EXHIBIT 10.12
EXECUTIVE SEVERANCE AGREEMENT
This Executive Severance Agreement (the "Agreement"), made as of the ___ day of
_______,200_, between U.S. Bancorp , a Delaware corporation ("USB") and its
Subsidiaries (individually and collectively the "Company"), and _________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best interests
and those of its shareholders; and
WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change in
control may make it difficult to hire and retain strong management personnel;
and
WHEREAS, the Company recognizes that the possibility of a change in control of
USB may exist and that, in the event negotiations are commenced to bring about
such a change in control, uncertainty and questions may arise among management
that could result in the distraction or departure of management personnel to the
detriment of the Company and the shareholders; and
WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and dedication as an
executive officer to his or her assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a change
in control of USB;
NOW THEREFORE, the Company and the Executive agree as follows:
1. Definitions
The following words and terms used in this Agreement shall have the following
meanings:
1.1 "Change in Control." For the purpose of this Agreement, a "Change
in Control" shall mean:
(a) The acquisition by any Person (as defined in Sections 13(d)(3) and
14(d)2 of the Exchange Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either (I) the then outstanding shares of Common Stock (the
"Outstanding Company Common Stock") or (II) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (1)
any acquisition directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by a subsidiary of the Company or any
employee benefit plan (or related trust) sponsored or maintained by the
Company or a subsidiary of the Company (a "Company Entity") or (4) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) or (3) of this subsection (a); or
(b) Individuals who, as of this date, constitute the Company's Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors (except as a result of the
death, retirement or disability of one or more members of the Incumbent
Board); provided, however, that any individual becoming a director
subsequent to the date of this Agreement whose election, or nomination
for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, (I) any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Incumbent Board, (II) any director designated by or on behalf of a
Person who has entered into an agreement with the Company (or which is
contemplating entering into an agreement) to effect a Business
Combination (as defined in Section 1.1 subsection (c)) with one or more
entities that are not Company Entities or (III) any director who serves
in connection with the act of the Board of Directors of increasing the
number of directors and filling vacancies in connection with, or in
contemplation of, any such Business Combination; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following
such Business Combination, (I) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock or the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (II) no Person (excluding any Company
Entity or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent
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that such ownership existed prior to the Business Combination and (III)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Cause" means conviction for the commission of a felony or removal
from office by order of the Comptroller of the Currency, Federal
Reserve Board, or other appropriate agency.
1.3 "Date of Termination" means the date the Executive's employment is
terminated under this Agreement whether by the Company or by the
Executive.
1.4 "Disability" means leaving active employment and qualifying for and
receiving disability benefits under the Company's long-term disability
programs as in effect from time to time.
1.5 "Effective Date" means the first date after the date of this
Agreement on which a Change in Control occurs.
1.6 "Employment Agreement" means an employment agreement, if any,
between the Company and the Executive.
1.7 "Good Reason" means:
(a) A reduction by the Company in the Executive's base salary
as in effect immediately prior to the Change in Control or as
the same may be increased from time-to-time following the
Change in Control (unless such reduction is part of an
across-the-board uniformly applied reduction affecting all
senior executives of the Company); or
(b) A significant diminution in the Executive's position,
authority, duties or responsibilities as in effect immediately
prior to the Change of Control (excluding an isolated,
insubstantial or inadvertent action not taken in bad faith
that is remedied promptly by the Company after receiving
notice); provided, however, that a change of the individual to
whom the executive reports, in and of itself, would not
constitute diminution; and further provided, anything in this
Agreement to the contrary notwithstanding, if the Company's
Chief Executive Officer ("CEO") immediately prior to the
Change in Control remains CEO of the Company during the
Protected Period following the Change in Control, and if 50%
or more of the Company's Board of Directors during the
Protected Period following the Change in Control were members
of the Board of Directors
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immediately prior to the Change in Control, the Executive
shall not be able to terminate employment for Good Reason
based solely on the events described under this Section 1.7(b)
until at least one (1) year following the Change in Control
(although at such time a termination of employment by the
Executive for Good Reason under this Section 1.7(b) may be
based on events that occurred during the first year of the
Protected Period and any such events shall not be deemed to
have been agreed to or waived by the Executive); or
(c) A failure by the Company (I) to continue any cash bonus or
other incentive compensation plans in substantially the same
form and with the same opportunity levels as in effect
immediately prior to the Change in Control, or (II) to
continue the Executive as a participant in such plans on at
least the same basis as the Executive participated in
accordance with the plans immediately prior to the Change in
Control; or
(d) A requirement by the Company that the Executive relocate
from his/her personal place of residence immediately prior to
the Change in Control or, if the Executive is not required to
relocate, a change of the Executive's principal work location
from that immediately prior to the Change in Control which is
50 or more miles further away from his/her personal place of
residence (other than if the Company's CEO immediately prior
to the Change in Control remains CEO of the Company during the
Protected Period following the Change in Control, and if 50%
or more of the Company's Board of Directors during the
Protected Period following the Change in Control were members
of the Board of Directors immediately prior to the Change in
Control); or
(e) A significant reduction in the Executive's aggregate level
of coverage under the Company's welfare, retirement and other
employee benefit plans, as in effect immediately prior to the
Change in Control; or the Company's failure to provide the
Executive with the number of paid vacation days annually to
which he/she was entitled immediately prior to the Change in
Control; or
(f) An agreement between the Board of Directors of USB and the
Executive that employment should be terminated.
