Document:

Eight Amendment to Second Amended and Restated Credit Agreement

EXHIBIT 10.1

EIGHTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

           THIS EIGHTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of July 21, 2008, is among ELIZABETH ARDEN, INC., a Florida Corporation (the "Borrower"), the banks listed on the signature pages hereto (the "Banks"), JPMORGAN CHASE BANK, N.A. (formerly JPMorgan Chase Bank), as the administrative agent (the "Administrative Agent"), and Bank OF AMERICA, N.A. (successor in interest by merger to Fleet National Bank), as the collateral agent (the "Collateral Agent", and together with the Administrative Agent, the "Agents").

RECITALS:

           The Borrower, the Administrative Agent, the Collateral Agent and the banks party thereto have entered into that certain Second Amended and Restated Credit Agreement dated as of December 24, 2002 (as the same has been modified by that certain First Amendment to Second Amended and Restated Credit Agreement dated February 25, 2004, that certain Second Amendment to Second Amended and Restated Credit Agreement dated June 2, 2004, that certain Third Amendment to Second Amended and Restated Credit Agreement dated September 30, 2004, that certain Fourth Amendment to Second Amended and Restated Credit Agreement dated November 2, 2005, that certain Fifth Amendment to Second Amended and Restated Credit Agreement dated August 11, 2006, that certain Sixth Amendment to Second Amended and Restated Credit Agreement dated as of August 15, 2007, and that certain Seventh Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2007,  the "Agreement").  The Borrower and the Guarantors have requested that the Agents and the Banks amend certain provisions of the Agreement and the Agents and the Banks party hereto have agreed to do so on and subject to the terms set forth herein.  Upon the execution of this Amendment, HSBC Business Credit (USA), Inc. and HSBC Bank plc shall become Banks under the Agreement.

           NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows effective as of the date hereof unless otherwise indicated:

ARTICLE I.

Definitions

           Section 1.1.          Definitions.  Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Agreement, as amended hereby.

 

ARTICLE II.

Amendments

           Section 2.1.          Amendment to Definition of "Commitment" in Section 1.01 (Definitions).  The definition of "Commitment" contained in Section 1.01 of the Agreement is amended in its entirety to read as follows:

                      "Commitment" means, with respect to a Bank, the obligation of such Bank to make

        advances of funds and purchase participation interests in Letters of Credit in the aggregate 

        principal or face amount at any time outstanding not to exceed the amount set forth opposite 

        such Bank's name on Schedule 1.01 hereto (or, in the case of an Assignee, in its Assignment 

        and Assumption Agreement), as such amount may be: (a) reduced from time to time pursuant

        to Section 2.09, (b) increased from time to time pursuant to Section 2.18, and (c) adjusted to 

        reflect assignments pursuant to Section 9.06.  As of July 21, 2008, the aggregate amount of the 

        Commitments is $325,000,000.

           Section 2.2.          Amendment to Definition of "Borrowing Base" in Section 1.01 (Definitions).  Clause (f) of the definition of "Borrowing Base" contained in Section 1.01 of the Agreement is amended in its entirety to read as follows:

                     (f)          Temporary Increase.  If the date of determination is during the period from and 

        including August 15 to and including October 31 during any fiscal year of the Borrower, the 

        Temporary Increase Amount; provided, however, that:

                          (i)          if the Borrower delivers a Borrowing Base Certificate at any time after October 1

           of such fiscal year of the Borrower which shows that the Borrowing Availability, as calculated in

           accordance with such Borrowing Base Certificate, is equal to or greater than the Temporary 

           Increase Amount but calculating the Borrowing Base on a pro forma basis without giving effect to 

           this clause (f), then effective as of the date of the delivery of such Borrowing Base Certificate, the 

           Borrower may, by written notice to the Administrative Agent, exclude the amount available under 

           this clause (f) from the Borrowing Base; and

                          (ii)         this clause (f) shall be included when determining the Borrowing Base for all 

           purposes under this Agreement, including when determining Borrowing Availability, Average 

