Exhibit 10.3
QUAD CITY BANK AND TRUST COMPANY
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT ("Agreement") is made this 1st day of January, 2004, by and
between QUAD CITY BANK AND TRUST COMPANY, a state-chartered commercial bank
located in Bettendorf, Iowa (the "Bank"), and MICHAEL A. BAUER (the
"Executive").
INTRODUCTION
The Executive and the Bank previously entered into that certain Quad City Bank
and Trust Company Executive Deferred Compensation Agreement, to encourage the
Executive to remain an employee of the Bank. The Bank is willing to continue to
provide to the Executive a deferred compensation opportunity together with
matching contributions by the Bank under the terms of this Agreement. The Bank
will pay the Executive's benefits from the Bank's general assets.
AGREEMENT
The Executive and the Bank agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:
1.1 "Anniversary Date" means December 31 of each year.
1.2 "Change of Control" means:
a) The consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 33
percent or more of the combined voting power of the then outstanding
voting securities of the Company; or
b) The individuals who, as of the date hereof, are members of the Board
of Directors of the Company (the "Board") cease for any reason to
constitute a majority of the Board, unless the election, or
nomination for election by the stockholders, of any new director was
approved by a vote of a majority of the Board, and such new director
shall, for purposes of this Agreement, be considered a member of the
Board; or
c) Approval by stockholders of the Company of (1) a merger or
consolidation if the stockholders, immediately before such a merger
or consolidation, do not, as a result of such merger or
consolidation, own, directly or indirectly, more than 67 percent of
the combined voting power of the then outstanding voting securities
of the entity resulting from such merger or consolidation, in
substantially the same proportion as their ownership of the combined
voting power of the voting securities outstanding immediately before
such merger or consolidation, or (2) a complete liquidation or
dissolution or an agreement for the sale or other disposition of
two-thirds or more of the consolidated assets of the Company.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to occur solely because 33 percent or more of the combined
voting power of the then outstanding securities of the Company are
acquired by (1) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained for employees of
the entity, or (2) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders in
the same proportion as their ownership of stock immediately prior to
such acquisition.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Company" means QCR Holdings, Inc.
1.5 "Compensation" means the total salary and bonus paid to the Executive
during a Plan Year.
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1.6 "Deferral Account" means the Bank's accounting of the Executive's
accumulated Deferrals plus accrued interest.
1.7 "Deferrals" means the amount of the Executive's Compensation which the
Executive elects to defer according to this Agreement.
1.8 "Disability" means, if the Executive is covered by a Bank or a Bank
affiliate's sponsored disability policy, total disability as defined in
such policy without regard to any waiting period. If the Executive is not
covered by such a policy, Disability means the Executive suffering a
sickness or injury which, in the judgment of the Executive Committee of
the Board of Directors of the Company limits the Executive from
performing the material and substantial duties of his position(s) with
the Bank. As a condition to any Disability benefits, the Bank may require
the Executive to submit to such physical or mental evaluations and tests
as the Bank's Board of Directors deems appropriate.
1.9 "Election Form" means the Form attached as Exhibit 1.
1.10 "Normal Retirement Age" means the Executive's 65th birthday.
1.11 "Normal Retirement Date" means the later of the Normal Retirement Age or
Termination of Employment.
1.12 "Original Effective Date" means June 28, 2000.
1.13 "Plan Year" means the calendar year.
1.14 "Termination of Employment" means that the Executive ceases to be
employed by the Bank for any reason whatsoever other than by reason of a
leave of absence which is approved by the Bank. For purposes of this
Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the
Bank shall have the sole and absolute right to decide the dispute.
Article 2
Deferral Election
2.1 Initial Election. The Executive shall make an initial deferral election
under this Agreement by filing with the Bank a signed Election Form
within thirty (30) days after the Original Effective Date of this
Agreement. The Election Form shall set forth the amount of Compensation
to be deferred and shall be effective to defer only Compensation earned
after the date the Election Form is received by the Bank.
