FIRSTMERIT CORPORATION DISPLACEMENT AGREEMENT
Exhibit 99.3
FIRSTMERIT CORPORATION
THIS AGREEMENT (“Agreement”) is effective the 18th day of May, 2006 (“Effective
Date”) by and between FirstMerit Corporation, an Ohio corporation (the “Company”), and Xxxx Xxxxx,
the executive employee who has executed this Agreement (“Employee”).
The Company and the Employee agree that, regardless of any term or provision suggesting the
contrary, this Agreement will be administered consistently with Section 409A of the Internal
Revenue Code of 1986, as amended (“Code”).
R E C I T A L S:
A. The Employee serves as an executive and is considered a key corporate officer of the
Company or one of its affiliates.
B. The Board of Directors of the Company (“Board”) has determined that the interests of the
Company’s shareholders will be best served by ensuring that its key corporate officers will adhere
to the policies of the Board and senior management with respect to any merger, acquisition or like
transaction that does not result or involve a Change in Control of the Company.
C. The Board has also determined that it is in the best interests of the shareholders to
promote stability among key officers and employees, particularly during the period leading up to
and after a merger, acquisition or like transaction.
D. The Employee and the Company have previously entered into an employment agreement and may
also enter into a Change in Control Termination Agreement which protects the Employee in the
circumstances of a termination of employment following a Change in Control of the Company. If an
event (or a series of events) creates an entitlement under both the Change in Control Termination
Agreement and this Agreement, the Employee will not be entitled to be paid benefits under both this
Agreement and the Change in Control Termination Agreement but will be entitled to a benefit under
this Agreement or under the Change in Control Termination Agreement, whichever produces the largest
after-tax benefit to the Employee.
IN CONSIDERATION OF THE FOREGOING, the mutual covenants hereinafter contained and other good
and valuable consideration, receipt of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. Duties of Employee. In exchange for the compensation and benefits described in this
Agreement, the Employee agrees to discharge the obligations described in Paragraph 9 and,
consistent with his duties to shareholders and other legal obligations, the Employee shall support
the position of the Board and the Company’s senior management and shall take any action reasonably
requested by the Board and the Company’s senior management with respect to any merger, acquisition
or like transaction not involving a Change in Control of the Company. The Employee agrees (on his
own behalf and in behalf of his heirs, assigns and beneficiaries) that the
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compensation and benefits described in this Agreement are adequate consideration for the
obligations assumed in this Agreement.
2. Displacement and Change in Control.
(a) The term “Displacement” shall mean a merger, acquisition or like transaction where no
Change in Control of the Company has occurred.
(b) The term “Change in Control” shall mean the occurrence of any one of the following events
on or after the Effective Date:
(i) Individuals who, on April 19, 2000, constituted the Board (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to April 19, 2000 whose election or nomination for election was
approved by a vote of at least 2/3rds of the then Incumbent Directors (either by a specific vote or
by approval of the proxy statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent Director; provided,
however, that no individual elected or nominated as a director of the Company initially as a result
of an actual or threatened election contest with respect to directors or any other actual or
threatened solicitation of proxies or consents by or on behalf of any person other than the Board
shall ever be deemed to be an Incumbent Director;
(ii) Any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act
of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
becomes through any means (including those described in paragraph (iii)(u) through (z)) a
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power of the Company’s
then outstanding securities eligible to vote for the election of the Board (the “Company Voting
Securities”);
(iii) Any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act
of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of Company Voting Securities representing 25% or more (but less than 50%) of the
Company Voting Securities; provided, however, that the event described in this paragraph (iii)
shall not be deemed to be a Change in Control for purposes of this paragraph (iii) by virtue of any
of the following acquisitions:
(u) by the Company or any Subsidiary (i.e., any entity related
to the Company through common ownership as determined under Sections
414 or 1563 of the Code);
(v) by or through any employee benefit plan sponsored or
maintained by the Company or any Subsidiary and described (or
intended to be described) in Section 401(a) of the Code;
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(w) directly through an equity compensation plan maintained by
the Company or any Subsidiary, including a program described in
Section 423 of the Code;
(x) by any underwriter temporarily holding securities pursuant
to an offering of such securities;
(y) by any entity or “person” (including a “group” as
contemplated by Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
with respect to which that acquirer has filed SEC Schedule 13G
indicating that the securities were not acquired and are not held
for the purpose of or with the effect of changing or influencing,
directly or indirectly, the Company’s management or policies
(regardless of whether such acquisition of securities is considered
to constitute the acquisition of control under the Bank Holding
Company Act of 1956 pursuant to Regulation Y promulgated
thereunder), unless and until that entity or person files SEC
Schedule 13D, at which point this exception will not apply to such
Company Voting Securities, including those previously subject to an
SEC Schedule 13G filing; or
(z) pursuant to a Non-Control Transaction (as defined in
paragraph (iv)).
(iv) The consummation of a merger, consolidation, statutory share exchange or similar form of
corporate transaction involving the Company or any of its Subsidiaries that requires the approval
of the Company’s shareholders, whether with respect to such transaction or the issuance of
securities in connection with the transaction (a “Business Combination”), unless immediately
following such Business Combination:
(y) more than 50% of the total voting power of (A) the
corporation resulting from such Business Combination (the “Surviving
Entity”), or (B) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the
voting securities eligible to elect directors (“Total Voting Power”)
of the Surviving Entity (the “Parent Entity”), is represented by
Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately
prior to the Business Combination; and
(z) at least a majority of the members of the board of
directors of the Parent Entity (or, if there is no Parent Entity,
the
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Surviving Entity) following the consummation of the Business
Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for
such Business Combination.