           Borrowing Base Capacity, Borrowing Base Capacity and the Borrowing Base;

           Section 2.3.          Addition of Definition of "Temporary Increase Amount" in Section 1.01 (Definitions).  The definition of "Temporary Increase Amount" is hereby added to Section 1.01 of the Agreement in proper alphabetical order and shall read as follows:

                          "Temporary Increase Amount" means the Dollar amount equal to the lesser of:

                                      (a)          $25,000,000 and

                                      (b)          the sum of:

                                                     (i)          five percent (5%) of all Eligible Accounts Receivable; plus 

                                                     (ii)         ten percent (10%) of the product of the Appraised 

           Liquidation Percentage (as defined below in this definition) multiplied by the difference of (y) 

           the gross cost of all finished goods inventory owned by the Borrower and Elizabeth Arden 

           GmbH that has been packaged for delivery to a customer and, with respect to such inventory 

           owned by Elizabeth Arden GmbH, that is located in the United States minus (z) the ZUG 

           Allocation applicable to such inventory; plus

                                                     (iii)       ten percent (10%) of the product of the Appraised Liquidation 

           Percentage (as defined below in this definition) multiplied by the difference of (y) the gross cost of 

           all finished goods inventory owned by the Borrower and Elizabeth Arden GmbH that has not been 

           packaged for delivery to a customer and, with respect to such inventory owned by Elizabeth Arden 

           GmbH, that is located in the United States minus (z) the ZUG Allocation applicable to such 

           inventory; plus 

                                                     (iv)       ten percent (10%) of the product of the Appraised Liquidation 

           Percentage (as defined below in this definition) multiplied by the difference of (y) the gross cost of 

           all work-in-process and raw materials inventory owned by the Borrower and Elizabeth Arden 

           GmbH and that, with respect to such inventory owned by Elizabeth Arden GmbH, is located in the 

           United States minus (z) the ZUG Allocation applicable to such inventory; plus

                                                     (v)         ten percent (10%) of the product of the Appraised Liquidation 

           Percentage (as defined below in this definition) multiplied by the difference of (y) the gross cost of 

           all inventory owned by the Borrower and Elizabeth Arden GmbH and held as a gift to be given 

           with purchased merchandise in the ordinary course of business or as promotional merchandise in 

           the ordinary course of business and that, with respect to such inventory owned by Elizabeth Arden 

           GmbH, is located in the United States minus (z) the ZUG Allocation applicable to such inventory.

           Section 2.4.          Amendment to Section 2.09 (Reduction or Termination of Commitments).  Clause (b) of Section 2.09 of the Agreement is amended in its entirety to read as follows:

                     (b)          Unless earlier reduced or terminated pursuant to Section 2.09(a), the aggregate 

        amount of the Commitments shall terminate on the Termination Date.

           Section 2.5.         Amendment to Section 2.18 (Increase of Commitments). The reference to "$300,000,000" in clause (iii) of the first proviso in Section 2.18 of the Agreement is amended in its entirety to read "$375,000,000".

           Section 2.6.         Article IX  (Miscellaneous).  Article IX is amended to add thereto new Sections 9.15 and 9.16 to read as set forth on Schedule 2.6 hereto.

           Section 2.7.         Amendment to Schedule 1.01 (Commitments).  Schedule 1.01 of the Agreement is amended in its entirety to read as set forth on Schedule 1.01 attached hereto.

ARTICLE III.

