Document:

Employment agreement

 

Exhibit 10.9

 

EMPLOYMENT AGREEMENT 

This Employment Agreement ("Agreement") is effective as of March __9___, 2004, by and between Guaranty Bank (the "Bank") and Shaun Burke (the "Executive"). 

 

WHEREAS, the Bank desires to employ the Executive on the terms and conditions hereinafter set forth; and 

 

WHEREAS, the Executive is willing to render his services to the Bank on the terms and conditions set forth herein with respect to such employment; and 

 

NOW, THEREFORE, in consideration of promises and the mutual terms and conditions hereof, the Bank and the Executive hereby agree as follows:

 

1.    Employment. The Bank hereby employs the Executive and the Executive hereby accepts employment with the Bank upon the terms and conditions hereinafter set forth.

 

2.    Exclusive Services. The Executive shall devote all working time, ability, and attention to the business of the Bank during the term of this Agreement and shall not, directly or indirectly, render any services to or for the benefit of any other business, corporation, organization, or entity, whether for compensation or otherwise, without the prior knowledge and written consent of the Board of Directors.

 

3.    Duties. The Executive is hereby employed as President and CEO of the Bank, and shall perform for or on behalf of the Bank such duties as the Bank shall assign from time to time and shall render his services at the principal business offices of the Bank, as such may be located from time to time, unless otherwise agreed in writing between the Bank and the Executive, and shall perform such duties in accordance with the Bank’s policies and practices, including its employment policies and practices. The Executive is expected to achieve, at a minimum, all the following performance standards and expectations:

 

	 	1)	Promptly notify Don Gibson and the Chairman of the Board of any and all events that materially or potentially could materially impact the financial, operational, or reputation of the Bank and/or Holding Company. Such events include but are not limited to regulatory, judicial, litigation, audit, loan defaults, major customer relations, internal operations, employee moral, and any and all discussions/contacts regarding acquisitions/mergers; and

	2)  	Perform all usual and customary responsibilities and duties of a Bank President and Chief Executive Officer. This includes but is not limited to receiving a 1 or 2 rating on the State Banking audit, receiving an unqualified opinion from the Independent Accountants’ Report, and producing financial statements free of material misstatement; and

	3)  	Lead in an ethical manner and make certain that the excellent reputation of the Bank is maintained. 

In addition to the expected performance standards set out above, the Executive should strive to:

	1.  	Achieve the Bank’s Profit and Budget plan as approved by the Board of Directors; and

	2.  	Achieve revenue (net interest margin plus non-interest revenues), total assets, and net income growth, an efficiency ratio, and net income per employee in the top quartile of competitor banks headquartered within the Springfield and surrounding area.

 

4.    Term. The term of employment under this agreement shall be a period of three years commencing on the Effective Date above (the "Commencement Date"), subject to earlier termination as provided herein. Beginning on the first anniversary of the Commencement Date, and on each anniversary thereafter, the term of employment under this Agreement may be extended for a period of one year in addition to the then-remaining term of employment under this Agreement, if approved by the Board of Directors of the Bank and agreed to by the Executive within 30 days in advance of the date on which the term of employment under this Agreement would otherwise be extended, in which event the remaining unexpired term of the Executive’s employment shall be at least three (3) years. If the Board of Directors does not so approve, or the Executive does not so agree, the term of Executive’s employment shall expire on the expiration date in effect at the time.

 

5.    Compensation. Executive is to treat compensation information as confidential and disclose it to no one other than immediate family members and Executive’s professional advisors, who must be instructed to keep such information confidential. As compensation for services rendered under this Agreement, the Executive shall receive the following:

 

a.    Base Salary. The Bank shall pay the Executive a base salary ("Base Salary") of $225,000 per year, payable semi-monthly ($ 9,375.00) on the 15th and 30th of each month, less applicable deductions and withholdings, during the term of this Agreement, prorated for any partial employment month. The Base Salary shall be reviewed annually by, and may be increased at the discretion of the Bank, but the Base Salary may not be decreased. Any adjustments in salary or other compensation shall in no way limit or reduce any other obligation of the Bank hereunder. Stock repurchases shall be excluded from the calculation of earnings per share.

