1
Exhibit 10.21
January 4, 1996
Xx. Xxxxxx X. Xxxxxxxx
Vice Chairman
U. S. Bancorp
3100 U. S. Bancorp Tower
000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Subject: Employment Agreement
Dear Xx. Xxxxxxxx:
U. S. Bancorp (which, together with its wholly owned
subsidiaries, is referred to in this letter agreement as "Bancorp") recognizes
you as an innovative, highly-experienced, and knowledgeable banking executive
whose creativity, expertise, and effort have been, and will continue to be,
crucial to the ongoing development and growth of Bancorp.
In order to induce you to remain in the employ of Bancorp,
this Agreement, which has been approved by the Board, includes:
- A SERP Agreement that sets forth your benefits under the
U.S. Bancorp Supplemental Benefits Plan;
- A CIC Agreement that sets forth the severance compensation
that Bancorp agrees will be provided you in the event your employment
with Bancorp is terminated subsequent to a "Change in Control" of
Bancorp under the circumstances described in Section 2 of this
Agreement; and
- An Employment Agreement that sets forth the termination
compensation that Bancorp agrees will be provided you in the event
your employment with Bancorp is terminated under the circumstances
described in Section 3 of this Agreement.
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings set forth below:
"Agreement" - This letter agreement, including the SERP
Agreement, the CIC Agreement, and the Employment Agreement.
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"Bancorp" - U. S. Bancorp, an Oregon corporation, and its
wholly-owned subsidiaries.
"Bancorp Shares" - Shares of the $5 par value common stock of
Bancorp.
"Benefit Plan" - Any plan, policy, or program of Bancorp
(whether or not on an insured basis) providing medical, dental, health,
disability income, life insurance or other death benefits, or similar types of
benefits to employees of Bancorp. Benefit Plan does not include any plan or
arrangement providing for vacation or severance pay, retirement benefits,
bonuses or incentive compensation of any kind, or current or deferred salary or
similar compensation.
"Board" - The Bancorp board of directors.
"Cause" - Cause for termination shall mean commission of an
act of fraud, embezzlement, or theft constituting a felony or commission of an
act (or failure to take an action) intentionally against the interest of
Bancorp which causes Bancorp material injury. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than two-thirds of the entire membership of
the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board you were guilty of conduct constituting Cause as defined in this
Agreement and specifying the particulars thereof in detail. The foregoing
provisions do not restrict the authority, discretion, or power of the Board, by
any action taken in compliance with Bancorp s articles of incorporation and
bylaws, to terminate your employment with or without Cause. Rather, the
foregoing provisions merely define, for purposes of your contractual rights and
remedies under this Agreement, the circumstances in which termination of your
employment will constitute termination for Cause.
"Change in Control" - A change in control of Bancorp shall
mean:
(i) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20 percent or more of the
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combined voting power of the then outstanding Voting Securities;
provided, however, that for purposes of this paragraph (i), the
following acquisitions shall not constitute a Change of Control; (A)
any acquisition directly from Bancorp, (B) any acquisition by Bancorp,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Bancorp or any corporation controlled by
Bancorp, or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B), and (C) of paragraph
(iii) below; or
(ii) individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date of this
Agreement whose election, or nomination for election by Bancorp'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, 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 Board; or
(iii) consummation of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all
of the assets of Bancorp (a "Business Combination") in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners of
the Voting Securities outstanding immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50
percent of, respectively, the then outstanding shares of common stock
and 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 Bancorp or all or substantially all of
Bancorp's assets
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either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination, of the Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of Bancorp or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20 percent 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 that such ownership existed prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of Bancorp of a complete
liquidation or dissolution of the Company.
"CIC Agreement" - The provisions of Section 2 of this
Agreement.
"CIC Term" - The term of the CIC Agreement as specified in
Section 2.2 of this Agreement.
"Code" - The Internal Revenue Code of 1986, as amended.
"Disability" or "Disabled" - Inability to perform services
with Bancorp on a full-time basis by reason of "Total Disability" within the
meaning of the U. S. Bancorp Disability Income Program (or any successor plan
or program maintained by Bancorp). In the event Bancorp no longer maintains a
similar plan or program, "Disability" or "Disabled" will mean inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment. You will be considered Disabled
for purposes of this Agreement:
(a) Upon the Board's acceptance of a Notice of Disability
from you accompanied by evidence, satisfactory to the Board, that you
are Disabled; or
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(x) 30 days after written notice to you of the Board's
determination (after notice to you and an opportunity to be heard
before the Board) that you are Disabled.
