Document:

EXHIBIT 10.7
 

PRIMUS GUARANTY, LTD.

 

	
                        SENIOR MANAGEMENT SEVERANCE PAY PLAN (Amended February 1, 2007)
 
	
                         
 

Section 1 Purpose

The Company is implementing the Plan to make available severance benefits to a select group of key management employees if and when employment with the Company is terminated under the circumstances and subject to the conditions described below. The Plan is intended to be a welfare benefit plan as defined by Section 3(1) of ERISA. The terms of the Plan may not be modified or amended, except as described below. 

Section 2 Definitions 

Capitalized terms used in the Plan and not elsewhere defined herein shall have the meanings set forth in this Section:

(a) “Base Salary” shall mean the Participant’s monthly rate of base pay, excluding any employer contributions towards employee benefits, bonuses, or other incentive pay, determined as of the date immediately prior to the date of such Participant’s Termination of Employment, provided that any reduction in the Participant’s rate of base pay that forms a basis for such Termination of Employment shall be disregarded.  

(b) “Board” shall mean the Board of Directors of the Company.

(c) “Bonus” shall mean, the average amount of cash and equity (valued as of the grant date) paid to the Participant as an annual bonus for the past three years (or such shorter period if they were not employed by the Company long enough to receive three bonuses). Any bonus for a period less than a full year shall be prorated.

(d) “Cause” shall have the meaning set forth in any employment agreement between the Company or any Subsidiary and the Participant, and otherwise shall mean a Participant’s having (i) been charged with a felony or a crime involving moral turpitude, (ii) materially failed, refused or neglected to substantially perform his or her duties (other than by reason of a physical or mental impairment), to implement the directives of the Company, or to comply with any written Company policy or agreement to which the Participant is a party, in each case after the Participant has been given written notice and a reasonable opportunity to cure such failure, refusal or neglect, to the extent curable, or (iii) willfully engaged in conduct that is materially injurious to the Company or any Subsidiary, monetarily or otherwise.

 

(e) “CIC Termination of Employment” shall mean a Participant’s termination of employment with the Company and its Subsidiaries (i) initiated by the Company or a Subsidiary other than on account of Cause or Disability, or (ii) initiated by the Participant for Good Reason, in either case which occurs at any time during the 18 month period following a Change in Control.

(f) A
  “Change in Control” shall be deemed to have occurred upon: 

(i) the acquisition by any person (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), excluding the Company or any of its Subsidiaries or any employee benefit plan sponsored by any of the foregoing, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 30% or more of the voting power with respect to the election of directors, except that 50% shall be substituted for 30% where such person beneficially owned Shares immediately prior to the time of the Company’s initial public offering of Shares, or is controlled by or is under common control with, any such beneficial owner of the Shares;

(ii) the cessation for any reason of the individuals who constitute the Board as of the effective date of the Plan (the “Incumbent Board”) to constitute at least a majority of the members of the Board, provided that any individual becoming a director subsequent to the effective date of the Plan whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than any individual whose nomination for election to Board membership was not endorsed by the Company’s management prior to, or at the time of, such individual’s initial nomination for election) shall be, for purposes of the Plan, considered as though such person were a member of the Incumbent Board; or 

(iii) the consummation of a merger, consolidation, recapitalization, reorganization, sale or disposition of all or a substantial portion of the Company’s assets, a reverse stock split of outstanding voting securities, or the issuance of shares of  stock of the Company in connection with the acquisition of the stock or assets of another entity, provided, however, that a Change in Control shall not occur under this clause (iii) if  consummation of the transaction would result in more than 50% of the total voting power with respect to the election of directors represented by the voting securities of the Company (or, if not the Company, the entity that succeeds to all or substantially all of the Company’s business) outstanding immediately after such transaction being beneficially owned by all or substantially all of the holders of outstanding voting securities
of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction.

 

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(g) “COBRA Premium” shall mean, for a Participant who is entitled to, and elects to receive, continued health coverage under the health plans of the Company or a Subsidiary pursuant to Part 6 of Subchapter I of Title I of the ERISA, the monthly premium paid by the Participant for such coverage.

(h) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(i) “Company” shall mean Primus Guaranty, Ltd. and any successor that assumes the Plan pursuant to Section 9 (other than for purposes of determining whether a Change in Control has occurred in connection with such successor). 

(j) “Disability” shall mean a Participant’s physical or mental impairment such that he or she qualifies for benefits under a long-term disability insurance plan sponsored by the Company or a Subsidiary.

(k) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(l) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(m) “Good Reason” shall mean a (i) reduction of a Participant’s rate of base pay (other than a reduction that applies proportionately to all employees similarly situated to the Participant) or his target annual bonus opportunity as in effect immediately prior to a Change in Control, (ii) a relocation of a Participant’s principle place of employment by more than 50 miles from such place of employment immediately prior to a Change in Control, (iii) a material and adverse change or diminution of the Participant’s job duties or responsibilities as in effect immediately prior to a Change in Control, after the Participant has given the Company written notice and a reasonable opportunity to cure such change or diminution, or (iv) any failure by the Company to obtain the assumption of the Plan by any successor or assign of the Company as provided in Section 9.

(n) “Non-CIC Termination of Employment” shall mean a Participant’s termination of employment with the Company and its Subsidiaries initiated by the Company or a Subsidiary other than on account of Cause or Disability that occurs at any time other than during the 18 month period following a Change in Control.

(o) “Participant” shall mean any employee of the Company or a Subsidiary who is described as an eligible employee in Section 3 and satisfies the conditions for participation in the Plan set forth in Section 3.

(p) “Plan” shall mean the Primus Guaranty Ltd. Senior Management Severance Pay Plan, as set forth herein, and as the same may from time to time be amended.

 

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(q) “Plan Committee” shall mean the committee designated to administer the Plan pursuant to Section 7.

(r) “Severance Period” for a Participant shall mean (i) with respect to a Non-CIC Termination of Employment, the period commencing on the date of such Participant’s termination of employment and ending on the date that is such number of months thereafter as is equal to the Participant’s Years of Service, but such period shall be no less than 2 months and no greater than 12 months, and (ii) with respect to a CIC Termination of Employment, a period commencing on the date of such termination of employment and ending on the date that is 18 months later.