 

 

b.    Additional Compensation. During Executive’s first year of employment, he may earn a bonus of $ 25,000 if the Bank generates new and additional loan production of a minimum of $ 20 million. Executive can earn an additional $ 25,000 bonus if the Bank generates new and additional loan production of a minimum of $ 25 million during the first year of his employment and an additional $ 25,000 bonus (for a maximum of $ 75,000 in bonus monies) if the Bank generates new and additional loan production of a minimum of $ 30 million during the first year of his employment. New and additional loan production shall mean production that is directly related to the Executive’s activities and results in a total increase of $20/$25/$30 million over the total loans produced by the Bank from Commencement Date to March 31, 2005.

 

The Executive can earn an additional $ 25,000 during the second and third years of his employment if the Bank’s earnings per share increase by 10 percent for each such year from that of the prior year. An additional $ 25,000 will be paid if, during each such year, the Bank’s earnings per share increase 15 percent from that of the prior year, and an additional $ 25,000 (for a maximum of $ 75,000) for a 20 percent increase. Stock repurchases are to be excluded from the calculation of earnings increases.

 

Annual bonuses will be paid within 15 days following the year-end audited financial statement being released. 

 

c.    Stock Options. The Executive will be granted options to purchase 25,000 shares of common stock of Guaranty Federal Bancshares, Inc. as set forth in the attached Stock Option Agreement.

 

6.    Benefits. In addition to the compensation pursuant to Section 5 hereof, the Executive shall be entitled to receive the following:

 

a.    Participation in Employee Plans. The Executive shall be entitled to participate in any health, disability, and group term life insurance plans, in any pension, retirement, or profit sharing plans, in any executive bonus plan, or in any other perquisites and fringe benefits that may be extended generally from time to time to employees of the Bank, benefits will be provided at no additional cost over and above what other employees pay.

 

b.    Vacation. The Executive shall be entitled to nineteen (19) days of vacation with full salary and benefits each year. Executive may carry over into the next year only 24 hours (3 days) of vacation. Upon termination of the Executive's employment, Executive will be paid the cash equivalent for accrued but unused vacation.

 

c.    Country Club Membership. The Bank agrees to obtain a corporate country club membership at a country club of its choice for use by the Executive and other authorized personnel of the Bank. The Bank in its sole discretion may terminate such membership or change the membership to a different country club. All charges for personal use by the Executive shall be reimbursed to the Bank by the Executive. 

 

7.    Reimbursement of Expenses. Subject to such rules and procedures as from time to time are specified by the Bank, the Bank shall reimburse the Executive on a monthly basis for reasonable business expenses necessarily incurred in the performance of his duties under this Agreement.

 

8.    Confidentiality/Trade Secrets. The Executive acknowledges his position with the Bank is one of the highest trust and confidence both by reason of his position and by reason of his access to and contact with the trade secrets and confidential and proprietary business information of the Bank. Both during the term of this Agreement and thereafter, the Executive therefore covenants and agrees as follows:

 

a.    He shall use his best efforts and exercise utmost diligence to protect and to safeguard the trade secrets and/or confidential and proprietary information of the Bank, including but not limited to the identity of its current or prospective customers, suppliers and licensors, its arrangements with its customers, suppliers and licensors, and its technical, financial and marketing data, records, compilations of information, processes, programs, methods, techniques, and specifications relating to its customers, suppliers, licensors, products, and services;

 

b.    He shall not disclose any of such trade secrets and/or confidential and proprietary information, except as may be required in the course of his employment with the Bank or by law; and

 

c.    He shall not use, directly or indirectly, for his own benefit or for the benefit of another, any of such trade secrets and/or confidential and proprietary information.

 

All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of the Bank, whether prepared by the Executive or otherwise coming into his possession, shall be the exclusive property of the Bank and shall be delivered to the Bank and not reproduced and/or retained by the Executive upon termination of his employment for any reason whatsoever or at any other time upon request of the Bank.