In either situation, for purposes of computing the continuation period
described in Section 3.2.2, you will be treated as having become Disabled as of
the first day of continuous absence from your duties with Bancorp on account of
such Disability.
"Employment Agreement" - The provisions of Section 3 of this
Agreement.
"Employment Term" - The term of the Employment Agreement,
namely the period from the date of this Agreement through the later of (i) the
Expiration Date, or (ii) (if you become Disabled prior to that date) 180 days
after you become Disabled; provided, however, that if you become Chief
Executive Officer of Bancorp, the Employment Term will expire as of the date
you assume that position.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended.
"Excise Tax" - A tax imposed by Section 4999(a) of the Code,
or any successor provision, with respect to "excess parachute payments" as
described in Section 280G(b) of the Code.
"Expiration Date" - December 31, 2002.
"Good Reason" -
A. Before Change in Control. For all purposes of this
Agreement, unless a Change in Control has occurred, termination by you of your
employment with Bancorp during the Employment Term for "Good Reason" means
termination based on any of the following:
(i) A change in your status or position or positions with
Bancorp that represents a material demotion from your status or
position or positions as of the date of this Agreement or a material
change in your duties or responsibilities that is inconsistent with
such status or position or positions;
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(xx) A reduction by Bancorp in your base salary (as in effect
on the date of this Agreement or as increased at any time during the
Term of this Agreement) other than a reduction applied on a
nondiscriminatory manner to all Key Executives;
(iii) The failure of Bancorp to continue your participation
(on terms comparable to those for other Key Executives) in any Plans
and vacation programs or arrangements in which other Key Executives
are participants; and
(iv) Bancorp's requiring you to be based more than 35 miles
from Bancorp's principal executive office, except for required travel
on Bancorp's business to an extent substantially consistent with your
business travel obligations as of the date of this Agreement.
B. After Change in Control - After a Change in Control has
occurred, termination by you of your employment with Bancorp during the CIC
Term for "Good Reason" means termination based on any of the following:
(i) a change in your status or position or positions with
Bancorp which, in your reasonable judgment, represents a demotion from
your status or position or positions as in effect immediately prior to
the Change in Control, or a change in your duties or responsibilities
which, in your reasonable judgment, is inconsistent with such status
or position or positions, or any removal of you from or any failure to
reappoint or reelect you to such position or positions, except in
connection with the termination of your employment for Cause or
Disability or as a result of your death or the termination by you
other than for Good Reason;
(ii) a reduction by Bancorp in your base salary as in effect
immediately prior to the Change in Control;
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(iii) the failure by Bancorp to continue in effect any Plan
in which you are participating at the time of the Change in Control
(or Plans providing you with at least substantially similar benefits),
other than as a result of the normal expiration of any such Plan in
accordance with its terms or a modification of such Plan which
modification is applicable to all employees who participate in such
Plan, as in effect at the time of the Change in Control, or the taking
of any action, or the failure to act, by Bancorp which would adversely
affect your continued participation in any of such Plans on at least
as favorable a basis to you as is the case on the date of the Change
in Control or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the Change in Control;
(iv) the failure by Bancorp to provide and credit you with
the number of paid vacation days to which you are then entitled in
accordance with Bancorp s normal vacation policy as in effect
immediately prior to the Change in Control;
(v) Bancorp's requiring you to be based anywhere more than 35
miles from where your office is located immediately prior to the
Change in Control except for required travel on Bancorp s business to
an extent substantially consistent with the business travel
obligations which you undertook on behalf of Bancorp prior to the
Change in Control;
(vi) the failure by Bancorp to obtain from any successor the
assent to this Agreement contemplated by Section 4.1.1 of this
Agreement;
(vii) any purported termination by Bancorp of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of this Agreement; and for purposes of this
Employment Agreement, no such purported termination shall be
effective; or
(viii) any refusal by Bancorp to continue to allow you to
attend to matters or engage in activities not directly related to the
business of Bancorp which,
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prior to the Change in Control, you were permitted by the Board to
attend to or engage in.
"Gross-Up Payment" - A payment described in Section 2.4 of
this Agreement with respect to an Excise Tax.
"Key Executives" - Executives of Bancorp who have positions of
Executive Vice President or higher, or executives of Bancorp whose positions
and responsibilities are substantially equivalent to those of executive vice
presidents of Bancorp as of the date of this Agreement.
"Other Agreement" - A plan, arrangement, or agreement pursuant
to which an Other Payment is made.