Any Business Combination which satisfies all of the criteria specified in (iv)(y) and (iv)(z)
shall be deemed to be a “Non-Control Transaction”); or
(v) the shareholders of the Company approve a plan of complete liquidation or dissolution of
the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 25% of the Company Voting
Securities as a result of the acquisition of Company Voting Securities by the Company which reduces
the number of Company Voting Securities outstanding; provided, that if after such acquisition by
the Company such person becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially owned by such person
by more than one percent, a Change in Control of the Company shall then occur.
For purposes of this Agreement, the entity resulting from a Displacement (including, if
appropriate, the Company) or succeeding to the Company’s interest in connection with a Displacement
is referred to as the “Displacement Entity.”
If more than one event that constitutes a Displacement occurs during a Protection Period (as
defined below), the Employee shall be entitled to the amount that equals the largest after-tax
amount generated by any of the Displacements.
If one or more events generate a payment under both this Agreement and the Change in Control
Termination Agreement, the Employee will be entitled only to the benefit described in this
Agreement or in the Change in Control Termination Agreement, whichever provides the highest
after-tax value to the Employee, but will not be entitled to amounts under both agreements.
Notwithstanding any other provision of this Agreement, the Employee will not be entitled to
any amount under this Agreement if he acted in concert with any person or group (as defined above)
to effect a Displacement, other than at the specific direction of the Board and in his capacity as
an employee of the Company or any Subsidiary.
3. Company’s Right to Terminate. The entity with which the Employee has a direct employment
relationship (“Employer”) may terminate the Employee’s employment at any time during the term of
this Agreement, subject to the terms of this Agreement and the obligation to provide the amounts
stated herein if due.
4. Termination in Connection With a Displacement. In the event of termination of employment
from the Company or any Subsidiary before a Displacement or, after a Displacement, the Displacement
Entity or any Related Entity (i.e. any entity related to the Displacement Entity through common
ownership as determined under Section 414 or 1563 of the
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Code) (including an involuntary termination while the employee is absent from active
employment pending determination of Disability under the procedures described in Paragraph 4(a))
within the Protection Period (i.e., the period beginning on the date the Board first learns of an
act or event that results in a Displacement, even if that period begins before the Effective Date,
and ending on the last day of the number of calendar months specified in Item 10 on Exhibit A
beginning coincident with or immediately after a Displacement), the Employee shall be entitled to
the benefits provided in Paragraph 6 unless such termination is because of the Employee’s death or
determination of Disability (as described in Paragraph 4(a)), for Cause, or by the Employee other
than for Good Reason.
(a) Disability. The term “Disability” shall mean termination because of Total and Permanent
Disability as defined in the Long-Term Disability Plan in effect at any time during the Protection
Period in which the Employee is or was participating when the condition began (or, if the Employee
is or was not participating in a Long-Term Disability Plan when the condition begins, as defined
under any long-term disability program in effect at any time during the Protection Period). If the
Employee is deemed Disabled, his date of termination will be the end of any period prescribed under
the long-term disability plan for determining eligibility for long term disability benefits and any
termination occurring before that date will not be a termination for Disability. Also, any
adjustment to the Employee’s compensation, job duties or other circumstances of employment during
the period his Disability is being established will not constitute a basis for “Good Reason” under
Paragraph 4(c).
(b) Cause. The term “Cause” shall mean one or more of the following acts of the Employee:
(i) any act of fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion by the Employee of the assets or business
opportunities of the Company or any Subsidiary before a Displacement or,
after a Displacement, the Displacement Entity or any Related Entity;
(ii) conviction of the Employee of (or plea by the Employee of guilty to) a
felony (or a misdemeanor that originally was charged as a felony but was
reduced to a misdemeanor as part of a plea bargain) or intentional and
repeated violations by the Employee of the Employer’s written policies or
procedures;
(iii) disclosure, other than through mere inadvertance, to unauthorized
persons of any Confidential Information (as defined below);
(iv) intentional breach of any contract with or violation of any legal
obligation owed to the Company or any Subsidiary before a Displacement or,
after a Displacement, the Displacement Entity or any Related Entity;
(v) dishonesty relating to the duties owed by the Employee to the Company or
any Subsidiary before a Displacement or, after a Displacement, the
Displacement Entity or any Related Entity;
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(vi) the Employee’s (x) willful and continued refusal to substantially
perform assigned duties (other than any refusal attributable to an event
that constitutes Good Reason, as defined in paragraph (c)), (y) willful
engagement in gross misconduct materially and demonstrably injurious to the
Company or any Subsidiary before a Displacement or, after a Displacement,
the Displacement Entity or any Related Entity or (z) breach of any term of
this Agreement; or
(vii) any intentional cooperation with any party attempting to effect a
Displacement unless (y) the Board has approved or ratified that action
before the Displacement or (z) that cooperation is required by law.
However, Cause will not arise solely because the Employee is absent from active employment
during periods of vacation, consistent with the Employer’s applicable vacation policy, sickness or
illness or while suffering from an incapacity due to physical or mental illness, including a
condition that does or may result in a Disability or other period of absence initiated by the
Employee and approved by the Employer.