Conditions Precedent

           Section 3.1.          Conditions.  The effectiveness of Article II of this Amendment is subject to the satisfaction of the following conditions precedent:

                     (a)         The Administrative Agent shall have received this Amendment duly executed by the Borrower, the Guarantors and the Banks and each Bank shall have receive a new Note in the amount of its Commitment in effect after giving effect to this Amendment if such Commitment amount is different then the principal amount of its existing Note;

                     (b)          The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of Borrower and the Guarantors, the authorization of this Amendment, the Notes and the transactions contemplated hereby and any other legal matters relating to this Amendment reasonably requested by the Administrative Agent, all in form and substance satisfactory to the Administrative Agent and its counsel;

                     (c)          The representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the date hereof as if made on the date hereof, except for such representations and warranties limited by their terms to a specific date and the representations and warranties in the second and third sentences of Section 4.15(b) which shall be deemed made as of the Effective Date;

                     (d)          The receipt by each Bank of an amendment fee equal to 0.10% of its Commitment as in effect immediately prior to the execution of this Amendment;

                     (e)          The receipt by each Bank who increased its Commitment as result of the effectiveness of this Amendment of an amendment fee equal to 0.75% of such Bank's allocated amount of the increase in the Commitments provided for in this Amendment; 

                     (f)          The Administrative Agent shall have received all fees due and payable on or prior to the effective date of this Amendment including, without limitation, those fees set forth in that certain Fee Letter dated the date hereof between the Administrative Agent and the Borrower;

                     (g)          No Default shall exist; and

                     (h)          All proceedings taken in connection with the transactions contemplated by this Amendment and all documentation and other legal matters incident thereto shall be satisfactory to Administrative Agent and its legal counsel, Hunton & Williams LLP.

ARTICLE IV.

Miscellaneous

           Section 4.1.          Ratifications.  The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement, and the other Loan Documents are ratified and confirmed and shall continue in full force and effect.  The Borrower, the Agents and the Banks agree that the Agreement as amended hereby and the other Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.  The Borrower (and by their execution of this Amendment below, each Guarantor) agrees that the term "Obligations" as that term is defined in the Agreement, includes, without limitation, the obligations, indebtedness and liability of the Borrower arising under the Agreement as amended hereby and as a result, the obligations, indebtedness and liabilities secured by the Security Agreement and guaranteed by the Guaranty Agreement include all the Obligations, including, without limitation, the obligations, indebtedness and liability of the Borrower arising under the Agreement as amended hereby.

           Section 4.2.          Representations and Warranties; Release.  The Borrower hereby represents and warrants to the Agents and the Banks as follows:  (a) no Default exists; (b) the representations and warranties set forth in the Loan Documents are true and correct on and as of the date hereof with the same effect as though made on and as of such date except with respect to any representations and warranties limited by their terms to a specific date and the representations and warranties in the second and third sentences of Section 4.15(b) which shall be deemed made as of the Effective Date; and (c) the indebtedness incurred and to be incurred pursuant to the Agreement, as amended hereby, is permitted under the terms of the Senior Subordinated Note Indenture and the terms of the other Indentures, in each case, to the extent the applicable Indenture is still in effect.  IN ADDITION, TO INDUCE THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE BANKS TO AGREE TO THE TERMS OF THIS AMENDMENT, THE BORROWER AND EACH GUARANTOR (BY ITS EXECUTION BELOW) REPRESENTS AND WARRANTS THAT AS OF THE DATE OF ITS EXECUTION OF THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR RIGHTS OF RECOUPMENT WITH RESPECT TO OR DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.

           Section 4.3.          Survival of Representations and Warranties.  All representations and warranties made in this Amendment or any other Loan Document including any Loan Document furnished in connection with this Amendment shall survive the execution and delivery of this Amendment, and no investigation by any Agent or any Bank or any closing shall affect the representations and warranties or the right of any Agent or any Bank to rely upon them.

           Section 4.4.          Reference to Agreement.  Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement as amended hereby.

           Section 4.5.          Expenses of Administrative Agent.  As provided in the Agreement, the Borrower agrees to pay on demand all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation, the reasonable costs and fees of the Administrative Agent's legal counsel provided it sends an invoice to the Borrower beforehand and addresses reasonable questions.