2.2 Election Changes.
2.2.1 Generally. Upon the Bank's approval, the Executive may modify the
amount of Compensation to be deferred annually by filing a new
Election Form with the Bank prior to the beginning of the Plan
Year in which the Compensation is to be deferred. The modified
deferral election shall not be effective until the Plan Year
following the year in which the subsequent Election Form is
received and approved by the Bank.
2.2.2 Hardship. If an unforeseeable financial emergency arising from
the death of a family member, divorce, sickness, injury,
catastrophe or similar event outside the control of the Executive
occurs, the Executive, by written instructions to the Bank, may
reduce future deferrals under this Agreement.
Article 3
Deferral Account
3.1 Establishing and Crediting. The Bank shall establish a Deferral Account
on its books for the Executive and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Compensation deferred by the Executive as of the
time the Compensation would have otherwise been paid to the
Executive.
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3.1.2 Matching Contribution. A matching contribution equal to (and
credited to the Deferral Account at the same time as) the amounts
credited to the Deferral Account under Section 3.1.1, subject to
an annual maximum matching contribution of 100 percent of the
Compensation deferred by the Executive, said matching
contribution not to exceed $20,000 (Twenty Thousand Dollars)
annually.
3.1.3 Interest. On each Anniversary Date of this Agreement and
immediately prior to the payment of any benefits, but only until
commencement of the benefit payments under this Agreement,
interest is to be accrued on the account balance and compounded
at an annual rate equal to the Wall Street Journal Prime Rate on
the first business day of the Plan Year. This interest rate shall
have a minimum or floor of 8 percent and shall not exceed 10
percent.
3.2 Statement of Accounts. The Bank shall provide to the Executive, within
one hundred twenty (120) days after each Anniversary Date, a statement
setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account
is not a trust fund of any kind. The Executive is a general unsecured
creditor of the Bank for the payment of benefits. The benefits represent
the mere Bank promise to pay such benefits. The Executive's rights are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by the
Executive's creditors.
Article 4
Lifetime Benefits
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank
shall pay to the Executive the benefit described in this Section 4.1 in
lieu of any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the
Deferral Account balance at the Executive's Normal Retirement
Date.
4.1.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the
first day of the month following the Executive's Normal
Retirement Date. The Bank shall credit interest pursuant to
Section 3.1.3 on the remaining account balance during any
applicable installment period.
4.2 Early Retirement Benefit. Upon Termination of Employment prior to the
Normal Retirement Age for reasons other than death, Change of Control or
Disability, the Bank shall pay to the Executive the benefit described in
this Section 4.2 in lieu of any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
Deferral Account balance at the Executive's Termination of
Employment.
4.2.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the
first day of the month following the Executive's Termination of
Employment. The Bank shall credit interest pursuant to Section
3.1.3 on the remaining account balance during any applicable
installment period.
4.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Bank shall pay to the
Executive the benefit described in this Section 4.3 in lieu of any other
benefit under this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the
Deferral Account balance at the Executive's Termination of
Employment.
4.3.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the
first day of the month following the Executive's Termination of
Employment. The Bank shall credit interest pursuant to Section
3.1.3 on the remaining account balance during any applicable
installment period.
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4.4 Change of Control Benefit. Upon a Change of Control, the Bank shall pay
to the Executive the benefit described in this Section 4.4 in lieu of any
other benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 shall be
the greater of: (a) the Deferral Account balance at the
Executive's Termination of Employment; or (b) $898,399 (Eight
Hundred Ninety Eight Thousand Three Hundred and Ninety-Nine
Dollars).
4.4.2 Payment of Benefit. The Bank shall pay the benefit to the
Executive in a lump sum within 60 days following the Executive's
Termination of Employment.
4.4.3 Obligation to Fund. Notwithstanding any provision to the contrary
contained herein, no later than the date of a Change of Control,
the Bank shall fund a "Rabbi Trust" (as such term is described in
Revenue Procedure 92-64) in the amount of the payment required
under Section 4.4.2, with the trustee of such trust being
designated by the Board in its sole and absolute discretion.