 

9.    Non-Competition. If Bank terminates Executive with Cause or if Executive terminates his employment without Good Reason, or upon termination of this Agreement as set forth in Section 4 hereof, for a period of two (2) years following the termination, the Executive Agrees that he will not, without the prior written consent of the Bank, directly or indirectly, as an employee, employer, consultant, agent, principal, partner, shareholder, corporate officer, director, or through any other kind of ownership (other than ownership of securities of publicly held corporations of which the Executive owns less than five percent 5% of any class of outstanding securities) or in any other representative or individual capacity, engage in or render any services to any business within 25 miles of any of the Bank’s locations engaged in the business of banking, investment and/or lending, or in any other segment of the industry in which the Bank or any subsidiary of the Bank is or may become involved after the date hereof and prior to the date of termination of the Executive’s employment. However, if Bank terminates without Cause, or Executive terminates with Good Reason, or if Executive’s employment terminates within one (1) year following a Change in Control, the restrictive period above shall be the length of time the Bank is required pursuant to the terms of this Agreement to pay Executive the compensation set forth in Section 5, but in no event shall such restrictive period be less than one (1) year.

 

10.    Nonsolicitation. If Bank terminates Executive with Cause or if Executive terminates his employment without Good Reason, or upon termination of this Agreement as set forth in Section 4 hereof, for a period of two (2) years following the termination, the Executive Agrees that he will not, without the prior written consent of the Bank, during the period of his employment and after termination of employment, he will not, either directly or indirectly, for himself or for any third party, except as otherwise agreed to in writing by the Bank, employ or hire any other person who is then employed by the Bank, or solicit, induce, recruit, or cause any other person who is then employed by the Bank to terminate his employment for the purpose of joining, associating, or becoming employed with any business or activity that is engaged in the industry or any other segment of the industry in which the Bank is involved in or may become involved after the date hereof. However, if Bank terminates without Cause, or Executive terminates with Good Reason, or if Executive’s employment terminates within one (1) year following a Change in Control, the restrictive period above shall be the length of time the Bank is required pursuant to the terms of this Agreement to pay Executive the compensation set forth in Section 5, but in no event shall such restrictive period be less than one (1) year.

 

11.    Remedies for Breach of Covenants of the Executive. 

 

a.    The covenants set forth in Section 8 of this Agreement shall continue to be binding upon the Executive, as provided herein in Section 11 notwithstanding the. The Bank and the Executive further acknowledge and agree that, if any court of competent jurisdiction or other appropriate authority shall disagree with the parties' foregoing agreement as to reasonableness, then such court or other authority shall reform or otherwise modify the foregoing covenants only so far as necessary to be enforceable.

 

b.    The covenants set forth in Sections 8 of this Agreement shall continue to be binding upon the Executive, as provided herein in Section 11 notwithstanding the termination of his employment with the Bank for any reason whatsoever. The covenants set forth in Sections 9 and 10 shall continue to be binding upon the Executive in accordance with their terms. Such covenants shall be deemed and construed as separate agreements independent of any other provisions of this Agreement and any other agreement between the Bank and the Executive. The existence of any claim or cause of action by the Executive against the Bank, unless predicated on this Agreement, shall not constitute a defense to the enforcement by the Bank of any or all such covenants. It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate, injunctive relief and specific performance shall be available to prevent the breach or any threatened breach thereof, and that the party bringing the claim shall not be required to post bond in pursuit of such claim. For any such claim, the prevailing party shall be entitled to recover his/its attorney’s fees and costs incurred in pursuit of such claim.

 

12.    Termination. This Agreement (other than Sections 8, 9 and 10, which shall survive any termination hereof according to their terms, but subject to claims or causes of action by Executive against the Bank predicated on this Agreement) may be terminated as follows:

 

a.    The Bank may terminate this Agreement and the Executive’s employment hereunder at any time, with Cause, upon written notice to the Executive. The Executive may terminate this Agreement and his employment hereunder, at any time, with Good Reason. 

 

b.    For purposes of this Agreement, "Cause" occurs when Executive, in the Bank’s reasonable belief, does any of the following:

 

(i)    is charged or indicted with, or pleads guilty or nolo contendre to, any criminal act under federal or state law which constitutes a felony;

 

(ii)    breaches any material provision of this Agreement;

 

(iii)    knowingly or should have known that Executive’s conduct would violate any provision of applicable federal or state banking laws or regulations; 

 

(iv)    knowingly or should have known that Executive’s conduct would violate any applicable local, state, or federal law relating to discrimination or harassment; 

 

(v)    knowingly or should have known that Executive’s conduct would violate the Bank’s policies and/or practices applicable to executive employees; or

 

(vi)    dies or becomes permanently disabled from continuing to provide the level of service required under this Agreement.

