Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") is made
as of the 1st day of January, 2003, (the "Effective Date") by and
between HEARTLAND FINANCIAL USA, INC., an Iowa corporation, (the
"Company") and (See Attachment to Exhibit 10.1)(the "Employee").
RECITALS
A. The Employee is currently serving as an employee of the
Company or one of its Affiliates.
B. The Company desires to continue to employ the Employee
as an employee of the Company or one of its Affiliates and the
Employer is willing to continue such employment.
C. The Company recognizes that circumstances may arise in
which a change of control of the Company through acquisition or
otherwise may occur thereby causing uncertainty of employment
without regard to the competence or past contributions of the
Employee, which uncertainty may result in the loss of valuable
services of the Employee, and the Company and the Employee wish
to provide reasonable security to the Employee against changes in
the employment relationship in the event of any such change of
control.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter contained, it is covenanted
and agreed by and between the parties hereto as follows:
1. Payment of Severance Amount. If the Employee's employment
by the Company, or any Affiliate or successor of the Company,
shall be subject to a Termination within the Covered Period, then
the Company shall pay the Employee an amount equal to the
applicable Severance Amount, payable within fifteen (15) days
after the Employee's termination that is related to the Change of
Control.
2. Definitions. As used throughout this Agreement, all of the
terms defined in this paragraph 2 shall have the meanings given
below.
A. An "Affiliate" shall mean any entity which owns or controls,
is owned by or is under common ownership or control with, the
Company.
B. "Base Annual Salary" shall mean the amount equal to the sum
of (i) the greater of Employee's then-current annual salary or
the Employee's annual salary as of the date one (1) day prior to
the Change of Control; (ii) the average of the three (3) most
recent bonuses paid to the Employee; and (iii) the average of the
three (3) most recent contributions made by the Company on behalf
of the Employee to the Company's tax-qualified retirement plans
(which, as of the date hereof, includes the profit sharing plan,
the money purchase pension plan and the 401(k) plan).
C. A "Change of Control" shall mean:
(i) 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 0000 Xxx) of fifty-one percent (51%)
or more of the combined voting power of
the then outstanding Voting Securities of
the Company; or
(ii) 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
as a member of the Board; or
(iii) approval by stockholders of the Company
of: (1) a merger or consolidation if the
stockholders, immediately before such
merger or consolidation, do not, as a
result of such merger or consolidation,
own, directly or indirectly, more than
fifty-one percent (51%) 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 of the Company
outstanding immediately before such merger
or consolidation; or (2) a complete
liquidation or dissolution or an agreement
for the sale or other disposition of all
or substantially all of the assets of the
Company.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because fifty-one percent (51%) 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.
D. "Covered Period" shall mean the period beginning six (6)
months prior to a Change of Control and ending twelve (12) months
after a Change of Control.
E. "Termination" shall mean termination of the Employee's
employment either:
(i) by the Company or its successor, as the
case may be, during the Covered Period,
other than a Termination for Cause or any
termination as a result of death,
disability, or normal retirement pursuant
to a retirement plan to which the Employee
was subject prior to any Change of
Control; or
(ii) by the Employee, for any reason, during
the period beginning ten (10) days prior
to a Change of Control and ending ten (10)
days after a Change of Control.
F. "Severance Amount" shall mean the sum of all amounts earned
or accrued through the Termination Date, including Base Annual
Salary, deferred compensation plan accruals and vacation pay,
plus (See Attachment to Exhibit 10.11) times the Employee's Base
Annual Salary.
G. "Termination for Cause" shall mean only a termination by the
Company as a result of the Employee's fraud, misappropriation of
or intentional material damage to the property or business of the
Company (including its Affiliates), substantial and material
failure by the Employee to fulfill the duties and
responsibilities of his or her regular position and/or comply
with the Company's or its Affiliates' policies, rules or
regulations, or the Employee's conviction of a felony.
H. "Termination Date" shall mean the date of employment
termination indicated in the written notice provided by the
Company or the Employee to the other.
I. "Voting Securities" shall mean any securities which
ordinarily possess the power to vote in the election of directors
without the happening of any pre-condition or contingency.