"Other Payment" - Any payment or benefit payable to you in
connection with a Change in Control of Bancorp pursuant to any plan,
arrangement, or agreement (other than this Agreement) with Bancorp, any person
whose actions result in a change in control of Bancorp, or any person
affiliated with Bancorp or such person.
"Outside Tax Counsel" - Outside tax counsel selected by
Bancorp's independent accountants and reasonably acceptable to you.
"Parachute Payment" - A payment or benefit payable to you in
connection with a change in control of Bancorp that is treated as a parachute
payment within the meaning of Code Section 280G(b)(2).
"Person" - Any individual, corporation, partnership, group,
association, or other "person," as such term is used in Section 13(d)(3) or
Section 14(d) of the Exchange Act, other than Bancorp or any employee benefit
plan or plans sponsored by Bancorp.
"Plan" - Any compensation plan such as a plan providing for
incentive or deferred compensation, stock options, or other stock or
stock-related grants or awards or any employee benefit plan such as a thrift,
investment, savings, pension, profit sharing, medical, disability, accident,
life insurance, cafeteria, or relocation plan or any other plan, policy, or
program of Bancorp providing similar types of benefits to employees of Xxxxxxx.
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"SERP" - Bancorp's Supplemental Benefits Plan, as amended from
time to time, or any successor plan providing substantially similar benefits.
"SERP Agreement" - The provisions of Section 1 of this
Agreement.
"Severance Payments" - The payments described in Section 2.3.4
of this Agreement.
"Termination Benefits" - The payments and benefits described
in Section 3.2.5 of this Agreement.
"Total Payments" - All payments or benefits payable to you in
connection with a Change in Control of Bancorp, including Severance Payments
and Other Payments.
"Voting Securities" - Bancorp's issued and outstanding
securities ordinarily having the right to vote at elections of Bancorp s Board.
SECTION 1
SERP BENEFITS
1.1 SERP Participation. You are designated as a participant
in the SERP with the following benefits:
- A Restoration Benefit under 6.1.1(a) of the SERP;
- An Enhanced Retirement Benefit under 6.1.1(f) of the SERP;
and
- An Investment Plan-Related Benefit under 6.2 of the SERP.
Except as expressly provided in this Agreement, the foregoing is an exclusive
list of your benefits under the SERP and supersedes all prior designations.
1.2 Benefit Service Credit. For purposes of your Enhanced
Retirement Plan Benefit, pursuant to 6.1.1(f)(3) of the SERP you are credited
with eleven years of Benefit Service for your service with a prior employer
(subject to the offset described in Section 1.3 of this Agreement). The eleven
years
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of Benefit Service are in addition to your actual years of Benefit Service.
1.3 Prior Employer Benefits. Pursuant to 6.1.1(f)(4) of the
SERP, your Enhanced Retirement Benefit is subject to offset for Prior Employer
Benefits equal to a single life annuity in the amount of $2,368.01 per month,
subject to an early retirement reduction factor of $10.319 times the number of
calendar months prior to age 65.
1.4 Eligibility Service Credit. For purposes of determining
vesting for the Enhanced Retirement Benefit under the provisions of 6.1.1(f)(6)
and 6.1.1(f)(7)(i) of the SERP, you will be credited with eleven years of
Eligibility Service in addition to your actual years of Eligibility Service
provided you do not violate the noncompetition provisions of Section 1.5 of
this Agreement. In the event that you compete in violation of Section 1.5,
your vesting will be determined on the basis of your actual number of years of
Eligibility Service without credit for the eleven additional years.
1.5 Noncompetition. For purposes of Section 1.4 of this
Agreement, in the event that your employment is terminated by Bancorp for Cause
or by you without Good Reason prior to a Change in Control, you will not be
entitled to the additional eleven years of Eligibility Service if, within three
years of the date you terminate employment with Bancorp, you either directly or
indirectly, on your own behalf or as a partner, member, shareholder (except by
ownership of less than 1 percent of the outstanding stock of a publicly held
corporation), officer, employee, consultant, financier, director, or trustee of
any person, firm, corporation, or other entity, engage in a financial services
business competing, as of the date of your termination of employment, with the
business then carried on by Bancorp or any of its subsidiaries and affiliates.
You agree to promptly notify Bancorp of any employment you undertake within
such three-year period. In the event that SERP benefits are paid to you based
on the eleven years of Eligibility Service credited pursuant to Section 1.4
and, within the three-year period you violate the provisions of this Section
1.5, you agree to repay to Bancorp (without interest) the difference, if any,
between the benefits paid and the benefits that would have been payable without
credit for the eleven years of Eligibility Service.
