Employment Agreement

Change in Control

 

 

 

 

EXHIBIT (10.1) - Employment Agreement dated May 29, 1998    

               between the Corporation and Ralph W. Babb

 

              EMPLOYMENT AGREEMENT (EXEC. OFF.)

             ---------------------------------

                            

    AGREEMENT, dated as of the 29th day of May, 1998, by

and between COMERICA INCORPORATED, a Delaware corporation

(the "Company") and RALPH W. BABB JR. (the "Executive") who

resides at  2360 Heronwood Drive, Bloomfield Hills, Michigan

48302.

 

    The Board of Directors of the Company (the "Board"),

has determined that it is in the best interests of the Com-

pany and its shareholders to assure that the Company will

have the continued dedication of the Executive,

notwithstanding the possibility, threat or occurrence of a

Change of Control (as defined below) of the Company.  The

Board believes it is imperative to diminish the inevitable

distraction of the Executive by virtue of the personal

uncertainties and risks created by a pending or threatened

Change of Control and to encourage the Executive's full

attention and dedication to the Company currently and in the

event of any threatened or pending Change of Control, and to

provide the Executive with compensation and benefits

arrangements upon a Change of Control which ensure that the

compensation and benefits expectations of the Executive will

be satisfied and which are competitive with those of other

corporations.  Therefore, in order to accomplish these

objectives, the Board has caused the Company to enter into

this Agreement.

 

    NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

         1.  Certain Definitions.  (a)  The "Effective Date"

shall mean the first date during the  Agreement Period (as

defined in Section 1(b)) on which a Change of Control(as

defined in Section 2) occurs. Anything in this Agreement to

the contrary notwithstanding, if a Change of Control occurs

and if the Executive's employment with the Company is termi-

nated prior to the date on which the Change of Control oc-

curs, and if it is reasonably demonstrated by the Executive

that such termination of employment (i) was at the request

of a third party who has taken steps reasonably calculated

to effect a Change of Control or (ii) otherwise arose in

connection with or anticipation of a Change of Control, then

for all purposes of this Agreement the "Effective Date"

shall mean the date immediately prior to the date of such

termination of employment.

 

         (b)  The "Agreement Period" shall mean the period

commencing on the date hereof and ending on the third an-

niversary of the date hereof; provided, however, that

 

 

commencing on the date one year after the date hereof, and

on each annual anniversary of such date (such date and each

annual anniversary thereof shall be hereinafter referred to

as the "Renewal Date"), unless previously terminated, the

Agreement Period shall be automatically extended so as to

terminate three years from such Renewal Date, unless at

least 60 days prior to the Renewal Date the Company shall

give notice to the Executive that the  Agreement Period

shall not be so extended.

 

         2.  Change of Control.   For the purpose of this

Agreement, a "Change of Control" shall mean:

 

         (a) The acquisition by any individual, entity or group

(within the meaning of Section 13(d)(3) or 14(d)(2) of the

Securities Exchange Act of 1934, as amended (the "Exchange

Act")) (a "Person") of beneficial ownership (within the

meaning of Rule 13d-3 promulgated under the Exchange Act) of

20% or more of either (i) the then outstanding shares of

common stock of the Company (the "Outstanding Company Common

Stock") or (ii) the combined voting power of the then out-

standing voting securities of the Company entitled to vote

generally in the election of directors (the "Outstanding

Company Voting Securities"); provided, however, that for

purposes of this subsection (a), the following acquisitions

shall not constitute a Change of Control:  (i) any acquisi-

tion directly from the Company, (ii) any acquisition by the

Company, (iii) any acquisition by any employee benefit plan

(or related trust) sponsored or maintained by the Company or

any corporation controlled by the Company or (iv) any acqui-

sition by any corporation pursuant to a transaction which

complies with clauses (i), (ii) and (iii) of subsection (c)

of this Section 2; or

 

         (b) Individuals who, as of the date hereof, constitute

the Board (the "Incumbent Board") cease for any reason to

constitute at least a majority of the Board; provided,

however, that any individual becoming a director subsequent

to the date hereof whose election, or nomination for

election by the Company's shareholders, was approved by a

vote of at least a majority of the directors then comprising

the Incumbent Board shall be considered as though such

individual were a member of the Incumbent Board, but exclud-

ing, for this purpose, any such individual whose initial

assumption of office occurs as a result of an actual or

threatened election contest with respect to the election or

removal of directors or other actual or threatened solicita-

tion of proxies or consents by or on behalf of a Person

other than the Board; or

 

         (c) Consummation of a reorganization, merger or

consolidation or sale or other disposition of all or

substantially all of the assets of the Company (a "Business

 

 