(s) “Subsidiary” shall mean an entity that is, either directly or through one or more intermediaries, controlled by the Company. 

(t) “Termination of Employment” shall mean either a CIC Termination of Employment or a Non CIC Termination of Employment. 

(u) “Years of Service” shall mean the number of consecutive full twelve  month periods since the Participant’s last date of hire by the Company in which the Participant is paid by the Company for the performance of full-time services in a capacity that qualifies such person for participation in this Plan. Years of Service shall be measured in full years and no credit shall be provided for fractions of a Year of Service.

Section 3 Eligibility

All members of the Company’s Operating Committee and all employees of the Company or any Subsidiary designated by the Plan Committee shall participate in the Plan. No employee shall receive any payments under the Plan unless such employee becomes party to a non-competition agreement substantially in the form attached as Appendix A (the “Non-Competition Agreement”).

Section 4 Severance Benefits

(a) Cash Severance. In the event of a Participant’s Termination of Employment, the Company shall pay the Participant his or her Base Salary and Bonus for each month during the Severance Period consistent with the Company’s normal payroll practices applicable to the Participant immediately prior to his or her Termination of Employment (or as such payroll practices may be revised by the Company from time to time). Notwithstanding the foregoing, the Plan Committee, in its sole and absolute discretion, may pay severance to a Participant in the form of a single lump sum payment.

(b) Prorated Bonus. In the event of a Participant’s Termination of Employment, the Company shall pay the Participant the cash portion of the annual bonus to which the Participant would have been entitled had he or she remained employed by the Company or a Subsidiary until the end of the fiscal year in which such termination occurs, multiplied by a fraction, the numerator of which equals the sum of the number of 

 

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months (or fractions thereof) during such fiscal year that the Participant was employed by the Company or a Subsidiary and the denominator of which equals twelve, paid when the bonus is normally paid.

(c) Health Benefits. In the event of a Participant’s Termination of Employment, the Company shall reimburse the Participant the COBRA Premium paid by the Participant in respect of each month during the Severance Period, provided that such reimbursement shall be reduced by the amount of any monthly co-premium payment the Participant would have been required to make had he or she remained actively employed by the Company or a Subsidiary.

(d) Accelerated Vesting. Upon a Participant’s CIC Termination of Employment, all outstanding unvested awards relating to the Company’s stock (or any securities or other consideration into which such stock was converted in connection with the Change in Control) whose vesting was conditioned solely upon the Participant’s future performance of services shall become fully vested. Additionally, upon a Participant’s death, disability or retirement (as such latter term is defined in the Company’s 2004 Share Incentive Plan) all outstanding unvested awards relating to the Company’s stock whose vesting was conditioned solely upon the Participant’s future performance of services shall become fully vested. As to any such award whose vesting was also dependent upon achieving a
targeted level of performance during a specified performance period, such award shall vest on the assumption that targeted level of performance was achieved, or, if greater, expected actual performance determined at the time of a Change in Control, and shall be prorated to reflect the portion of such specified performance period during which the participant was actually employed by the Company or any Subsidiary.

Additionally, (i) all of a Participant’s unvested “make-whole signing bonuses” shall vest in the event of a Non-CIC Termination of Employment, and (ii) all of a Participant’s unvested “Annual Awards” shall vest in the event their position is eliminated.

Section 5 Conditions; Offset

(a) Conditions. No benefits will be paid or provided pursuant to Section 4 unless and until the Participant executes a release of claims in favor of the Company and its affiliates in substantially the form attached as Appendix B, and such release becomes irrevocable, as provided in such release. In addition, a Participant shall not be entitled to any benefits under Section 4 if such Participant has breached the Non-Competition Agreement, or has breached any other agreement with the Company relating to nondisclosure of confidential information, or ownership of intellectual property. In the event of such breach, the Participant shall repay to the Company all amounts previously paid to him or her under the Plan.

(b) Offset. Any amount to be paid or benefit to be provided under Section 4 shall be reduced by any like amount to be paid or provided pursuant to the terms of any 

 

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employment agreement between the Company or any Subsidiary and the Participant. In addition, the Company may offset from any payment otherwise due a Participant pursuant to the Plan any amount the Participant owes the Company or any Subsidiary.

Section 6 Special Tax Gross-Up

(a) Gross-Up. A Participant shall be entitled to a payment in an amount that, on an after-tax basis (including federal income and excise taxes, social security and Medicare taxes and state and local income taxes) equals the excise tax imposed by Section 4999 of the Code (the “Excise Tax”) upon the Participant by reason of amounts payable under the Plan (including this Section 6), as well as other amounts payable outside the Plan by the Company or any Subsidiary that are described in Section 280G(b)(2)(A)(i) of the Code. For purposes of this subsection, the Participant shall be deemed to pay federal, state and local income taxes at the highest marginal rate of taxation. 

(b) Cut-Back. Notwithstanding Section 6(a), no payment shall be made thereunder, and amounts payable under Section 4 and, if necessary, amounts payable  outside of the Plan by the Company or any Subsidiary that are described in Section 280G(b)(2)(A)(i) of the Code, shall be reduced to the extent necessary to avoid any portion of any such payment being treated as a “parachute payment” within the meaning of Section 280G(b)(2) of the Code if, after such reduction, the Participant would retain at least 90% of the amount that would otherwise be payable without regard to this Section 6(b). Reductions to be made under this Section 6(b) shall first be applied to amounts payable in cash, then to non-cash benefits other than acceleration of vesting, and then to acceleration of vesting.

