EMPLOYMENT AGREEMENT BETWEEN
QUAD CITY BANCARD,INC. AND XXXX X. XXXXXXXXX
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated effective
as of the 1st day of July, 1997, is by and between QUAD CITY BANCARD, INC. (the
"Employer") and XXXX X. XXXXXXXXX (the "Employee"), and joined in for purposes
of Section 13 by QUAD CITY HOLDINGS, INC., a Delaware corporation (the
"Corporation").
WITNESSETH:
1. Employment. The Employer hereby employs the Employee, and
the Employee hereby accepts employment, upon the terms and conditions
hereinafter set forth.
2. Duties. The Employee agrees to provide all services
necessary, incidental or convenient as the President and Chief Executive Officer
("CEO") of the Employer. The Employer shall designate the location or locations
for the performance of the Employee's services. The Employer shall furnish or
make available to the Employee such equipment, office space and other facilities
and services as shall be adequate and necessary for the performance of his
duties.
3. Term. The term of this Agreement shall commence on July 1,
1997 (the "Effective Date"), and shall continue for a period of three (3) years.
This Agreement shall thereafter automatically extend for successive one (1) year
terms, unless terminated by either party effective as of the last day of the
then current term by written notice to that effect delivered to the other not
less than ninety (90) days prior to the last day of the then current term.
4. Compensation. (a) The annual base compensation of the
Employee shall be Fifty Thousand Dollars ($50,000). Said compensation shall be
payable bi-weekly, in equal installments beginning July 1, 1997.
(b) The Employee shall be paid a monthly incentive bonus based
upon the Employer's monthly financial performance, all in accordance with the
terms of this section (the "Bonus"). The Bonus shall be equal to a graduated
percentage of the Employer's net income, plus an amount equal to the annual rate
of three percent (3%) of the merchants' holds account for a given calendar month
calculated in accordance with the Employer's past practices, except that income
shall not be reduced by any accruals for taxes or the Bonus (the "Monthly
Income"). The Bonus shall be paid at the earliest normal payroll date in the
next month, provided, however, that if the Bonus cannot then be paid because the
Employer's net income for the previous month has not yet been calculated, then a
good faith estimate of the Bonus shall be made and paid to Employee at such
earliest normal payroll date and appropriate adjustments shall be made as
between the Employee and the Employer at the next regular payroll date when the
Bonus has been properly determined. The percentage levels used to compute the
Bonus shall decrease as set forth below as the aggregate Monthly Income for the
Employer's current fiscal year increases.
Notwithstanding anything contained herein to the contrary, if
the Monthly Income for any calendar month is a negative number (a "Monthly
Loss"), then no Bonus shall be paid for such month and the calculation of the
Monthly Income for all subsequent calendar months (including a subsequent
calendar month in the Employer's succeeding fiscal year) shall, until such
Monthly Loss has been completely netted against any future income, be taken into
account in calculating the Monthly Income. The percentages used to calculate the
Bonus in any given calendar month are as follows:
Percentage Applied to Monthly Aggregate Monthly Income
Income to Calculate Bonus for Current Fiscal Year
12.0% $0 - $200,000
10.5% $200,001 - $499,000
9% $500,000 - $999,999
7.5% $1,000,000 and over
Example 1: In September, 1997, the Employer has Monthly Income
of $50,000, and through the end of September, 1997, for the current fiscal year,
the Employer's aggregate Monthly Income is $240,000. The Bonus for September,
1997, would be equal to the sum of: (i) 12% of $10,000, plus (ii) 10.5% of
$40,000, or a total of $5,400.
Example 2: In October, 1997, the Employer has a Monthly Loss
of $50,000 and therefore no Bonus is payable for October, 1997. Through the end
of October, 1997, the Employer's aggregate Monthly Income (after taking into
account the loss for October) for the current fiscal year is $190,000. In
November, 1997, the Employer has Monthly Income, before reduction for the prior
Monthly Loss, of $80,000. For purposes of calculating the Monthly Income for
November, 1997, the cumulative Monthly Loss reduces the unadjusted Monthly
Income to an adjusted Monthly Income of $30,000. The Bonus for November, 1997,
would be equal to 10.5 % of $30,000, or a total of $3,150.
