Exhibit 10(iii)
MANAGEMENT CONTINUITY AGREEMENT
This Agreement ("Agreement"), dated as of ___________, ______, is
between F&M National Corporation, a Virginia corporation (the "Company"), and
_________________ (the "Executive") and provides as follows.
1. Purpose
The Company recognizes that the possibility of a Change in
Control exists, and the uncertainty and questions that it may raise among
management may result in the departure or distraction of management personnel to
the detriment of the Company and its shareholders. Accordingly, the purpose of
this Agreement is to encourage the Executive to continue employment after a
Change in Control by providing reasonable employment security to the Executive
and to recognize the prior service of the Executive in the event of a
termination of employment under certain circumstances after a Change in Control.
2. Term of the Agreement
This Agreement is effective September 30, 1999 and will expire
on December 31, 2002; provided that on December 31, 2000 and on each December
31st thereafter (each such December 31st is referred to as the "Renewal Date"),
this Agreement will be automatically extended for an additional calendar year so
as to terminate three years from such Renewal Date. This Agreement will not,
however, be extended if the Company gives written notice of such non-renewal to
the Executive no later than September 30 before the Renewal Date (the original
and any extended term of this Agreement is referred to as the "Change in Control
Period").
3. Employment after a Change in Control
If a Change in Control of the Company (as defined in Section
13) occurs during the Change in Control Period and the Executive is employed by
the Company on the date the Change in Control occurs (the "Change in Control
Date"), the Company will continue to employ the Executive in accordance with the
terms and conditions of this Agreement for the period beginning on the Change in
Control Date and ending on the third anniversary of such date (the "Employment
Period"). If a Change in Control occurs on account of a series of transactions,
the Change in Control Date is the date of the last of such transactions.
4. Terms of Employment
(a) Position and Duties. During the Employment Period, (i) the
Executive's position, authority, duties and responsibilities will be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Change in Control Date and (ii) the Executive's services will be
performed at the location where the Executive was employed immediately preceding
the Change in Control Date or any office that is the headquarters of the Company
and is less than 35 miles from such location.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive will
receive an annual base salary (the "Annual Base Salary") at least equal to the
base salary paid or payable to the Executive by the Company and its affiliated
companies for the twelve-month period immediately preceding the Change of
Control Date. During the Employment Period, the Annual Base Salary will be
reviewed at least annually and will be increased at any time and from time to
time as will be substantially consistent with increases in base salary generally
awarded in the ordinary course of business to other peer executives of the
Company and its affiliated companies. Any increase in the Annual Base Salary
will not serve to limit or reduce any other obligation to the Executive under
this Agreement. The Annual Base Salary will not be reduced after any such
increase, and the term Annual Base Salary as used in this Agreement will refer
to the Annual Base Salary as so increased. The term "affiliated companies"
includes any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to the Annual Base Salary, the
Executive will be awarded for each year ending during the Employment Period an
annual bonus (the "Annual Bonus") in cash at least equal to the highest annual
bonus paid or payable, including by reason of any deferral, for the two years
immediately preceding the year in which the Change in Control Date occurs. Each
such Annual Bonus will be paid no later than the end of the third month of the
year next following the year for which the Annual Bonus is awarded.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive will be entitled to participate in all incentive
(including stock incentive), savings and retirement, insurance plans, policies
and programs applicable generally to other peer executives of the Company and
its affiliated companies, but in no event will such plans, policies and programs
provide the Executive with incentive opportunities, savings opportunities and
retirement benefit opportunities, in each case, less favorable, in the
aggregate, than those provided by the Company and its affiliated companies for
the Executive under such plans, policies and programs as in effect at any time
during the six months immediately preceding the Change in Control Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, will be eligible
for participation in and will receive all benefits under welfare benefit plans,
policies and programs provided by the Company and its affiliated companies to
the extent applicable generally to other peer executives of the Company and its
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affiliated companies, but in no event will such plans, policies and programs
provide the Executive with benefits that are less favorable, in the aggregate,
than the most favorable of such plans, policies and programs in effect at any
time during the six months immediately preceding the Change in Control Date.
(v) Fringe Benefits. During the Employment Period, the Executive will
be entitled to fringe benefits in accordance with the most favorable plans,
policies and programs of the Company and its affiliated companies in effect for
the Executive at any time during the six months immediately preceding the Change
in Control Date or, if more favorable to the Executive, as in effect generally
from time to time after the Change in Control Date with respect to other peer
executives of the Company and its affiliated companies.
