EXHIBIT 10.10

 

CHANGE IN CONTROL AGREEMENT

 

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”) is entered into as of the
24th day of March 2014 (the “Effective Date”), by and among MainStreet
BankShares Corporation, a Virginia corporation (“MainStreet”), Franklin
Community Bank, National Association, MainStreet’s wholly owned subsidiary
(“Bank”) and Todd S. Hammock (“Employee”).

 

WITNESSETH:

 

WHEREAS, Employee is employed by either MainStreet or Bank, MainStreet’s wholly
owned subsidiary, which together conduct a financial services and community
banking business. (MainStreet or Bank, as the case may be, in the capacity of
employer of Employee and any Successor is herein referred to as “Employer”);
and,

 

WHEREAS, MainStreet has agreed to provide for certain payments to Employee in
the event of a termination of Employee’s employment with the Employer under
certain circumstances in conjunction with a Change in Control Event (as defined
below), Employee has agreed to protect certain information of MainStreet and
Bank and under certain circumstances, not to compete against Employer and, to
set forth the terms and conditions of that arrangement, MainStreet, Bank and
Employee desire to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual promises, covenants
and conditions hereinafter set forth, and for other good and valuable
considerations, the receipt and sufficiency of which hereby are acknowledged,
MainStreet, Bank and Employee hereby agree as follows:

 

1.           Effective Date of Agreement. This Agreement shall be effective on
the Effective Date set out above and shall remain in effect until terminated as
provided herein.

 

 

 

 

2.           Payment in Certain Events. If at the effective time of a “Change in
Control Event” (as defined below) or any time within one (1) year following a
Change in Control Event (A) Employer terminates Employee’s employment without
“Cause” (as defined below) or, (B) Employee terminates his or her employment
with Employer for Good Reason (as defined below), provided that (i) Employee
gives Employer notice of the condition constituting Good Reason and at least
thirty (30) days to remedy such condition and (ii) such termination occurs
within one (1) year following the initial existence the condition constituting
Good Reason, then in either event (subject to the limitations set forth herein)
Employee shall be entitled to receive from MainStreet, and MainStreet shall be
obligated to pay or cause to be paid to Employee, an amount equal to the lesser
of (x) one (1) times the Employee’s annual base salary for the calendar year
preceding the year in which the Termination Date occurs or (y) the maximum
amount that may be taken into account under a qualified plan pursuant to
Internal Revenue Code Section 401(a)(17) for the year in which the Termination
Date occurs. If Employee’s employment is terminated by Employer without Cause
prior to the effective time of a Change in Control Event but following the date
on which MainStreet’s board of directors takes action to approve an agreement
(including any definitive agreement or an agreement in principle) relating to a
Change in Control Event, then for purposes of this Agreement, such termination
of employment shall be deemed to occur at the effective time of the Change in
Control Event. Otherwise, if Employee’s employment is terminated prior to the
effective time of a Change in Control Event, Employee shall have no rights
hereunder. Amounts payable under this Section 2 shall be paid in a lump sum
payable on the first day of the seventh month following the Termination Date.

 

3.           Definitions. For purposes of this Agreement:

 

(A)         “Change of Control Event” shall mean: a change in the ownership of
the Employer, a change in the effective control of the Employer, or a change in
the ownership of a substantial portion of the assets of the Employer, consistent
with and interpreted in accordance with Internal Revenue Code Section 409A and
regulations issued thereunder, and specifically defined as follows:

 

In order to constitute a Change in Control Event as to the Employee, the Change
in Control Event shall relate to:

 

(1)         the corporation for whom the Employee is performing services at the
time of the Change in Control Event; or

 

(2)         the corporation that is liable for the payment of the deferred
compensation (or all corporations liable for the payment if more than one
corporation is liable) but only if either the deferred compensation is
attributable to the performance of service by the Employee for such corporation
(or corporations) or there is a bona fide business purpose for such corporation
or corporations to be liable for such payment and, in either case, no
significant purpose of making such corporation or corporations liable for such
payment is the avoidance of Federal income tax; or

 

(3)         a corporation that is a majority shareholder of a corporation
identified in either subparagraph (1) or (2), or any corporation in a chain of
corporations in which each corporation is a majority shareholder of another
corporation in the chain, ending in a corporation identified in either
subparagraph (1) or (2) above.