           Section 4.6.          Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

           Section 4.7.          Applicable Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York other than those conflict of law provisions that would defer to the substantive laws of another jurisdiction.  This governing law election has been made by the parties in reliance (at least in part) on Section 5-1401 of the General Obligations Law of the State of New York, as amended (as and to the extent applicable), and other applicable law.

           Section 4.8.          Successors and Assigns.  This Amendment is binding upon and shall inure to the benefit of the Agents, each Bank, the Borrower, each Guarantor and their respective successors and assigns, except neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Banks.

           Section 4.9.          Effectiveness; Counterparts.  This Amendment shall become effective when the Administrative Agent shall have received this Amendment duly executed by the Borrower, the collateral Agent, the Guarantors and the Banks.  This Amendment may be executed in one or more counterparts and on telecopy or other electronic counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement.

           Section 4.10.         Effect of Waiver.  No consent or waiver, express or implied, by any Agent or any Bank to or for any breach of or deviation from any covenant, condition or duty by the Borrower or any Guarantor shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty.

           Section 4.11.         Headings.  The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

           Section 4.12.         ENTIRE AGREEMENT.  THIS AMENDMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

                 Executed as of the date first written above.

	
ELIZABETH ARDEN, INC., as the Borrower

	 	 
	
By:
	
/s/ Marcey Becker

	 	
Marcey Becker, Senior Vice President, Finance

 

 

	
JPMORGAN CHASE BANK, N.A. (formerly

JPMorgan Chase Bank), individually as a Bank, an

Issuing Bank and as Administrative Agent

	 	 
	
By:
	
/s/ Christy L. West

	 	
Christy L. West, Vice President

 

	
Bank OF AMERICA, N.A. (successor in interest by 

merger to Fleet National Bank), as Collateral Agent and

a Bank

	 	 
	
By:
	
/s/ Donald C. McQueen

	 	
Donald C. McQueen, Senior Vice President

 

	
THE CIT GROUP/BUSINESS CREDIT, INC.

(assignee of LaSalle Business Credit, L.L.C.)

	 	 
	
By:
	
/s/ Robyn Pingree

	 	
Robyn Pingree, Vice President

 

	
U.S. BANK BUSINESS CREDIT

(formerly known as Firstar Bank N.A.)

	 	 
	
By:
	
/s/ Ronald Giblin

	 	
Ronald Giblin, Vice President

 

	
WACHOVIA Bank, National Association

(formerly known as First Union National Bank)

	 	 
	
By:
	
/s/ Susan Cromartie

	 	
Susan Cromartie, Vice President

 

 

	
CREDIT SUISSE, Cayman Islands Branch (formerly

known as Credit Suisse First Boston)

	 	 
	
By:
	
/s/ Karl Studer

	 	
Karl Studer, Director

	 	 
	
By:
	
/s/ Robert Hetu

	 	
Robert Hetu, Managing Director

 

	
NATIONAL CITY BUSINESS CREDIT, INC.

(successor to The Provident Bank)

	 	 
	
By:
	
/s/ Todd W. Milenius

	 	
Todd W. Milenius, Vice President

 

	
HSBC BUSINESS CREDIT (USA), INC.

	 	 
	
By:
	
/s/ Jimmy Schwartz

	 	
Jimmy Schwartz, Vice President - Team Leader

	
HSBC BANK plc

	 	 
	
By:
	
/s/ David Michael Phillips

	 	
David Michael Phillips,

Senior Corporate Banking Manager

CONSENT OF GUARANTORS AND REAFFIRMATION OF LOAN DOCUMENTS

            Each of the Guarantors consent and agree to this Amendment (including without limitation, the provisions of Sections 4.1 and 4.2 hereof) and agree that the Loan Documents to which it is a party shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of such Guarantor enforceable against it in accordance with their respective terms.

	
FD MANAGEMENT, INC.

	 	 
	
By:
	
/s/ Stephen J. Smith

	 	
Stephen J. Smith, Vice President & Treasurer

 

	
DF ENTERPRISES, INC.