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1.6 Effect of Change in Control. Upon a Change in Control of
Bancorp, your right to an Enhanced Retirement Benefit under the SERP will be
modified as provided in Section 2.3.4 of the CIC Agreement.
1.7 Effect of SERP Plan Document. The provisions of this
SERP Agreement modify and describe your benefits under the SERP but shall not
be deemed to create a separate benefit in addition to the SERP benefits.
Except as expressly provided in this Agreement, your benefits under the SERP
are subject to the provisions of the SERP plan document.
SECTION 2
CHANGE IN CONTROL AGREEMENT
2.1 Agreement to Provide Services; Right to Terminate;
Confidentiality.
2.1.1 Termination Prior to Certain Offers. Except in the
event of a Change in Control, and except as otherwise provided in Section 2.1.2
of this Agreement, either Bancorp or you may terminate your employment at any
time, subject to Bancorp paying whatever severance benefits as are provided for
pursuant to applicable Bancorp Plans or compensation agreements other than this
Agreement. If, and only if, termination of your employment with Bancorp occurs
after a Change in Control, the provisions of this CIC Agreement shall apply.
2.1.2 Continuation of Services Subsequent to Certain Offers.
In the event a tender offer or exchange offer is made by a Person for more than
20 percent of Bancorp s Voting Securities, you agree that you will not leave
the employ of Bancorp (other than as a result of Disability) and will render
services to Bancorp in the capacity in which you then serve until such tender
offer or exchange offer has been abandoned or terminated or a Change in Control
has occurred. In the event that, during the period you are obligated to
continue in the employ of Bancorp pursuant to this Section 2.1.2, Bancorp
reduces your compensation, your obligations under this Section 2.1.2 shall
terminate.
2.1.3 Termination for Cause. Bancorp may terminate your
employment for Cause whether or not a Change in Control has occurred.
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2.1.4 Confidentiality. You acknowledge that (i) by reason of
the capacity in which you have been employed, you have financial information
regarding Bancorp which has not been publicly disclosed and which is
confidential to Bancorp, and (ii) disclosure of such financial information
could cause irreparable harm to Bancorp. You agree that you will not disclose,
without prior written consent of Bancorp, any financial or other confidential
business information regarding Bancorp which has not been publicly disclosed by
Bancorp.
2.2 Term of Change in Control Provisions. This CIC Agreement
commences on the date hereof and shall continue in effect until December 31,
2002; provided, however, that commencing on January 1, 2003, and each January 1
thereafter, the CIC Term shall automatically be extended for one additional
year unless at least 90 days prior to such January 1, Bancorp or you shall have
given notice that this CIC Agreement shall not be extended; and provided,
further, that if a Change in Control shall occur while this CIC Agreement is in
effect, the CIC Term shall automatically be extended for a period of three
calendar years beyond the calendar year in which such Change in Control occurs.
Except as provided in Section 2.1.1 of this Agreement, this CIC Agreement shall
terminate if you or Bancorp terminate your employment prior to a Change in
Control.
2.3 Termination Following Change in Control. In the event
that your employment with Bancorp is terminated, whether by you or by Bancorp,
within three years from the date of occurrence of any event constituting a
Change in Control that occurs during the CIC Term (it being recognized that
more than one such event may occur in which case the three-year period shall
run from the date of occurrence of each such event), you shall be entitled to
the following respective benefits:
2.3.1 Disability. During any period that you are unable to
perform your duties hereunder as a result of incapacity due to
physical or mental illness, you shall continue to receive your full
base salary at the rate then in effect until your employment with
Bancorp is terminated by Bancorp for Disability. Thereafter, your
benefits shall be determined in accordance with Bancorp's Disability
Income Program. If Bancorp's Disability Income Program is modified or
terminated following a Change
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in Control, Bancorp shall substitute another plan or program with
benefits applicable to you substantially similar to those provided by
the Disability Income Program prior to its modification or
termination.
2.3.2 Termination Upon Death. In the event of your death
while an employee of Bancorp, Bancorp shall pay to your representative
your full base salary through the date of your death at the rate in
effect on the date of the Change in Control, together with all
benefits, including death benefits, to which you are then entitled
under Plans in which you are a participant, and Bancorp shall have no
further obligations to you under this Agreement.