4.5 Hardship Distribution. Upon the Board of Director's determination
(following petition by the Executive) that the Executive has suffered an
unforeseeable financial emergency as described in Section 2.2.2, the Bank
shall distribute to the Executive all or a portion of the Deferral
Account balance as determined by the Bank, but in no event shall the
distribution be greater than is necessary to relieve the financial
hardship.
Article 5
Death Benefits
5.1 Death During Active Service. If the Executive dies while in the
employment of the Bank, the Bank shall pay to the Executive's beneficiary
the benefit described in this Section 5.1 in lieu of any other benefit
under this Agreement.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is the greater
of: (a) the Deferral Account balance; or (b) $898,399 (Eight
Hundred Ninety Eight Thousand Three Hundred and Ninety-Nine
Dollars).
5.1.2 Payment of Benefit. The Bank shall pay the benefit to the
beneficiary in the manner elected by the Executive on the
attached Beneficiary Designation form, or as such form may have
been amended by the Executive prior to his death. In the event
that the death benefit hereunder is paid in installments, the
Bank shall credit interest pursuant to Section 3.1.3 on the
remaining account balance during any applicable installment
period.
5.2 Death During Payment of a Lifetime Benefit. If the Executive dies after
any Lifetime Benefit payments have commenced under this Agreement but
before receiving all such payments, the Bank shall pay the remaining
benefits to the Executive's beneficiary at the same time and in the same
amounts they would have been paid to the Executive had the Executive
survived.
5.3 Death After Termination of Employment But Before Payment of a Lifetime
Benefit Commences. If the Executive is entitled to a Lifetime Benefit
under this Agreement, but dies prior to the commencement of said benefit
payments, the Bank shall pay the Lifetime Benefit to the Executive's
beneficiary that the Executive was entitled to prior to death except that
the benefit payments shall commence on the first day of the month
following the date of the Executive's death.
Article 6
Beneficiaries
6.1 Beneficiary Designations. The Executive shall designate a beneficiary by
filing a written designation with the Bank. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and
accepted by the Bank during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the
beneficiary predeceases the Executive or if the Executive names a spouse
as beneficiary and the marriage is subsequently dissolved. If the
Executive dies without a valid beneficiary designation, all payments
shall be made to the Executive's estate.
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6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative or person having the care or custody of
such minor, incompetent person or incapable person. The Bank may require
proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge the Bank from all liability with respect to such
benefit.
Article 7
General Limitations
7.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall not pay any benefit under this Agreement
that is attributable to the Bank match credited under Section 3.1.2 of
this Agreement and the interest earned on the Deferral Account if the
Bank terminates the Executive's employment for:
(a) A material violation by the Executive of any applicable material law
or regulation respecting the business of the Bank;
(b) The Executive being found guilty of a felony, an act of dishonesty
in connection with the performance of his duties as an officer of
the Bank, or which disqualifies the Executive from serving as an
officer or director of the Bank or the Company; or
(c) The willful or negligent failure of the Executive to perform his
duties for the Bank or the Company in any material respect.
7.2 Suicide or Misstatement. The Bank shall not pay any death benefit under
this Agreement exceeding the Deferral Account if the Executive commits
suicide within two years after the date of this Agreement, or if the
Executive has made any material misstatement of fact on any application
for life insurance purchased by the Bank.
Article 8
Claims and Review Procedures
8.1 Claims Procedure. The Bank shall notify any person or entity that makes a
claim against the Agreement (the "Claimant") in writing, within 90 days
of Claimant's written application for benefits, of his or her eligibility
or non-eligibility for benefits under the Agreement. If the Bank
determines that the Claimant is not eligible for benefits or full
benefits, the written notice shall set forth (1) the specific reasons for
such denial, (2) a specific reference to the provisions of the Agreement
on which the denial is based, (3) a description of any additional
information or material necessary for the Claimant to perfect his or her
claim, and a description of why it is needed, (4) an explanation of the
Agreement's claims review procedure, the time limits applicable and other
appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed, and (5) a statement of the Claimant's
right to bring a civil action under Section 502(a) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") following an
adverse benefit determination on review. If the Bank determines that
there are special circumstances requiring additional time to make a
decision, the Bank shall notify the Claimant, prior to the expiration of
the initial 90-day period, of the special circumstances and the date by
which a decision is expected to be made, and may extend the time for up
to an additional 90 days.
