1
EXHIBIT 10
MANAGEMENT CONTINUITY AGREEMENT
THIS IS AN AGREEMENT between INDEPENDENT BANK CORPORATION (the
"Corporation"), whose principal offices are 000 Xxxx Xxxx Xxxxxx, Xxxxx,
Xxxxxxxx 00000, and _____________ (the "Executive"), dated ______________, 1998.
RECITALS
The Executive is a key officer of the Corporation or a Subsidiary whose
continued dedication, availability, advice and counsel to the Corporation and
its Subsidiaries is deemed important to the Board of Directors of the
Corporation ("Board"), the Corporation and its shareholders. The services of the
Executive, his experience and knowledge of the affairs of the Corporation and
his reputation and contacts in the industry are extremely valuable to the
Corporation. The Corporation wishes to attract and retain such well-qualified
executives, and it is in the best interests of the Corporation to secure the
continued services of the Executive notwithstanding any change in control of the
Corporation.
The Corporation considers the establishment and maintenance of a sound
and vital management team to be part of its overall corporate strategy and to be
essential to protecting and enhancing the best interests of this Corporation and
its shareholders. Accordingly, the Board has approved this Agreement with the
Executive and authorized its execution and delivery on behalf of the
Corporation.
AGREEMENT
1. Term of Agreement. This Agreement will begin on the date entered
above (the "Commencement Date") and will continue in effect through the third
anniversary of the Commencement Date (the "Initial Term"). Thereafter, this
Agreement shall be extended automatically for additional three (3) year periods
("Renewal Terms") at the end of the Initial Term and each Renewal Term, unless
not later than twelve (12) months prior to the end of the Initial Term or a
Renewal Term, the Corporation gives written notice to Executive that it has
elected not to renew this Agreement. Notwithstanding the foregoing, if a Change
of Control occurs during the term of this Agreement, this Agreement will
continue in effect for thirty-six (36) months beyond the end of the month in
which any Change of Control occurs.
2. Definitions. The following defined terms shall have the meanings
set forth below, for purposes of this Agreement:
(a) Average Base Salary. Average Base Salary shall mean the
Executive is average annual salary during the three (3) calendar year
period beginning two (2) years immediately prior to the year of Change
of Control and the year in which the Change of Control occurred;
provided that if Executive has been employed for less than three (3)
years, Average Base Salary shall be determined, during that lesser
period or if less than one year, the Executive's prevailing salary
shall be annualized.
1
2
(b) Average Bonus. Average Bonus shall mean the average of the
last three (3) bonuses paid to Executive under the Corporation's
Management Incentive Compensation Plan immediately preceding the Change
of Control, and if the Executive is eligible to participate in the
Corporation's Incentive Share Grant Plan, the Executive shall be deemed
to have participated in that plan for each of those three years,
whereby those bonuses shall be based on the aggregate fair market value
of the shares of the Corporation's stock acquired or that would have
been acquired irrespective of the restrictions on transfer or
forfeiture provisions.
(c) Change of Control. A "Change in Control" shall mean a change
in control of the Corporation of such a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 ("Exchange
Act"), or such item thereof which may hereafter pertain to the same
subject; provided that, and notwithstanding the foregoing, a Change in
Control shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing twenty
percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) At any time a majority of the Board of Directors of the
Corporation is comprised of other than Continuing Directors (for
purposes of this paragraph, the term Continuing Director means a
director who was either (A) first elected or appointed as a
Director prior to the date of this Agreement; or (B) subsequently
elected or appointed as a director if such director was nominated
or appointed by at least a majority of the then Continuing
Directors); or
(iii) Any of the following occur:
(A) Any merger or consolidation of the Corporation,
other than a merger or consolidation in which the voting
securities of the Corporation immediately prior to the merger
or consolidation continue to represent (either by remaining
outstanding or being converted into securities of the
surviving entity) fifty-one percent (51%) or more of the
combined voting power of the Corporation or surviving entity
immediately after the merger or consolidation with another
entity;
(B) Any sale, exchange, lease, mortgage, pledge,
transfer, or other disposition (in a single transaction or a
series of related transactions) of all or substantially all
of the assets of the Corporation which shall include, without
limitation, the sale of assets or earning power aggregating
more than fifty percent (50%) of the assets or earning power
of the Corporation on a consolidated basis;
2
3
(C) Any liquidation or dissolution of the Corporation;
(D) Any reorganization, reverse stock split, or
recapitalization of the Corporation which would result in a
Change of Control; or
(E) Any transaction or series of related transactions
having, directly or indirectly, the same effect as any of the
foregoing; or any agreement, contract, or other arrangement
providing for any of the foregoing.
(d) Disability. "Disability" means that, as a result of
Executive's incapacity due to physical or mental illness, the Executive
shall have been found to be eligible for the receipt of benefits under
the Corporation's long term disability plan.