(c) Determinations. Determinations of the Excise Tax and the amount of the payment or reduction to be made pursuant to Section 6(a) or (b) shall be made by the Plan Committee. If it is subsequently determined by the Internal Revenue Service (“IRS”) that the Excise Tax is greater than the amount so determined, the Plan Committee shall recalculate the payment or reduction to be made pursuant to Section 6(a) or (b), and make any appropriate payment to the Participant. The Company, at its cost, may, on the Participant’s behalf, challenge any assessment or imposition of any such excise tax by the IRS, and the Participant will reasonably assist and cooperate with the Company, at the Company’s expense, with respect to any such challenge. Should the Participant receive a refund of any excise
tax previously paid, the Participant shall repay to the Company the portion of any gross-up payment made in respect of the Excise Tax so refunded. The Participant will, with respect to the applicability of the Excise Tax, take a position consistent with that of the Company at all times.

Section 7 Administration

(a) Plan Committee. The Plan shall be administered by the Compensation Committee of the Board, unless the Board shall appoint a different committee. Other provisions of the Plan notwithstanding, the Board may perform any function of the Plan 

 

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Committee under the Plan, and to the extent authority is specifically reserved to the Board under the terms of the Plan, the Company’s Certificate of Incorporation or Bye-Laws, or applicable law, such authority shall be exercised by the Board and not by the Plan Committee. 

(b) Powers and Duties of Plan Committee. In addition to the powers and duties specified elsewhere in the Plan, the Plan Committee shall have full authority and discretion to: 

(i) adopt, amend, suspend, and rescind such rules and regulations and appoint such agents as the Plan Committee may deem necessary or advisable to administer the Plan;

(ii) correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan or other instrument hereunder;  

(iii) make determinations relating to eligibility for and entitlements to benefits under the Plan, and to make all factual findings related thereto; and

(iv) make all other decisions and determinations as may be required under the terms of the Plan or as the Plan Committee may deem necessary or advisable for the administration of the Plan.

(c) Delegation by Plan Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Plan Committee may delegate to any person or persons selected by it, who may or may not be members of the Board, all or any part of its responsibilities and powers as set forth in the Plan. Any such allocation or delegation may be revoked by the Plan Committee at any time. Except as notified in writing to the contrary by the Plan Committee, in the event of such allocation or delegation, the Plan Committee’s delegates shall have all of the powers vested in the Plan Committee necessary to fulfill the functions delegated.

Section 8 Claims Procedure

(a) Generally. This Section 8 describes the Plan’s procedures under which an individual can make a claim for benefits under the Plan and appeal a denied claim for benefits. A request for benefits is a “claim” subject to these procedures only if it is filed by an individual or his or her authorized representative in accordance with the Plan’s claim filing guidelines. All claims must be filed with the Plan Committee in writing (to the attention of “Severance Plan Committee” addressed to the Company’s corporate headquarters). If an individual wants to bring a claim for benefits under the Plan, the individual may designate an authorized representative to act on his or her behalf so long as the individual provides written notice of such designation to the Plan Committee
identifying such authorized representative. 

 

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(b) Time Periods for Responding to Initial Claims. If an individual brings a claim for benefits under the Plan, the Plan Committee will respond to the individual within 90 days after receipt of the claim. If the Plan Committee determines that an extension is necessary due to matters beyond the control of the Plan, the Plan Committee will notify the individual within the initial 90-day period that the Plan Committee needs up to an additional 90 days to review his or her claim. 

(c) Notice and Information Contained in Notice Denying Initial Claim. If the Plan Committee denies a claimant’s claim (in whole or in part), the Plan Committee will provide the individual with written notice of the denial. This notice will include the specific reason or reasons for the denial; reference to the specific provisions on which the denial is based; a description of any additional material or information necessary for the individual to perfect his or her claim and an explanation as to why such information is necessary; and a description of the Plan’s appeals procedures and the time limits applicable for such procedures (such description to include a statement that the individual is eligible to bring a civil action in Federal court under Section 502 of ERISA to appeal any adverse
decision on appeal and a description of any expedited review process for urgent care claims).

(d) Appealing a Denied Claim for Benefits. If an individual’s initial claim for benefits is denied, the individual may appeal the denial by filing a written request addressed to the Severance Plan Committee, within 60 days after the individual receives the notice denying his or her initial claim for benefits. If the individual decides to appeal a denied claim for benefits, the individual will be able to submit written comments, documents, records, and other information relating to his or her claim for benefits (regardless of whether such information was considered in his or her initial claim for benefits) for review and consideration. The claimant will also be entitled to receive, upon request and free of charge, access to and copies of, all documents, records and other information that is relevant
(within the meaning of ERISA) to his or her appeal.

(e) Time Periods for Responding to Appealed Claims. If a claimant appeals a denied claim for benefits under the Plan, the Plan Committee will respond to the individual within 60 days after receipt of the claim. If the Plan Committee determines that an extension is necessary due to matters beyond the control of the Plan, the Plan Committee will notify the individual within the initial 60-day period that the Plan Committee needs up to an additional 60 days to review his or her appeal.

(f) Notice and Information Contained in Notice Denying Appeal. If the Plan Committee denies an individual’s appeal (in whole or in part), the Plan Committee will provide the individual with written notice of the denial. This notice will include the specific reason or reasons for the denial; reference to the specific provisions on which the denial is based; a statement that the individual is entitled to receive, upon request and free of charge, access to and copies of, all documents, records and other information that is relevant (within the meaning of ERISA) to his or her claim and/or appeal for benefits; and a statement that the individual is entitled to bring a civil action in Federal court under Section 502 of ERISA to pursue his or her claim for benefits. 

 

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Section 9 Successor to the Company

The Company may require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company to expressly to assume the Plan and agree to perform the obligations hereunder in the same manner and to the same extent the Company would be required to perform if no such succession had taken place.

Section 10 Amendment; Termination; Removal from Participation

The Board retains the right to amend, suspend or terminate the Plan in whole or in part for any reason, and the Plan Committee retains the right to remove any particular Participant from further participation in the Plan for any reason; provided, however, that if any such action adversely affects the rights of any Participant under the Plan, (i) 12 months advance notice must be provided to each adversely affected Participant before any such action is effective, and (ii) no such action shall become effective during the 18 month period following a Change in Control. 