The term “Confidential Information” shall mean any and all information (other than information
in the public domain) related to the Company’s, any Subsidiary’s, the Displacement Entity’s or any
Related Entity’s business, including all processes, inventions, trade secrets, computer programs,
technical data, drawings or designs, information concerning pricing and pricing policies, marketing
techniques, plans and forecasts, new product information, information concerning methods and manner
of operations and information relating to the identity and location of all past, present and
prospective customers and suppliers.
(c) Good Reason. The term “Good Reason” shall mean any of the following to which the Employee
has not specifically consented in writing:
(i) at any time during the Protection Period, any breach of this Agreement
(including breach of the commitments undertaken under Paragraph 9(d) of any
nature whatsoever) by or on behalf of the Company or any Subsidiary before a
Displacement or, after a Displacement, the Displacement Entity or any
Related Entity;
(ii) at any time during the Protection Period, a reduction in the Employee’s
title, duties, responsibilities or status, as compared to either (y) the
Employee’s title, duties, responsibilities or status immediately before the
beginning of the Protection Period or (z) any enhanced or increased title,
duties, responsibilities or status assigned to the Employee during the
Protection Period;
(iii) at any time during the Protection Period, the permanent assignment to
the Employee of duties that are inconsistent with (y) the Employee’s office
immediately before the beginning of the Protection Period or (z) any more
senior office to which the Employee is promoted during the Protection
Period;
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(iv) during any calendar year ending during the Protection Period (or any
fractional calendar year ending within the Protection Period), a 15 percent
(or larger) reduction (other than a reduction that is attributable to any
termination for death, after reaching age 65 (but only if the Employee is
then entitled to an immediate, unreduced benefit under a deferred
compensation plan described in Section 401(a) of the Code), Disability or
Cause, voluntary termination by the Employee other than for Good Reason or
for any period of temporary absence protected by law or initiated by the
Employee and approved by the Employer) in the aggregate value of the highest
of the Employee’s total compensation for the calendar year ending before the
Date of Termination, as determined under Paragraph 5 (including base salary,
cash bonus potential (as distinguished from the cash bonus earned), the
value of employee benefits, other than value associated solely with the
performance of investments the Employee controls, and fringe benefits but
excluding compensation attributable to the exercise or liquidation of stock
options) or, if higher, the Employee’s total compensation for the last
calendar year ending before the beginning of the Protection Period
(including base salary, cash bonus potential, the value of employee
benefits, other than value associated solely with the performance of
investments the Employee controls, and fringe benefits) but, in both cases,
determined without regard to any amounts, paid or payable, under Paragraphs
6, 7, 8 and 11;
(v) at any time during the Protection Period, a requirement that the
Employee relocate to a principal office or worksite (or accept indefinite
assignment) to a location more than 50 miles distant from (y) the principal
office or worksite to which the Employee was assigned immediately before the
beginning of the Protection Period or (z) any location to which the Employee
agreed, in writing, to be assigned after a Displacement;
(vi) at any time during the Protection Period, the imposition on the
Employee of business travel obligations substantially greater than the
Employee’s business travel obligations during the
12-consecutive-calendar-month period ending immediately before the beginning
of the Protection Period but determined without regard to any special
business travel obligations associated with activities relating to the
Displacement;
(vii) at any time during the Protection Period, the Employer’s (u) failure
to continue in effect any material fringe benefit or compensation plan,
retirement or deferred compensation plan, life insurance plan, health and
accident plan, sick pay plan or disability plan in which the Employee is
participating (or was eligible to participate) immediately before the
beginning of the Protection Period, (v) modification of any of the plans or
programs just described that adversely affects the potential value of the
Employee’s benefits under those plans (other than value associated solely
with the performance of investments the Employee controls) or (w) failure to
provide the Employee, after a Displacement, with the same number of
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paid vacation days to which the Employee is or becomes entitled at or
anytime during the Protection Period under the terms of the Employer’s
vacation policy or program. However, Good Reason will not arise under this
subsection solely because (x) the Company or any Subsidiary before a
Displacement or, after a Displacement, the Displacement Entity or any
Related Entity terminates or modifies any such program during the Protection
Period solely to comply with applicable law but only to the extent required
to meet applicable legal standards, (y) a plan or benefit program expires
under self-executing terms contained in that plan or benefit program before
the Displacement or (z) the Company or any Subsidiary before a Displacement
or, after a Displacement, the Displacement Entity or any Related Entity
replaces a plan or program with a successor plan or program of equal or
equivalent value to the Employee;
(viii) for the duration of any period of any absence from active employment
that begins or continues at any time during the Protection Period, failure
to provide or continue for the Employee any benefits (including disability
benefits) available to employees who are absent from active employment
(including because of disability) under programs maintained by the Company,
a Subsidiary, the Displacement Entity or any Related Entity on the date the
absence (including disability) begins;
(ix) during the Protection Period, the Employee is unable to perform
normally assigned duties because of a physical or mental condition and
before his Disability is established under Paragraph 4(a), the Company or
any Subsidiary before a Displacement or, after a Displacement, the
Displacement Entity or any Related Entity terminates the Employee before the
end of the Disability determination period described in Paragraph 4(a);
(x) during the Protection Period, the Company or any Subsidiary before a
Displacement or, after a Displacement, the Displacement Entity or any
Related Entity unsuccessfully attempts to terminate the Employee for Cause,
in which case the Effective Period will not end earlier than 60 days after
the conclusion of the Employer’s unsuccessful attempt to terminate the
Employee for Cause;
(xi) during the Protection Period, the Employer attempts to amend or
terminate this Agreement without regard to the procedures described in
Paragraphs 10 or 13;
(xii) failure at any time to obtain an assumption of the Company’s or any
Subsidiary’s, before a Displacement, or, after a Displacement, the
Displacement Entity’s or any Related Entity’s obligations under this
Agreement by any successor to any of them, regardless of whether such entity
becomes a successor to the Company or any Subsidiary, before a Displacement,
or, after a Displacement, the Displacement Entity or any
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Related Entity as a result of a merger, consolidation, sale of assets or any
other form of reorganization; or
(xiii) termination of employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Paragraph 5 herein.