2.3.3 Termination for Cause or Without Good Reason. If your
employment is terminated by Bancorp for Cause, or by you other than
for Good Reason, Bancorp shall pay you your full base salary through
the Date of Termination at the rate in effect on the date the Change
in Control occurs, together with all benefits to which you are then
entitled under Plans in which you are a participant, and Bancorp shall
have no further obligations to you under this Agreement.
2.3.4 Termination Without Cause or With Good Reason. If your
employment with Bancorp is terminated (other than for Disability or
upon your death) by Bancorp without Cause or by you with Good Reason,
subject to the limitations set forth in Section 4.5 of this Agreement,
Bancorp shall pay you, upon demand, the following amounts ("Severance
Payments"):
(a) your full base salary through the Date of
Termination at the rate in effect on the date the Change in
Control occurs;
(b) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, an amount
of severance pay equal to three times the sum
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of (i) your annual base salary, at the rate in effect on the
date the Change in Control occurs, plus (ii) the average
annual incentive compensation (if any) paid to you or accrued
to your benefit (prior to any deferrals) in respect of the two
fiscal years last ended prior to the fiscal year in which the
Change in Control occurs;
(c) all legal fees and expenses incurred by you as a
result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement); and
(d) reimbursement in full of all reasonable amounts
(up to a maximum of $50,000) paid or incurred by you for
outplacement services in connection with obtaining other
employment.
(e) In addition, your Enhanced Retirement Benefit
under the SERP as described in the SERP Agreement will be
modified as follows:
(i) Notwithstanding 6.1.1(f)(6) and 6.1.1(f)(7)
of the SERP and Section 1.5 of the SERP Agreement,
your right to an Enhanced Retirement Benefit will be
fully vested and nonforfeitable as of the Date of
Termination;
(ii) If you have not attained age 55 as of
the Date of Termination, your Enhanced Retirement
Benefit will commence on the first day of the
calendar month in which you attain age 55;
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(iii) For purposes of computing your Target
Benefit under the SERP, you will continue to accrue
Benefit Service after the Change in Control;
(iv) Your Early Retirement Reduction Percentage
for purposes of 6.1.1(f)(5) of the SERP will be 3
percent; and
(v) Your Enhanced Retirement Benefit will not be
reduced pursuant to the Reduction in Change in
Control Related Benefits provisions under 6.1.1(g) of
the SERP.
The amount of Severance Payments otherwise payable
pursuant to this CIC Agreement shall be reduced by (A) amounts
payable to you pursuant to Bancorp s Severance Benefits Plan
or any successor plan providing severance benefits to Bancorp
employees and (B) amounts payable to you (after any adjustment
or reduction to reflect payments described in clause (A)) as
salary continuation and incentive compensation pursuant to any
other employment agreement between you and Bancorp which is in
effect as of the Date of Termination. The payments provided
for in this paragraph shall be made not later than the fifth
day following the Date of Termination; provided, however, that
if the amounts of such payments cannot be finally determined
on or before such day, Bancorp shall pay to you on such day an
estimate, as determined in good faith by Bancorp, of the
minimum amount of such payments, and shall pay the remainder
of such payments (together with interest at the rate of 10
percent per annum) as soon as the amount thereof can be
determined but in no event later than the 30th day
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after the Date of Termination. In the event that the amount
of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by Bancorp to you, payable on the fifth day after demand
by Bancorp (together with interest at the rate of 10 percent
per annum).
2.3.5 Related Benefits. Unless you die or your employment is
terminated by Bancorp for Cause or Disability, or by you other than
for Good Reason, Bancorp shall maintain in full force and effect, for
the continued benefit of you for three years after the Date of
Termination, all Benefit Plans in which you were entitled to
participate immediately prior to the Date of Termination, provided
that your continued participation is possible under the general terms
and provisions of such Benefit Plans; provided, however, that if you
become eligible to participate in a benefit plan, program, or
arrangement of another employer which confers benefits upon you
substantially similar to those provided by one or more Benefit Plans,
you shall cease to receive benefits under this subparagraph in respect
of such Benefit Plan or Plans. In the event that your participation
in any Benefit Plan is barred by the provisions of such Benefit Plan,
Bancorp shall arrange to provide you with benefits substantially
similar to those which you are entitled to receive under such Benefit
Plan. Nothing contained in this Section 2.3.5 shall be construed to
extend your employment for such three-year period or to cause you to
be treated as an employee of Bancorp during such three-year period.