5. Benefits. The Employer shall provide the following benefits
to the Employee:
(a) 70% of the cost of family medical insurance;
(b) Reimbursement of reasonable expenses advanced by the
Employee in connection with the performance of his duties hereunder, including,
but not limited to, one (1) paid week of continuing education;
(c) The Employee will initially be entitled to twenty (20)
personal days which may be increased in accordance with the Employer's
established policies and practices;
(d) Long-term and short-term disability coverage equal to 60 %
of compensation;
(e) A 401(k)/profit sharing plan;
(f) Stock options as approved by the Employer; and
(g) Term life insurance of two (2) times annual compensation.
The Employee will be allowed to purchase additional life insurance of at least
two (2) times annual compensation through such plan.
The benefits listed above in this Section are of the same type and scope as the
benefits generally made available to other employees of the subsidiaries of the
Corporation at this time. The Employer and the Employee each acknowledge that
the benefits described in this Section 5, and the terms upon which they are
offered by the Employer to the Employee, shall automatically be revised to
reflect any changes made by the Corporation in such benefits, or the terms upon
which they are offered, to other employees of the subsidiaries of the
Corporation.
6. Time Requirement. The Employee shall devote full time to
his duties under this Agreement. The Employee shall be allowed to serve on
outside boards of directors subject to the consent of the Employer and the
Corporation. Notwithstanding the foregoing, the Corporation and the Employer
expressly consent to the Employee serving as a member of Nobel Electronic
Transfer, L.L.C., an Iowa limited liability company ("Nobel"), and devoting a
portion of his business time to the affairs of Nobel, provided, that none of the
foregoing relationships with or service to Nobel has a material adverse effect
on the performance of his other duties under this Agreement to the Employer, and
provided further, that any compensation paid by Nobel for services rendered by
the Employee shall be paid to the Employer. Nothing herein shall require that
membership distributions to Employee from Nobel, as distinguished from
compensation paid to Employee from Nobel for services rendered, be paid to
Employer. Further, upon termination of this Agreement, nothing herein shall
require that any compensation paid to Employee from Nobel be paid to Employer.
7. Termination upon Disability or Death. In the event that
illness, incapacity, injury or death of the Employee occurs during the
employment term, payments based upon the Employee's then current annual base
compensation shall continue thereafter through the last day of the six (6) month
period beginning on the date of such illness, incapacity, injury or death.
Payments made in the event of the Employee's illness, incapacity or injury will
be reduced by any amounts received under the Employer's long-term disability
program. In the event of the Employee's death during the term of this Agreement,
such amounts shall be payable to the persons designated in writing by the
Employee, or if none, to his estate.
8. Confidentiality and Loyalty. The Employee acknowledges that
during the course of his employment he has produced and will produce and have
access to material, records, data, trade secrets and information not generally
available to the public (collectively, "Confidential Information") regarding the
Employer and any subsidiaries and affiliates. Accordingly, during and subsequent
to termination of this Agreement, the Employee shall hold in confidence and not
directly or indirectly disclose, use, copy or make lists of any such
Confidential Information, except to the extent that such information is or
thereafter becomes lawfully available from public sources, or such disclosure is
authorized in writing by the Employer, required by a law or any competent
administrative agency or judicial authority, or otherwise as reasonably
necessary or appropriate in connection with performance by the Employee of his
duties hereunder. All records, files, documents and other materials or copies
thereof relating to the Employer's business which the Employee shall prepare or
use, shall be and remain the sole property of the Employer, shall not be removed
from the Employer's premises without its written consent, and shall be promptly
returned to the Employer upon termination of the Employee's employment
hereunder. The Employee agrees to abide by the Employer's reasonable policies,
as in effect from time to time, respecting avoidance of interests conflicting
with those of the Employer. The parties acknowledge that the Employee has
substantial experience and background in the credit card business, and nothing
herein shall act to treat or consider that background and experience as
"Confidential Information" within the meaning of this Agreement.