 

 

 

 

(i)          Change In Ownership. A change in the ownership of a corporation
shall occur on the date that any one person, or more than one person acting as a
group, acquires ownership of stock of the corporation that, together with stock
held by such person or group, constitutes more than 50% of the total fair market
value or total voting power of the stock of such corporation. However, if any
person, or more than one person acting as a group, is considered to own more
than 50% of the total fair market value or total voting power of the stock of a
corporation, then the acquisition of additional stock by the same person or
persons shall not be considered to cause a change in the ownership of the
corporation (or to cause a change in the effective control of the corporation).

 

(ii)         Change In Effective Control. Notwithstanding the fact that a
corporation has not undergone a change in ownership as described above, a change
in the effective control of a corporation shall occur only on the date that
either:

 

(a)          any one person or more than one person acting as a group acquires
(or has acquired during the twelve month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of the
corporation possessing 30% or more of the total voting power of the stock of
such corporation; or

 

(b)          a majority of members of the corporation’s Board of Directors is
replaced during any 12-month period by Directors whose appointment or election
is not endorsed by a majority of the members of the corporation’s Board of
Directors prior to the date of the appointment or election, provided that for
purposes of this subparagraph, the term “corporation” refers solely to the
relevant corporation identified above, for which no other corporation is a
majority shareholder.

 

(iii)        Change In Ownership of Assets. A change in the ownership of a
substantial portion of the assets of a corporation shall occur on the date that
any one person, or more than one person acting as a group, acquires (or has
acquired during the twelve-month period ending on the date of the most recent
acquisition by such person or persons) assets from the corporation that have a
total gross fair market value equal to or more than 40% of the total gross fair
market value of all of the assets of the corporation immediately prior to such
acquisition or acquisitions. For this purpose, “gross fair market value” shall
mean the value of the assets of the corporation, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.

 

A transfer of assets by a corporation shall not be treated as a change in the
ownership of such assets if the assets are transferred to:

 

(a)          a shareholder of the corporation (immediately before the asset
transfer) in exchange for or with respect to its stock;

 

 

 

 

(b)          an entity, 50% or more of the total value or voting power of which
is owned, directly or indirectly, by the corporation; or

 

(c)          a person, or more than one person acting as a group, that owns,
directly or indirectly, 50% or more of the total value or voting power of all
the outstanding stock of the corporation; or

 

(d)          an entity, at least 50% of the total value or voting power of which
is owned, directly or indirectly, by a person who is a “related person” under
applicable Treasury Regulations.

 

There shall be no Change in Control Event when there is a transfer to an entity
that is controlled by the shareholders of the transferring corporation
immediately after the transfer.

 

(B)         “Successor” shall mean any person or entity (corporate or otherwise)
which, in connection with a Change in Control Event, shall be merged into
MainStreet or Bank or which MainStreet or Bank shall merge into or be
consolidated with or to which all or substantially all of MainStreet ‘s or
Bank’s assets shall be transferred in any manner or which by law or agreement
assumes, takes assignment of or becomes obligated for MainStreet’s or Bank’s
obligation. Successor shall include any Successor of a preceding Successor.