Section 11 General Provisions

(a) No Mitigation. A Participant shall not be required to mitigate the amount of any payment or benefit provided for in the Plan by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 

(b) Non-Exclusivity of Rights. Nothing in the Plan shall prevent or limit the Participant’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or Plan provided by the Company and for which the Participant may qualify; provided, however, that if the Participant becomes entitled to and receives all of the payments provided for in the Plan, the Participant agrees to waive his right to receive payments under any severance plan or similar Plan applicable to all employees of the Company.

(c) Nonalienation of Benefits. None of the payments, benefits or rights of any Participant shall be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, trustee’s process, or any other legal or equitable process available to any creditor of such Participant. No Participant shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which he may expect to receive, contingently or otherwise, under the Plan.

(d) No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Participant the right to be retained in the 

 

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service of the Company or any Subsidiary, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been adopted.

(e) Death. In the event of a Participant’s death following his or her Termination of Employment and after having become entitled to benefits under the Plan, any amounts not yet paid pursuant to Section 4(a) shall be paid to the person(s) or trust(s) which have been designated by the Participant in his or her most recent written beneficiary designation filed with the Plan Committee. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive such amounts. 

(f) Tax Withholding. The Company and each Subsidiary shall have the right to withhold from any payment to be made pursuant to the Plan such amount as it is required to withholding under applicable withholding tax laws.

(g) Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.

(h) Unfunded Plan. The Plan shall not be funded. No Participant shall have any right to, or interest in, any assets of the Company or any Subsidiary which may be applied by the Company to the payment of Benefits.

(i) Controlling Law. The Plan shall be construed and enforced according to the laws of the state of New York, except to the extent preempted by United States Federal law.

 

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Appendix
  A

Non-Competition Agreement

This agreement is made by and between Primus Guaranty Limited (the “Company”) and _____________ (“Employee”) as of the ___ day of ___________, 200__. 

In consideration of Employee’s continued employment with the Company or any of its subsidiaries, the selection of Employee to participate in the Primus Guaranty Limited Senior Management Severance Pay Plan (the “Severance Plan”), and other good and valuable consideration hereby acknowledged by Employee, Employee acknowledges and agrees as follows:

1. Employee will not, during Employee’s employment and during the Restricted Period (as defined below) directly or indirectly, on Employee’s own behalf or as a partner, officer, director, employee, agent, consultant or stockholder (other than as the holder of 1% or less of the voting capital stock of any corporation with a class of equity securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended) engage in or render services to any person or entity engaged in the development or sale of financial products related to credit enhancement, or that is a dealer with respect to such products, where Employee’s activities will relate primarily to financial products offered by the Company or one of its subsidiaries or affiliates at the time of Employee’s termination of employment. For purposes of this agreement, the “Restricted Period”
shall mean the period commencing on the date hereof and ending on the one year anniversary of Employee’s termination of employment with the Company and all of its subsidiaries, provided that in the event such termination is under circumstances entitling Employee to severance benefits under Section 4 of the Severance Plan, the Restricted Period shall end on the earlier of such one year anniversary, or the date that the Severance Period, as defined in the Severance Plan, expires.

2. Employee acknowledges that the relationships of the Company and its subsidiaries with their employees, customers and vendors are valuable business assets. Employee agrees that, during Employee’s employment and during the Restricted Period, Employee will not directly or indirectly (for Employee or for any third party) divert or attempt to divert from the Company or its subsidiaries and affiliates any business, employee, customer or vendor, through solicitation or otherwise. 

3. Employee acknowledges that the restrictions contained in paragraphs 1 and 2 of this agreement, in view of the nature of the businesses in which the Company and its subsidiaries are engaged, are reasonable and necessary in order to protect the legitimate interests of the Company and its subsidiaries and that any violation thereof would result in irreparable injuries to the Company and its subsidiaries which would not be readily ascertainable or compensable in terms of money, and therefore further acknowledges that, in the event of his violation of any of these restrictions, the Company shall be 

 

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entitled to obtain from any court of competent jurisdiction temporary, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. Employee further agrees that if it is determined by a court that Employee has breached the terms of the aforesaid paragraphs, the Company shall be entitled to recover from Employee all costs and reasonable attorneys’ fees incurred as a result of its attempts to redress such breach or to enforce its rights and protect its legitimate interests. Employee agrees that a copy of this agreement may be submitted to any court or other tribunal in connection with any proceeding concerning the meaning, interpretation or enforcement of the terms of this agreement. 

4. The Company may assign this agreement to any successor to its business or assets. This agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and upon Employee and his legal representatives.

5. This agreement does not confer upon Employee any right or obligation to continue in the employ of the Company or alter in any way the at-will nature of Employee’s employment relationship with the Company.

6. If any portion or application of this agreement, including particularly the restrictions set forth above, should for any reason whatsoever be declared invalid, in whole or in part, by a court of competent jurisdiction, such illegal or unenforceable provision or application or part thereof shall be severable from this agreement and shall not in any way affect the validity or enforceability of any of the remaining provisions or applications. In that regard, Employee hereby declares that the restrictions set forth above are reasonable and properly required for the adequate protection of the businesses of the Company. In the event the scope of any restriction is deemed to be unreasonable by any court of competent jurisdiction, Employee agrees to the reduction of said restriction to such scope that said court shall deem reasonable. 

7. This agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to choice of law principles. Employee (i) irrevocably submits to the jurisdiction of any state or federal court sitting in the State of New York for the purposes of any suit, action or other proceeding arising out of or relating to this agreement, and (ii) waives and agrees not to assert in any such proceeding a claim that he is not personally subject to the jurisdiction of the court referred to above, that the suit or action was brought in an inconvenient forum or that the venue of the suit or action is improper.

 

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

 

  	
        EMPLOYEE

      	
         

      	
        PRIMUS
          GUARANTY LTD.