3. Golden Parachute Payment Adjustment. It is the intention of
the parties that the Severance Amount payments under this
Agreement shall not constitute "excess parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), and any regulations thereunder. If the
independent accountants acting as auditors for the Company on the
date of a Change of Control (or another accounting firm
designated by the parties) determine, in consultation with legal
counsel acceptable to the parties, that any amount payable to the
Employee by the Company under this Agreement, or any other plan
or agreement under which the Employee participates or is a party,
would constitute an excess parachute payment within the meaning
of Section 280G of the Code and be subject to the "excise tax"
imposed by Section 4999 of the Code, then the Company shall pay
to the Employee the amount of such excise tax and all federal and
state income or other taxes with respect to the payment of the
amount of such excise tax, including all such taxes with respect
to any such additional amount. If at a later date, the Internal
Revenue Service assesses a deficiency against the Employee for
the excise tax which is greater than that which was determined at
the time such amounts were paid, the Company shall pay to the
Employee the amount of such excise tax plus any interest,
penalties and professional fees or expenses, incurred by the
Employee as a result of such assessment, including all such taxes
with respect to any such additional amount. The highest marginal
tax rate applicable to individuals at the time of payment of such
amounts will be used for purposes of determining the federal and
state income and other taxes with respect thereto. The Company
shall withhold from any amounts paid under this Agreement the
amount of any excise tax or other federal, state or local taxes
then required to be withheld. Computations of the amount of any
supplemental compensation paid under this subparagraph shall be
made by the independent public accountants then regularly
retained by the Company, in consultation with legal counsel
acceptable to the parties. The Company shall pay all accountant
and legal counsel fees and expenses.
4. Medical and Dental Benefits. If the Employee's employment
by the Company or any Affiliate or successor of the Company shall
be subject to a Termination within the Covered Period, then to
the extent that the Employee or any of the Employee's dependents
may be covered under the terms of any medical and dental plans of
the Company (or any Affiliate) for active employees immediately
prior to the termination, the Company will provide the Employee
and those dependents with equivalent coverages for a period not
to exceed twenty-four (24) months from the Termination Date. The
coverages may be procured directly by the Company (or any
Affiliate, if appropriate) apart from, and outside of the terms
of the plans themselves; provided that the Employee and the
Employee's dependents comply with all of the conditions of the
medical or dental plans. In the event the Employee or any of the
Employee's dependents become eligible for coverage under the
terms of any other medical and/or dental plan of a subsequent
employer which plan benefits are comparable to Company (or any
Affiliate) plan benefits, coverage under Company (or any
Affiliate) plans will cease for the eligible Employee and/or
dependent. The Employee and Employee's dependents must notify
the Company (or any Affiliate) of any subsequent employment and
provide information regarding medical and/or dental coverage
available. In the event the Company (or any Affiliate) discovers
that the Employee and/or dependent has become employed and not
provided the above notification, all payments and benefits under
this Agreement will cease.
5. Out-Placement Counseling. If the Employee's employment by
the Company or any Affiliate or successor of the Company shall be
subject to a Termination within the Covered Period, the Company
will provide out-placement counseling assistance in the form of
reimbursement of the expenses incurred for such assistance within
the twelve (12) month period following the Termination Date, such
reimbursement amount not to exceed one-quarter (1/4) of the
Employee's Base Annual Salary on the Termination Date.
6. A. Restrictive Covenant. The Company and the Employee have
jointly reviewed the customer lists and operations of the
Company and have agreed that the primary service area of the
lending and deposit taking functions of the Company in which the
Employee has actively participated extends to an area
encompassing a fifty (50) mile radius from the main office of
Dubuque Bank and Trust Company (DB&T). Therefore, as an
essential ingredient of and in consideration of this Agreement
and the payment of the Severance Amount, the Employee hereby
agrees that, except with the express prior written consent of the
Company, for a period of two (2) years after the termination of
the Employee's employment with the Company (the "Restrictive
Period"), he will not directly or indirectly compete with the
business of the Company, including, but not by way of limitation,
by directly or indirectly owning, managing, operating,
controlling, financing, or by directly or indirectly serving as
an employee, officer or director of or consultant to, or by
soliciting or inducing, or attempting to solicit or induce, any
employee or agent of the Company to terminate employment and
become employed by any person, firm, partnership, corporation,
trust or other entity which owns or operates, a bank, savings and
loan association, credit union or similar financial institution
(a "Financial Institution") within a fifty (50) mile radius of
DB&T's main office (the "Restrictive Covenant"). If the Employee
violates the Restrictive Covenant and the Company brings legal
action for injunctive or other relief, the Company shall not, as
a result of the time involved in obtaining such relief, be
deprived of the benefit of the full period of the Restrictive
Covenant. Accordingly, the Restrictive Covenant shall be deemed
to have the duration specified in this paragraph computed from
the date the relief is granted but reduced by the time between
the period when the Restrictive Period began to run and the date
of the first violation of the Restrictive Covenant by the
Employee. The foregoing Restrictive Covenant shall not prohibit
the Employee from owning directly or indirectly capital stock or
similar securities which do not represent more than one percent
(1%) of the outstanding capital stock of any Financial
Institution listed on a securities exchange or quoted on the
National Association of Securities Dealers Automated Quotation
System. Notwithstanding the above, the Restrictive Covenant will
be unenforceable in the event the Company terminates the
employment of the Employee for other than Cause at or after the
end of the Covered Period.