 

(C)         “Cause” or “for Cause” shall mean:

 

(i)          continual or deliberate neglect by Employee in the performance of
his material duties and responsibilities or the Employee’s willful failure to
follow reasonable instructions or policies of Employer applicable to Employee
after a Change in Control Event after being notified of such failure and being
given a reasonable opportunity and period to remedy such failure;

 

(ii)         with respect to Employee, conviction of, indictment for (or its
procedural equivalent), entering of a guilty plea or plea of no contest with
respect to a felony, a crime of moral turpitude or any other crime with respect
to which imprisonment is a possible punishment, or the commission of an act of
embezzlement or fraud;

 

(iii)        any breach or violation by Employee in any material respect of any
code or standard of behavior generally applicable to employees of Employer,
after being advised in writing of such breach or violation and being given a
reasonable opportunity and period to remedy such breach or violation;

 

 

 

 

(iv)        dishonesty of Employee in any aspect of his or her employment, or
breach of a fiduciary duty to Employer or to Employer’s its subsidiaries;

 

(v)         the willful engaging by Employee in conduct that is reasonably
likely to result, in the good faith judgment of Employer, in material injury to
Employer or any of its subsidiaries or affiliates, monetarily or otherwise;

 

(vi)        the violation by Employee of any applicable federal or state law, or
any applicable rule, regulation, order or statement of policy promulgated by any
governmental agency or authority having jurisdiction over Employer or any of its
affiliates or subsidiaries (a “Regulatory Authority,” including without
limitation the Federal Deposit Insurance Corporation, the Virginia Bureau of
Financial Institutions, Office of the Comptroller of the Currency, the Federal
Reserve Board, the Securities and Exchange Commission or any other regulatory
agency), which results from Employee’s negligence, misconduct or disregard of
such law, rule, regulation, order or policy statement and results in any not
immaterial damage, monetary or otherwise, to Employer or any of its affiliates
or subsidiaries or to their reputation;

 

(vii)       the conviction of Employee of any felony or any criminal offense
involving dishonesty or breach of trust, or the occurrence of any event
described in Section 19 of the Federal Deposit Insurance Act or any other event
or circumstance which disqualifies Employee from serving as an employee or
executive officer of, or a party affiliated with, Employer or any of its
affiliates or subsidiaries; or, in the event Employee becomes unacceptable to,
or is removed, suspended or prohibited from participating in the conduct of the
affairs of Employer or any of its affiliates or subsidiaries (or if proceedings
for that purpose are commenced) by, any Regulatory Authority; or

 

(viii)      the exclusion of Employee by the carrier or underwriter from
coverage under Employer’s then current “blanket bond” or other fidelity bond or
insurance policy covering its or its affiliates’ or subsidiaries’ directors,
officers or employees, or the occurrence of any event which Employer believes,
in good faith, will result in Employee being excluded from such coverage, or
having coverage limited as to Employee as compared to other covered officers or
employees, pursuant to the terms and conditions of such “blanket bond” or other
fidelity bond or insurance policy.

 

(D)         “Good Reason” shall mean the existence of one or more of the
following conditions which arises in connection with or after the effective time
of a Change in Control Event without the consent of the Employee:

 

(i)          a material diminution in the Employee’s base compensation;

 

 

 

 

(ii)         a material diminution in the Employee’s authority, duties or
responsibilities;

 

(iii)        a material diminution in the authority, duties or responsibilities
of the supervisor to whom the Employee is required to report;

 

(iv)        a material diminution in the budget over which the Employee retains
authority;

 

(v)         a material change in the geographic location at which the Employee
must perform services; or

 

(vi)        any other action or inaction that constitutes a material breach by
the Employer of the agreement under with the Employee provides services.

 

(vii)       any failure by a Successor to expressly agree to the terms and
conditions of this Agreement without modification.

 

(E)         “Other than Good Reason” shall mean any voluntary termination by the
Employee which is not for Good Reason.

 

(F)         “Retirement” shall mean the Employee’s retirement on or after the
age of 65.

 

(G)         “Determination of Long Term Incapacity” shall mean a good faith
determination by Employer that, as a result of mental or physical illness or
injury the Employee has failed to perform his assigned duties with Employer on a
full time basis for a period exceeding twelve (12) consecutive months.

 

(H)         “Termination Date” means the effective date as of which the
Employee’s employment with Employer is terminated, giving rise to a payment
obligation under Section 2.