(vi) Vacation. During the Employment Period, the Executive will be
entitled to paid vacation in accordance with the most favorable plans, policies
and programs of the Company and its affiliated companies in effect for the
Executive at any time during the six months immediately preceding the Change in
Control Date or, if more favorable to the Executive, as in effect generally from
time to time after the Change in Control Date with respect to other peer
executives of the Company and its affiliated companies.
5. Termination of Employment Following Change in Control
(a) Death or Disability. The Executive's employment will
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may terminate the Executive's
employment. For purposes of this Agreement, "Disability" means the Executive's
inability to perform his duties with the Company on a full time basis for 180
consecutive days or a total of at least 240 days in any twelve month period as a
result of the Executive's incapacity due to physical or mental illness (as
determined by an independent physician selected by the Board).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" means (i) gross incompetence, gross negligence, willful
misconduct in office or breach of a material fiduciary duty owed to the Company
or any affiliated company; (ii) conviction of a felony or a crime of moral
turpitude (or a plea of nolo contendere thereto) or commission of an act of
embezzlement or fraud against the Company or any affiliated company; (iii) any
material breach by the Executive of a material term of this Agreement,
including, without limitation, material failure to perform a substantial portion
of his duties and responsibilities hereunder; or (iv) deliberate dishonesty of
the Executive with respect to the Company or any affiliated company.
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(c) Good Reason; Window Period. The Executive's employment may
be terminated (i) during the Employment Period by the Executive for Good Reason
or (ii) during the Window Period by the Executive without any reason. For
purposes of this Agreement, the "Window Period" means the 90-day period
beginning on the later of the one-year anniversary of the Change in Control Date
or the date of closing of the corporate transaction that is the subject of
shareholder approval in Section 13. For purposes of this Agreement, "Good
Reason" means:
(i) a material reduction in the Executive's duties or
authority;
(ii) a material adverse change in the Executive's overall
working environment;
(iii) a failure by the Company to comply with any of the
provisions of Section 4(b);
(iv) the Company's requiring the Executive to be based at
any office or location other than that described in Section 4(a)(ii);
(v) the failure by the Company to comply with and satisfy
Section 7(b);
(vi) the Executive is directed by the Board of Directors or
an officer of the Company or any affiliated company to engage in conduct that is
unethical, illegal or contrary to the Company's good business practices; or
(vii) the Company fails to honor any term or provision of
this Agreement;
Any good faith determination of Good Reason made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company or by the Executive for Good Reason or during
the Window Period shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the date specified in the Notice of Termination (which
shall not be less than 30 nor more than 60 days from the date such Notice of
Termination is given), and (iii) if the Executive's employment is terminated for
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Disability, 30 days after Notice of Termination is given, provided that the
Executive shall not have returned to the full-time performance of his duties
during such 30-day period.
6. Compensation Upon Termination
(a) Termination Without Cause or for Good Reason or During Window Period.
The Executive will be entitled to the following benefits if, during the
Employment Period, the Company terminates his employment without Cause or the
Executive terminates his employment with the Company or any affiliated company
for Good Reason or during the Window Period.
(i) Accrued Obligations. The Accrued Obligations are the sum of: (1)
the Executive's Annual Base Salary through the Date of Termination at the rate
in effect just prior to the time a Notice of Termination is given; (2) the
amount, if any, of any incentive or bonus compensation theretofore earned which
has not yet been paid; (3) the product of the Annual Bonus paid or payable,
including by reason of deferral, for the most recently completed year and a
fraction, the numerator of which is the number of days in the current year
through the Date of Termination and the denominator of which is 365; and (4) any
benefits or awards (including both the cash and stock components) which pursuant
to the terms of any plans, policies or programs have been earned or become
payable, but which have not yet been paid to the Executive (but not including
amounts that previously had been deferred at the Executive's request, which
amounts will be paid in accordance with the Executive's existing directions).