2.3.6 No Mitigation. You shall not be required to mitigate
the amount of any payment provided for in this Section 2.3 by seeking
other employment or otherwise, nor, except as expressly set forth in
Section 2.3.5, shall the amount of any payment provided for in this
Section 2.3 be reduced by any compensation earned by you as the result
of employment by another employer after the Date of Termination, or
otherwise.
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2.4 Gross-Up Payment.
2.4.1 General. In the event any portion of the Total
Payments will be subject to the Excise Tax, Bancorp will pay you an additional
amount (the "Gross-Up Payment") equal to (a) the Excise Tax imposed on you with
respect to the portion of the Total Payments that constitutes an Excess
Parachute Payment, plus (b) all federal, state, and local income taxes and
Excise Tax imposed on you with respect to the Gross-Up Payment.
2.4.2 Effect on Stock Incentive Plan Awards. Under the terms
of Award Agreements under Bancorp's Stock Incentive Plan, the vesting or
exercisability of certain Awards are accelerated upon the occurrence of a
Change in Control, but only to the extent such acceleration does not result in
an excess parachute payment. The provisions of this CIC Agreement are not
intended to modify the provisions of the Award Agreements and no Gross-Up
Payment will be paid with respect to any Awards under the Stock Incentive Plan.
2.4.3 Determining Amount of Excise Tax. For purposes of
determining whether any portion of the Total Payments will be subject to the
Excise Tax and the amount of any Excise Tax:
(a) The entire amount of the Total Payments shall be treated
as an Excess Parachute Payment unless and to the extent, in the
written opinion of Outside Tax Counsel, the Total Payments, in whole
or in part, are not subject to the Excise Tax;
(b) The value of any noncash benefits or any deferred payment
that are part of the Total Payments shall be determined by Bancorp's
independent accountants in accordance with the requirements of
Sections 280G(d)(3) and 280G(d)(4) of the Code and any regulations
promulgated under those sections.
2.4.4 Determining Amount of Gross-Up Payment. For purposes
of determining the amount of the Gross-Up Payment:
(a) You will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to
individuals (including any applicable surtaxes and taking into account
any
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Xx. Xxxxxx X. Xxxxxxxx - 18 - January 4, 1996
applicable loss or reduction of deductions or exemptions) for the
Calendar year in which the Gross-Up Payment is to be made;
(b) You shall be deemed to pay state and local income taxes
at the highest marginal rates of taxation applicable to individuals
(including any applicable surtaxes and taking into account any
applicable loss or reduction of deductions or exemptions) in the state
and locality of your residence at the date the Gross-Up Payment will
be made.
2.4.5 Time of Payment. Bancorp will pay the Gross-Up Payment
to you not later than the 45th day following the Date of Termination (but in no
event later than 10 days before any applicable payment of tax is due);
provided, however, that if the amount of the Gross-Up Payment cannot be finally
determined on or before such day, Bancorp shall pay you on that day an
estimate, as determined in good faith by Bancorp, of the minimum amount of the
Gross-Up Payment, and shall pay the remainder of the Gross-Up Payment (together
with interest at 10 percent per annum) as soon as the amount of the Gross-Up
Payment can be determined, but in no event later than the 90th day after the
Date of Termination. In the event that the estimated amount of Gross-Up
Payment paid to you exceeds the total amount of Gross-Up Payment subsequently
determined to have been due, the excess will constitute a loan by Bancorp to
you, payable on the 5th day after demand by Bancorp (together with interest at
the rate of 10 percent per annum).
2.4.6 Subsequent Adjustment - Repayment. In the event that
the amount of Excise Tax you are required to pay is subsequently determined to
be less than the amount taken into account under this Agreement, you agree that
promptly after the amount of such reduction in Excise Tax is finally
determined, you will repay to Bancorp, without interest, the amount of such
reduction, plus the net federal income tax benefit, if any, you actually will
receive (in the opinion of Outside Tax Counsel) as a result of making the
repayment described in this Section 2.4.6.
2.4.7 Subsequent Adjustment - Additional Payment. In the
event that the amount of Excise Tax you are required to pay is subsequently
determined to exceed the amount taken into account under this Agreement,
Bancorp shall make an additional
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Gross-Up Payment in the manner set forth in this Section 2.4.7 in respect of
such additional Excise Tax, plus any interest, additions to tax, or penalties
payable by you with respect to the additional Excise Tax, promptly after the
time that the amount can be reasonably determined.
2.5 Miscellaneous. No provision of this CIC Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by you and the Chairman of the Board or Chief
Executive Officer of Bancorp (or, if you are Chairman of the Board and Chief
Executive Officer, an officer of Bancorp specifically authorized for such
purpose by the Compensation Committee of Bancorp's Board of Directors). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of 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 expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Oregon.