 

c.    The Executive shall have "Good Reason" to effect a termination in the event that the Bank (i) breaches its obligations to pay any salary, benefit, or bonus due hereunder, (ii) requires the Executive to relocate more than 25 miles from the Bank’s principal place of business, or (iii) substantially diminishes the functional responsibilities of the Executive (it being understood that structural changes, such as a change in title or to whom the Executive reports, do not constitute changes in functional responsibilities) or a reduction due to performance-based reasons, and in the event of any of (i), or (ii), the Executive has given written notice to the Bank as to the details of the basis for such Good Reason within thirty (30) days following the date on which the Executive alleges the event giving rise to such Good Reason occurred and the Bank has failed to provide a reasonable cure within thirty (30) days after its receipt of such notice.

 

d.    In the event that (x) Bank terminates Executive’s employment with Bank for cause or as a result of the death, disability or adjudication of legal incompetence of Executive, or (y) Executive terminates Executive’s employment with Employer for any or no reason, Bank shall pay or provide to Executive:

 

(i)    such salary as Executive shall have earned up to the date of Executive’s termination: and

 

(ii)    such other benefits and other amounts due Executive under Sections 5 and 6 or as otherwise required by applicable law, as Executive shall have earned up to the date of Executive’s termination.

 

e.    In the event that Bank terminates Executive’s employment with Bank without cause or if Executive shall have terminated his employment for Good Reason, Bank shall pay to Executive:

 

(i)    the Base Salary for the remaining term of employment under this Agreement, at the time such payments are due: and

 

(ii)    such other benefits and other amounts due Executive under sections 5 and 6 above for the remaining term of this Agreement, at the time such payments are due.

 

f.  Further, notwithstanding anything herein contained to the contrary, if a "Change of Control" (as hereinafter defined) occurs during the term of this Agreement and Executive’s employment with Bank terminates for any reason (other than Executive’s death or the expiration of the term of this Agreement) at any time within the greater of twelve (12) months or the then remaining term of the Agreement after the Change of Control is consummated, then Bank shall pay to Executive in one lump sum, in cash, within ten (10) business days after the effective date of the termination of Employment, an amount equal to the sum of two and ninety-nine one hundredths (2.99) times the Base Salary and Additional Compensation; provided, however, that if and to the extent payment of such lump sum would not be deductible by Bank for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), then payment of that portion due Executive under this part f shall be deferred until the earliest date upon which payment can be made without being nondeductible under section 162(m) of the code.

 

For purposes of this Agreement, the term "Change in Control" shall mean (A) the sale of all, or a material portion, of the assets of the Bank or its holding company, unless the Executive executes a new employment agreement with the purchaser; (B) the merger or recapitalization of the Bank or its holding company whereby the Bank or its holding company is not the surviving entity, unless the Executive executes a new employment agreement with the surviving entity; or (C) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) of fifty percent (50%) or more of the outstanding voting securities of the Bank or its holding company by any person, trust, entity or group. This limitation shall not apply to the purchase of Shares by underwriters in connection with a public offering of the Bank’s stock or the holding company’s stock, [or the purchase of shares of up to twenty-five percent (25%) of any class of securities of the Bank or its holding company by a tax-qualified employee stock benefit plan which is exempt from the approval requirements set forth under 12 C.F.R. section 574.3(c)(1)(vi) as now in effect or as may hereafter be amended.] The term "person" refers to an individual or a corporation, partnership, limited liability company, trust, association, joint venture, Pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.

 

g.    Voluntary Termination. If the Executive shall voluntary terminate his employment in connection with, or within 12 months after, a "Change in Control" which occurs, and if such Change in Control was at any time opposed by the Bank’s Board of Directors, the Executive shall be entitled to receive the compensation described in Sections 12e. and 12f. on the same basis as is set forth in Sections 12e. and 12f.

 

13.    Arbitration of Disputes.

 

a.    Any dispute or claim arising out of or relating to this Agreement or any termination of the Executive’s employment, other than a dispute or claim arising under Sections 8 through 11, shall be settled by final and binding arbitration in the greater Springfield, Missouri metropolitan area in accordance with the Employment Arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

 

b.    The fees and expenses of the arbitration panel shall be borne equally by the Executive and the Bank.

