AMENDMENT TO EMPLOYMENT AGREEMENT FOR INTERNAL REVENUE CODE SECTION 409A COMPLIANCE
Exhibit 10.7(b)
AMENDMENT TO EMPLOYMENT AGREEMENT FOR INTERNAL REVENUE CODE
SECTION 409A COMPLIANCE
SECTION 409A COMPLIANCE
By their signatures below, U.S. Bancorp (the “Company”) and Xxxxxx X. Xxxxxx (“Employee”), agree
that the Employment Agreement dated May 7, 2001 among the Company, Employee, Nova Corporation and
Nova Information Systems, Inc. (“Employment Agreement”) is hereby amended as set forth below. The
purpose of this amendment (“Amendment”) is to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”). Capitalized words that are not otherwise defined herein shall
have the meaning ascribed to them in the Employment Agreement.
WHEREAS, Employee and the Company have entered into the Employment Agreement which provides, among
other things, for the payment of Termination Payments upon Employee’s termination of employment (i)
by the Company without cause, (ii) by Employee as a result of negative changes in the employment
relationship that effectively render such termination an involuntary termination, or (iii) by
Employee voluntarily within two years following a Change in Control; and
WHEREAS, the Company and Employee wish to amend the Employment Agreement to comply with Section
409A of the Code:
NOW, THEREFORE, in consideration of the mutual benefits to the parties that result from compliance
with Code Section 409A and the timely amendment of the Employment Agreement, the Company and
Employee agree that, notwithstanding anything to the contrary contained in the Employment
Agreement, the following provisions, definitions and rules will apply and the Employment Agreement
shall be construed accordingly.
1. Vesting of Rights. Sections 3(h) of the Employment Agreement provides for the acceleration of
vesting of options, restricted stock and other similar rights as well as any non-qualified
retirement balance or deferred compensation balance (collectively referred to as “Rights”) upon a
Change in Control. Sections 7(a)(iii) and (iv) of the Employment Agreement provide for the
acceleration of vesting of Rights in the event that Employee’s employment is terminated under
specified circumstances. Notwithstanding anything arguably to the contrary in the Employment
Agreement, including, without limitation, Sections 3(h) and 7(a)(iii) and (iv), the acceleration of
vesting of Rights that constitute deferred compensation subject to Code Section 409A shall not, in
and of itself, alter the payment date with respect to such deferred compensation. The time and
form of payment of such deferred compensation shall be governed by the terms of the applicable
deferred compensation plan, provided, however, that if Employee has been awarded
restricted stock units (“RSUs”) under the Company’s stock incentive plan that are subject to Code
Section 409A, and the vesting of such RSUs is accelerated pursuant to the terms of the Employment
Agreement, the payment date for such RSUs shall be the earlier of (i) the vesting date for the
RSUs, prior to any accelerated vesting, if the Employee had continued in employment (a specified
date), and (ii) the date that is thirty days following Employee’s “separation from service” with
the Company and its affiliates. Separation from service has the meaning ascribed to it under Code Section 409A and applicable guidance, provided that the term
“affiliate” shall mean a business entity which is affiliated in ownership with the Company and
that
is treated as a single employer under the rules of section 414(b) and (c) of the Code, applying an
eighty percent common ownership standard (“Separation from Service”).
2. Termination Payments. Section 7 of the Employment Agreement provides for the payment of a
Severance Payment and a Supplemental Payment upon Employee’s termination of employment (i) by the
Company without cause, or (ii) by Employee as a result of negative changes in the employment
relationship that effectively render such termination an involuntary termination. It is mutually
understood that the Supplemental Payment, which is defined in Section 7(a)(ii), (i) is an
additional payment required as a result of Employee’s actual or constructive involuntary
termination, the amount of which is determined with reference to the prior year’s Bonus
Compensation, and (ii) is not a payment of all or any portion of Bonus Compensation that would or
could have become payable with respect to Employee’s services for the year in which Employee’s
termination of employment occurs had Employee continued employment through the end of that year.
Section 7 provides for the payment of a Severance Payment (but not a Supplemental Payment) upon a
termination of employment by Employee voluntarily within two years following a Change in Control.
Notwithstanding anything to the contrary in the Employment Agreement, the following rules will
apply with respect to the Severance Payment and the Supplemental Payment.
(a) Definition of Separation from Service. Any termination of Employee’s employment, which
termination results in the Company’s obligation to pay a Severance Payment or a Supplemental
Payment, will in all cases meet the definition of Separation from Service.
(b) Specified Employee; Delay in Payment of Severance Payment and Supplemental Payment. If
Employee is a Specified Employee at the time of her Separation from Service, the payment of
any portion of the Severance Payment and/or the Supplemental Payment that would otherwise
have been paid during the six month period following Employee’s Separation from Service will
be delayed until at least six (6) months following her Separation from Service. On the
first business day following the expiration of that six (6) month period, all amounts that
would have been paid during the six (6) month period shall be paid to Employee.