For purposes of this Section 1.7, a reasonable and good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
1.8 "Protected Period" means the twenty-four (24) month period
immediately following each and every Change in Control.
1.9 "Termination Benefits" means those benefits described in Section 2
of the Agreement.
1.10 "Subsidiaries" means any and all companies at least fifty percent
(50%) owned, directly or indirectly, by USB.
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2. Benefits Upon Termination of Employment.
2.1 General. If, during the Protected Period following each Change in
Control, the Executive's employment is terminated either (i) by the
Company (other than for Cause or Disability), or (ii) by the Executive
for Good Reason, then the Executive (or his estate or personal
representative), shall be entitled to the Termination Benefits provided
in this Section 2.
2.2 Base Salary and Bonus Through Date of Termination. The Company
shall promptly pay the Executive his or her full base salary through
the Date of Termination at the rate in effect at the time notice of
termination is given. In addition, the Company shall promptly pay the
amount of any bonus or incentive for the year in which the Date of
Termination occurs (based on the target bonus for the Executive for the
year) prorated to the Date of Termination (without application of any
denial provisions based on unsatisfactory personal performance or any
other reason). The Company shall also pay the Executive for any
vacation earned but not taken with such payment being equal to the
Executive's calculated daily base salary rate times the applicable days
of such vacation.
2.3 Severance Payment. The Company shall pay the Executive a severance
payment equal to three (3) times the sum of: (a) the Executive's
highest base salary, on an annualized basis, established by the Company
during the last five years plus (b) the highest bonus earned by the
Executive, with respect to any single year, over the last five (5)
years. The severance payment shall be made in a lump-sum within thirty
(30) days of the Date of Termination.
2.4 Termination Which Does Not Require Payment Of Termination Benefits.
No Termination Benefits need to be provided by the Company to the
Executive under this Section 2 if the Executive's employment is
terminated:
(a) By the Executive for any reason other than for
Good Reason;
(b) By the Company for Cause or Disability; or
(c) By death.
3. New Employment; Reduction of Termination Benefits.
The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.
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4. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments
required under this Section 4) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes and any benefits
that result from the deductibility by the Executive of such taxes
(including, in each case, any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed on them) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all determinations
required to be made under this Section 4, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's independent accounting firm or such
other certified nationally recognized public accounting firm as may be
designated by the Company (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to or for the
benefit of the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive.
Notwithstanding any other provision of this Section 4, the Company may
withhold and pay over to the Internal Revenue Service, for the benefit
of the Executive, all or any portion of the Gross-Up Payment that it
determines in good faith it is required to withhold. Executive consents
to such withholding. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made.
In the event that the Company exhausts its remedies pursuant to Section
4(c) and the Executive is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
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(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten business days
after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and xxx for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
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of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 4(a) or 4(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 4(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 4(c), a
determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset the amount of Gross-Up Payment
required to be paid.
5. Notice of Termination.
Any purported termination by the Company of the Executive's employment for Cause
or Disability or by the Executive for Good Reason shall be communicated by
notice of termination to the other party. A notice of termination shall include
the specific reason for termination relied upon and shall set forth in
reasonable detail, the facts and circumstances claimed to provide a basis for
termination of employment.
Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after the
notice of termination is given. If the particulars of the dispute are not
conveyed within the thirty (30) day period, then the disputing party's claims
regarding the termination shall be deemed forever waived.
6. Successor; Binding Agreement.
USB will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of USB expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place (the assumption shall be by agreement
in form and substance satisfactory to the Executive). Failure of USB to obtain
such agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive, at his election, to
Termination Benefits from the Company in the same amount and on the same terms
as the Executive would be entitled to if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such election becomes effective shall be deemed the Date of
Termination. As used
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in this Agreement, "Company" shall mean the Company and any successor to its
business and/or assets as described above or which otherwise becomes bound by
all the terms and provision of this Agreement by operation of law.
In addition, as used in this Agreement, "USB" shall mean USB and any successor
to its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable to him hereunder if he had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his designee or, if there is no
such designee, to his estate.
7. Miscellaneous.
7.1 Notice. All notices, elections, waivers and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States certified mail, return receipt requested, postage
prepaid, to such address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
7.2 No Waiver. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed
to in writing signed by the Executive and the Chief Executive Officer
of the Company. No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly
in this Agreement.
7.3 Indemnification. If litigation shall be brought to enforce or
interpret any provision in this Agreement, the Company agrees to
indemnify the Executive for his attorney's fees and disbursement
incurred in such litigation, and agrees to pay prejudgment interest on
any money judgment obtained by the Executive, calculated at the prime
interest rate announced as such by the Wall Street Journal from
time-to-time, from the earliest date that payment(s) to him should have
been made under this Agreement. If the Wall Street Journal announces
two or more rates as the prime rate, then the highest rate shall be
used.
7.4 Payment Obligations Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided shall
be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off,
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counterclaim, recoupment, defense or other right which the Company may
have against the Executive or any third party. All amounts payable by
the Company shall be paid without notice or demand. Each and every
payment made by the Company shall be final and the Company will not
seek, nor permit its subsidiaries, affiliates, successors or assigns to
seek, to recover all or any part of such payment for any reason.
7.5 Term of Agreement. The term of this Agreement shall continue for an
initial period of three (3) years from the date of this Agreement. On
each anniversary of this Agreement, the term shall be extended for an
additional year unless prior to an anniversary date USB's Board of
Directors cause a notice of nonrenewal to be sent to the Executive. Any
Termination Benefits due pursuant to this Agreement shall continue to
be an obligation of the Company and enforceable by the Executive until
paid in full.
7.6 Controlling Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota.
7.7 Interpretation of Agreement. In the event of any ambiguity,
vagueness or other matter involving the interpretation or meaning of
this Agreement, this Agreement shall be construed liberally so as to
provide to the Executive the full benefits described in this Agreement.
7.8 Severability. Each section, subsection or paragraph of this
Agreement shall be deemed severable and if for any reason any portion
of this Agreement is unenforceable, invalid or contrary to any existing
or future law, such unenforceability or invalidity shall not affect the
applicability or validity of any other portion of this Agreement.
7.9 U.S. Dollars. All payments required to be made under this Agreement
shall be made in United States Dollars.
7.10 Employment Agreement. Any benefits provided to the Executive under
this Agreement will, unless specifically stated otherwise in this
Agreement, be in addition to and not in lieu of any benefits that may
be provided the Executive under an Employment Agreement, if any, with
the Company.
Nothing in this Agreement is to be deemed to give the Company the right
to take any action or engage in any omission with respect to the
Executive at any time when any such action or omission is not
permissible and proper under any Employment Agreement if then in force.
Similarly, except as provided otherwise in this Agreement, nothing in
this Agreement is to be deemed to give the Executive the right to take
any action or engage in any omission with respect to the Company at any
time when any such act or omission is not permissible and proper under
any Employment Agreement if then in force.
This Agreement shall continue in force so long as the Executive remains
employed by the Company and shall not be affected by any termination of
any Employment Agreement.
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7.11 Title and Captions. All section, subsection or paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the text of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
U.S. BANCORP, on
behalf of itself and each Subsidiary
_________________________________________
Xxxxxxx X. Xxxxx
Executive Vice President - Human Resources
EXECUTIVE:
_________________________________________
Name
_________________________________________
Attest: By:
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