      
	
         

      	
         

      	
         

      
	
         

      	
         

      	
         

      
	
        
        

      	 	 	
         

      	
        
        

      
	
         

      	
         

      	
        By: 

      
	
         

      	
         

      	
        Title:

      
	
         

      	
         

      	
         

      
	
        Dated:
          

      	
         

      	
         

      	
         

      	
        Dated:
          

      	
         

      
						

 

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Appendix B

RELEASE

I, ______________________, the undersigned, agree to accept the compensation, payments, benefits and other consideration provided for in Section 4 of the Senior Management Severance Pay Plan (the “Plan”) of Primus Guaranty Limited (the “Company”) in full resolution and satisfaction of, and hereby IRREVOCABLY AND UNCONDITIONALLY RELEASE, REMISE AND FOREVER DISCHARGE the Company and Releasees from any and all agreements, promises, liabilities, claims, demands, rights and entitlements of any kind whatsoever, in law or equity, whether known or unknown, asserted or unasserted, fixed or contingent, apparent or concealed, to the maximum extent permitted by law (“Claims”), which I, my heirs, executors, administrators, successors or assigns ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever
existing, arising, occurring or relating to my employment  and/or termination thereof with the Company and Releasees, or my status as a stockholder of the Company and Releasees, at any time on or prior to the date I execute this Release, including, without limitation, any and all Claims arising out of or relating to compensation, benefits, any and all contract claims, tort claims, fraud claims, claims for bonuses, commissions, sales credits, etc., defamation, disparagement, or other personal injury claims, claims for accrued vacation pay, claims under any federal, state or municipal wage payment, discrimination or fair employment practices law, statute or regulation, and claims for costs, expenses and attorneys’ fees with respect thereto.  This release and waiver includes, without limitation, any and all rights and claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of 1866, 1871 and 1991, the Employee Retirement Income Security Act, the Age
Discrimination in Employment Act (including but not limited to the Older Workers Benefit Protection Act), the Americans with Disabilities Act, the National Labor Relations Act, the Family and Medical Leave Act, the Equal Pay Act, the Sarbanes-Oxley Act, [add applicable state laws and/or Bermuda laws relating to employment] and all amendments to the foregoing, and any other federal, state or local statute, ordinance, regulation or constitutional provision regarding employment, compensation, employee benefits, termination of employment or discrimination in employment. Notwithstanding the above, I do not release my right to any right to indemnification I may have as a director, officer or employee pursuant to applicable law and/or the Company’s certificate of incorporation.

I represent and affirm (i) that I have not filed any Claim against the Company or Releasees and (ii) that to the best of my knowledge and belief, there are no outstanding Claims within the meaning of this paragraph.

For
  the purpose of implementing a full and complete release and discharge of Claims,
  I expressly acknowledge that this Release is intended to include in its effect,
  without limitation, all the Claims described in the preceding paragraphs, whether
  known or unknown, apparent or concealed, and that this Release contemplates
  the extinction of all such Claims, including Claims for attorney’s fees.
  I expressly waive any right to

   

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 assert after the execution of this Release that any such Claim has, through ignorance or oversight, been omitted from the scope of the Release.

For purposes of this Release, the term “the Company and Releasees” includes the Company and its past, present and future direct and indirect parents, subsidiaries, affiliates, divisions, predecessors, successors, and assigns, and their past, present and future officers, directors, shareholders, representatives, agents, attorneys and employees, in their official and individual capacities, and all other related individuals and entities, jointly and individually, and this Release shall inure to the benefit of and shall be binding and enforceable by all such entities and individuals.

[add any special provisions necessary under state law relating to employment]

I understand that I have a period of up to 14 days [21 if age 40 or older] from my receipt of this Release to review and consider this Release. [if age 40 or older add: I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following its execution by delivering a written notice of revocation to the Company, attention General Counsel.]  I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 14 [21] day period, [or revoke my execution of the Release during such 7 day period], I will not be entitled to the compensation, payments, benefits and other consideration provided for in Section 4 of the Plan.

 

  	
        I
          ACKNOWLEDGE THAT I HAVE READ THIS

          RELEASE AND I UNDERSTAND

          AND ACCEPT ITS TERMS

      	
         

      	
         

      
	
         

      	
         

      	
         

      	
         

      
	
         

      	
         

      	
         

      	
         

      
	
        
        

      	
         

      	
         

      	
        
        

      
	
         

      	
         

      	
         

      	
        Date

      
	
         

      	
         

      	
         

      	
         

      
	
        Sworn
          to before me this

          ___ day of ________, 20__

      	
         

      	
         

      	
         

      
	
         

      	
         

      	
         

      	
         

      
	
         

      	
         

      	
         

      	
         

      	
         

      
	
        Notary
          Public

      	
         

      	
         

      	
         

      	
         

      

 

15exv10w31

 

Exhibit 10.31

EMPLOYMENT AGREEMENT BETWEEN

QCR HOLDINGS, INC.,

QUAD CITY BANK AND TRUST COMPANY

AND MICHAEL A. BAUER

(As Amended and Restated December 14, 2006)

     THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 14th day of December,
2006 (the “Effective Date”), is between QCR HOLDINGS, INC. (the “Company”) and QUAD CITY BANK AND
TRUST COMPANY (the “Bank”) (collectively, the “Employer”), and MICHAEL A. BAUER (the “Employee”).

RECITALS

     WHEREAS, Employee is currently serving as an executive of the Company and the Bank pursuant to
that certain Employment Agreement as amended and restated March 21, 2006 (the “Prior Employment
Agreement”); and

     WHEREAS, the parties desire to further amend and restate the Prior Employment Agreement on the
terms hereinafter set forth.

     NOW, THEREFORE, in consideration of the promises and of the covenants and agreements
hereinafter contained, it is covenanted and agreed by and among the parties hereto as follows:

AGREEMENTS

     Section 1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter set forth.

     Section 2. Duties. The Employee agrees to provide all services necessary,
incidental or convenient as an officer and employee of the Company and the Bank as provided herein.
The Employer shall designate the location or locations for the performance of the Employee’s
services. Consistent with the Company’s corporate succession plan, Employee shall serve as
President and Chief Executive Officer (“CEO”) of the Bank through May 2, 2007. Upon relinquishing
the above titles with the Bank, Executive shall continue as an employee of the Employer and shall
become Vice Chairman of the board of directors of the Bank, until otherwise provided by the
Company’s board of directors (the “Board”). Executive shall, subject to stockholder approval and
the discretion of the Board, continue to serve on the Board during the Term (as defined below) and
shall serve as its chairman through December 31, 2006, and as Vice Chairman thereafter, until
otherwise provided by the Board. 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.