 

c.    Either party may elect to have any dispute governed by this Section 13 to be resolved by a panel of three arbitrators, and the party electing same shall bear any additional costs resulting from such selection, the provisions of Section 13.b. notwithstanding.

 

14.    No Mitigation. The Executive shall not be required to mitigate the amount of any salary or other payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by the Executive as the result of employment by another, by retirements after the date of termination or otherwise.

 

15.    Notices. Any notices to be given hereunder by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid, with return receipt requested. Mailed notices shall be addressed as follows:

 

a.    If to the Bank:

 

Chairman of Board

Guaranty Bank

1341 W. Battlefield

Springfield, MO 65807 

 

b.    If to the Executive:

 

Shaun Burke

1354 Stone House Road

Nixa, MO 65714

Either party may change its address for notice by giving notice in accordance with the terms of this Section 15.

 

16.    General Provisions.

 

a.    Law Governing. Notwithstanding any conflict of laws to the contrary, this Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, and the parties hereby submit to the jurisdiction of the federal/state courts in the State of Missouri for any dispute not subject to Section 13.

 

b.    Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable, then such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and still be legal, valid or enforceable.

 

c.    Entire Agreement. With the exception of the Stock Options Agreement, this Agreement sets forth the entire understanding of the parties and supersedes all prior agreements or understandings, whether written or oral, with respect to the subject matter hereof. No terms, conditions, warranties, other than those contained herein, and no amendments or modifications hereto shall be binding unless made in writing and signed by the parties hereto.

 

d.    Binding Effect. This Agreement shall extend to and be binding upon and inure to the benefit to the parties hereto, their respective heirs, representatives, successors, and assigns. This Agreement may not be assigned by the Executive, but may be assigned by the Bank to any person or entity that succeeds to the ownership or operation of the business in which the Executive is primarily employed by the Bank.

 

e.    Waiver. The waiver by either party hereto of a breach of any term or provision of this Agreement shall not operate or be construed as a waiver of a subsequent breach of the same provision by any party or of the breach of any other term or provision of this Agreement.

 

f.    Titles. Titles of the paragraphs herein are used solely for convenience and shall not be used for interpretation or construing any work, clause, paragraph, or provision of this Agreement.

 

g.    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Bank and the Executive have executed this Agreement as of the date and year first above written.

 

THIS AGREEMENT CONTAINS AN ARBITRATION CLAUSE.

 

EXECUTIVE:                GUARANTY BANK:

/s/ Shaun Burke                By: /s/ Don M. Gibson            

Shaun Burke           Name: Don M. Gibson

                            Title: PresidentExhibit 10.10 Stock Option Agreement

 

Exhibit 10.10

 

STOCK OPTION AGREEMENT

FOR NON-QUALIFIED STOCK OPTION

FOR OFFICERS AND EMPLOYEES

 

A NON-QUALIFIED STOCK OPTION (the "Option") for a total of 25,000 shares (the "Shares") of common stock, par value $0.10 ("Common Stock"), of Guaranty Federal Bancshares, Inc. (the "Corporation"), which Option shall not be considered an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, is hereby granted to Shaun Burke (the "Optionee") at the price and upon the terms and conditions set forth in this Stock Option Agreement (this "Agreement").

 

1.    Option Price. The exercise price is $ 19.62 for each Share under the Option, being 100% of the fair market value of the Common Stock on the date of grant of the Option as determined by the Stock Compensation Plan Committee of the Board of Directors of the Corporation (the "Committee").

 

2.    Exercises of Option. 

 

(a)    Schedule of Rights to Exercise. The Option shall become exercisable and vest as follows:

                                                                                                                                                                                     Percentage of

                                                                                                                                                                                      Total Shares

                                                                               Date                                                         Shares                     Under Option Which

                                                                                                                                             Exercisable                       Are Exercisable

                                                            

As of    March 9, 2005                                           5,000     20%

As of    March 9, 2006                                           5,000     40%

As of    March 9, 2007                                           5,000     60%

As of    March 9, 2008                                           5,000     80%

As of    March 9, 2009                                           5,000     100%

Subject to Section 5(a) hereof, the Option shall be exercisable to the extent as of the dates shown above, provided the Optionee is an employee, director or director emeritus of the Corporation or Guaranty Bank (the "Bank") as of such applicable date. Notwithstanding any provisions in this Section 2, in no event shall the Option be exercisable prior to six months following the date of grant of the Option. Subject to Sections 6 and 7(b) hereof, the Option shall be 100% vested and exercisable upon the death or Disability of the Optionee, or upon a Change in Control (defined hereafter) of the Corporation.