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8.2 Review Procedure. If the Claimant is determined by the Bank not to be
eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Bank by filing a petition
for review with the Bank within 60 days after receipt of the notice
issued by the Bank. Said petition shall state the specific reasons which
the Claimant believes entitle him or her to benefits or to greater or
different benefits. Within 60 days after receipt by the Bank of the
petition, the Bank shall afford the Claimant (and counsel, if any) an
opportunity to present his or her position to the Bank verbally or in
writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents. In considering the review, the Bank shall take into
account all materials and information submitted by Claimant, without
regard to whether the information was submitted or considered in the
initial benefit determination. The Bank shall notify the Claimant of its
decision in writing within the 60-day period, which notice shall set
forth (a) the specific basis of its decision, written in a manner
calculated to be understood by the Claimant, (b) the specific provisions
of the Agreement on which the decision is based, (c) a statement that the
Claimant is entitled to receive, upon request and free of charge,
reasonable access to and copies of all documents, records and other
information (as defined in applicable ERISA regulations) to the
Claimant's claim for benefits, and (d) a statement of the Claimant's
right to bring a civil action under Section 502(a) of ERISA. If, because
of the need for a hearing, the 60-day period is not sufficient, the
decision may be deferred for up to another 60 days at the election of the
Bank, but notice of this deferral shall be given to the Claimant.
Article 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Bank and the Executive.
Notwithstanding the previous paragraph, the Bank may amend or terminate this
Agreement at any time if, pursuant to legislative, judicial or regulatory
action, continuation of the Agreement would (i) cause benefits to be taxable to
the Executive prior to actual receipt, or (ii) result in significant financial
penalties or other significantly detrimental ramifications to the Bank (other
than the financial impact of paying the benefits). In no event shall this
Agreement be terminated under this section without payment to the Executive of
the Deferral Account balance attributable to the Executive's Deferrals and
interest credited on such amounts.
Article 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and
their beneficiaries, survivors, executors, administrators and
transferees.
10.2 No Guarantee of Employment. This Agreement is not a contract for
employment. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the shareholders' rights
to replace the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.
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10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Bank shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.
10.5 Applicable Law. The Agreement and all rights hereunder shall be governed
by the laws of the State of Iowa, except to the extent preempted by the
laws of the United States of America.
10.6 Unfunded Arrangement. The Executive and the Executive's beneficiary are
general unsecured creditors of the Bank for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Bank to
pay such benefits. The rights to benefits are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance on
the Executive's life is a general asset of the Bank to which the
Executive and the Executive's beneficiary have no preferred or secured
claim.
10.7 Reorganization. The Bank shall not merge or consolidate into or with
another Bank, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations
of the Bank under this Agreement.
10.8 Entire Agreement. This Agreement constitutes the entire agreement between
the Bank and the Executive as to the subject matter hereof. No rights are
granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
10.9 Administration. The Bank shall have powers which are necessary to
administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting for the
Agreement;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement.
The decision or action of the Bank with respect to any question
arising out of or in connection with the administration,
interpretation, and application of this Agreement and the rules and
regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in this Agreement.
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10.10 Payment of Legal Fees. The Bank is aware that after a Change of Control,
management of the Bank or its successor could cause or attempt to cause
the Bank to refuse to comply with its obligations under this Agreement,
including the possible pursuit of litigation to avoid its obligations
under this Agreement. In these circumstances, the purpose of this
Agreement would be frustrated. It is the Bank's intention that the
Executive not be required to incur the expenses associated with the
enforcement of his rights under this Agreement, whether by litigation or
other legal action, because the cost and expense thereof would
substantially detract from the benefits intended to be granted to the
Executive hereunder. It is the Bank's intention that the Executive not be
forced to negotiate settlement of his rights under this Agreement under
threat of incurring expenses. Accordingly, if after a Change of Control
occurs it appears to the Executive that (a) the Bank has failed to comply
with any of its obligations under this Agreement, or (b) the Bank or any
other person has taken any action to avoid its obligations under this
Agreement, the Bank irrevocably authorizes the Executive from time to
time to retain counsel of his choice, at the expense of the Bank as
provided in this Section 10.10, to represent the Executive in connection
with the initiation or defense of any litigation or other legal action,
whether by or against the Bank or any director, officer, stockholder, or
other person affiliated with the Bank, in any jurisdiction.
