Exhibit 10.9
HEARTLAND COMMUNITY BANK
HCB BANCSHARES, INC.
------------------
Amended and Restated
Change-in-Control
Protective Agreement with
-----------------
-----------------
THIS AGREEMENT entered into this 1st day of October, 2003, by and between
HEARTLAND Community Bank (the "Bank"), HCB Bancshares, Inc. (the "Company"), and
Paula J. Bergstrom (the "Employee"), effective on the date of the execution of
this agreement (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
officer, and the Company and the Bank deem it to be in their best interest to
enter into this Agreement as additional incentive to the Employee to continue as
an officer of the Bank; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the event a
change of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 50% of the Bank's
or the Company's voting stock, (ii) the acquisition of the ability to control
the election of a majority of the Bank's or the Company's directors, (iii) the
acquisition of a controlling influence over the management or policies of the
Bank or the Company by any person or by persons acting as a "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (iv) during
any period of two consecutive years, individuals (the "Continuing Directors")
who at the beginning of such period constitute the Board of Directors of the
Bank or the Company (the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Existing Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director. Notwithstanding the foregoing, in the case of
(i), (ii) and (iii) hereof, ownership or control of the Bank by the Company
itself shall not constitute a Change in Control. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein. The decision of the Bank's non-employee directors as to whether or not a
Change in Control has occurred shall be conclusive and binding.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and as interpreted through applicable rulings and regulations in
effect from time to time.
(c) "Code Sec. 280G Maximum" shall mean product of 2.99 and the Employee's
"base amount" as defined in Code Sec. 280G(b)(3).
(d) "Good Reason" shall mean any of the following events, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move her personal residence, or perform her principal
executive functions, more than thirty (30) miles from her primary office as of
the date of the Change in Control; (ii) a material reduction in the Employee's
base compensation as in effect on the date of the Change in Control or as the
same may be increased from time to time; (iii) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
her under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by her at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with her
position; (v) a material diminution or reduction in the Employee's
responsibilities or authority (including reporting responsibilities) in
connection with her employment with the Bank or the Company; or (vi) a material
reduction in the secretarial or other administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the Bank's
Board of Directors, the Employee's 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.
The Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause. No act, or failure to act, on the
Employee's part shall
be considered "willful" unless she has acted, or failed to act, with an absence
of good faith and without a reasonable belief that her action or failure to act
was in the best interest of the Bank and the Company.
(f) "Protected Period" shall mean the period that begins on the date that
is the earlier of (i) the date that the Bank or the Company enters into a
binding, definitive written agreement for a Change in Control or (ii) the date
that a Change in Control occurs, and ends on the first annual anniversary of the
consummation of a Change in Control (the "Anniversary Date").
(g) "Trust" shall mean a grantor trust designed in accordance with Revenue
Procedure 92-64 and having a trustee independent of the Bank and the Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment within 90 days of an event that both occurs during the
Protected Period and constitutes Good Reason, or (ii) the Bank, the Company, or
their successor(s) in interest terminate the Employee's employment for any
reason other than Just Cause during the Protected Period.
3. Amount of Severance Benefit
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Company shall, if not paid by the Bank pursuant to the
severance agreement between the Employee and the Bank, pay the Employee a
severance benefit equal to the difference between the Code Sec. 280G Maximum and
the sum of any other "parachute payments" as defined under Code Sec. 280G(b)(2)
that the Employee receives on account of the Change in Control.
The amount payable under this Section 3 shall be paid either (i) in one
lump sum within ten days of the later of the date of the Change in Control and
the Employee's last day of employment with the Bank or the Company or successor
thereto, or (ii) if prior to the date which is 90 days before the date on which
a Change in Control occurs, the Employee filed a duly executed irrevocable
written election in the form attached hereto as Exhibit "A", payment of such
amount shall be made according to the elected schedule. Deferred amounts shall
bear interest from the date on which they would otherwise be payable until the
date paid at a rate equal to 120% of the applicable federal rate, compounded
semiannually, as determined under Code Section 1274(d) and the regulations
thereunder.