5. Notice of Termination. Any purported termination of the Employee’s employment shall be
communicated by written Notice of Termination to the other party delivered no later than 60 days
after the Employee, in the case of Good Reason, or, in other cases, the Company or any Subsidiary,
before a Displacement, or, after a Displacement, the Displacement Entity and any Related Entity,
know or with reasonable diligence should have known of the event constituting Good Reason, Cause or
Disability. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which
shall indicate the specific termination provisions in this Agreement relied upon, shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Employee’s employment under the provisions so indicated, and shall specify a “Date of Termination”.
However, the Date of Termination specified in the notice:
(a) In the case of a termination because of Disability, will be no earlier than the
end of the disability determination period described in Paragraph 4(a);
(b) In the case of a termination for Cause, on the Date of Termination specified in
the Notice of Termination (which may not be earlier than the date on which the
condition constituting Cause occurred), unless, within 30 days after the date the
Notice of Termination for Cause is delivered to the Employee, the Employee corrects
to the reasonable satisfaction of the Employer the condition specified in the Notice
of Termination for Cause as the basis for the termination, in which case the Notice
of Termination will be deemed to have been withdrawn and will be of no effect;
(c) In the case of a termination for Good Reason, on the Date of Termination
specified in the Notice of Termination (which may not be earlier than the day before
the event constituting Good Reason occurred), unless, within 30 days after the date
the Notice of Termination for Good Reason is delivered (even if this 30 day period
extends beyond the term as defined in Paragraph 10), the Employer corrects to the
reasonable satisfaction of the Employee the condition specified in the Notice of
Termination for Good Reason as the basis for the termination, in which case the
Notice of Termination will be deemed to have been withdrawn and will be of no
effect; and
(d) in all other cases, the date the Notice of Termination is delivered.
6. Compensation and Benefits Upon Termination.
(a) If a Displacement has occurred and during the Protection Period the Employee’s employment
is terminated (i) by the Employer other than for Cause, Disability or death, or (ii) by the
Employee for Good Reason, the Employee shall be entitled to (and each of
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the Displacement Entity and all Related Entities shall be jointly liable for) the compensation
and benefits provided in subparagraph (c) below.
(b) The compensation described in subparagraphs (c)(i), (c)(ii) and (c)(iii) shall be paid by
the Displacement Entity or the Employer (or jointly by them) to the Employee in a single lump sum
cash payment on or before the fifth business day following the effective Date of Termination. The
compensation and benefits described in subparagraphs (c)(iv), (c)(v), (c)(vi) and (c)(vii) will be
paid as provided in those subparagraphs.
(c) The compensation and benefits payable to an Employee pursuant to this Paragraph 6 shall be
as follows:
(i) Base Salary to Date of Termination. The Employee’s full base salary
through the Date of Termination.
(ii) Base Salary. An amount equal to the Employee’s annual base salary (at
the highest annualized rate in effect at any time during the Protection
Period) multiplied by the number indicated in Item 6(c)(ii) on Exhibit A,
which Exhibit is attached hereto and incorporated by reference herein.
(iii) Incentive Compensation. An amount equal to (y) the value of the
incentive compensation payment the Employee would receive if payout was made
at the “target” percentage for the Employee under the Company’s Executive
Incentive Plan (and/or any analogous plan adopted after the date of this
Agreement) for the year of the Employee’s Date of Termination (or any higher
percentage based on objective criteria specified in the Executive Incentive
Compensation Plan for the year in which the Date of Termination occurs
and/or any analogous plan adopted after the date of this Agreement that the
Employee has achieved before the Date of Termination) or, if higher, the
value of any incentive compensation payment received by the Employee under
the Company’s Executive Incentive Plan (and/or any analogous plan adopted
after the date of this Agreement) at any time during the Protection Period
multiplied by (z) the number indicated in Item 6(c)(iii) on Exhibit A.
(iv) Stock Plans. The Employee’s outstanding stock options, restricted
stock and other stock, phantom stock, stock appreciation rights or similar
arrangements in which he participates, whether issued before, in connection
with or after the Displacement will be fully vested and exercisable.
Notwithstanding any provisions to the effect that rights terminate upon
termination of employment, the Employee (or his beneficiary) shall be given
the longer of 90 days after the Date of Termination, or the remaining period
provided in the grant (determined without regard to the Employee’s
termination), to realize or exercise all rights or options provided under
such plans with respect to any stock
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option, and other stock, phantom stock, stock appreciation rights or similar
grants.
