefits pursuant to Section 5, as selected

by the Executive, which such opinion indicates that there is a high probability

do not result in any of such payments and benefits being non-deductible to the

Employers and subject to the imposition of the excise tax imposed under Section

4999 of the Code and (ii) the Employers may request, and Executive shall have

the right to demand that the Employers request, a ruling from the IRS as to

whether the disputed payments and benefits pursuant to Section 5 hereof have

such consequences.  Any such request for

a ruling from the IRS shall be promptly prepared and filed by the Employers,

but in no event later than thirty (30) days from the date of the opinion of

counsel referred to above, and shall be subject to Executive’s approval prior

to filing, which shall not be unreasonably withheld.  The Employers and Executive agree to be bound by any ruling

received from the IRS and to make appropriate payments to each other to reflect

any such rulings, together with interest at the applicable federal rate

provided for in Section 7872(f)(2) of the Code.  Nothing contained herein shall result in a reduction of any

payments or benefits to which the Executive may be entitled upon termination of

employment under any circumstances other than as specified in this Section 6,

or a reduction in the payments and benefits specified in Section 5 below zero.

 

7.             Mitigation; Exclusivity of Benefits.

 

(a)           The Executive shall

not be required to mitigate the amount of any benefits hereunder by seeking

other employment or otherwise, nor shall the amount of any such benefits be

reduced by any compensation earned by the Executive as a result of employment

by another employer after the Date of Termination or otherwise.

 

(b)           The specific

arrangements referred to herein are not intended to exclude any other benefits

which may be available to the Executive upon a termination of employment with

the Employers pursuant to employee benefit plans of the Employers or otherwise.

 

8.             Withholding.  All

payments required to be made by the Employers hereunder to the Executive shall

be subject to the withholding of such amounts, if any, relating to tax and

other payroll deductions as the Employers may reasonably determine should be

withheld pursuant to any applicable law or regulation.

 

9.             Assignability.  The

Employers may assign this Agreement and its rights and obligations hereunder in

whole, but not in part, to any corporation, bank or other entity with or into

which the Employers may hereafter merge or consolidate or to which the

Employers may transfer all or substantially all of its assets, if in any such

case said corporation, bank or other entity shall by operation of law or

expressly in writing assume all obligations of the Employers hereunder as fully

as if it had been originally made a party hereto, but may not otherwise assign

this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer

this Agreement or any rights or obligations hereunder.

 

5

 

10.          Notice.  For the

purposes of this Agreement, notices and all other communications provided for

in this Agreement shall be in writing and shall be deemed to have been duly

given when delivered or mailed by certified or registered mail, return receipt

requested, postage prepaid, addressed to the respective addresses set forth

below:

 

	

  To the Employers:

  	

   

  	

  Board of Directors

  
	

   

  	

   

  	

  First Federal Bancshares of Arkansas, Inc.

  
	

   

  	

   

  	

  200 West

  Stephenson Avenue

  
	

   

  	

   

  	

  Harrison, Arkansas 72602-0550

  
	

   

  	

   

  	

   

  
	

  To the Executive:

  	

   

  	

  Sherri Billings

  
	

   

  	

   

  	

  4101 Turtle Creek Cove

  
	

   

  	

   

  	

  Harrison, Arkansas  72601

  

 

11.          Amendment; Waiver.  No

provisions of this Agreement may be modified, waived or discharged unless such

waiver, modification or discharge is agreed to in writing signed by the

Executive and such officer or officers as may be specifically designated by the

Boards of Directors of the Employers to sign on its behalf.  No waiver by any party hereto at any time of

any breach by any other party hereto of, or compliance with, any condition or

provision of this Agreement to be performed by such other party shall be deemed

a waiver of similar or dissimilar provisions or conditions at the same or at

any prior or subsequent time.

 

12.          Governing Law.  The

validity, interpretation, construction and performance of this Agreement shall

be governed by the laws of the United States where applicable and otherwise by

the substantive laws of the State of Arkansas.

 

13.          Nature of Obligations.  Nothing

contained herein shall create or require the Employers to create a trust of any

kind to fund any benefits which may be payable hereunder, and to the extent

that the Executive acquires a right to receive benefits from the Employers

hereunder, such right shall be no greater than the right of any unsecured

general creditor of the Employers.