The Accrued Obligations will be paid to the Executive in a lump sum cash payment
within ten days after the Date of Termination;
(ii) Salary Continuance Benefit. The Salary Continuance Benefit is an
amount equal to 2.99 times the Executive's Final Compensation. For purposes of
this Agreement, "Final Compensation" means the Annual Base Salary in effect at
the Date of Termination, plus the highest Annual Bonus paid or payable for the
two most recently completed years and any amount contributed by the Executive
during the most recently completed year pursuant to a salary reduction agreement
or any other program that provides for pre-tax salary reductions or compensation
deferrals. The Salary Continuance Benefit will be paid to the Executive in a
lump sum cash payment not later than the 45th day following the Date of
Termination;
(iii) Welfare Continuance Benefit. For 36 months following the Date of
Termination, the Executive and his dependents will continue to be covered under
all health and dental plans, disability plans, life insurance plans and all
other welfare benefit plans (as defined in Section 3(1) of ERISA) ("Welfare
Plans") in which the Executive or his dependents were participating immediately
prior to the Date of Termination (the "Welfare Continuance Benefit"). The
Company will pay all or a portion of the cost of the Welfare Continuance Benefit
for the Executive and his dependents under the Welfare Plans on the same basis
as applicable, from time to time, to active employees covered under the Welfare
Plans and the Executive will pay any additional costs. If participation in any
one or more of the Welfare Plans included in the Welfare Continuance Benefit is
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not possible under the terms of the Welfare Plan or any provision of law would
create an adverse tax effect for the Executive or the Company due to such
participation, the Company will provide substantially identical benefits
directly or through an insurance arrangement. The Welfare Continuance Benefit as
to any Welfare Plan will cease if and when the Executive has obtained coverage
under one or more welfare benefit plans of a subsequent employer that provides
for equal or greater benefits to the Executive and his dependents with respect
to the specific type of benefit. The Executive or his dependents will become
eligible for COBRA continuation coverage as of the date the Welfare Continuance
Benefit ceases for all health and dental benefits.
(b) Death. If the Executive dies during the Employment Period,
this Agreement will terminate without any further obligation on the part of the
Company under this Agreement, other than for (i) payment of the Accrued
Obligations and three months of the Executive's Base Salary (which shall be paid
to the Executive's beneficiary designated in writing or his estate, as
applicable, in a lump sum cash payment within 30 days of the date of death);
(ii) the timely payment or provision of the Welfare Continuance Benefit to the
Executive's spouse and other dependents for 36 months following the date of
death; and (iii) the timely payment of all death and retirement benefits
pursuant to the terms of any plan, policy or arrangement of the Company and its
affiliated companies.
(c) Disability. If the Executive's employment is terminated
because of the Executive's Disability during the Employment Period, this
Agreement will terminate without any further obligation on the part of the
Company under this Agreement, other than for (i) payment of the Accrued
Obligations and three months of the Executive's Base Salary (which shall be paid
to the Executive in a lump sum cash payment within 30 days of the Date of
Termination); (ii) the timely payment or provision of the Welfare Continuance
Benefit for 36 months following the Date of Termination; and (iii) the timely
payment of all disability and retirement benefits pursuant to the terms of any
plan, policy or arrangement of the Company and its affiliated companies.
(d) Cause; Other than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
will terminate without further obligation to the Executive other than the
payment to the Executive of the Annual Base Salary through the Date of
Termination, plus the amount of any compensation previously deferred by the
Executive. If the Executive terminates employment during the Employment Period,
excluding a termination either for Good Reason or during the Window Period, this
Agreement will terminate without further obligation to the Executive other than
for the Accrued Obligations (which will be paid in a lump sum in cash within 30
days of the Date of Termination) and any other benefits to which the Executive
may be entitled pursuant to the terms of any plan, program or arrangement of the
Company and its affiliated companies.
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(e) Gross-Up Payment. In the event any payment or distribution
by the Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 6(e)) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") or any
interest or penalties are incurred by the Executive with respect to such excise
tax (collectively, the "Excise Tax"), then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any income taxes and
interest or penalties imposed with respect to such taxes) and the Excise Tax
imposed on the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments. All determinations
required to be made under this Section 6(e), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by the independent accounting firm of the Company immediately prior to the
Executive's termination of employment (the "Accounting Firm"). All fees and
expenses of the Accounting Firm will be borne solely by the Company, and any
determination by the Accounting Firm will be binding upon the Company and the
Executive. Any Gross-Up Payment, as determined pursuant to this Section 6(e),
will be paid by the Company to the Executive within ten days of the receipt of
the Accounting Firm's determination.
(i) If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall so indicate to the Executive in writing.
(ii) In the event there is an under-payment of the Gross-Up
Payment due to the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
will determine the amount of any such under-payment that has occurred and such
amount will be promptly paid by the Company to or for the benefit of the
Executive.
7. Binding Agreement; Successors
(a) This Agreement will be binding upon and inure to the
benefit of the Executive (and his personal representative), the Company and any
successor organization or organizations which shall succeed to substantially all
of the business and property of the Company, whether by means of merger,
consolidation, acquisition of all or substantially of all of the assets of the
Company or otherwise, including by operation of law.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
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expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
(c) For purposes of this Agreement, the term "Company"
includes any subsidiaries of the Company and any corporation or other entity
which is the surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the Company ceases to
exist; provided, however, that for purposes of determining whether a Change in
Control has occurred herein, the term "Company" refers to F&M National
Corporation or its successors.