(v) Medical Benefits and Life Insurance. The Employer or the Displacement
Entity shall maintain in full force and effect for the Employee’s (and for
his family if family coverage is then in effect) continued benefit until the
earlier of the number of months listed in Item 6(c)(v) on Exhibit A after
the Date of Termination, or the end of the calendar month in which the
Employee reaches the age of 67, all medical insurance (including health
care, dental and prescription drug insurance), life insurance, and
accidental death and dismemberment insurance including conversion rights
(collectively “Welfare Benefits”), with coverage and limits, separately for
each Welfare Benefit and in the aggregate, identical to those in effect with
respect to the Employee (including family coverage if family coverage is
then in effect), immediately before the Date of Termination or, if higher
(both separately and in the aggregate) at any time during the Protection
Period. If the Employer or the Displacement Entity is unable to provide
some or all of the Welfare Benefits through its insured program for the
duration of the period described in the first sentence of this paragraph,
the Employer or the Displacement Entity will distribute to the Employee a
lump sum cash amount equal to the highest aggregate premium amount paid
during the Protection Period with respect to the Welfare Benefit it is
unable to provide through its insured programs multiplied by the number of
whole and fractional premium periods for which it is unable to provide this
coverage through its insured program, plus an additional amount equal to the
Premium Tax Obligation (as defined below). If the Employee is a participant
in the Company’s Executive Life Insurance Program (and/or any analogous plan
adopted after the date of this Agreement) on the Date of Termination, the
Displacement Entity and/or the Employer shall pay the premium for the
Employee on such insurance for a period ending the earlier of the number of
months listed in Item 6(c)(v) on Exhibit A after the Date of Termination, or
the calendar month in which the Employee reaches the age of 67, plus an
additional amount to the Employee equal to the Premium Tax Obligation. For
the sole purpose of determining the Employee’s eligibility to participate in
the Company’s Welfare Benefit programs, the Employee shall be considered to
be on a paid leave of absence as long as he is receiving benefits under this
Agreement.
The term “Premium Tax Obligation” shall mean an additional cash amount equal
to all applicable federal, state and local, income, wage, employment and
excise taxes (including those imposable under Code § 4999) so that, after
payment of all taxes due on the cash payments described in this subparagraph
(c)(v) (i.e., the cash equivalent of the premiums needed to provide the
Welfare Benefits the Displacement Entity and/or the Company are unable to
provide through their insured programs), the Employee will retain cash equal
to the highest aggregate
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premium amount paid during the Protection Period with respect to the Welfare
Benefit it is unable to provide through its insured programs multiplied by
the number of whole and fractional premium periods for which it is unable to
provide this coverage through its insured program.
(vi) Executive Supplemental Retirement Plan. The following shall apply for
purposes of calculating the Employee’s benefits, if applicable, under the
FirstMerit Corporation Executive Supplemental Retirement Plan and/or any
other nonqualified plan of deferred compensation in effect during the
Protection Period (the “SERP”):
(x) for purposes of calculating the Employee’s Monthly
Retirement Income (as defined in the SERP) under Sections
4.01 and 4.02 (or successor section) of the SERP and for
purposes of determining the Employee’s vested Monthly
Retirement Income under Section 4.05 (or successor section)
of the SERP, the Employee’s Years of Service (as defined in
the SERP) shall be increased by 36 months;
(y) for purposes of calculating the Employee’s Monthly
Retirement Income under Section 4.02 of the SERP, the
Employee’s Attained Age (as defined in the SERP) shall be
increased by 36 months; and
(z) the Employee’s Average Monthly Earnings for
purposes of the SERP shall be deemed to be equal to the
total of the highest monthly base salary earned by the
Employee during the 24 months immediately preceding the
Displacement and the value of the incentive compensation
payment the Employee would receive if payout was made at the
“target” percentage for the Employee under the Company’s
Executive Incentive Plan (and/or any analogous plan adopted
after the date of this Agreement) in the year of the
Employee’s Date of Termination (or any higher percentage
based on objective criteria specified in the Incentive
Compensation Plan for the year in which the Date of
Termination occurs and/or any analogous plan adopted after
the date of this Agreement) that the Employee has achieved
before the Date of Termination) in the year of Employee’s
Date of Termination divided by 12.
The terms of this subparagraph (vi) shall apply only if the Employee is a participant in the
SERP, and shall supersede any contrary provisions of the SERP and any membership agreement executed
between the Company and the Employee in connection with the Employee’s participation in the SERP,
unless expressly provided otherwise in such membership agreement. The Employee’s SERP benefit,
calculated using the provisions of subparagraphs
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(vi)(x), (y) and (z) above, is assumed to commence on the earliest date upon which the
Employee is eligible to retire under the SERP for purposes of determining the Actuarial Equivalent
(as defined in the SERP) of such benefit.
If the SERP is terminated and the Employee cites that termination as a basis for Good Reason
termination, the benefits due under this subparagraph will be calculated as if the SERP had not
been terminated.
(vii) Outplacement Fees. For a period not to exceed one year after the Date
of Termination, the Displacement Entity, the Employer or any Related Entity
will pay directly to the provider the reasonable expenses associated with
outplacement training of the Employee by a professional placement firm and
in an amount not to exceed that listed as Item 6(c)(vii) on Exhibit A.
(viii) The additional consideration described in the Employee’s employment
agreement dated May 15, 2006 (or any successor agreement) in exchange for a
continuation of the obligations described in Article 6 (or any successor
section of similar effect) therein.