 

(b)    Method of Exercise. The Option shall be exercisable by a written notice, a form of which is attached hereto, which shall:

 

(i)State the election to exercise the Option, the number of Shares with respect to which it is being exercised, the person in whose name the stock certificate or certificates for such Shares is to be registered, his or her address and Social Security Number (or if more than one, the names, addresses and Social Security Numbers of such persons);

 

(ii)Contain such representations and agreements as to the holder’s investment intent with respect to such Shares as may be satisfactory to the Corporation’s counsel;

 

(iii)Be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Corporation, of the right of such person or persons to exercise the Option; and

 

(iv)Be in writing and delivered in person or by certified mail to the Chief Financial Officer of the Corporation.

 

Payment of the purchase price of any Shares with respect to which the Option is being exercised shall be paid to the Corporation in cash (by certified or bank cashier’s or teller’s check), Common Stock or a combination of cash and Common Stock. Common Stock utilized in full or partial payment of the exercise price shall be valued at the fair market value at the date of exercise of such Option. Upon receipt by the Corporation of payment in full, the certificate or certificates for Shares as to which the Option shall be exercised shall be registered in the name of the person or persons exercising the Option. Optionee shall not have any of the rights of a stockholder of the Corporation with respect to the Shares being acquired pursuant to this Agreement until the Shares are issued to the Optionee.

 

Subject to vesting requirements contained herein, Optionee may engage in the "cashless exercise" of the Option. Upon a cashless exercise, Optionee shall give the Corporation written notice of the exercise of the Option together with an order to a registered broker-dealer or equivalent third party, to sell part or all of the Shares subject to the Option (the "Optioned Stock") and to deliver enough of the proceeds to the Corporation to pay the Option exercise price and any applicable withholding taxes. If the Optionee does not sell the Optioned Stock through a registered broker-dealer or third party, the Optionee can give the Corporation written notice of the exercise of the Option and the third party purchaser of the Optioned Stock shall pay the Option exercise price plus any applicable withholding taxes to the Corporation.

 

(c)    Restrictions on Exercise. The Option may not be exercised if the issuance of Shares upon such exercise would constitute a violation of any applicable federal or state securities or other law or valid regulation or the requirements of any stock exchange or trading market upon which the Common Stock is then listed. As a condition to the Optionee’s exercise of the Option, the Corporation may require the person exercising the Option to make any representation and warranty to the Corporation as may be required by any applicable law or regulation. Upon the termination of Optionee’s employment or service by the Corporation or the Bank for "cause" (as defined in 12 C.F.R. 563.39(b)(1)) as determined by the Board of Directors of the Corporation, the unexercised portion of the Option at the time of such termination shall immediately cease to be exercisable as of the date of such termination of employment or service. Upon the exercise of the Option (or any portion thereof), the Committee, in its sole and absolute discretion, may make a cash payment to the Optionee, in whole or in part, in lieu of the delivery of Shares. Such cash payment shall be equal to the difference between the fair market value of the Common Stock on the date the Option (or any portion thereof) is exercised and the exercise price per Share of the Option, less applicable withholding. Such cash payment shall be in exchange for the cancellation of such Option (or portion thereof). Such cash payment shall not be made in the event that such transaction would result in liability to the Optionee or the Corporation under Section 16(b) of the Securities Exchange Act of 1934, as amended, and regulations promulgated thereunder.

 

3.    Non-transferability of Option. The Option may not be transferred in any manner otherwise than by will or the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee (or a guardian of Optionee if Optionee is incapacitated). The terms of the Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

 

4.    Term of Option. The Option may not be exercised more than ten (10) years from the date of grant of the Option (the "Expiration Date"), as set forth below, and may be exercised during such term only in accordance with the terms of this Agreement.