 Combination"), in each case, unless, following such

Business Combination, (i) all or substantially all of the

individuals and entities who were the beneficial owners,

respectively, of the Outstanding Company Common Stock and

Outstanding Company Voting Securities immediately prior to

such Business Combination beneficially own, directly or

indirectly, more than 50% of, respectively, the then out-

standing shares of common stock and the combined voting

power of the then outstanding voting securities entitled to

vote generally in the election of directors, as the case may

be, of the corporation resulting from such Business Combina-

tion (including, without limitation, a corporation which as

a result of such transaction owns the Company or all or sub-

stantially all of the Company's assets either directly or

through one or more subsidiaries) in substantially the same

proportions as their ownership, immediately prior to such

Business Combination of the Outstanding Company Common Stock

and Outstanding Company Voting Securities, as the case may

be, (ii) no Person (excluding any corporation resulting from

such Business Combination or any employee benefit plan (or

related trust) of the Company or such corporation resulting

from such Business Combination) beneficially owns, directly

or indirectly, 20% or more of, respectively, the then out-

standing shares of common stock of the corporation resulting

from such Business Combination or the combined voting power

of the then outstanding voting securities of such

corporation except to the extent that such ownership existed

prior to the Business Combination, and (iii)  at least a

majority of the members of the board of directors of the

corporation resulting from such Business Combination were

members of the Incumbent Board at the time of the execution

of the initial agreement, or of the action of the Board,

providing for such Business Combination; or

 

         (d) Approval by the shareholders of the Company of a

complete liquidation or dissolution of the Company.

 

         3.  Employment Period.  The Company hereby agrees to

continue the Executive in its employ, and the Executive

hereby agrees to remain in the employ of the Company subject

to the terms and conditions of this Agreement, for the

period commencing on the Effective Date and ending on the

last day of the thirtieth consecutive month following such

date (the "Employment Period").

 

         4.  Terms of Employment.  (a)  Position and Duties.

(i)  During the Employment Period, (A) the Executive's posi-

tion (including status, offices, titles and reporting re-

quirements), authority, duties and responsibilities shall be

at least commensurate in all material respects with the most

significant of those held, exercised and assigned at any

time during the 120-day period immediately preceding the Ef-

fective Date and (B) the Executive's services shall be

 

 

 

performed at the location where the Executive was employed

immediately preceding the Effective Date or any office or

location less than  60 miles from such location.

 

             (ii) During the Employment Period, and excluding

any periods of vacation and sick leave to which the Ex-

ecutive is entitled, the Executive agrees to devote reason-

able attention and time during normal business hours to the

business and affairs of the Company and, to the extent

necessary to discharge the responsibilities assigned to the

Executive hereunder, to use the Executive's reasonable best

efforts to perform faithfully and efficiently such responsi-

bilities.  During the Employment Period it shall not be a

violation of this Agreement for the Executive to (A) serve

on corporate, civic or charitable boards or committees, (B)

deliver lectures, fulfill speaking engagements or teach at

educational institutions and (C) manage personal invest-

ments, so long as such activities do not significantly

interfere with the performance of the Executive's

responsibilities as an employee of the Company in accordance

with this Agreement.  It is expressly understood and agreed

that to the extent that any such activities have been

conducted by the Executive prior to the Effective Date, the

continued conduct of such activities (or the conduct of

activities similar in nature and scope thereto) subsequent

to the Effective Date shall not thereafter be deemed to

interfere with the performance of the Executive's

responsibilities to the Company.

 

         (b) Compensation.  (i)  Base Salary.  During the

Employment Period, the Executive shall receive an annual

base salary ("Annual Base Salary"), which shall be paid at a

monthly rate, at least equal to twelve times the highest

monthly base salary paid or payable, including any base sal-

ary which has been earned but deferred, to the Executive by

the Company and its affiliated companies in respect of the

twelve-month period immediately preceding the month in which

the Effective Date occurs.  During the Employment Period,

the Annual Base Salary shall be reviewed no more than 12

months after the last salary increase awarded to the

Executive prior to the Effective Date and thereafter at

least annually.  Any increase in Annual Base Salary shall

not serve to limit or reduce any other obligation to the

Executive under this Agreement.  Annual Base Salary shall

not be reduced after any such increase and the term Annual

Base Salary as utilized in this Agreement shall refer to An-

nual Base Salary as so increased.  As used in this

Agreement, the term "affiliated companies" shall include any

company controlled by, controlling or under common control

with the Company.

 

             (ii) Annual Bonus.  In addition to Annual Base

Salary, the Executive shall be awarded, for each fiscal year

 

 

 

ending during the Employment Period, an annual bonus (the

"Annual Bonus") in cash at least equal to the Executive's

highest bonus under the Company's  Management Incentive

Plan, Long-Term Incentive Plan and/or business unit

incentive plan (or any predecessor or successor plan to any

thereof) as applicable, for the last three full fiscal years

prior to the Effective Date (annualized in the event that

the Executive was not employed by the Company for the whole

of such fiscal year) (the "Recent Annual Bonus").  Each such

Annual Bonus shall be paid no later than the end of the

third month of the fiscal year next following the fiscal

year for which the Annual Bonus is awarded, unless the

Executive shall elect to defer the receipt of such Annual

Bonus.

 

             (iii) Incentive, Savings and Retirement Plans.