In the event that the Employee, Bank, and the Company agree that the
Employee has collected an amount exceeding the Code ss.280G Maximum, the parties
may jointly agree in writing that such excess shall be treated as a loan ab
initio which the Employee shall repay to the Bank, on terms and conditions
mutually agreeable to the parties, together with interest at the applicable
federal rate provided for in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after the last day of the Employee's
employment with Bank or the Company, the Bank shall (i) deposit in a Trust the
amount of the severance benefit specified in Section 3, unless the Employee has
previously provided a written release of any claims under this Agreement, and
(ii) provide the trustee of the Trust with a written direction to hold said
amount and any investment return thereon in a segregated account for the benefit
of the Employee, and to follow the procedures set forth in the next paragraph as
to the payment of such amounts from the Trust. Upon the earlier of the Trust's
final payment of all amounts due under the following paragraph or the
Anniversary Date, the trustee of the Trust shall pay to the Bank the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the Trust.
During the 12-consecutive month period after consummation of a Change in
Control, the Employee may provide the trustee of the Trust with a written notice
requesting that the trustee pay to the Employee an amount designated in the
notice as being payable pursuant to this Agreement. Within three business days
after receiving said notice, the trustee of the Trust shall send a copy of the
notice to the Bank via overnight and registered mail return receipt requested.
On the tenth (10th) business day after mailing said notice to the Bank, the
trustee of the Trust shall pay the Employee the amount designated therein in
immediately available funds, unless prior thereto the Bank provides the trustee
with a written notice directing the trustee to withhold such payment. In the
latter event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs of such arbitration shall be paid by the Bank.
The trustee shall choose the arbitrator to settle the dispute, and such
arbitrator shall be bound by the rules of the American Arbitration Association
in making his or her determination. The parties and the trustee shall be bound
by the results of the arbitration and, within three days of the determination by
the arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Bank, and in no event shall the trustee be
liable to either party for making the payments as determined by the arbitrator.
5. Covenant Not to Compete.
------------------------
If the Employee voluntarily terminates employment for any reason within
thirty (30) days of the date of a Change in Control or for Good Reason within
twelve (12) months of the date of a Change of Control, or is terminated without
Just Cause within twelve (12) months of the date of the date of a Change in
Control, the Company shall pay, if not paid by the Bank pursuant to this
Agreement, the Employee an amount equal to the Employee's annual base
compensation in effect on the date of the Change in Control. Such sum shall be
paid in one lump sum within ten (10) days of the Employee's last day of
employment with the Bank or successor thereto. In consideration of the payments
to be made to her under this Section 5, the Employee agrees as follows:
(i) The parties recognize that the Employee's reputation and business and
personal relationships are of significant benefit to the Company and the Bank.
The parties further recognize that the Company and the Bank are in direct
competition with certain banks and other similar institutions. Therefore, the
Employee agrees that for a period of twelve (12) months following her
termination of employment she will not accept employment or serve in any
capacity with any bank, savings bank or savings and loan association, the
deposits or accounts or shares of which are insured by the Federal Deposit
Insurance Corporation or credit union, the deposits or accounts or shares of
which are insured by the National Credit Union Administration, or any holding
company for such bank, savings bank, savings and loan association or credit
union or other entity controlling, controlled by or under common control with
such financial institution at a principal place of employment within the
following Arkansas counties: Ouachita, Union and Columbia.
(ii) For a period of one (1) year following her termination of employment,
the Employee will not solicit or induce any person who is an employee of the
Company or the Bank, or any entity controlling, controlled by or under common
control with the Company or the Bank, or any successor to either, or any person
who was such on the date of her termination of employment, to become employed by
any other person or entity or approach any such employee for such purpose or
authorize or knowingly approve the taking of such actions by other persons.
(iii) The Employee acknowledges that during the course of her employment
with the Bank she has and will continue to receive, obtain or become aware of,
and will have access to proprietary information, lists and records of customers
and trade secrets which are the property of the Company or the Bank which are
not known by competitors or generally by the public ("Proprietary Information")
and recognizes that such Proprietary Information to be valuable and unique
assets of the Company or the Bank, as the case may be. For a period of three (3)
years following her termination of employment, the Employee agrees to hold the
Proprietary Information in the strictest confidence and agrees not to use or
disclose any Proprietary Information, directly or indirectly, at any time for
any purpose, or to use for the Employee's benefit or the benefit of any person,
firm, corporation or other entity (other than the Company or the Bank or an
affiliate of or successor to either), any Proprietary Information, and to use
Employee's best efforts to prevent such prohibited use or disclosure by any
other persons.