(c) Definition of Specified Employee. Specified Employee means an individual who is a
specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations and
the determination by the Company of the identity of the Specified Employees as of a given
date will be determined pursuant to the rules and procedures set forth in the separate
document entitled “U.S. Bank Specified Employee Determination.
3. Medical, Dental and Life Insurance Benefits During Continuation Period. Section 7(a) provides
that the Company will (with limited exceptions), during the Continuation Period, provide to
Employee and her dependents medical, dental and life insurance benefits. To the extent that such benefits
are provided through a self funded group health plan, the fair market
value of any Company subsidy of the cost of coverage will be reported as taxable income to the
Employee.
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4. Accrued but Unpaid Bonus Compensation. Section 7(a) provides that upon Employee’s termination
of employment under certain circumstances Employee’s accrued but unpaid Bonus Compensation shall be
paid on the date that Bonus Compensation would have been payable under the Incentive Compensation
Plan had termination of employment not occurred. Notwithstanding anything in the Employment
Agreement to the contrary, including, without limitation, Section 7(a), it is mutually agreed and
understood that to the extent that Bonus Compensation is payable pursuant to an award under the
Company’s 2006 Executive Incentive Plan, no portion of such award shall be paid unless the
performance criteria for the performance period have been met and Employee remains employed at the
end of the performance period.
5. One Year Payment and Two Year Payment — Delay in Payment. Section 7(c) provides that upon
certain terminations of employment other than by the Company without cause or by Employee for
reasons constituting a constructive termination, the Company, at its sole discretion, may cause
Employee to comply with certain non-disclosure, non-solicitation and non-compete obligations for a
period of either one year or two years, in exchange for the One Year Payment or the Two Year
Payment, as applicable, each to be paid in monthly installments. Notwithstanding anything to the
contrary in the Employment Agreement, including, without limitation, Section 7(c), the following
rules will apply.
(a) Definition of Separation from Service. Any termination of Employee’s employment, which
termination results in the Company’s obligation to pay a One Year Payment or a Two Year
Payment will in all cases meet the definition of Separation from Service.
(b) Specified Employee; Delay in Payment of One Year Payment and Two Year Payment. If
Employee is a Specified Employee at the time of her Separation from Service, the payment of
any portion of the One Year Payment or the Two Year Payment that would otherwise have been
paid during the six month period following Employee’s Separation from Service will be
delayed until at least six (6) months following her Separation from Service. On the first
business day following the expiration of that six (6) month period, all amounts that would
have been paid during the six (6) month period shall be paid to Employee.
6. Gross-Up Payment. Section 7(e) provides that if Termination Payments result in an excise tax
under Code Section 4999 as a result of an excess parachute payment under Code Section 280G, the
Company will make an additional payment to Employee, such payment referred to as the “Gross-Up
Payment”. Notwithstanding anything to the contrary in the Employment Agreement, including,
without limitation, under Section 7(e), the Gross-Up Payment, or any portion of it, (if any) will be paid by the end of Employee’s taxable year next
following the taxable year in which Employee remits the related taxes.
7. Definition of Change in Control. Section 7(f)(i) of the Employment Agreement defines “Change in
Control”. Notwithstanding anything to the contrary in the Employment Agreement, including, without
limitation, Section 7(f)(i), the events described in Sections 7(f)(i)(A) through (D) shall
constitute a Change in Control only if such events also would constitute a “change in
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the
ownership” of the Company, a “change in the effective control” of the Company, or a “change in the
ownership of a substantial portion” of the Company’s assets, all as defined under Treasury
Regulation 1.409A-3(i)(5) and other applicable guidance.
8. Intent to Comply with Code section 409A. The Termination Payments provided for under the
Employment Agreement and all other terms of the Employment Agreement, as amended by this Amendment,
are intended to comply with Code Section 409A and applicable guidance. The Employment Agreement as
amended by this Amendment will be construed and administered accordingly. If at any time the
Company determines that the Employment Agreement must be further amended to comply with Code
Section 409A, Employees consents to such amendment for the limited purpose, and only to the extent
required, to comply with Code Section 409A.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the December 31,
2008.
| U.S. BANCORP | ||||||
Date: December 31, 2008
|
By: | /s/ Xxxxxx Xxxxxxx | ||||
| Its: | Executive Vice President, Human Resources |
|||||
| EMPLOYEE | ||||||
| Date: December 31, 2008 | /s/ Xxxxxx X. Xxxxxx | |||||
| Xxxxxx X. Xxxxxx | ||||||
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