9. Non-Competition.
(a) Restrictive Covenant. The Employer and the Employee have
jointly reviewed the operations of the Employer and have agreed that the primary
service area of the Employer's credit card processing extends to an area
encompassing a two hundred (200) mile radius of the Employer's headquarters in
Moline, Illinois (the "Non-Compete Area"). Therefore, as an essential ingredient
of and in consideration of this Agreement and the payment of the amounts
described in Sections 4 and 5, the Employee hereby agrees that, except with the
express prior written consent of the Employer, and except as otherwise provided
in Section 10, during the term of this Agreement and for a period of one (1)
year after the termination of the Employee's employment with the Employer (the
"Restrictive Period"), he will not directly or indirectly compete with the
business of the Employer in the following particulars:
(i)directly or indirectly own, manage, operate, control,
finance, or directly or indirectly serve as an employee, officer or
director of, or consultant to, any person, firm, partnership,
corporation, trust or other entity which owns or operates, a business
similar to that conducted by the Employer (a "Competing Institution")
whose primary service area includes, or whose principal place of
business is situated in the Non-Compete Area;
(ii) solicit or induce, or attempt to solicit or induce, any
employee or agent of the Employer to terminate employment with the
Employer, or to establish a relationship with a Competing Institution;
or
(iii) solicit or induce, or attempt to solicit or induce, any
client or account of the Employer, including, but not limited to,
cardholders, merchants, Independent Sales Organizations or agent banks,
to terminate its relationship with the Employer or to establish a
relationship with a Competing Institution.
If the Employee violates the Restrictive Covenant and the
Employer brings legal action for injunctive or other relief, the Employer 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
Section 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. Notwithstanding
anything contained herein to the contrary, the foregoing Restrictive Covenant
shall not prohibit the Employee from owning directly or indirectly capital stock
or similar securities which are listed on a securities exchange or quoted on the
Nasdaq which do not represent more than one percent (1%) of the outstanding
capital stock of any Competing Institution.
(b) Remedies for Breach of Restrictive Covenant. The Employee
acknowledges that the restrictions contained in this Section and Section 8 are
reasonable and necessary for the protection of the legitimate business interests
of the Employer, that any violation of these restrictions would cause
substantial injury to the Employer and such interests, that the Employer 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
Employer to enter into this Agreement. In the event of any violation or
threatened violation of these restrictions, the Employer, in addition to and not
in limitation of, any other rights, remedies or damages available to the
Employer 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.
10. Severance. (a) If the Employee is terminated without
"Cause" (as defined in Section 11), including any notice by Employer to prevent
automatic extension of the term of the Agreement under Section 3 hereof, a
severance payment will be made equal to six (6) months of compensation (as
defined in Section 14(e) below) and the Restrictive Period described in Section
9 shall extend for a period of only six (6) months after the termination of the
Employee's employment with the Employer. Such payment upon a termination without
cause shall be made in a lump sum within fifteen (15) days of termination or in
equal installments over the six (6) month period, at the Employee's option. If
the Employee chooses to receive such payment in a lump sum, the amount due shall
be discounted to its present value using the rate then applicable to securities
with a term of two (2) years issued by the United States Treasury. If a Change
of Control (as defined below) of the ownership of the Employer occurs and the
Employee elects within six months thereafter to terminate his employment, a
severance payment will be made within fifteen (15) days of termination equal to
two (2) years of compensation. Such payment after a Change of Control shall be
made in a lump sum within fifteen (15) days of termination or in equal
installments over the two (2) year period, at the Employee's option. If the
Employee chooses to receive any payment required by this Section in a lump sum,
the amount due shall be discounted to its present value using the rate then
applicable to securities with a term of two years issued by the United States
Treasury.
(b) For purposes of this Section, the term "Change in Control"
shall mean the following:
(1) 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 thirty-three percent
(33%) or more of the combined voting power of the then outstanding voting
securities of the Employer or the Corporation; or
(2) The individuals who, as of the date hereof, are
members of the board of directors of the Corporation (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
(3) Approval by stockholders of either the Employer
or Corporation: (A) 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 sixty-seven percent (67%)
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 (B) a
complete liquidation or dissolution or an agreement for the sale or other
disposition of all or substantially all of the assets of the entity.
(c) Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because thirty-three percent (33%) or more of the
combined voting power of the then outstanding securities is 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) If the Employer is not in compliance with any minimum
capital requirements applicable to it or if the payments required under this
Section would cause the Employer's capital to be reduced below any such minimum
capital requirements, such payments shall be deferred until such time as the
Employer is in capital compliance. Any amounts payable to the Employee that are
deferred as a result of this paragraph (d) shall, when paid, be paid to the
Employee with interest at the same rate then applicable to securities with a
term of two years issued by the United States Treasury.
(e) Any severance payments required to be made by the Employer
to the Employee pursuant to the terms of this Agreement shall not be reduced in
the event the Employee obtains other employment following the termination of
employment by the Employer.