	 	 
	
By:
	
/s/ Stephen J. Smith

	 	
Stephen J. Smith, Vice President & Treasurer

 

	
ELIZABETH ARDEN INTERNATIONAL 

HOLDING, INC., (formerly FFI International, Inc.)

	 	 
	
By:
	
/s/ Marcey Becker

	 	
Marcey Becker, Vice President

 

	
RDEN MANAGEMENT, INC.

	 	 
	
By:
	
/s/ Stephen J. Smith

	 	
Stephen J. Smith, Vice President & Treasurer

 

	
ELIZABETH ARDEN (FINANCING), INC.

	 	 
	
By:
	
/s/ Stephen J. Smith

	 	
Stephen J. Smith, Vice President & Treasurer

 

	
ELIZABETH ARDEN TRAVEL RETAIL, INC.

	 	 
	
By:
	
/s/ Stephen J. Smith

	 	
Stephen J. Smith, Vice President & Treasurer

SCHEDULE 2.6

to

EIGHTH amendment TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

New Sections 9.15 and 9.16

 

            Section 9.15.     USA PATRIOT Act.  Each Bank that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act") hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank to identify the Borrower in accordance with the Act.

            Section 9.16.     OFAC.  Borrower represents and warrants that, to its knowledge, as of July 21, 2008, neither it nor any Subsidiary of the Borrower:  (a) is a Person whose property or interests in property are blocked or are subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001) or (b) is otherwise a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or executive order.  Neither the Borrower nor any Subsidiary of the Borrower will knowingly (i) engage in any dealings or transactions prohibited by Section 2 of such executive order, or (ii) be otherwise associated with any such Person in any manner violative of Section 2 of such order.exhibit10_21.htm

    Exhibit
10.21

    CHANGE IN CONTROL
AGREEMENT

    

    

    THIS CHANGE IN CONTROL AGREEMENT (the
“Agreement”) entered into this 17th day of July, 2008 between McINTOSH
BANCSHARES, INC., a Georgia corporation (the “Corporation”), and WILLIAM K.
MALONE (the “Employee”).

    

    W I T N E S S E T
H:

    

    WHEREAS, the Corporation wishes to
assure both itself and its key employees of continuity of management and
objective judgment in the event of any actual or contemplated Change in Control
(as defined hereinafter) of the Corporation or McIntosh State Bank, the
Corporation’s wholly-owned subsidiary (the “Bank”), and Employee is a key
employee of the Corporation and Bank and an integral part of their management;
and

    

    WHEREAS, this Agreement is not intended
to materially alter the compensation and benefits that Employee could reasonably
expect to receive in the absence of a Change in Control of the Corporation or
the Bank, and this Agreement accordingly will be offered solely upon
circumstances relating to an actual or anticipated Change in Control of the
Corporation or Bank.

    

    NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants herein contained, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:

    

    1.           DEFINITIONS

    

    As used in this Agreement of the
following terms shall have the definitions as set forth
hereinafter:

    

    1.1           “Board
of Directors” shall mean the Board of Directors of the Corporation or the Bank,
as the case may be.

    

    1.2           “Cause”
shall mean either:

    

    1.2.1                any
act that constitutes on Employee’s part, fraud, dishonesty, a felony or gross
malfeasance of duty, and that directly results in material injury to the
Corporation or to the Bank; or

    

    
      
        
          --

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    1.2.2                conduct
by Employee in his office with the Corporation or the Bank that is grossly
inappropriate and demonstrably likely to lead to material injury to the
Corporation or the Bank, as determined by the Board of Directors acting
reasonably and in good faith; provided, however, such conduct shall not
constitute Cause unless the Board of Directors shall deliver to Employee notice
setting forth with specificity that conduct to qualify as Cause, reasonable
action that would remedy such objection, and a reasonable time (not less than
thirty (30) days) within which Employee may take such remedial action, and
Employee shall not have taken such specified remedial action within the
specified time.