 

4.           Possible Reduction in Payment and Benefits. Following any Change in
Control Event, to the extent that any amount of pay or benefits provided under
to Employee under this Agreement would cause Employee to be subject to excise
tax under sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), and after taking into consideration all other amounts
payable to Employee under other plans, programs, policies, and arrangements,
then the amount of pay and benefits provided under this Agreement shall be
reduced to the extent necessary to avoid imposition of any such excise taxes.
Employee may select the payments and benefits to be limited or reduced,
including an election not to have the vesting of certain benefits, including
stock options, accelerate as a result of a Change in Control Event.

 

 

 

 

5.           Legal Fees and Costs. Except as otherwise provided herein,
MainStreet will pay or reimburse Employee for all costs and expenses, including
without limitation court costs and reasonable attorneys’ fees and expert witness
fees and expenses, incurred by Employee in seeking to obtain or enforce by legal
proceeding any right or benefit provided by this Agreement.

 

6.           Documents. All documents, record, tapes and other media of any kind
or description relating to the business of Employer or any of its subsidiaries
and affiliates (the “Documents”), whether or not prepared by Employee, shall be
the sole and exclusive property of Employer. The Documents (and any copies)
shall be returned to Employer upon Employee’s termination of employment for any
reason or at such earlier time or times as Employer may specify.

 

7.           Regulatory Requirements. Notwithstanding anything contained in this
Agreement to the contrary, it is understood and agreed that MainStreet shall not
be required to make any payment or take any action under this Agreement if:

 

(A)         MainStreet is declared by any Regulatory Authority to be insolvent,
in default or operating in an unsafe or unsound manner, or if

 

(B)         in the opinion of counsel to MainStreet such payment or action (i)
would be prohibited by or would violate any provision of state or federal law
applicable to MainStreet, (ii) would be prohibited by or would violate any
applicable rules, regulations, orders or formal statements of policy, whether
now existing or hereafter promulgated, of any Regulatory Authority, or (iii)
otherwise is prohibited by any Regulatory Authority.

 

8.           Termination of Agreement. Except as provided in Section 21, this
Agreement shall terminate automatically and become null and void upon any
termination of Employee’s employment with Employer other than a termination of
employment which results in MainStreet’s payment obligation under Section 2
above. Following any such termination of this Agreement except as provided in
Section 21, it shall be of no further force or effect and Employee shall have no
further rights hereunder.

 

9.           Severability. If any provision of this Agreement, or part thereof,
is determined to be unenforceable for any reason whatsoever, it shall be
severable from the remainder of this Agreement and shall not invalidate or
affect the other provisions of this Agreement, which shall remain in full force
and effect and shall be enforceable according to their terms. No covenant shall
be dependent upon any other covenant or provision herein, each of which stands
independently.

 

 

 

 

10.         Modification. The parties expressly agree that should a court find
any provision of this Agreement, or part thereof, to be unenforceable or
unreasonable, the court may modify the provision, or part thereof, in a manner
which renders that provision reasonable, enforceable, and in conformity with the
public policy of Virginia.

 

11.         Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.

 

12.         Notices. All written notices required by this Agreement shall be
deemed given when delivered personally or sent by registered or certified mail,
return receipt requested, to the parties at their addresses set forth on the
signature page of this Agreement. Each party may, from time to time, designate a
different address to which notices should be sent by giving notice thereof in
writing to the other party at least three days before the effective date of such
change in address.

 

13.         Amendment. This Agreement may not be varied, altered, modified or in
any way amended except by an instrument in writing executed by the parties
hereto or their legal representatives.

 

14.         Binding Effect. This Agreement shall be binding upon Employee and
MainStreet, Bank, their respective Successors and assigns effective on the date
first above written.