11. Termination for Cause. This Agreement may be terminated
for cause as hereinafter defined. "Cause" for termination will exist if: (a) the
Employee dies or suffers a disability which leaves him unable as a result of
physical or mental incapacity, substantially to perform his duties hereunder for
a period of six (6) consecutive months; (b) the Employee engages in one or more
unsafe and unsound business practices or material violations of a law or
regulation applicable to the Employer, any repeated violations of a policy of
the Employer after being warned in writing by the Board not to violate such
policy or any single violation of a policy of the Employer if such violation
materially and adversely affects the business or affairs of the Employer or a
direction or order of the Board; (c) the Employee engages in a breach of
fiduciary duty or act of dishonesty involving the affairs of the Employer; (d)
the Employee commits a material breach of his obligations under this Agreement;
or (e) the willful or negligent failure of the Employee to perform his duties
hereunder, or with the degree of skill, care or competence which the Board
should reasonably expect given the Employee's age, experience and compensation
level, in either case which materially and adversely affects the business or
affairs of the Employer. The Employee shall be entitled to at least 30 days'
prior written notice of the Employer's intention to terminate his employment for
any cause (except the Employee's death) specifying the grounds for such
termination, a reasonable opportunity to cure any conduct or act, if curable,
alleged as grounds for such termination, and a reasonable opportunity to present
to the Board his position regarding any dispute relating to the existence of
such cause. In the event of the termination of the Employee by the Employer for
cause, the Employer shall have no further obligations under the terms of this
Agreement.
12. Indemnification.
(a) The Employer shall provide the Employee (including his
heirs, personal representatives, executors and administrators) for the term of
this Agreement with coverage under a standard directors' and officers' liability
insurance policy at its expense.
(b) In addition to the insurance coverage provided in this
Section, the Employer shall hold harmless and indemnify the Employee (and his
heirs, executors and administrators) to the fullest extent permitted under
applicable law against all expenses and liabilities reasonably incurred by him
in connection with or arising out of any action, suit or proceeding in which he
may be involved by reason of his having been an officer of the Employer (whether
or not he continues to be an officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
(c) In the event the Employee becomes a party, or is
threatened to be made a party, to any action, suit or proceeding for which the
Employer has agreed to provide insurance coverage or indemnification under this
Section, the Employer shall, to the full extent permitted under applicable law,
advance all expenses (including reasonable attorneys' fees, judgments, fines and
amounts paid in settlement (collectively "Expenses")) incurred by the Employee
in connection with the investigation, defense, settlement or appeal of any
threatened, pending or completed action, suit or proceeding, subject to receipt
by the Employer of a written undertaking from the Employee: (1) to reimburse the
Employer for all Expenses actually paid by the Employer to or on behalf of the
Employee in the event it shall be ultimately determined that the Employee is not
entitled to indemnification by the Employer for such Expenses; and (2) to assign
to the Employer all rights of the Employee to indemnification, under any policy
of directors' and officers' liability insurance or otherwise, to the extent of
the amount of Expenses actually paid by the Employer to or on behalf of the
Employee.
13. Guarantee. The Corporation hereby guarantees the
performance by the Employer of the Employer's duties and obligations under this
Agreement, and Employee acknowledges the Corporation's right to enforce the
Employer's rights and remedies under this Agreement.
14. General Provisions.
(a) This Agreement supersedes all prior agreements and
understandings between the parties relating to the subject matter of this
Agreement. It binds and benefits the parties and their successors in interest,
heirs, beneficiaries, legal representatives and assigns.
(b) This Agreement is governed by and construed in accordance
with the laws of the State of Iowa.
(c) No amendment or modification of this Agreement is
effective unless made in writing and signed by each party.
(d) This Agreement may be signed in several counterparts, each
of which will be an original and all of which will constitute one agreement.
(e) When used in this Agreement, the term "compensation" shall
mean the average of the cash compensation, including any Bonus, paid during the
preceding twelve (12) months to the Employee by the Employer pursuant to the
terms of this Agreement; provided however, for purposes of computing any
severance payment to Employee upon a Change of Control arising from the sale of
the assets, rather than the stock, of Employer, any extraordinary compensation
paid to Employee as a result of such sale shall not be included in the
computation of the severance payment.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above set forth.
QUAD CITY BANCARD, INC. QUAD CITY HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx X. Xxxxx
-------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxxxx Xxxxxxx X. Xxxxx
Secretary-Treasurer Chairman of the Board
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------- --------------------------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxxxxxx
Chairman of the Board President
/s/ Xxxx X. Xxxxxxxxx
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XXXX X. XXXXXXXXX