(d) This Agreement supersedes and replaces the Executive
Severance Agreement dated ________________, or any similar agreements between
the Executive and the Company.
8. Fees and Expenses; Mitigation
(a) The Company will pay or reimburse the Executive, on a
current basis, for all costs and expenses, including without limitation court
costs and reasonable attorneys' fees, incurred by the Executive (i) in
contesting or disputing any termination of the Executive's employment or (ii) in
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case regardless of whether or not the Executive's claim is upheld by a
court of competent jurisdiction; provided, however, the Executive will be
required to repay any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the determination that the
position taken by the Executive was frivolous or advanced by him or her in bad
faith.
(b) The Executive shall not be required to mitigate the amount
of any payment the Company becomes obligated to make to the Executive in
connection with this Agreement, by seeking other employment or otherwise. Except
as specifically provided above with respect to the Wefare Continuance Benefit,
the amount of any payment provided for in Section 6 shall not be reduced, offset
or subject to recovery by the Company by reason of any compensation earned by
the Executive as the result of employment by another employer after the Date of
Termination, or otherwise.
9. No Employment Contract
Nothing in this Agreement will be construed as creating an
employment contract between the Executive and the Company prior to Change in
Control.
10. Outplacement Services
If the Executive is entitled to the severance benefits under
Section 6(a), the Executive will be entitled to receive complete outplacement
services, including job search services, paid by the Company up to a total of
$25,000. The services will be provided by a recognized outplacement organization
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selected by the Executive with the approval of the Company (which approval will
not be unreasonably withheld). The services will be provided for up to two years
after the Date of Termination.
11. Continuance of Welfare Benefits Upon Death
If the Executive dies while receiving a Welfare Continuation
Benefit, the Executive's spouse and other dependents will continue to be covered
under all applicable Welfare Plans during the remainder of the 36-month coverage
period. The Executive's spouse and other dependents will become eligible for
COBRA continuation coverage for health and dental benefits at the end of such
36-month period.
12. Notice
Any notices and other communications provided for by this
Agreement will be sufficient if in writing and delivered in person or sent by
registered or certified mail, postage prepaid (in which case notice will be
deemed to have been given on the third day after mailing), or by overnight
delivery by a reliable overnight courier service (in which case notice will be
deemed to have been given on the day after delivery to such courier service).
Notices to the Company shall be directed to the Secretary of the Company, with a
copy directed to the Chairman of the Board of the Company. Notices to the
Executive shall be directed to his last known address.
13. Definition of a Change in Control
For purposes of this Agreement, a "Change in Control" means:
(a) The acquisition by any Person of beneficial ownership of
20% or more of the then outstanding shares of common stock of the Company;
(b) Individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease to constitute a majority of the Board,
provided that any director whose nomination was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board will be
considered a member of the Incumbent Board, but excluding any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company (as
such terms are used in Rule 14a-11 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act"));
(c) Approval by the shareholders of the Company of a
reorganization, merger, share exchange or consolidation (a "Reorganization"),
provided that shareholder approval of a Reorganization will not constitute a
Change in Control if, upon consummation of the Reorganization, each of the
following conditions is satisfied:
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(i) more than 60% of the then outstanding shares of common
stock of the corporation resulting from the Reorganization is beneficially owned
by all or substantially all of the former shareholders of the Company in
substantially the same proportions as their ownership existed in the Company
immediately prior to the Reorganization;
(ii) no Person beneficially owns 20% or more of either (1)
the then outstanding shares of common stock of the corporation resulting from
the transaction or (2) the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors; and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from the Reorganization were members of
the Incumbent Board at the time of the execution of the initial agreement
providing for the Reorganization.
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, or of the sale or other disposition
of all or substantially all of the assets of the Company.
(e) For purposes of this Agreement, "Person" means any
individual, entity or group (within the meaning of Section 13(d)(3) of the
Exchange Act, other than any employee benefit plan (or related trust) sponsored
or maintained by the Company or any affiliated company, and "beneficial
ownership" has the meaning given the term in Rule 13d-3 under the Exchange Act.
14. Confidentiality
The Executive will hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies and their respective
businesses, which was obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and which will not
be or become public knowledge. After termination of the Executive's employment
with the Company, the Executive will not, without the prior written consent of
the Company or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 13 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
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15. Miscellaneous
No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, modification, waiver or discharge is
agreed to in a writing signed by the Executive and the Chairman of the Board or
President of the Company. 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.
16. Governing Law
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of Virginia.
17. 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.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by F&M National Corporation by its duly authorized officer, and by
the Executive, as of the date first above written.
F&M NATIONAL CORPORATION
By:______________________
EXECUTIVE:
_________________________
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