 

15.         No Construction Against Any Party. This Agreement is the product of
informed negotiations between the Employee, Bank and MainStreet. If any part of
this Agreement is deemed to be unclear or ambiguous, it shall be construed as if
it were drafted jointly by all parties. The Employee, Bank and MainStreet agree
that no party was in a superior bargaining position regarding the substantive
terms of this Agreement.

 

16.         Entire Agreement. This Agreement constitutes the complete, final and
entire agreement of the parties with respect to the matters addressed herein and
it supersedes all other prior agreements and understandings, both written and
oral, express or implied, with respect to the subject matter of this Agreement.
No promises, representations or warranties have been made by any party to or for
the benefit of the other with respect to such matters which are not expressly
set forth herein.

 

17.         Exclusions. Notwithstanding anything contained herein to the
contrary, it is expressly understood and agreed by Employee that:

 

(a)          Employee shall not be entitled to any payments under this Agreement
if no Change in Control Event occurs or in the event a Change in Control Event
occurs (i) Employer terminates Employee’s employment for Cause, or (ii) Employee
voluntarily terminates his employment with Employer for Other than Good Reason,
or (iii) Employee’s employment with Employer terminates or is terminated due to
his death, Retirement or pursuant to a Determination of Long Term Incapacity,

 

 

 

 

(b)          Employee’s employment with Employer is on an “at will” basis and
this Agreement does not constitute an employment contract or an agreement by
Employer to employ Employee for any particular period of time or in any
particular capacity. Nothing in this Agreement is intended or should be
interpreted to confer upon Employee the right to continue in the employ of
Employer or to be or become an employee of Bank or MainStreet if Bank or
MainStreet is not the Employer or to interfere with or restrict in any way the
right of Employer to discharge Employee or terminate his or her employment at
any time or for any reason whatsoever, with or without Cause, and without any
obligation or liability to Employee except as herein provided, it being the
intent of the parties hereto only to provide for payment of the severance
benefits specified herein in the event of the termination of Employee’s
employment with Employer under the circumstances described in Section 2.

 

18.         Confidentiality. The Employee recognizes that as an employee of
Employer, Employee will have access to and may participate in the origination of
non-public, proprietary and confidential information for both MainStreet and
Bank and that Employee owes a fiduciary duty to the Employer in addition to
Employee’s contractual obligation hereunder with respect to such confidential
information. Confidential information may include, but is not limited to, trade
secrets, customer lists and information, internal corporate planning, strategic
plans, methods of marketing and operation, and other data or information of or
concerning MainStreet or Bank in which Employer has an interest or customers of
MainStreet and/or Bank that is not generally known to the public or in the
banking industry. The Employee agrees that, as a condition to his employment by
Employer, Employee agrees never to make a disclosure of confidential information
to a third party or use confidential information other than for the exclusive
benefit of MainStreet or Bank.

 

19.         Non Competition. Employee hereby further recognizes and acknowledges
that in view of Employee’s knowledge as an employee of Employer of MainStreet
and Bank’s confidential and proprietary information, customer base and goodwill,
it would be unfair for Employee immediately to engage in any enterprise
competitive with the Employer following the end of his employment with Employer.
Accordingly, for a period of twelve (12) months following a termination of
Employment at the effective time of a Change in Control or within one year
thereafter, Employee covenants and agrees that without the prior written consent
of Employer, Employee will not for the purpose of competing with Employer,
within the Restricted Territory (as defined below):

 

(a)          Undertake the planning of any business to derive revenue from the
Restricted Business (as defined below):

 

 

 

 

(b)          Organize or assist in the organization or formation of any
enterprise or entity to derive or intend to derive revenue from the Restricted
Business; or

 

(c)          Commence employment with or provide services to or on behalf of any
individual or enterprise, which employment or services involve all or part of
the Restricted Business.