7. Overall Limitation on Benefits. Notwithstanding any provision in this Agreement to the
contrary (other than Paragraphs 6(c)(v), 8 and 11 which will apply under the circumstances
described in those paragraphs and below), if, as of the date of the Displacement, the Displacement
Entity (after consulting with an independent accounting or compensation consulting company)
ascertains that the compensation and benefits provided to the Employee pursuant to or under this
Agreement, either alone or when combined with other compensation and benefits received by the
Employee, would constitute “parachute payments” within the meaning of Section 280G of the Code, or
the regulations adopted thereunder, then the Employee will be entitled to a “full gross-up” in an
amount sufficient to ensure that, after payment of the taxes (including those attributable to the
gross-up) the Employee will retain an after-tax amount equal to the amount he would have retained
had no tax arisen under Section 4999 of the Code.
8. Legal, Etc. Fees. The Displacement Entity shall pay all reasonable legal, accounting and
actuarial fees and expenses incurred by the Employee in enforcing any right or benefit provided by
this Agreement. If it is subsequently determined that payment of these fees are parachute
payments, the Displacement Entity or the Employer will fully gross-up the Employee for the income,
wage, employment and excise taxes associated with that payment so that, after all applicable
federal, state and local, income, wage, employment and excise taxes (plus any assessed interest and
penalties), the Employee will have incurred no liability (either for these fees or the taxes just
listed) with respect to the matters encompassed in this paragraph.
9. Obligations. By signing this Agreement, the Employee agrees to be bound by and to comply
with the following restrictions, whether or not the Employee also receives the compensation and
benefits described in Paragraph 6.
(a) If any “person” (as used in Paragraphs 2(b)) initiates a tender or exchange offer,
distributes proxy materials to the Company’s shareholders or takes other steps to
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effect, or that may result in, a Displacement, the Employee agrees not to terminate
employment voluntarily during the pendency of that activity (other than by reason of
termination after reaching retirement age or Disability or for Good Reason) and to continue
to serve as a full-time employee until those efforts are abandoned, that activity is
terminated or until a Displacement has occurred.
(b) Except as otherwise required by applicable law, the Employee expressly agrees to
keep and maintain Confidential Information (as defined in Paragraph 4(b)) confidential and
not, at any time during or subsequent to the Employee’s employment, to use any Confidential
Information for the Employee’s own benefit or to divulge, disclose or communicate any
Confidential Information to any person or entity in any manner except (i) to employees or
agents of the Company, any Subsidiary, the Displacement Entity and any Related Entity that
need the Confidential Information to perform their duties on behalf of the Company, any
Subsidiary, the Displacement Entity and any Related Entity, (ii) in the performance of
Employee’s duties, (iii) as a necessary (and only to the extent necessary) part of any
undertaking by the Employee to enforce the Employee’s rights under this Agreement or (iv)
pursuant to a subpoena. The Employee also agrees to notify the Company, before a
Displacement and, after a Displacement, the Displacement Entity promptly of any circumstance
the Employee believes may legally compel the disclosure of Confidential Information and to
give this notice before disclosing any Confidential Information.
(c) The Employee agrees that during and after employment and without additional
compensation (other than reimbursement for reasonable associated expenses) to cooperate with
the Company, any Subsidiary, the Displacement Entity and any Related Entity in the following
areas:
(i) the Employee agrees (w) to be reasonably available to answer questions for
the Company’s, any Subsidiary’s, the Displacement Entity’s and any Related Entity’s
officers regarding any matter, project, initiative or effort for which the Employee
was responsible while employed by the Employer and (x) to cooperate with the
Company, any Subsidiary, the Displacement Entity and any Related Entity during the
course of all third-party proceedings arising out of the Company’s, any
Subsidiary’s, the Displacement Entity’s or any Related Entity’s business about which
the Employee has knowledge or information. For purposes of this Agreement, (y)
“proceedings” includes internal investigations, administrative investigations or
proceedings and lawsuits (including pre-trial discovery and trial testimony) and (z)
“cooperation” includes the Employee’s being reasonably available for interviews,
meetings, depositions, hearings and/or trials without the need for subpoena or
assurances by the Company, any Subsidiary, the Displacement Entity or any Related
Entity providing any and all documents in the Employee’s possession that relate to
the proceeding and providing assistance in locating any and all relevant notes
and/or documents.
(ii) unless compelled to do so by lawfully-served subpoena or court order, the
Employee agrees not to communicate with, or give statements or testimony to, any
attorney representing an interest opposed to the Company’s, any
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Subsidiary’s, the Displacement Entity’s or any Related Entity’s interest
(“Opposing Attorney”), Opposing Attorney’s representative (including private
investigators) or current or former employee relating to any matter (including
pending or threatened lawsuits or administrative investigations) about which the
Employee has knowledge or information (other than knowledge or information that is
not Confidential Information as defined in Paragraph 4(b)) as a result of employment
with the Company, any Subsidiary, the Displacement Entity or any Related Entity.
The Employee also agrees to notify the Employer after being contacted by a third
party or receiving a subpoena or court order to appear and testify with respect to
any matter that may include a claim opposed to the Company’s, any Subsidiary’s, the
Displacement Entity’s or any Related Entity’s interest. However, this subsection
will not apply to any effort undertaken by the Employee to enforce the Employee’s
rights under this Agreement but only to the extent necessary for that purpose.
(iii) the Employee agrees not to communicate with, or give statements to, any
member of the media (including print, television or radio media) relating to any
matter (including pending or threatened lawsuits or administrative investigations)
about which the Employee has knowledge or information (other than knowledge or
information that is not Confidential Information as defined in Paragraph 4(b)) as a
result of employment with the Company or a Subsidiary, before a Displacement, or,
after a Displacement, the Displacement Entity or a Related Entity immediately after
being contacted by any member of the media with respect to any matter affected by
this section.