Notwithstanding any existing or previous attorney-client relationship
between the Bank and any counsel chosen by the Executive under this
Section 10.10, the Bank irrevocably consents to the Executive entering
into an attorney-client relationship with that counsel, and the Bank and
the Executive agree that a confidential relationship shall exist between
the Executive and that counsel. The fees and expenses of counsel selected
from time to time by the Executive as provided in this Section 10.10
shall be paid or reimbursed to the Executive by the Bank on a regular,
periodic basis upon presentation by the Executive of a statement or
statements prepared by such counsel in accordance with such counsel's
customary practices. The Bank's obligation to reimburse Executive for
legal fees as provided under this Section 10.10 and any separate
employment, severance or other agreement between the Executive and the
Bank shall not exceed $200,000 in the aggregate. Accordingly, the Bank's
obligation to pay the Executive's legal fees provided by this Section
10.10 shall be offset by any legal fee reimbursement obligation the Bank
may have with the Executive under any separate employment, severance or
other agreement between the Executive and the Bank.
10.11 Named Fiduciary. For purposes of the Employee Retirement Income Security
Act of 1974, if applicable, the Bank shall be the named fiduciary and
plan administrator under the Agreement. The named fiduciary may delegate
to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed
this Agreement.
BANK: EXECUTIVE:
QCR HOLDINGS, INC.
By: /s/ James J. Brownson /s/ Michael A. Bauer
------------------------------- ---------------------------
James J. Brownson Michael A. Bauer
Chairman, Executive Committee
By: /s/ Douglas M. Hultquist
-------------------------------
Douglas M. Hultquist,
President
QUAD CITY BANK AND TRUST COMPANY
By: /s/ James J. Brownson
-------------------------------
James J. Brownson
Secretary
By: /s/ Douglas M. Hultquist
-------------------------------
Douglas M. Hultquist,
Chairman
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EXHIBIT 1
TO
QUAD CITY BANK AND TRUST COMPANY
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
Deferral Election
I elect to defer my Compensation received under the Executive Deferred
Compensation Agreement with the Bank, as follows:
- --------------------------------------------------------------------------------
Amount of Deferral Duration
================================================================================
[Initial and Complete one] [Initial One]
____ I elect to defer ____% of my ____ One Year only
Compensation.
____ For ______ [Insert
I elect to defer $______ of all Number] Years
- -------
Compensation.
Until
-------
____ I elect not to defer any of my Termination
Compensation. of Employment
____ Until ___________,
___________ (date)
- --------------------------------------------------------------------------------
Upon the Bank's approval, I understand that I may change the amount and duration
of my deferrals by filing a new election form with the Bank; provided, however,
that any subsequent election will not be effective until the Plan Year following
the year in which the new election is received by the Bank.
Signature
Date
Accepted by the Bank this _____ day of ______________, 20____.
By
Title
9
Beneficiary Designation
QUAD CITY BANK AND TRUST COMPANY
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
I designate the following as beneficiary of benefits under the Executive
Deferred Compensation Agreement payable following my death:
Primary:
Contingent:
Note: To name a trust as beneficiary, please provide the name of the trustee(s)
and the exact name and date of ----- the trust agreement.
I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
FORM OF PRE-RETIREMENT DEATH BENEFIT, Article 5, Section 5.1.2
I elect to have my beneficiary receive benefits under the Agreement in the
following form: [Initial One]
Lump Sum Equal monthly installments for 180 months
- ----------- --------------
Signature
Date
Accepted by the Bank this ____ day of ___________, 20____.
By
Title
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