(iv) The Employee hereby acknowledges that her duties and responsibilities
under this Section 5 are unique and that irreparable injury may result to the
Company and the Bank, or an affiliate of or successor to either, in the event of
a breach of the terms and conditions of this Section 5, which may be difficult
to ascertain, and that the award of damages would not be adequate relief to the
Company or the Bank or affiliate or successor. The Employee therefore agrees
that in the event of her breach of any of the terms or conditions of this
Section 5, the Company and the Bank or their successors shall have the right,
without posting any bond or other security, to preliminary and permanent
injunctive relief as well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies in law or
equity to which they may be entitled against the Employee. If at the time of the
enforcement of any provision of this Section 5 a court shall hold that the
period or scope of the provisions thereof are unreasonable under the
circumstances then existing, the parties hereby agree that the maximum period or
scope under the circumstances shall be substituted for the period or scope
stated in such provision.
6. Term of the Agreement.
----------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 36 months after the
Effective Date, and (ii) the date on which the Employee's employment with the
Bank terminates; provided that the Employee's rights hereunder shall continue
following the termination of her employment with the Bank or the Company under
any of the circumstances described in Section 2 hereof. Additionally, on each
annual anniversary date from the Effective Date, the term of this Agreement
shall be extended for an additional one-year period beyond the then effective
expiration date provided the Board of Directors of the Bank and the Company
determine in duly adopted resolutions that the performance of the Employee has
met the requirements and standards of the respective boards, and that this
Agreement shall be extended.
7. Termination or Suspension Under Federal Law.
--------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary:
(a) Notwithstanding the foregoing, but only to the extent required under
federal banking law, the benefits payable hereunder to the Employee shall be
reduced to the extent that either (A) the present value of such benefits exceeds
the limitations set forth in Regulatory Bulletin 27a of the Office of Thrift
Supervision ("OTS"), as in effect on the Effective Date, or (B) such reduction
is necessary to avoid subjecting the Bank or the Company to loss of any
deductions pursuant to Section 280G of the Internal Revenue Code of 1986, as
amended.
(b) The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Case.
(c) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all
obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(f) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
However, this paragraph shall not affect the vested rights of the parties.
(g) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (A) by the Director of the OTS or her other
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in section 13(c) of the FDIA; or (B) by the Director of the OTS or her
designee, at the time the Director or her designee approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by such
action.
8. Expense Reimbursement.
----------------------
In the event that any dispute arises between the Employee and the Bank or
the Company as to the terms or interpretation of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action that
the Employee takes to enforce the terms of this Agreement or to defend against
any action taken by the Bank or the Company, the Employee shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Employee shall obtain a
final judgement in favor of the Employee in a court of competent jurisdiction or
in binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank and the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
9. Successors and Assigns.
-----------------------
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Company.
(b) Since the Bank is contracting for the unique and personal skills of the
Employee, the Employee shall be precluded from assigning or delegating her
rights or duties hereunder without first obtaining the written consent of the
Bank.
10. Consideration from Company: Joint and Several Liability.
--------------------------------------------------------
In the event that the Bank does not pay the benefits due to the Employee
under Section 3 of this Agreement, the Company hereby agrees that to the extent
permitted by law, it shall be jointly and severally liable with the Bank for the
payment of all amounts due under this Agreement.
11. Amendments.
-----------
No amendments or additions to this Agreement shall be binding unless made
in writing and signed by all of the parties, except as herein otherwise
specifically provided.
12. Applicable Law.
---------------
Except to the extent preempted by Federal law, the laws of the State of
Arkansas shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
13. Tax Withholding.
----------------
The Company or the Bank may withhold all Federal and state income or other
taxes from any amount payable under this Agreement.
14. Severability.
-------------
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
15. Entire Agreement.
-----------------
This Agreement, together with any understanding or modifications thereof as
agreed to in writing by the parties, shall constitute the entire agreement
between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: HEARTLAND COMMUNITY BANK
/s/ Paula J. Bergstrom By:/s/ Vida H. Lampkin
- ------------------------------------ -----------------------------------
Secretary Its Chairman of the Board
ATTEST: HCB BANCSHARES, INC.
/s/ Paula J. Bergstrom By:/s/ Vida H. Lampkin
- ------------------------------------ -----------------------------------
Secretary Its Chairman of the Board
WITNESS: EMPLOYEE
/s/ Kelly Carman By:/s/ Paula J. Bergstrom
- ------------------------------------ -----------------------------------
Secretary Paula J. Bergstrom