 

For purposes of this Agreement, the term “Restricted Business” shall mean:

 

(a)          Soliciting, underwriting, approving or disapproving, administering
or managing consumer, commercial or mortgage loans or other similar extensions
of credit or financing transactions, making recommendations concerning or
providing advice regarding such loans, credit or financing transactions, or
lending or extending such credit, or marketing or lending services or managing,
advising, supervising or overseeing others who do any of the foregoing; or

 

(b)          Soliciting or marketing to obtain deposits; soliciting, marketing,
administering or otherwise engaging in cash management services; or managing,
advising, supervising or overseeing others who do any of the foregoing.

 

(c)          Engaging in the business of commercial or retail banking in any
capacity.

 

For purposes of this Agreement, the “Restricted Territory” shall be defined as
the geographic area within a fifty (50) mile radius of the office of Employer
where Employee was principally located for Employer during the twelve (12)
months preceding Employee’s termination.

 

20.         Remedies. Employee acknowledges that as a result of Employee’s
employment with Employer, Employee will possess trade secrets and confidential
information of MainStreet and Bank and customer contacts and customer
information of MainStreet and Bank which Employee would inevitably use if
Employee were to engage in conduct prohibited as set forth in this Agreement,
such use would be unfair and extremely detrimental to Employer, and, in view of
the benefits provided Employee as an employee of Employer, such conduct on
Employee’s part would be inequitable. Employee further agrees that it would be
difficult to measure damages to Employer from any breach of the covenants
contained in Sections 18 and 19 of this Agreement and that such breach would
threaten Employer with irreparable harm. Accordingly, Employee agrees that the
Employer may have specific performance of Sections 18 and 19 of this Agreement
in any court having jurisdiction. Specific performance shall not be the
exclusive remedy, and Employer (or MainStreet or Bank, if not the Employer) may
enforce any other remedy or remedies available to it either in law or in equity,
including but not limited to monetary damages, temporary, preliminary, and/or
permanent injunctive relief and Employer (or MainStreet or Bank, if not the
Employer) shall further be entitled to reasonable attorney’s fees expended in
obtaining such relief notwithstanding any other provisions of this Agreement. It
is further expressly agreed that Sections 18 and 19 shall each operate and apply
as independent covenants irrespective of any alleged breach of any other
provision of this Agreement.

 

 

 

 

Employee specifically acknowledges and agrees that the purpose of the
restrictions contained in Section 19 are to protect against unauthorized use of
confidential information of Company and Bank and misappropriation of customer
base and good will and that the restrictions contained herein are reasonably
designed to achieve that end. Employee agrees that the restrictions contained in
this Agreement will not prevent Employee from earning a livelihood and will not
impose hardship on Employee in the event of Employee’s separation. Employee
further agrees that adequate compensation has been received for such
obligations. Employee further agrees that the prohibitions and the
noncompetition provisions of this Agreement set forth in Section 19 are limited
to employment or other activity that would be in competition with Employer.
Notwithstanding anything to the contrary herein, nothing in Section 19 of this
Agreement shall be construed to prohibit any activity which cannot reasonable be
construed to further in any meaningful way any actual or potential competition
against Employer. If, however, for any reason any court determines that the
restrictions in Section 19 are not reasonable, that consideration is inadequate
or that Employee has been prevented unlawfully from earning a livelihood, such
restrictions shall be interpreted, modified or rewritten to include as much of
the restrictions and duration, scope and geographic area thereof as will render
such restrictions valid and enforceable.

 

21.         Survival. Notwithstanding any provisions of this Agreement the
following sections shall survive termination of this Agreement and Employee’s
employment with Employer: 9, 11, 12, 15, 16, 18, 19, and 20.

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written herein.

 

Franklin Community Bank,     MainStreet BankShares, Inc. National Association  
              By: /s/ Brenda Smith   By: /s/ Brenda Smith   Brenda Smith,
President/CEO     Brenda Smith, President/CEO           Address:    
Address:  1075 Spruce Street                         Martinsville, VA  24112    
              /s/ Todd S. Hammock         Employee:  Todd S. Hammock            
      Address:    102 Pointe ‘O’ Woods Drive        
                  Huddleston, VA  24104