EXHIBIT 10.9
HEARTLAND COMMUNITY BANK
HCB BANCSHARES, INC.
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Change-in-Control
Protective Agreement with
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THIS AGREEMENT entered into this 19th day of July, 2001, 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 Section 280G Maximum" shall mean product of 2.99
and the Employee's "base amount" as defined in Code Section
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 Section 280G Maximum
and the sum of any other "parachute payments" as defined under Code Section
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 Section 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. 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
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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.
6. Termination or Suspension Under Federal Law. Nothwithstanding 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.
7. 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.
8. 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.
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9. 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.
10. 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.
11. 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.
12. 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.
13. 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
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Secretary Its Chairman of the Board
ATTEST: HCB BANCSHARES, INC.
/s/ Paula J. Bergstrom By: /s/ Vida H. Lampkin
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Secretary Its Chairman of the Board
WITNESS: EMPLOYEE
/s/ Kevin W. Pletcher /s/ Paula J. Bergstrom
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Paula J. Bergstrom
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EXHIBIT "A"
HCB BANCSHARES, INC.
HEARTLAND COMMUNITY BANK
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
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DEFERRED PAYMENT ELECTION FORM
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AGREEMENT, made this 19th day of July, 2001, by and between Paula J.
Bergstrom (the "Employee"), HEARTLAND Community Bank (the "Bank") and HCB
Bancshares, Inc. (the "Company"), with respect to payment of severance
compensation to the Employee pursuant to Section 3 of her change-in-control
protective agreement ("Agreement") with the Bank and the Company dated July 19,
2001.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Employee, by the execution hereof, in accordance
with Section 3 of the Agreement, elects to have her change in control severance
benefits (plus earnings thereon) distributed in cash as follows:
__________in one lump sum payment.
__________in substantially equal annual payments over a period of
_____ years (no more than 10).
2. In the event of the Employee's death, her benefits shall be distributed
- -- __________in one lump sum payment.
__________in accordance with the payment schedule selected in
paragraph 1 hereof (with payments made as though the Employee survived
to collect all benefits, and as though the Employee terminated service
on the date of her death, if payments had not already begun).
3. Designation of Beneficiary. In the event of the Employee's death before
she has collected all of the benefits payable pursuant to the Agreement and this
election, any such benefits payable shall be distributed to the beneficiary or
beneficiaries designated under subparagraphs a and b of this paragraph 3 in the
manner elected pursuant to paragraph 2 above:
a. Primary Beneficiary. The Employee hereby designates the person(s) named
below to be her primary beneficiary and to receive the balance of any unpaid
benefits under the Agreement:
- ----------------------------- --------------------------- ---------------------
Name of Mailing Address Percentage of
Primary Beneficiary Death Benefit
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%
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%
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b. Contingent Beneficiary. In the event that the primary beneficiary or
beneficiaries named above are not living at the time of the Employee's death,
the Employee hereby designates the following person(s) to be her contingent
beneficiary for purposes of the Agreement:
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Name of Mailing Address Percentage of
Contingent Beneficiary Death Benefit
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%
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%
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4. Effect of Election. The elections made in paragraph 1 hereof shall
become irrevocable 90 days prior to the change in control. The Employee may, by
submitting an effective superseding Deferred Payment Election Form at any time
and from time to time, prospectively change the beneficiary designation and the
manner of payment to a beneficiary. Such elections shall, however, become
irrevocable upon the Employee's death.
5. Commitments. The Bank and the Company agree to make payment of all
amounts due the Employee in accordance with the terms of the Agreement and the
elections made by the Employee herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
WITNESS: EMPLOYEE
/s/ /s/ Paula J. Bergstrom By: /s/ Paula J. Bergstrom
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Paula J. Bergstrom
WITNESS: HEARTLAND COMMUNITY BANK
/s/ Paula J. Bergstrom By: /s/ Vida H. Lampkin
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Its Chairman of the Board
ATTEST: HCB BANCSHARES, INC.
/s/ Kevin W. Pletcher By: /s/ Vida H. Lampkin
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Its Chairman of the Board