(e) Cause. "Cause" means (i) the willful commission by the
Executive of a criminal or other act that causes or will probably cause
substantial economic damage to the Corporation or a Subsidiary or
substantial injury to the business reputation of the Corporation or a
Subsidiary; (ii) the commission by the Executive of an act of fraud in
the performance of such Executive's duties on behalf of the Corporation
or a Subsidiary; (iii) the continuing willful failure of the Executive
to perform the duties of such Executive to the Corporation or a
Subsidiary (other than any such failure resulting from the Executive's
Disability or occurring after issuance by Executive of a Notice of
Termination for Good Reason) after written notice thereof (specifying
the particulars thereof in reasonable detail) and a reasonable
opportunity to be heard and cure such failure are given to the
Executive by the Board; or (iv) the order of a federal or state bank
regulatory agency or a court of competent jurisdiction requiring the
termination of the Executive's employment. For purposes of this
subparagraph, no act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Corporation or a
Subsidiary.
(f) Good Reason. For purposes of this Agreement, "Good Reason"
means the occurrence of any one or more of the following without the
Executive's express written consent:
(i) The assignment to Executive of duties which are
materially different from or inconsistent with the duties,
responsibilities and status of Executive's position at any time
during the six (6) month period prior to the Change of Control of
the Corporation, or which result in a significant reduction in
Executive's authority and responsibility as an executive of the
Corporation or a Subsidiary;
(ii) A reduction by the Corporation in Executive's base
salary or salary grade as of the day prior to the Change of
Control, or the failure to grant salary increases and bonus
payments on a basis comparable to those granted to other
executives of the Corporation, or reduction of Executive's most
recent incentive bo-
3
4
nus potential prior to the Change of Control under the
Corporation's Management Incentive Compensation Plan, or any
successor plan;
(iii) Either (a) the Corporation requiring Executive to be
based at a location in excess of ten (10) miles from the location
where Executive is currently based, or (b) in the event of any
relocation of the Executive with the Executive's express written
consent, the failure of the Corporation or a Subsidiary to pay (or
reimburse the Executive for) all reasonable moving expenses by the
Executive relating to a change of principal residence in
connection with such relocation and to pay the Executive the
amount of any loss realized in the sale of the Executive's
principal residence in connection with any such change of
residence. Any gain realized upon the sale shall not offset the
obligation to pay moving expenses, and the amounts payable under
(b) shall be tax effected, all to the effect that the Executive
shall incur no loss on an after tax basis;
(iv) The failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and
agree to perform this Agreement, as contemplated in Paragraph 6
hereof;
(v) Any termination by the Corporation of Executive's
employment that is other than for Cause;
(vi) Any termination of Executive's employment, reduction in
Executive's compensation or benefits, or adverse change in
Executive's location or duties, if such termination, reduction or
adverse change (aa) occurs within six (6) months before a Change
of Control, (bb) is in contemplation of such Change in Control,
and (cc) is taken to avoid the effect of this Agreement should
such action occur after such Change in Control; or
(vii) The failure of the Corporation to provide the Executive
with substantially the same fringe benefits (including, without
limitation, retirement plan, health care, insurance, stock options
and paid vacations) that were provided to him immediately prior to
the Change in Control, or with a package of fringe benefits that,
though one or more of such benefits may vary from those in effect
immediately prior to such Change in Control, is substantially
comparable in all material respects to such fringe benefits taken
as a whole.
The existence of Good Reason shall not be affected by Executive's
Disability. Executive's continued employment shall not constitute a
waiver of Executive's rights with respect to any circumstance
constituting Good Reason under this Agreement.
(g) Notice of Termination. "Notice of Termination" means a
written notice indicating the specific termination provision in this
Agreement relied upon and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
employment under the provision so indicated. The Executive shall not be
entitled to give a Notice of Termination that the Executive is
terminating employment for Good Reason more than six (6) months
following the occurrence of the event alleged to
4
5
constitute Good Reason, except with respect to an event which occurred
before the Change of Control, in which case the Notice of Termination
must be given within six (6) months following the Change of Control.
Any termination by the Corporation for Cause or due to Executive's
Disability, or by Executive for Good Reason shall be communicated by
Notice of Termination to the other party.
(h) Subsidiary. "Subsidiary" means a corporation with at least
eighty percent (80%) of its outstanding capital stock owned directly or
indirectly by the Corporation.
3. Eligibility for Severance Benefits. Subject to Paragraph 5, the
Executive shall receive the Severance Benefits described in Paragraph 4 if the
Executive's employment is terminated during the term of this Agreement, and
(a) The termination occurs within thirty-six (36) months after a
Change of Control, unless the termination is (i) because of Executive's
death or Disability, (ii) by the Corporation for Cause, or (iii) by the
Executive other than for Good Reason; or
(b) The Corporation terminates the employment of Executive within
six (6) months before a Change of Control, in contemplation of such
Change of Control, and to avoid the effect of this Agreement should
such action occur after such Change of Control.