     Section 3. Term. The term of this Agreement shall commence on the Effective
Date, and shall continue through the date of the annual meeting of the Company’s stockholders to be
held in May of 2009, at which time it shall terminate (the “Term”), unless it is earlier terminated
pursuant to Sections 6, 7 or 10 hereunder.

     Section 4. Compensation. As compensation for the services to be provided by
the Employee hereunder:

          (a) Base Salary. The Bank shall pay Employee an annual base salary of two
hundred and twenty thousand five hundred dollars ($220,500) (“Base Salary”). Base Salary shall be
payable bi-weekly, in equal installments in accordance with the Employer’s payroll practice. The
Company shall reimburse the Bank for Employee’s Base Salary attributable to services for the
Company. The Employee’s Base Salary shall be subject to

 

 

review during the Term in the sole and absolute discretion of the Executive
Committee of the board of directors of the Company (the “Committee”).

          (b) Annual Bonuses. The Employee shall be entitled to receive cash bonuses
(“Cash Bonus” or “Cash Bonuses”), based upon performance, which may be granted in the future in the
discretion of the Employer, which may be based upon performance criteria or levels independent of
any such criteria or levels that may established for other executive management, as modified from
time to time, in the sole discretion of the Committee.

          (c) Transition Incentive Bonus. The Employee shall be eligible to receive
an additional bonus of up to eighty thousand dollars ($80,000) per year (the “Transition Bonus”).
The performance cycle for the Transition Bonus shall run between the dates of the Company’s annual
stockholders’ meetings, with the first cycle beginning with the May 2006 meeting and the last cycle
ending as of the annual meeting of the Company’s stockholders to be held in May of 2009. The
amount of Transition Bonus earned shall be determined by the Committee and may be deferred by Mr.
Bauer. Any Transition Bonus paid hereunder shall not constitute a Cash Bonus and shall not be
considered when determining the Annual Average Bonus (as defined below).

          (d) Non-Qualified Supplemental Executive Retirement Agreement. Employee
shall participate in the Non-Qualified Supplemental Executive Retirement Agreement, as amended, in
accordance with its terms.

          (e) Benefits. The Employer shall provide the following additional benefits
to the Employee:

               (i) Medical Insurance. Family medical insurance, provided that Employee shall be responsible
for paying any portion of the premium in accordance with the Employer’s policy applied to similarly
situated employees.

               (ii) Reimbursements. Reimbursement of reasonable expenses advanced by the Employee in
connection with performance of his duties hereunder, including, but not limited to, two (2) paid
weeks of continuing education, a quarterly automobile allowance of $2,000, fuel, maintenance and
insurance expense of such automobile, and the annual reimbursement of club dues for the Crow Valley
Club.

               (iii) Personal Days. The Employee will initially be entitled to five (5) weeks of personal
days, which may be increased in accordance with the Employer’s established policies and practices.

               (iv) Disability Coverage. Long-term and short-term disability coverage equal to 66-2/3% of
Base Salary and Average Annual Bonus. For purposes of this Agreement, “Average Annual Bonus” shall
mean the average of the three (3) most recent annual Cash Bonuses paid to the Employee immediately
preceding the determination date.

               (v) Employee Benefits. Participation in a 401(k)/profit sharing plan, deferred compensation
program and such other benefits as are specifically granted to Employee or in which he participates
as an employee of the Employer.

               (vi) Life Insurance. Term life insurance of two (2) times Employee’s Base Salary and Average
Annual Bonus as of the date of this Agreement; which insurance may be provided through a group term
carve-out plan at the Employer’s election. The Employee will be allowed to purchase additional
life insurance of at least that same amount through such plan.

               (vii) Stock Options. In the event that Employee is granted additional stock options during
the Term, such option awards shall provide for the full vesting of such awards upon the Employee’s
retirement from employment from the Company, the Bank or any subsidiary (based upon the latest such
retirement).

2

 

     Section 5. Time Requirement. Subject to the direction of the Board, the
Employee shall devote his best efforts and full business time to his duties under this Agreement.
The Employee shall be allowed to serve on outside boards subject to the consent of the Employer.

     Section 6. Termination upon Disability. In the event of the Employee’s
Disability (as defined below) during the Term, payments based upon the Employee’s then current
annual Base Salary and Average Annual Bonus shall continue thereafter through the last day of the
one (1) year period beginning on the date of such Disability, after which time Employee’s
employment shall terminate. Payments made in the event of the Employee’s Disability shall be equal
to 66-2/3% of Employee’s Base Salary and Average Annual Bonus, less any amounts received under the
Employer’s short or long-term disability programs, as applicable. Disability for purposes of this
Agreement shall mean that the Employee is limited from performing the material and substantial
duties of the positions set forth in Section 2 due to the Employee’s sickness or injury for a
period of six (6) consecutive months. The Committee shall determine whether and when the Employee
has incurred a Disability under this Agreement.

     Section 7. Payment upon Death. In the event of the Employee’s death during
the Term, the Employee shall be paid his accrued and unpaid Base Salary, and his earned Cash Bonus
for the year in which he died prorated on a per diem basis through the date of death. The earned
Base Salary shall be paid in accordance with the Employer’s regular payroll on the next regular
payroll date following the Employee’s death. The earned Cash Bonus for the year shall be paid when
Cash Bonuses are paid to other executive officers of the Employer with respect to such year. Such
amounts shall be payable to the persons designated in writing by the Employee, or if none, to his
estate.

     Section 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.