(d) The Employee, the Company, any Subsidiary, the Displacement Entity and any Related
Entity agree that none will make any disparaging remarks about the others. However, this
restriction will not preclude (i) remarks by any employee made in the normal course of
business, (ii) remarks by the Employee that are required to discharge the Employee’s regular
duties or other duties described in this Agreement, (iii) the Company, any Subsidiary, the
Displacement Entity or any Related Entity from making (or eliciting from any person)
disparaging remarks about the Employee concerning any conduct that may lead to a termination
for Cause (including initiating an inquiry or investigation that may result in a termination
for Cause), but only to the extent reasonably necessary to investigate the Employee’s
conduct and to protect the Company’s, any Subsidiary’s, the Displacement Entity’s and any
Related Entity’s interests or (iv) any remarks made by any party that are necessary (but
only to the extent necessary) to resolve any dispute arising under this Agreement and that
are made solely in the context of proceeding undertaken pursuant to Paragraph 11.
(e) If the Employee breaches any obligation described in this Agreement:
(i) If that breach occurs before a Displacement, this Agreement will terminate
as of the date of the breach, even if the fact of the breach becomes apparent at a
later date and no amounts will be due under this Agreement;
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(ii) If that breach occurs after a Displacement but before the Employee has
terminated, this Agreement will terminate as of the date of the breach, even if the
fact of the breach becomes apparent at a later date, and no amounts will be due
under this Agreement; or
(iii) If that breach occurs after a Displacement and after the Employee
terminates employment, (y) the Displacement Entity will be entitled to treat the
Employee as having terminated for Cause and (z) the Employee will repay the amounts
already received under Paragraph 6 plus interest calculated with reference to the
mid-term applicable federal rate [as defined in Section 1274(d) of the Code] for
January 1 of each calendar year, compounded annually until paid and will be entitled
to no further amounts under this Agreement.
10. Term of Agreement. The Term of this Agreement shall be from the Effective Date through
the last day of the calendar month which is the number of months listed in Item 10 on Exhibit A
beginning after a Displacement. Nevertheless, this Agreement will terminate on the earliest of the
following to occur:
(a) Except as provided in Paragraph 6, the Employee’s employment with the Company or
any Subsidiary, before a Displacement, or, after a Displacement, the Displacement Entity or
any Related Entity terminates before the beginning of the Protection Period;
(b) Before the beginning of a Protection Period, the Employee is reassigned to a more
junior position than that held on the date of this Agreement; however, if the more junior
position is in an employee classification, the majority of whose members have displacement
agreements (or analogous agreements, other than a Change in Control Termination Agreement),
this Agreement will remain in effect, although benefit levels will automatically be adjusted
to the level established under those agreements;
(c) The Employee mutually agrees, in writing, to terminate this Agreement, whether or
not it is replaced with a similar agreement;
(d) The Company notifies the Employee, in writing, that the Agreement is to terminate
at the end of its then current term. To be effective, however, this written notice (i) must
be given no later than 60 consecutive calendar days before the end of the then current term
but (ii) may never be effective during a Protection Period, although a notice of termination
of this Agreement given during the portion of the Protection Period before a Displacement
may be effective if a Displacement does not occur; or
(e) All payments due under this Agreement have been fully paid.
However this Agreement will not terminate if, before the beginning of or during a Protection
Period, the Employee is reassigned to a more senior position than that held on the date of this
Agreement. In this case, the Agreement will remain in effect, although the benefit levels will
automatically be adjusted to the level established for other employees assigned to that
classification or, if there is no other employee in that classification, to the highest level in
effect under this Agreement.
- 16 -
11. Dispute Resolution. Any disagreement concerning the calculation of any payment due under
this Agreement that is not resolved by agreement between the parties (or by the independent
accounting or compensation consulting company described in Paragraph 7 with reference to matters
described in that paragraph) or other dispute or controversy arising out of or relating to this
Agreement that is not resolved by agreement between the parties, including the basis on which the
Employee’s employment is terminated, will be resolved by arbitration in accordance with the rules
of the American Arbitration Association. The award of the arbitrator will be final, conclusive and
nonappealable and judgment upon the award rendered by the arbitrator may be entered in any court
having competent jurisdiction. The arbitrator must be an arbitrator qualified to serve in
accordance with the rules of the American Arbitration Association and one who is approved by the
Company, before a Displacement, or, after a Displacement, the Displacement Entity and the Employee.
If the Employee and the Company, before a Displacement, or, after a Displacement, the Displacement
Entity fail to agree on an arbitrator, each must designate a person qualified to serve as an
arbitrator in accordance with the rules of the American Arbitration Association and these persons
will select the arbitrator from among those persons qualified to serve in accordance with the rules
of the American Arbitration Association. Any arbitration relating to this Agreement will be held
in Summit County, Ohio (or other geographical area acceptable to the parties).
The Company, before a Displacement, or, after a Displacement, the Displacement Entity will
bear all reasonable costs associated with any dispute arising under this Agreement, including
reasonable accounting and legal fees incurred by the Employee in connection with the arbitration
proceedings just described. If it is subsequently determined that payment of these costs are
parachute payments, the Company, before a Displacement, or, after a Displacement, the Displacement
Entity will fully gross-up the Employee for the income, wage, employment and excise taxes
associated with that payment so that, after all applicable federal, state and local, income, wage,
employment and excise taxes (plus any assessed interest and penalties), the Employee will have
incurred no liability (either for these fees or the taxes just listed) with respect to the matters
encompassed in this Paragraph 11.