4. Severance Benefits. Subject to Paragraph 5, the Executive shall
receive the following Severance Benefits (in addition to accrued compensation
and vested benefits) if eligible under Paragraph 3:
(a) A lump sum cash amount (which shall be paid not later than
thirty (30) days after the date of termination of employment) equal to
Executive's Average Base Salary, multiplied by ________________;
(b) A lump sum cash amount (which shall be paid not later than
thirty (30) days after the date of termination of employment) equal to
the Executive's Average Bonus, multiplied by __________________;
(c) For a __________ year period after the date the employment is
terminated, the Corporation will arrange to provide to Executive at the
Corporation's expense, with:
(i) Health care coverage equal to that in effect for
Executive prior to the termination (or, if more favorable to
Executive, that furnished generally to salaried employees of the
Corporation), including, but not limited to, hospital, surgical,
medical, dental, prescription and dependent coverages. Upon the
expiration of the health care benefits required to be provided
pursuant to this subparagraph 4(c), the Executive shall be
entitled to the continuation of such benefits under the provisions
of the Consolidated Omnibus Budget Reconciliation Act. Health care
benefits otherwise receivable by Executive pursuant to this
subparagraph 4(c) shall be reduced to the extent comparable
benefits are actually received by Executive from a subsequent
employer during the ___________ year period follow-
5
6
ing the date the employment is terminated and any such benefits
actually received by Executive shall be reported to the
Corporation;
(ii) Life and accidental death and dismemberment insurance
coverage (including supplemental coverage purchase opportunity and
double indemnity for accidental death) equal (including policy
terms) to that in effect at the time Notice of Termination is
given (or on the date the employment is terminated if no Notice of
Termination is required) or, if more favorable to Executive, equal
to that in effect at the date the Change of Control occurs; and
(iii) Disability insurance coverage (including policy terms)
equal to that in effect at the time Notice of Termination is given
(or on the date employment is terminated if no Notice of
Termination is required) or, if more favorable to Executive, equal
to that in effect immediately prior to the Change of Control;
provided, however, that no income replacement benefits will be
payable under such disability policy with regard to the _____ year
period following a termination of employment provided that the
payments payable under subparagraphs 4(a) and (b) above have been
made.
(d) The Corporation shall pay all fees for outplacement services
for the Executive up to a maximum equal to fifteen percent (15%) of the
Executive's base salary used to calculate his benefit under
subparagraph 4(a) plus provide a travel expense account of up to
$10,000 to reimburse job search travel;
(e) In computing and determining Severance Benefits under
subparagraphs 4(a) through (d) above, a decrease in Executive's salary,
incentive bonus, or insurance benefits shall be disregarded if such
decrease occurs within six (6) months before a Change of Control, is in
contemplation of such Change of Control, and is taken to avoid the
effect of this Agreement should such action be taken after such Change
of Control; in such event, the salary, incentive bonus, and/or
insurance benefits used to determine Average Annual Salary, Average
Bonus, and therefore Severance Benefits shall be that in effect
immediately before the decrease that is disregarded pursuant to this
subparagraph 4(e);
(f) Executive shall not be required to mitigate the amount of any
payment provided for in this Paragraph 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Paragraph 4 be reduced by any compensation earned by Executive as the
result of employment by another employer after the date the employment
is terminated, or otherwise, with the exception of a reduction in
health insurance coverage as provided in subparagraph 4(c)(i).
5. Maximum Payments. Notwithstanding any provision in this Agreement
to the contrary, if part or all of any amount to be paid to Executive by the
Corporation under this Agreement or otherwise constitute a "parachute payment"
(or payments) under Section 280G or any other similar provision of the Internal
Revenue Code of 1986, as amended (the "Code"), the following limitation shall
apply:
6
7
If the aggregate present value of such parachute payments (the
"Parachute Amount") exceeds (i) three (3) times Executive's "base
amount" as defined in Section 280G of the Code, and (ii) less One
Dollar ($1.00), then the amounts otherwise payable to or for the
benefit of the Executive subsequent to the termination of his
employment, and taken into account in calculating the Parachute Amount
(the "Termination Payments"), shall be reduced and/or delayed, as
further described below, to the extent necessary so that the Parachute
Amount is equal to three (3) times the Executive's "base amount," less
One Dollar ($1.00).