     Section 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 areas of the
Employer’s lending and deposit taking functions extends to the areas encompassing the sixty (60)
mile radii from each of the offices of the Employer. Therefore, as an essential ingredient of and
in consideration of this Agreement and the payment of the amounts described in Sections 4 and 10,
the Employee hereby agrees that, except with the express prior written consent of the Employer, for
a period of two (2) years after the termination of the later of Employee’s employment with the
Employer or any subsidiaries and affiliates or the end of any consulting arrangement with the
Employer or any subsidiaries and affiliates (the “Restrictive Period”), he will not directly or
indirectly compete with the business of the Employer, 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 Employer to terminate
employment with the Employer 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 the sixty (60) mile radii of each
of the Employer’s offices (the “Restrictive Covenant”). If the Employee violates the Restrictive
Covenant and the Employer brings legal action

3

 

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. 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 National Association of Securities
Dealers Automated Quotation System which do not represent more than one percent (1%) of the
outstanding capital stock of any Financial Institution.

          (b) Remedies for Breach of Restrictive Covenant. The Employee acknowledges
that the restrictions contained in this Section 9 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.

     Section 10. Severance.

          (a) Termination Without Cause. If the Employee is terminated without
“Cause” (as defined below), the Employer will pay the Employee a sum equal to his then current
annual Base Salary plus his Average Annual Bonus. Such payment shall be made in a lump sum within
15 days of termination or in equal installments over the one (1) year period, at the Employer’s
option. In addition, the Employer shall provide reasonable out-placement services for up to three
(3) months following termination.

          (b) Termination for Cause or Voluntary Termination. If the Employee is
terminated for Cause (as defined below) or voluntarily terminates his employment, then the Employer
shall pay Employee any accrued and unpaid Base Salary, and any accrued and unpaid personal days and
shall have no further obligations to the Employee under this Agreement. For purposes of this
Agreement, “Cause” shall mean:

               (i) a material violation by the Employee of any applicable material law or regulation
respecting the business of the Employer;

               (ii) the Employee being found guilty of a felony, an act of dishonesty in connection with the
performance of his duties as an officer of the Employer, or which disqualifies the Employee from
serving as an officer or director of the Employer; or

               (iii) the willful or negligent failure of the Employee to perform his duties hereunder in any
material respect.

The Employee shall be entitled to at least thirty (30) days’ prior written notice of the Employer’s
intention to terminate his employment for any Cause 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.

          (c) Termination Upon Change in Control. If a Change in Control (as defined
below) of the ownership of the Employer occurs and the Employee is terminated within one (1) year
following the Change in Control or the Employee elects to terminate his employment within six (6)
months following the Change in Control, a severance payment will be made within 15 days of
termination equal to the sum of his Base Salary and Annual Average Bonus as would have been paid
through the end of the Term as if his employment was not terminated. In addition, the Employer shall continue, or cause to be
continued, Employee’s health insurance as in effect on the date

4

 

of termination (including, if applicable, family coverage) through the end of the Term as if his employment was not terminated.

          For purposes of this paragraph, the term “Change in Control” shall mean the following:

               (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 1934 Act) of thirty-three percent
(33%) 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) Consummation by the Company of (i) 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 of the Company outstanding immediately before such merger or consolidation
or (ii) a complete liquidation or dissolution or an agreement for the sale or other disposition of
two-thirds or more of the consolidated assets of the Company.

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
of the Company is acquired by (i) a trustee or other fiduciary holding securities under one or more
employee benefit plans maintained for employees of the entity or (ii) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of stock of the Company immediately
prior to such acquisition.

               (iv) If it is determined, in the opinion of the Company’s independent accountants, in
consultation, if necessary, with the Company’s independent legal counsel, that any amount paid
under this Agreement due to a Change in Control, either separately or in conjunction with any other
payments, benefits and entitlements received by the Employee in respect of a Change in Control
under any other plan or agreement under which the Employee participates or to which he is a party,
would constitute an “Excess Parachute Payment” within the meaning of Section 280G of the Code, and
thereby be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then
in such event the Employer shall pay to the Employee a “grossing-up” amount equal to the amount of
such Excise Tax, plus 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 grossing-up
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, then the Employer shall pay to the Employee the amount of such unreimbursed
Excise Tax plus any interest, penalties and reasonable 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 the
payment of such amounts will be used for purposes of determining the federal and state income and
other taxes with respect thereto. The Employer 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 with respect to the amount paid hereunder. Computations of the amount of any grossing-up
supplemental compensation paid under this subparagraph shall be conclusively made by the Employer’s
independent accountants, in consultation, if necessary, with the Employer’s independent legal
counsel. If, after the Employee receives any gross-up payments or other amount pursuant to this
Section 10, the Employee receives any refund with respect to the Excise Tax, the Employee shall
promptly pay the Employer the amount of such refund within ten (10) days of receipt by the
Employee.

               (v) If the Employer is not in compliance with its minimum capital requirements or if the
payments required under this Section 10 would cause the Employer’s capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such time as the Employer is in
capital compliance. At

5

 

the election of the Employee, which election is to made within thirty (30)
days of the Employee’s termination, such payments shall be made in a lump sum or paid monthly
during the remaining term of this Agreement following the Employee’s termination. In the event
that no election is made, payment to the Employee will be made on a monthly basis during the
remaining term of this Agreement. Such payments shall not be reduced in the event the Employee
obtains other employment following the termination of employment by the Employer.

     Section 11. Post-Term Services.

          (a) Consulting Arrangement. Following the end of the Term and for a period of three
(3) years thereafter, the Employee and the Company shall enter into a consulting arrangement
whereby the Employee shall continue to assist the Company and the Bank with the retention of
certain designated customer relationships. The arrangement shall provide for a formula-based
consulting fee whereby Employee may earn up to two thousand dollars ($2,000) per month. Throughout
the period of the consulting arrangement, Company shall reimburse Employee for annual club dues for
the Crow Valley Club.

          (b) Charitable Foundation. Prior the end of the Term, the Company shall establish
and fund a charitable foundation to be administered by the Employee for the benefit of the local
community. Following the end of the Term and for a period of up to three years, the Employee shall
earn fifteen hundred dollars ($1,500) per month for services performed on behalf of such new
charitable foundation, with such payments to be made by the Company.