2.6 Validity. The invalidity or unenforceability of any
provision of this CIC Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
2.7 Payments During Controversy. Notwithstanding the
pendency of any dispute or controversy, Bancorp will continue to pay you your
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary and installments of incentive
compensation) and continue you as a participant in all Plans in which you were
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with the procedure described in this
Agreement in connection with the definition of "Date of Termination." Amounts
paid under this Section 2.7 are in addition to all other amounts due under this
CIC Agreement and shall not be offset against or reduce any other amounts due
under this CIC Agreement. You shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during
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Xx. Xxxxxx X. Xxxxxxxx - 20 - January 4, 1996
the pendency of any dispute or controversy arising under or in connection with
this CIC Agreement.
SECTION 3
EMPLOYMENT AGREEMENT
3.1 Employment. Bancorp agrees to employ you, and you accept
employment with Bancorp, during the Employment Term on the terms and conditions
set forth in this Employment Agreement.
3.2 Termination of Agreement.
3.2.1 Death. If you die prior to the expiration of the
Employment Term, Bancorp shall pay to your representative your Base Salary
through the date of death. All, benefits including death benefits, to which
you are then entitled under Plans in which you are a participant will be
payable as provided in those Plans. This Employment Agreement will terminate
as of the date of death and Bancorp shall have no further obligations to you
under this Employment Agreement.
3.2.2 Disability. In the event you become Disabled during
the Employment Term, the Employment Agreement will remain in effect and you
will be entitled to continue to receive your base salary and all benefits under
Plans in which you are a participant until the earlier of (i) the expiration of
the Employment Term, or (ii) 180 days after the date you become Disabled. This
Employment Agreement will then terminate as of the end of such continuation
period. To the extent allowable under applicable law and other Plans, you will
be treated as an employee of Bancorp during the continuation period for
purposes of this Employment Agreement and the Plans in which you are a
participant.
3.2.3 Termination for Cause. Pending the determination by
the Board whether or not Cause exists for termination of your employment
pursuant to the definition of Cause in this Agreement, the Board may suspend
you or relieve you of your duties as an officer, but shall not terminate your
employment. Upon such determination that Cause exists, Bancorp may terminate
your employment. This Employment Agreement shall terminate as of the date of
termination of your employment for Cause, and Bancorp shall have no further
obligations to you under this Agreement. If Bancorp terminates your employment
for Cause, Bancorp shall pay you
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Xx. Xxxxxx X. Xxxxxxxx - 21 - January 4, 1996
your base salary through the effective date of such termination for Cause. All
accrued benefits to which you are then entitled under Plans in which you are a
participant shall be payable as provided in those Plans.
3.2.4 Voluntary Termination Without Good Reason. If you
voluntarily terminate employment with Bancorp during the Employment Term
without Good Reason (other than by reason of Disability), Bancorp will pay you
your base salary through the effective date of such termination of employment,
together with all accrued benefits to which you are then entitled under Plans
in which you are a participant, payable at the times provided in those Plans,
and Bancorp shall have no further obligations to you under this Employment
Agreement.
3.2.5 Involuntary Termination Without Cause or Voluntary
Termination With Good Reason. If Bancorp terminates your employment prior to
the expiration of the Employment Term without Cause for any reason other than
death or Disability, or if you voluntarily terminate employment with Bancorp
prior to the expiration of the Employment Term for Good Reason, you will be
entitled to receive the following Termination Benefits:
(a) Your full base salary will be continued through the date
of termination at the rate in effect on the date of termination.
(b) You will be paid an amount equal to three times the sum
of (i) your annual base salary, at the rate in effect on the date of
termination, plus (ii) the average annual incentive compensation (if
any) paid to you or accrued for your benefit (prior to any deferrals)
in respect of the two fiscal years of Bancorp last ended prior to the
fiscal year in which the termination occurs.
(c) Bancorp will continue for a period of three years
following the date of termination of all Benefit Plans (which do not
include the Retirement Plan or the Employee Investment Plan) in which
you were entitled to participate immediately prior to the date of
termination, provided that your continued participation is possible
under the general terms and provisions of such Benefit Plans;
provided, however, that if you become eligible to
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Xx. Xxxxxx X. Xxxxxxxx - 22 - January 4, 1996
participate in a benefit plan, program, or arrangement of another
employer which confers benefits upon you substantially similar to
those provided by one or more Benefit Plans, you shall cease to
receive benefits under this subparagraph in respect of such Benefit
Plan or Plans. In the event that your participation in any Benefit
Plan is barred by the provisions of such Benefit Plan, Bancorp shall
arrange to provide you with benefits substantially similar to those
which you are entitled to receive under such Benefit Plan.