If otherwise due, payments not being contested under the procedures described in this
paragraph will not be deferred during the pendency of procedures described in this paragraph.
If the arbitrator decides, at the conclusion of the arbitration proceedings described in this
paragraph, that the Company, before a Displacement, or, after a Displacement, the Displacement
Entity has understated the amount due under this Agreement, the Company, before a Displacement, or,
after a Displacement, the Displacement Entity will, subject to application of Paragraph 7 to the
aggregate of the amount initially paid under Paragraph 6 and the additional award, pay the
additional amount, if any, to the Employee within 30 days after the date of the award along with
interest calculated at the interest rate prescribed by the arbitrator. However, if, after
application of Paragraph 7 to the arbitrator’s award, the net amount due to the Employee would not
increase, no amounts will be paid under this subsection, regardless of the arbitrator’s award.
12. Notice. For the purposes 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
delivered or mailed by certified or registered mail, return receipt requested, postage
- 17 -
prepaid, provided that all notices to the Company or any Subsidiary, before a Displacement,
or, after a Displacement, the Displacement Entity, the Employer or any Related Entity shall be
directed to the attention of the President of the Company with a copy to the Secretary of the
Company, before a Displacement or, after a Displacement, to the President of the Displacement
Entity with a copy to the Secretary of the Displacement Entity (or, in the case of the President,
directed to the notice of the Chairman of the Board of the Company, before a Displacement, or,
after a Displacement, to the Chairman of the board of directors of the Displacement Entity with a
copy to the Secretary of the Displacement Entity), or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt. If the last address given by the Employee is not
current, the Employer will use reasonable means to locate the Employee.
13. Miscellaneous.
(a) No provisions of this Agreement may be modified, waived, or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by the Employee and such officer as
may be specifically designated by the Board or the board of directors of the Displacement Entity.
No waiver by either party hereto at any time of any breach by the other party hereto 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 provisions or conditions at the same or at any prior or
subsequent time.
(b) 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; provided, however, that this Agreement shall not supersede or in any way limit the
rights, duties or obligations the Employee may have under any other written agreement with the
Company or any Subsidiary, the Displacement Entity, the Employer or any Related Entity that are not
inconsistent with the terms of this Agreement.
(c) Except as expressly provided in this Agreement, the Employee’s right to receive the
payments described in this Agreement will not decrease the amount of, or otherwise adversely
affect, any other benefits payable to the Employee under any other plan, agreement or arrangement.
(d) The Employee is not required to mitigate the amount of any payment described in this
Agreement by seeking other employment or otherwise, nor will the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation or benefits the Employee earns, or is
entitled to receive, in any capacity after termination or by reason of the Employee’s receipt of or
right to receive any retirement or other benefits attributable to employment.
(e) Except as expressly provided elsewhere in this Agreement, the amount of any payment made
under this Agreement will be reduced by amounts the Employer is required to withhold in payment (or
in anticipation of payment) of any income, wage or employment taxes imposed on the payment.
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(f) The right of an Employee or any other person to receive any amount under this Agreement
may not be assigned, transferred, pledged or encumbered except by will or by applicable laws of
descent and distribution. Any attempt to assign, transfer, pledge or encumber any amount that is
or may be receivable under this Agreement will be null and void and of no legal effect. However,
this paragraph will not preclude payment under Paragraph 13(g) of any benefit to which a deceased
Employee is entitled.
(g) Subject to the preceding subparagraph (f), this Agreement inures to the benefit of and may
be enforced by the Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
(h) If:
(i) the Employee’s employment relationship shifts between the Company and any Subsidiary
before a Displacement or after a Displacement, between the Displacement Entity and any Related
Entity and there has been no intervening termination, this Agreement will remain in full force and
effect and for all purposes of this Agreement, the Employee’s new employer will be substituted for
the Employee’s prior employer.
(ii) the Employee’s employer is no longer a Subsidiary, whether or not as part of a
transaction that constitutes a Displacement, this Agreement will remain in full force and effect.
However, the Employee will not be entitled to any amount under this Agreement on account of a
Displacement that solely affects the Company after that transfer and is not part of the same
transaction through which the employer stopped being a Subsidiary.
14. Validity. The validity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement, which shall remain
in full force and effect. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws (other than the laws of conflict of laws) of the State of
Ohio.
15. Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original by all of which together will constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date above first
written.
| FirstMerit Corporation | ||||||
| By: | /s/ Xxxxxxxxxxx X. Xxxxx | |||||
| Executive Vice President—Human Resources | ||||||
| Employee: Xxxx Xxxxx | ||||||
| /s/ Xxxx Xxxxx | ||||||
| (Signature) | ||||||
| Xxxx Xxxxx | ||||||
| (Print Name) | ||||||
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Exhibit A
Name of Executive:
|
Xxxx Xxxxx | |||
Item6(c)(ii): Multiplied By:
|
1.0 | |||
Item6(c)(iii): Multiplied By:
|
1.0 | |||
Item6(c)(v):
|
36 | |||
Item6(c)(vii): Outplacement Fee:
|
$ | 35,000 | ||
Item10
|
36 | |||
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