Any determination or calculation described in this Paragraph 5 shall be
made by the Corporation's independent accountants or the Corporation's tax
counsel, as selected by Executive. Such determination, and any proposed
reduction and/or delay in termination payments shall be furnished in writing
promptly by the accountants to the Executive. The Executive may then elect, in
his sole discretion, which and how much of any particular termination payment
shall be reduced and/or delayed and shall advise the Corporation in writing of
his election, within thirty (30) days of the accountant's determination, of the
reduction or delay in termination payments. If no such election is made by the
Executive within such 30-day period, the Corporation may elect which and how
much of any termination payment shall be reduced and/or delayed and shall notify
the Executive promptly of such election. As promptly as practicable following
such determination and the elections hereunder, the Corporation shall pay to or
distribute to or for the benefit of the Executive such amounts as are then due
to the Executive.
Any disagreement regarding a reduction or delay in termination payments
will be subject to arbitration under Paragraph 15 of this Agreement. Neither the
Executive's designation of specific payments to be reduced or delayed, nor the
Executive's acceptance of reduced or delayed payments, shall waive the
Executive's right to contest such reduction or delay.
6. Successors; Binding Agreements. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. Executive's rights and benefits under this Agreement may not be
assigned, except that if Executive dies while any amount would still be payable
to Executive hereunder if Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement, to the beneficiaries designated by the Executive to receive
benefits under this Agreement in a writing on file with the Corporation at the
time of the Executive's death or, if there is no such beneficiary, to
Executive's estate. The Corporation 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 the Corporation (or of any
division or Subsidiary thereof employing Executive) to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation from the Corporation in the same
amount and on the same terms to which Executive would be entitled hereunder if
Executive terminated the employment for Good Reason following a Change of
Control.
7
8
7. Withholding of Taxes. The Corporation may withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes as
required by law.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addressees set forth on the first page of this Agreement, or at
such other addresses as the parties may designate in writing.
9. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Corporation. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Michigan.
10. Employment Rights. Except as specifically provided in this
Agreement, this Agreement shall not confer upon Executive any right to continue
in the employ of the Corporation or its Subsidiaries and shall not in any way
affect the right of the Corporation or its Subsidiaries to dismiss or otherwise
terminate Executive's employment at any time with or without cause.
11. No Vested Interest. Neither Executive nor Executive's beneficiary
shall have any right, title, or interest in any benefit under this Agreement
prior to the occurrence of the right to the payment thereof, or in any property
of the Corporation or its subsidiaries or affiliates.
12. Prior Agreements. This Agreement contains the understanding
between the parties hereto with respect to Severance Benefits in connection with
a Change of Control of the Corporation and supersedes any such prior agreement
between the Corporation (or any predecessor of the Corporation) and Executive.
If there is any discrepancy or conflict between this Agreement and any plan,
policy, or program of the Corporation regarding any term or condition of
Severance Benefits in connection with a Change of Control of the Corporation,
the language of this Agreement shall govern.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
8
9
15. Arbitration. The sole and exclusive method for resolving any
dispute arising out of this Agreement shall be arbitration in accordance with
this paragraph. Except as provided otherwise in this paragraph, arbitration
pursuant to this paragraph shall be governed by the Commercial Arbitration Rules
of the American Arbitration Association. A party wishing to obtain arbitration
of an issue shall deliver written notice to the other party, including a
description of the issue to be arbitrated. Within fifteen (15) days after either
party demands arbitration, the Corporation and the Executive shall each appoint
an arbitrator. Within fifteen (15) additional days, these two arbitrators shall
appoint the third arbitrator by mutual agreement; if they fail to agree within
said fifteen (15) day period, then the third arbitrator shall be selected
promptly pursuant to the rules of the American Arbitration Association for
Commercial Arbitration. The arbitration panel shall hold a hearing in Kent
County, Michigan, within ninety (90) days after the appointment of the third
arbitrator. The fees and expenses of the arbitrator, and any American
Arbitration Association fees, shall be paid by the Corporation. Both the
Corporation and the Executive may be represented by counsel and may present
testimony and other evidence at the hearing. Within ninety (90) days after
commencement of the hearing, the arbitration panel will issue a written
decision; the majority vote of two of the three arbitrators shall control. The
majority decision of the arbitrators shall be final and binding on the parties,
and shall be enforceable in accordance with law. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Executive shall be
entitled to seek specific performances of his rights under this Agreement during
the pendency of any dispute or controversy arising under or in connection with
this Agreement. The Corporation will reimburse Executive for all reasonable
attorney fees incurred by Executive as the result of any arbitration with regard
to any issue under this Agreement (or any judicial proceeding to compel or to
enforce such arbitration); (i) which is initiated by Executive if the
Corporation is found in such proceeding to have violated this Agreement
substantially as alleged by Executive; or (ii) which is initiated by the
Corporation,
9
10
unless Executive is found in such proceeding to have violated this Agreement
substantially as alleged by the Corporation.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year written above.
CORPORATION: INDEPENDENT BANK CORPORATION
By ______________________________________
Its _________________________________
EXECUTIVE:
_________________________________________
10