(d) You will be entitled to an Enhanced Retirement Benefit
under Section 6.1.1(f) of the SERP as described in Section 1 of this
Agreement, payable at the times specified in and subject to the terms
and conditions of the SERP, with the following additional provisions:
(i) Notwithstanding Section 6.1.1(f)(6) and Section
6.1.1(f)(7) of the SERP, your right to an Enhanced Retirement
Benefit will be fully vested and nonforfeitable as of the date
of termination; and
(ii) The Reduction Percentage for purposes of Section
6.1.1(f)(5) of the SERP will be 3 percent.
(e) You will not be required to mitigate the amount of any
payments provided in this Section 3.2.5 by seeking other employment or
otherwise, nor, except as expressly provided in subparagraph (c), will
the amount of any payment provided for in this Section 3.2.5 be
reduced by any compensation held by you as the result of employment
with another employer after the date of termination, or otherwise.
The Termination Benefits payable pursuant to this Section
3.2.5 are in lieu of any other severance benefits payable under the U. S.
Bancorp Severance Benefits Plan.
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Xx. Xxxxxx X. Xxxxxxxx - 23 - January 4, 1996
3.2.6 Treatment of Termination Benefits; Effect of Change in
Control. The Termination Benefits payable under Section 3.2.5 of this
Employment Agreement are not conditioned upon a Change in Control of Bancorp
but are payable upon any termination described in this Employment Agreement,
whether or not a Change in Control has occurred. Thus, it is our mutual
intention that the benefits payable under this Employment Agreement are not to
be treated as Total Payments. In the event a termination of employment that
would otherwise be governed by Section 3.2.5 occurs within the period described
in Section 2.3 following a Change in Control, you will be entitled to the
benefits described in Section 2.3 in lieu of any benefits described in this
Section 3.
SECTION 4
GENERAL
4.1 Successors; Binding Agreement.
4.1.1 Successors of Bancorp. This Agreement shall inure to
the benefit of, and be binding upon, any corporate or other successor or
assignee of Bancorp which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of the
business or assets of Bancorp. Bancorp shall require any such successor, by an
agreement in form and substance reasonably satisfactory to you, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as Bancorp would be required to perform if no such succession had taken
place.
4.1.2 Your Successors. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee, or other designee or, if there is no such designee,
to your estate.
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Xx. Xxxxxx X. Xxxxxxxx - 24 - January 4, 1996
4.2 Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by you and the Chairman of the Board or Chief
Executive Officer of Bancorp (or, if you are Chairman of the Board and Chief
Executive Officer, an officer of Bancorp specifically authorized for such
purpose by the Compensation Committee of Bancorp's Board of Directors). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of 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 expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Oregon.
4.3 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.
4.4 Withholding. Bancorp will withhold from any payment of
Termination Benefits, Gross-Up Payments, or any other benefits under this
Agreement all federal, state, and local taxes as will be required pursuant to
any law or governmental regulation or ruling.
4.5 Regulatory Limitations. Notwithstanding any other
provision of this Agreement, Bancorp shall have no obligation to make any
payments to you pursuant to this Agreement if, or to the extent, such payments
are prohibited by any applicable law or regulation, including without
limitation the FDIC s regulations regarding Golden Parachute and
Indemnification Payments promulgated under the Comprehensive Thrift and Bank
Fraud Prosecution and Taxpayer Recovery Act of 1990.
4.6 Cancellation of Change in Control Agreement. Effective
upon execution of this Agreement, the Change in Control Agreement between you
and Bancorp dated May 1, 1994, is canceled and will have no further effect.
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Xx. Xxxxxx X. Xxxxxxxx - 25 - January 4, 1996
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to Bancorp the enclosed copy of
this letter, which will then constitute our agreement on this subject.
Sincerely,
U. S. BANCORP
By: /s/ Xxxxx X. Xxxxxxx
----------------------------
Its: Chairman and CEO
----------------------------
Approved as to form.
/s/
------------------------------------
N. Xxxxxxx Xxxxxx, Chairman
U. S. Bancorp Compensation Committee
Agreed to this 4th day of January, 1996.
/s/
------------------------------------
Xxxxxx X. Xxxxxxxx