    

    1.3           “Change
in Control” occurs when (a) any one person or more than one person acting as a
group acquires ownership of the stock of the Corporation that, together with
stock held by such person or group, constitutes more than fifty percent (50%) of
the total fair market value or total voting power of the stock of the
Corporation; (b) a change in the effective control of the Corporation occurs on
either of the following dates:  The date any one person or more than
person acting as a group acquires ownership of the stock possessing thirty
percent (30%) of the total voting power of the stock of the Corporation or the
date a majority of the members of the Corporation’s Board of Directors is
replaced during any twelve (12) months period by directors whose appointment or
election is not endorsed by a majority of the members of the Corporation’s Board
of Directors before the date of appointment or election, provided that for
purposes of this paragraph the term Corporation refers solely to the
Corporation; or (c) a change in the ownership of a substantial portion of the
Corporation’s assets occurs on the date that any one person, or more than one
person acting as a group, acquires assets of the Corporation that has a total
gross fair market value equal to or more than forty percent (40%) of the total
gross fair market value of all assets of the Corporation immediately before such
acquisition or acquisitions over a twelve (12) month period.

    

    1.4           “Current
Salary” shall mean that salary at the highest rate in effect during the six (6)
month period prior to Employee’s termination.

    

    1.5           “Disability”
means if an employee is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months.

    

    1.6           “Involuntary
Termination” shall mean termination of his employment by Employee following a
Change in Control, which in the reasonable judgment of Employee is due to
either:

    

    1.6.1                a
change in Employee’s responsibilities, position (including status, office,
title, reporting relationships or working conditions), authority or duties
(including changes resulting from the assignment to Employee of any duties
inconsistent with his positions, duties or responsibilities as in effect
immediately prior to the Change in Control); or

    

    1.6.2                a
reduction in Employee’s compensation or benefits; or

    

    1.6.3                a
forced relocation of Employee outside of Butts County or significant increase in
Employee’s travel requirements.  Involuntary Termination does not
include Employee’s Disability, Retirement (as defined hereinafter) or
death.

    

    1.7           “Person”
shall mean a natural person, corporation, partnership, association, joint-stock
company, trust, unincorporated organization, or government or political
subdivision thereof.

    

    1.8           “Present
Value” shall have the same meaning as provided in Section 280G(d)(4) of the
Internal Revenue Code of 1986, as amended.

    

    1.9           “Proposed
Transaction” shall mean either a public announcement of a proposal for a
transaction that, if consummated, would constitute a Change in Control or the
Board of Directors of the Corporation or the Bank receives and decides to
explore an expression of interest with respect to a transaction in which, if
consummated, would lead to a Change in Control.

    

    1.10                “Retirement”
shall mean Employee’s termination by “retirement” as that term is defined in any
of the Corporation’s or Bank’s retirement plans.

    

    1.11                “Specified
Employee” means a key employee (as defined in Section 416(i) of the Internal
Revenue Code without regard to paragraph 5 thereof) of the Corporation if any
stock of the Corporation is publicly traded on an established securities market
or otherwise.

    

    
      	
              2.

            	
              OPERATION OF
      AGREEMENT

            

    

    

    This Agreement shall be effective
immediately upon its execution by the parties hereto, but anything in this
Agreement to the contrary notwithstanding, neither the Agreement nor any
provision hereof shall be operative unless, during the term of this Agreement,
there has been a Change in Control of the Corporation or of the
Bank.  Upon such a Change in Control of the Corporation or of the Bank
during the term of this Agreement, all of the provisions hereof shall become
operative immediately.

    

    3.           TERM
OF AGREEMENT

    

    The term of this Agreement shall be for
an initial three (3) year period commencing on the date hereof, and shall be
renewable at the end of the first year of such initial three (3) year period and
annually thereafter, for an additional one (1) year period following the initial
three (3) year period and prior extensions thereof in the sole discretion of the
Board of Directors of the Corporation and upon such terms and conditions as it
may authorize at such time.