 

5.    Effect of Termination of Service or Employment, Disability, Death and Retirement.

 

(a)    Termination of Service or Employment. Except as provided in Section 2(c) hereof, in the event that Optionee’s service or employment with the Corporation or the Bank shall terminate for any reason, other than Disability, death or Retirement, all of the Option and all of Optionee’s rights to purchase or receive Shares pursuant hereto, shall automatically terminate on (A) the earlier of (i) or (ii): (i) the Expiration Date, or (ii) the expiration of not more than three (3) months after the date of such termination of service or employment; or (B) at such later date as is determined by the Committee at the time of the grant of the Option based upon the Optionee’s continuing status as a director or director emeritus of the Bank or the Corporation, but only if, and to the extent that, the Optionee was entitled to exercise the Option at the date of such termination of service or employment. In the event that a subsidiary of the Corporation ceases to be a subsidiary of the Corporation, the employment of all of its employees who are not immediately thereafter employees of the Corporation shall be deemed to terminate upon the date such subsidiary so ceases to be a subsidiary of the Corporation.

 

(b)    Disability or Retirement. If Optionee’s employment or service with the Corporation or the Bank shall terminate as the result of the Disability or Retirement of Optionee, the Option shall become immediately 100% exercisable, and Optionee thereafter may exercise any part or all of the Option at any time prior to the Expiration Date. For purposes of this Agreement, (i) the term "Disability" shall mean any physical or mental impairment which renders the Optionee incapable of continuing in the employment or service of the Bank or the Corporation in his or her then current capacity as determined by the Committee, and (ii) the term "Retirement" shall mean termination of service in all capacities as an employee, director and director emeritus following attainment of not less than age 55 and completion of not less than ten years of service to the Corporation or the Bank. Service to the Corporation or the Bank rendered prior to the date of grant of the Option shall be recognized in determining eligibility to meet the requirements of Retirement under this Agreement.

 

(c)    Death. In the event of death of Optionee, the Option shall become immediately 100% exercisable and may be exercised by the person or persons to whom the Optionee’s rights under the Option pass by will or by the laws of descent and distribution (including the Optionee’s estate during the period of administration) at any time prior to the Expiration Date.

 

(d)    Option Deemed Exercisable. For purposes of this Section 5, any portion of the Option shall be considered exercisable at the date of termination of employment or service if any such portion of the Option would have been exercisable at such date of termination of employment or service without regard to the Disability or death of Optionee.

 

(e)    Termination of Option. To the extent that Optionee’s service or employment with the Corporation or Bank terminates for any reason, and the Option (or portion thereof) shall not have been exercised within the applicable period set forth in this Section 5, the Option (or portion thereof), and all rights to purchase or receive Shares pursuant thereto, shall terminate on the last day of the applicable period as provided herein.

 

6.    Recapitalization, Merger, Consolidation, Change in Control and Other Transactions.

 

(a)    Adjustment. Subject to any required action by the stockholders of the Corporation, within the sole discretion of the Committee, the number of Shares covered by the Option and the exercise price per Share of the Option shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of shares of Common Stock (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of Shares effected without the receipt or payment of consideration by the Corporation (other than shares held by dissenting stockholders).

 

(b)    Change in Control. The Option shall become immediately exercisable in the event of a Change in Control (defined hereafter) of the Corporation, as determined by the Committee. In the event of such a Change in Control, the Committee and the Board of Directors will take one or more of the following actions to be effective as of the date of such Change in Control:

 

(i)provide that such Option shall be assumed, or equivalent options shall be substituted ("Substitute Options") by the acquiring or succeeding corporation (or an affiliate thereof), provided that: the shares of stock issuable upon the exercise of such Substitute Options shall constitute securities registered in accordance with the Securities Act of 1933, as amended (the "1933 Act"), or such securities shall be exempt from such registration in accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act (collectively, "Registered Securities"), or in the alternative, if the securities issuable upon the exercise of such Substitute Options shall not constitute Registered Securities, then the Optionee will receive upon consummation of the Change in Control transaction a cash payment for the Option surrendered equal to the difference between (1) the fair market value of the consideration to be received for each Share in the Change in Control transaction times the number of Shares subject to the surrendered Option, and (2) the aggregate exercise price of the surrendered Option; or

 

(ii)in the event of a transaction under the terms of which the holders of the Common Stock of the Corporation will receive upon consummation thereof a cash payment (the "Merger Price") for each Share exchanged in the Change of Control transaction, to make or to provide for a cash payment to the Optionee equal to the difference between (A) the Merger Price times the number of Shares under the Option (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such Shares under the Option in exchange for such Shares under the Option.