          (c) Medical Benefit Coverage. Following the end of the Term, Employee shall be
entitled to continue to participate in the medical insurance programs of the Company or the
foundation through the date on which Employee first becomes eligible for coverage under Medicare,
but in no event beyond Employee’s sixty-fifth (65th) birthday; provided, however, that
the cost to the Company, or the foundation, for such coverage shall not exceed the cost of
providing similar benefits to current employees of the Company; provided, further, that, in the
event that Employee is not eligible for participation in the medical insurance programs of the
Company, or the foundation, the Company may either provide individual insurance coverage (of no
greater cost to the Company or foundation) or may provide Employee a cash payment equal to the cost
of providing such insurance to current employees for such period.

     Section 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 for 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 (i) 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 (ii) to assign to the Employer all rights of the Employee to indemnification, under

6

 

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.

     Section 13. Payment of Legal Fees. The Employer is aware that after a
Change in Control, management of the Employer or its successor could cause or attempt to cause the
Employer to refuse to comply with its obligations under this Agreement, including the possible
pursuit of litigation to avoid its obligations under this Agreement. In these circumstances, the
purpose of this Agreement would be frustrated. It is the Employer’s intention that the Employee
not be required to incur the expenses associated with the enforcement of his rights under this
Agreement, whether by litigation or other legal action, because the cost and expense thereof would
substantially detract from the benefits intended to be granted to the Employee hereunder. It is
the Employer’s intention that the Employee not be forced to negotiate settlement of his rights
under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control
occurs it appears to the Employee that (a) the Employer has failed to comply with any of its
obligations under this Agreement, or (b) the Employer or any other person has taken any action to
avoid its obligations under this Agreement, the Employer irrevocably authorizes the Employee from
time to time to retain counsel of his choice, at the expense of the Employer as provided in this
Section 12, to represent the Employee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Employer or any director, officer,
stockholder, or other person affiliated with the Employer, in any jurisdiction. Notwithstanding
any existing or previous attorney-client relationship between the Employer and any counsel chosen
by the Employee under this Section 12, the Employer irrevocably consents to the Employee entering
into an attorney-client relationship with that counsel, and the Employer and the Employee agree
that a confidential relationship shall exist between the Employee and that counsel. The fees and
expenses of counsel selected from time to time by the Employee as provided in this Section 12 shall
be paid or reimbursed to the Employee by the Employer on a regular, periodic basis upon
presentation by the Employee of a statement or statements prepared by such counsel in accordance
with such counsel’s customary practices. The Employer’s obligation to reimburse Employee for legal
fees as provided under this Section 12 and any separate employment, deferred compensation,
severance or other agreement between the Employee and the Employer shall not exceed $200,000 in the
aggregate. Accordingly, the Employer’s obligation to pay the Employee’s legal fees provided by
this Section 12 shall be offset by any legal fee reimbursement obligation the Employer may have
with the Employee under any separate employment, deferred compensation, severance or other
agreement between the Employee and the Employer.

     Section 14. Regulatory Suspension and Termination.

          (a) If the Employee is suspended from office and/or temporarily prohibited from
participating in the conduct of the Employer’s affairs by a notice served under Section 8(e)(3) (12
U.S.C. § 1818(e)(3)) or 8(g) (12 U.S.C. § 1818(g)) of the Federal Deposit Insurance Act, as
amended, the Employer’s obligations under this contract shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the
Employer shall (A) pay the Employee all of the compensation withheld while their contract
obligations were suspended and (B) reinstate any of the obligations, which were suspended.

          (b) If the Employee is removed and/or permanently prohibited from participating in
the conduct of the Employer’s affairs by an order issued under Section 8(e) (12 U.S.C. § 1818(e))
or 8(g) (12 U.S.C. § 1818(g)) of the Federal Deposit Insurance Act, as amended, all obligations of
the Employer under this contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

          (c) If the Employer is in default as defined in Section 3(x) (12 U.S.C. §
1813(x)(1)) of the Federal Deposit Insurance Act, as amended, all obligations of the Employer under
this contract shall terminate as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

          (d) All obligations of the Employer under this contract shall be terminated, except
to the extent determined that continuation of the contract is necessary for the continued operation
of the institution by the Federal Deposit Insurance Corporation (the “FDIC”), at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Employer under the authority
contained in Section 13(c) (12 U.S.C. § 1823(c)) of the Federal Deposit Insurance Act, as amended,
or when the Employer is determined by the FDIC to be in an unsafe

7

 

or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by such action.

          (e) Any payments made to the Employee pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) (12 U.S.C. § 1828(k)) of the
Federal Deposit Insurance Act as amended, and any regulations promulgated thereunder.

     Section 15. 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. The Company
agrees that it shall not merge or consolidate into or with another company, or reorganize, or sell
substantially all its assets to another company, firm or person unless such succeeding or
continuing company, firm or person agrees to assume and discharge the obligations of the Company
under this Agreement.

          (b) This Agreement is governed by and construed in accordance with the laws of the
State of Iowa.

          (c) The provisions of Sections 8 and 9 shall survive the termination of this
Agreement.

          (d) No amendment or modification of this Agreement is effective unless made in
writing and signed by each party.

          (e) This Agreement may be signed in several counterparts, each of which will be an
original and all of which will constitute one agreement.

(Remainder of Page Intentionally Left Blank)

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year
first above set forth.

QCR HOLDINGS, INC.

	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ James J. Brownson
 

	 	 	 	/s/ Michael A. Bauer
 

	 	 
	 

	 	     James J. Brownson
	 	 	 	MICHAEL A. BAUER	 	 
	 

	 	     Chairman, Executive Committee	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Douglas M. Hultquist	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	     Douglas M. Hultquist,	 	 	 	 	 	 
	 

	 	     President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	QUAD CITY BANK AND TRUST COMPANY	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ James J. Brownson	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	     James J. Brownson	 	 	 	 	 	 
	 

	 	     Secretary	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Douglas M. Hultquist	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	     Douglas M. Hultquist,	 	 	 	 	 	 
	 

	 	     Chairman	 	 	 	 	 	 

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}]]