    

    4.           BENEFITS
FOLLOWING A CHANGE IN CONTROL

    

    4.1           Provided
Employee is providing services to the Corporation or an Employer, the majority
of which is owned by the Corporation, at the time of the Change in Control,
Employee shall be entitled to and the Corporation shall pay to Employee, the
salary, bonus and benefits set forth in paragraph 4.3 below if a Change in
Control occurs during the term of this Agreement and Employee’s employment is
terminated within two (2) years following the Change in Control
either:

    

    4.1.1                by
the Corporation or the Bank other than for Cause or by reason of Employee’s
Disability, Retirement or death, or

    

    4.1.2                by
Employee pursuant to Involuntary Termination.

    

    4.2           Employee
shall be entitled to and the Corporation shall pay to Employee the salary, bonus
and benefits set forth in paragraph 4.3 below if during the term of this
Agreement there is a Proposed Transaction  and Employee’s employment
is thereafter terminated by the Corporation or the Bank other than for Cause or
by reason of Employee’s Disability, Retirement or death, and the Proposed
Transaction is consummated within one (1) year after the date of termination of
Employee’s employment, then a Change in Control shall be deemed to have occurred
during the term of this Agreement and the termination of Employee’s employment
shall be deemed to have occurred within two (2) years following a Change in
Control.

    

    4.3.1                The
Corporation or the Bank shall pay and Employee shall receive his Current Salary
(subject to withholding all applicable taxes) for a period of two (2) years from
his date of termination in the same manner as it was being paid as of the date
of termination; provided, however, that the salary payments provided for
hereunder shall be paid in a single lump sum payment, to be paid not later than
thirty (30) days after his termination of employment, said lump sum payment to
be determined by taking the salary payments to be made and discounting them to
their Present Value.

    4.3.2                The
Corporation or the Bank shall pay and Employees shall receive a bonus (subject
to withholding all applicable taxes) greater than or equal to a pro rata
percentage of the previous years’ bonus based upon the number of months worked
during the current fiscal year prior to termination.

    

    4.3.3                The
Corporation or the Bank shall pay and Employees shall receive the §401(k)
contributions based upon employee’s Current Salary (subject to withholding all
applicable taxes) for a period of two (2) years from the date of his termination
in the same manner as it was being paid as of the date of termination; provided,
however, that the §401(k) contributions provided for hereunder
shall  be paid in a single lump sum payment, to be paid not later than
thirty (30) days after his termination of employment, said lump sum payment to
be determined by taking the §401(k) contributions to be made and discounting
them to their Present Value.

    

    4.3.4                Employees
shall be entitled to any life, health or disability insurance in effect at the
time of employee’s termination for a period of two (2) years from his date of
termination in the same manner as it was provided as of the date of
termination.

    

    4.3.5                Employees
shall be entitled to purchase the automobile provided by the Bank at the Bank’s
depreciated value.

    

    4.4           Restriction
on Timing of Distribution.  Notwithstanding any provision of this
Agreement to the contrary, if the Employee is considered a Specified Employee at
Termination of Employment under such procedures as established by the
Corporation in accordance with Section 409A of the Code, benefit distributions
that are made upon Termination of Employment may not commence earlier than six
(6) months after the date of such Termination of Employment.  In the
event this Section 4.4 is applicable to the Employee, any distribution which
would otherwise be paid to the Employee within the first six (6) months
following the Termination of Employment shall be accumulated and paid to the
Employee in a lump sum on the first day of the seventh (7th) month
following the Termination of Employment.  All subsequent distributions
shall be paid in the manner specified.

    

    
      
        
          --

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    5.           MISCELLANEOUS

    

    5.1           Assignment.  The
parties acknowledge that this Agreement has been entered into due to, among
other things, the special skills of Employee, and agree that this Agreement may
not be assigned or transferred by Employee, in whole or in part, without the
prior written consent of the Corporation.  Any business entity
succeeding to all or substantially all of the business of the Corporation or the
Bank by purchase, merger, consolidation, sale of assets or otherwise shall be
bound by this Agreement.