 

(iii)For purposes of this Agreement, the term "Change in Control" shall mean (A) the sale of all, or a material portion, of the assets of the Corporation; (B) the merger or recapitalization of the Corporation whereby the Corporation is not the surviving entity; or (C) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) of twenty-five percent (25%) or more of the outstanding voting securities of the Corporation by any person, trust, entity or group. This limitation shall not apply to the purchase of Shares by underwriters in connection with a public offering of Corporation stock, or the purchase of shares of up to 25% of any class of securities of the Corporation by a tax-qualified employee stock benefit plan which is exempt from the approval requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or as may hereafter be amended. The term "person" refers to an individual or a corporation, partnership, limited liability company, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. The decision of the Committee as to whether a Change in Control has occurred shall be conclusive and binding.

 

(c)    Extraordinary Corporate Action. Notwithstanding any provisions of this Agreement to the contrary, subject to any required action by the stockholders of the Corporation, in the event of any Change in Control, recapitalization, merger, consolidation, exchange of shares, spin-off, reorganization, tender offer, partial or complete liquidation or other extraordinary corporate action or event, the Committee, in its sole discretion, shall have the power, prior or subsequent to such action or event, to:

 

(i)appropriately adjust the number of Shares subject to the Option, the exercise price per Share under the Option, and the consideration to be given or received by the Corporation upon the exercise of any part or all of the Option;

 

(ii)cancel any part or all of a previously granted Option, provided that appropriate consideration is paid to the Optionee in connection therewith; and/or

 

(iii)make such other adjustments in connection with the Option as the Committee, in its sole discretion, deems necessary, desirable, appropriate or advisable.

 

(d)    Acceleration. The Committee shall at all times have the power to accelerate the exercise date of the Option for any or no reason in the Committee’s sole and absolute discretion.

 

Except as expressly provided in Sections 6(a) and 6(b) hereof, Optionee shall not have any rights by reason of the occurrence of any of the events described in this Section 6.

 

7.    Modification of the Option. At any time and from time to time, the Board of Directors of the Corporation may authorize the Committee to direct the execution of an instrument providing for the modification of the Option, provided no such modification, extension or renewal shall confer on the holder of the Option any right or benefit which could not be conferred on the Optionee by the grant of a new option at such time, or shall not materially decrease the Optionee’s benefits under the Option without the consent of the holder of the Option, except as otherwise permitted under Section 9 hereof.

 

8.    Change in Applicable Law. Notwithstanding any other provision contained in this Agreement, in the event of a change in any federal or state law, rule or regulation which would make the exercise of all or part of the Option unlawful or subject the Corporation or Bank to any penalty, the Committee may restrict any such exercise without the consent of the Optionee or other holder thereof in order to comply with any such law, rule or regulation or to avoid any such penalty.

 

9.    Unsecured Obligation. Optionee shall not have any interest in any fund or special asset of the Corporation or the Bank by reason of this Agreement or the Option. No trust fund shall be created in connection with this Agreement or the Option, and there shall be no required funding of amounts which may become payable to Optionee.

 

10.    Withholding Tax. The Corporation shall have the right to deduct from all amounts paid in cash with respect to the cashless exercise of Option under this Agreement any taxes required by law to be withheld with respect to such cash payments. If Optionee or any other person is entitled to receive Shares pursuant to the exercise of the Option, the Corporation shall have the right to require the Optionee or such other person to pay the Corporation the amount of any taxes which the Corporation is required to withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a number of Shares sufficient to cover the amount required to be withheld.

 

11.    No Employee Rights. No action taken by the Committee in administration of this Agreement shall be construed as giving any person any rights of employment or retention as an employee, director or in any other capacity with the Corporation, the Bank or other subsidiaries thereof.

 

12.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to its conflict or choice of laws provisions, except to the extent that federal law shall be deemed to apply.

 

GUARANTY FEDERAL BANCSHARES, INC.

Date of Grant: March 9, 2004       By:     /s/ Don M. Gibson                

       Name:    Don M. Gibson                

       Title:     President-CEO                

      OPTIONEE:

      /s/ Shaun A. Burke                

     Shaun A. Burke

Attest:

/s/ E. Lorene Thomas    

E. Lorene Thomas, Secretary

[SEAL]

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