B. Remedies for Breach of Restrictive Covenant. The Employee
acknowledges that the restrictions contained in this paragraph
are reasonable and necessary for the protection of the legitimate
business interests of the Company, that any violation of these
restrictions would cause substantial injury to the Company and
such interests, that the Company would not have entered into this
Agreement with the Employee without receiving the additional
consideration offered by the Employee in binding himself to these
restrictions and that such restrictions were a material
inducement to the Company to enter into this Agreement. In the
event of any violation or threatened violation of these
restrictions, the Company, in addition to and not in limitation
of, any other rights, remedies or damages available to the
Company under this Agreement or otherwise at law or in equity,
shall be entitled to preliminary and permanent injunctive relief
to prevent or restrain any such violation by the Employee and any
and all persons directly or indirectly acting for or with him, as
the case may be.
7. Notices. Notices and all other communications under this
Agreement shall be in writing and shall be deemed given when
mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Company to:
Heartland Financial USA, Inc.
Attention: President
0000 Xxxxxxx Xxxxxx
Xxx 000
Xxxxxxx, Xxxx 00000-0000
If to the Employee to:
(See Attachment to Exhibit 10.1)
or to such other address as either party may furnish to the other
in writing, except that notices of changes of address shall be
effective only upon receipt.
8. Applicable Law. This Agreement is entered into under, and
shall be governed for all purposes by, the laws of the state of
Iowa.
9. Severability. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or
unenforceable, then the invalidity or unenforceability of that
provision shall not affect the validity or enforceability of any
other provision of this Agreement and all other provisions shall
remain in full force and effect.
10. Withholding of Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or
other taxes as may be required pursuant to any law, governmental
regulation or ruling.
11. Not an Employment Agreement. Nothing in this Agreement
shall give the Employee any rights (or impose any obligations) to
continued employment by the Company or any Affiliate or successor
of the Company, nor shall it give the Company any rights (or
impose any obligations) for the continued performance of duties
by the Employee for the Company or any Affiliate or successor of
the Company.
12. No Assignment. The Employee's rights to receive payments or
benefits under this Agreement shall not be assignable or
transferable whether by pledge, creation of a security interest
or otherwise, other than a transfer by will or by the laws of
descent or distribution. In the event of any attempted
assignment or transfer contrary to this paragraph, the Company
shall have no liability to pay any amount so attempted to be
assigned or transferred. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
13. Successors. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns
(including, without limitation, any company into or with which
the Company may merge or consolidate). The Company agrees that
it will not effect the sale or other disposition of all or
substantially all of its assets unless either (a) the person or
entity acquiring the assets, or a substantial portion of the
assets, shall expressly assume by an instrument in writing all
duties and obligations of the Company under this Agreement, or
(b) the Company shall provide, through the establishment of a
separate reserve, for the payment in full of all amounts which
are or may reasonably be expected to become payable to the
Employee under this Agreement.
14. Legal Fees. All reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) paid or
incurred by the Employee pursuant to any dispute or question of
interpretation relating this Agreement shall be paid or
reimbursed by the Company if the Employee is successful on the
merits pursuant to a legal judgment, arbitration or settlement.
15. Term. This Agreement shall remain in effect through
December 31, 2003. In the event of a Change of Control during
the term of this Agreement, this Agreement shall remain in effect
for the Covered Period.
16. Amendment. This Agreement may not be amended or modified
except by written agreement signed by the Employee and the
Company.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the day and year first
written.
HEARTLAND FINANCIAL USA, INC.
By: /s/ Xxxx X. Xxxx /s/ Employee
-------------------- --------------------
Xxxx X. Xxxx (See Attachment to
Director Exhibit 10.1)
Chairman, Compensation Committee
ATTACHMENT TO EXHIBIT 10.1
TIMES
EMPLOYEE PAY ADDRESS
--------------------- ------- -----------------------
1. Xxxx X. Xxxxxx four (4) 000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
2. Xxxx X. Xxxxxxx three (3) 0000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
3. Xxxxxxx X. Xxxxxxxx three (3) 00000 Xxxxxx Xxxxxxx Xx.
Xxxxxxx, XX 00000-0000
4. Xxxxxx X. Xxxxxx two (2) 0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