    

    5.2           Other
Agents.  Nothing in this Agreement is to be interpreted as limiting
the Corporation from employing other personnel on such terms and conditions as
may be satisfactory to the Corporation.

    

    5.3           Notices.  All
notices, requests, demands and other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or three days after mailing, if mailed first class, certified mail,
postage prepaid:

    

    To the
Corporation:                                                                McIntosh
Bancshares, Inc.

    210 South Oak Street

    P. O. Box 3818

    Jackson, GA 30233

    

    To
Employee:                                                      William
K. Malone

    c/o McIntosh State Bank

    210 South Oak Street

    P. O. Box 3818

    Jackson, GA 30233

    

    Any party
may change the address to which notices, requests, demands, and other
communications shall be delivered or mailed by giving notice thereof to the
other part in the same manner provided herein.

    

    5.4           Severability.  If
any provision or covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in whole or in
part, such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of the remaining provisions or covenants,
or any part thereof, of this Agreement, all of which shall remain in full force
and effect.

    

    5.5           Waiver.  Failure
of either party to insist, in one or more instances, on performance by the other
in strict accordance with the terms and conditions of this Agreement shall not
be deemed a Waiver or relinquishment of any right granted in this Agreement or
of the future performance of any such term or condition or of any other term or
condition of this Agreement, unless such waiver is contained in a writing signed
by the party making the Waiver.

    

    5.6           Amendments.  This
Agreement may be amended or modified only by a writing signed by both parties
hereto making specific reference to this Agreement.  This Agreement
shall supersede and replace all prior Change in Control Agreements between the
Corporation and Employee.

    

    5.7           Governing
Law.  The validity and effect of this Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Georgia.

    

    5.8           Arbitration.  The
parties agree that all disputes that may arise between them relating to the
interpretation or performance of this Agreement, shall be determined by binding
arbitration through an arbitrator approved by the American Arbitration
Association or other arbitrator mutually acceptable to the
parties.  The award of the arbitrator shall be final and binding upon
the parties and judgment upon the award rendered may be entered in any court
having jurisdiction.  In the event Employee incurs legal fees and
other expense in seeking to obtain or to enforce any rights or benefits provided
by this Agreement and is successful, in whole or in part, in obtaining or
enforcing any such rights or benefits through settlement, arbitration or
otherwise, the Corporation shall promptly pay the Employee’s reasonable legal
fees and expense incurred in enforcing this Agreement.  Except to the
extent provided in the preceding sentence, each party shall pay its own legal
fees and other expenses associated with the arbitration, with the fee for the
arbitrator to be shared equally.

    

    5.9           Compliance
with Section 409A.  This Agreement shall at all times be administered
and the provisions of this Agreement shall be interpreted consistent with the
requirements of Section 409A of the Code and any and all regulations thereunder,
including such regulations as may be promulgated after the Effective Date of
this First Amendment.

    

    5.10                Rescission.  Any
modification to the terms of this Agreement that would inadvertently result in
(i) treatment as a material modification under Section 409A of the Code; or (ii)
an additional tax liability on the part of the Employee, shall have no effect
provided the change in the terms of the plan is rescinded by the earlier of a
date before the right is exercised (if the change grants a discretionary right)
and the last day of the calendar year during which such change
occurred.

    

    IN WITNESS WHEREOF, the Corporation has
caused this Agreement to be executed on its behalf by its duly authorized
officers and Employee has hereunto set his hand, as of the date and year first
above written.

    

    “CORPORATION”

    

    McINTOSH BANCSHARES, INC.

    

    By:/s/ William K.
Malone                         

                                          Chairman

    

    

    Attest: /s/ James P.
Doyle               

      Secretary

    

    (SEAL)

    

    

    

    “EMPLOYEE”

    

    

    /s/ William K.
Malone                           

    WILLIAM K.
MALONE

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