 

14.          Interpretation and Headings.  This

agreement shall be interpreted in order to achieve the purposes for which it

was entered into.  The section headings

contained in this Agreement are for reference purposes only and shall not

affect in any way the meaning or interpretation of this Agreement.

 

15.          Validity.  The

invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceability of any other provisions of this

Agreement, which shall remain in full force and effect.

 

16.          Counterparts.  This

Agreement may be executed in one or more counterparts, each of which shall be

deemed to be an original but all of which together will constitute one and the

same instrument.

 

17.          Regulatory Actions.  The

following provisions shall be applicable to the parties to the extent that they

are required to be included in employment agreements between a savings

association and its employees pursuant to Section 563.39(b) of the Regulations

Applicable to all Savings Banks, 12 C.F.R. § 563.39(b), or any successor

thereto, and shall be controlling in the event of a conflict with any other provision

of this Agreement, including without limitation Section 5 hereof.

 

(a)           If Executive is

suspended from office and/or temporarily prohibited from participating in the

conduct of the Employers’ affairs pursuant to notice served under Section

8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12

U.S.C. §§1818(e)(3) and 1818(g)(1)), the Employers’ obligations under this

Agreement shall be suspended as of the date of service, unless stayed by

appropriate proceedings.  If the charges

in the notice are dismissed, the Employers may, in their discretion:  (i) pay Executive all or part of the

compensation withheld while its obligations under this Agreement were

suspended, and (ii) reinstate (in whole or in part) any of its obligations

which were suspended.

 

(b)           If Executive is

removed from office and/or permanently prohibited from participating in the

conduct of the Employers’ affairs by an order issued under Section 8(e)(4) or

Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and

 

6

 

(g)(1)),

all obligations of the Employers under this Agreement shall terminate as of the

effective date of the order, but vested rights of the Executive and the

Employers as of the date of termination shall not be affected.

 

(c)           If the Association

is in default, as defined in Section 3(x)(1) of the FDIA (12 U.S.C.

§1813(x)(1)), all obligations under this Agreement shall terminate as of the

date of default, but vested rights of the Executive and the Employers as of the

date of termination shall not be affected.

 

(d)           All obligations

under this Agreement shall be terminated pursuant to 12 C.F.R. §563.39(b)(5)

(except to the extent that it is determined that continuation of the Agreement

for the continued operation of the Employers is necessary): (i) by the Director

of the Office of Thrift Supervision (“OTS”), or his or her designee, at the

time the Federal Deposit Insurance Corporation (“FDIC”) or Resolution Trust

Corporation enters into an agreement to provide assistance to or on behalf of

the Association under the authority contained in Section 13(c) of the FDIA (12

U.S.C. §1823(c)); or (ii) by the Director of the OTS, 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 Association or when the

Association is determined by the Director of the OTS to be in an unsafe or

unsound condition, but vested rights of the Executive and the Employers as of

the date of termination shall not be affected.

 

18.          Regulatory Prohibition. 

Notwithstanding any other provision of this Agreement to the contrary,

any payments made to the Executive pursuant to this Agreement, or otherwise,

are subject to and conditioned upon their compliance with Section 18(k) of the

FDIA (12 U.S.C. §1828(k)) and any regulations promulgated thereunder.

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date

first above written.

 

 

	

  Attest:

  	

  FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

  
	

   

  	

   

  	

   

  
	

  /s/ Tommy Richardson

  	

   

  	

  By:

  	

  /s/ Larry J. Brandt

  	

   

  
	

   

  	

   

  	

  Larry J. Brandt

  
	

   

  	

   

  	

   

  
	

  Attest:

  	

  FIRST FEDERAL BANK 

  OF ARKANSAS, FA

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  /s/ Tommy Richardson

  	

   

  	

  By:

  	

  /s/ Larry J. Brandt

  	

   

  
	

   

  	

   

  	

  Larry J. Brandt

  
	

   

  	

   

  	

   

  
	

   

  	

  EXECUTIVE

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Sherri Billings

  	

   

  
	

   

  	

   

  	

  Sherri Billings

  

 

7

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