During the Employment Period, the Executive shall be

entitled to participate in all incentive, savings and

retirement plans, practices, policies and programs

applicable generally to other peer executives of the Company

and its affiliated companies, but in no event shall such

plans, practices, policies and programs provide the

Executive with incentive opportunities (measured with

respect to both regular and special incentive opportunities,

to the extent, if any, that such distinction is applicable),

savings opportunities and retirement benefit opportunities,

in each case, less favorable, in the aggregate, than the

most favorable of those provided by the Company and its af-

filiated companies for the Executive under such plans,

practices, policies and programs as in effect at any time

during the 120-day period immediately preceding the

Effective Date or if more favorable to  the Executive, those

provided generally at any time after the Effective Date to

other peer executives of the Company and its affiliated

companies.

 

             (iv) Welfare Benefit Plans.  During the Employment

Period, the Executive and/or the Executive's family, as the

case may be, shall be eligible for participation in and

shall receive all benefits under welfare benefit plans,

practices, policies and programs provided by the Company and

its affiliated companies (including, without limitation,

medical, prescription, dental, disability, employee life,

group life, accidental death and travel accident insurance

plans and programs) to the extent applicable generally to

other peer executives of the Company and its affiliated com-

panies, but in no event shall such plans, practices,

policies and programs provide the Executive with benefits

which are less favorable, in the aggregate, than the most

favorable of such plans, practices, policies and programs in

effect for the Executive at any time during the 120-day

period immediately preceding the Effective Date or, if more

favorable to the Executive, those provided generally at any

 

 

time after the Effective Date to other peer executives of

the Company and its affiliated companies.

 

             (v)  Expenses.  During the Employment Period, the

Executive shall be entitled to receive prompt reimbursement

for all reasonable expenses incurred by the Executive in

accordance with the most favorable policies, practices and

procedures of the Company and its affiliated companies in

effect for the Executive at any time during the 120-day pe-

riod immediately preceding the Effective Date or, if more

favorable to the Executive, as in effect generally at any

time thereafter with respect to other peer executives of the

Company and its affiliated companies.

 

             (vi) Fringe Benefits.  During the Employment

Period, the Executive shall be entitled to fringe benefits,

including, without limitation, tax and financial planning

services, payment of club dues, and, if applicable, use of

an automobile and payment of related expenses, in accordance

with the most favorable plans, practices, programs and poli-

cies of the Company and its affiliated companies in effect

for the Executive at any time during the 120-day period im-

mediately preceding the Effective Date or, if more favorable

to the Executive, as in effect generally at any time

thereafter with respect to other peer executives of the

Company and its affiliated companies.

 

             (vii) Office and Support Staff.  During the

Employment Period, the Executive shall be entitled to an of-

fice or offices of a size and with furnishings and other ap-

pointments, and to exclusive personal secretarial and other

assistance, at least equal to the most favorable of the

foregoing provided to the Executive by the Company and its

affiliated companies at any time during the 120-day period

immediately preceding the Effective Date or, if more favor-

able to the Executive, as provided generally at any time

thereafter with respect to other peer executives of the

Company and its affiliated companies.

 

             (viii)  Vacation.  During the Employment Period,

the Executive shall be entitled to paid vacation in ac-

cordance with the most favorable plans, policies, programs

and practices of the Company and its affiliated companies as

in effect for the Executive at any time during the 120-day

period immediately preceding the Effective Date or, if more

favorable to the Executive, as in effect generally at any

time thereafter with respect to other peer executives of the

Company and its affiliated companies.

 

         5.  Termination of Employment.  (a)  Death or Dis-

ability.  The Executive's employment shall terminate auto-

matically 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 (pursuant to the definition of Disability

set forth below), it may give to the Executive written

notice in accordance with Section 12(b) of this Agreement of

its intention to terminate the Executive's employment.  In

such event, the Executive's employment with the Company

shall terminate effective on the 30th day after receipt of

such notice by the Executive (the "Disability Effective

Date"), provided that, within the 30 days after such

receipt, the Executive shall not have returned to full-time

performance of the Executive's duties.  For purposes of this

Agreement, "Disability" shall mean the absence of the

Executive from the Executive's duties with the Company on a

full-time basis for 180 consecutive business days as a

result of incapacity due to mental or physical illness which

is determined to be total and permanent by a physician

selected by the Company or its insurers and acceptable to

the Executive or the Executive's legal representative.

 

         (b) Cause.  The Company may terminate the Executive's

employment during the Employment Period for Cause.  For

purposes of this Agreement, "Cause" shall mean:

 

             (i)  the willful and continued failure of the Ex-

         ecutive to perform substantially the Executive's duties

         with the Company or one of its affiliated companies

         (other than any such failure resulting from incapacity

         due to physical or mental illness), after a written

         demand for substantial performance is delivered to the

         Executive by the Board or  the Chief Executive Officer

         of the Company which specifically identifies the manner

         in which the Board or Chief Executive Officer believes

         that the Executive has not substantially performed the

         Executive's duties, or

 

             (ii) the willful engaging by the Executive in il-

         legal conduct or gross misconduct which is materially

         and demonstrably injurious to the Company.

 

For purposes of this provision, no act or failure to act, on

the part of the Executive, shall be considered "willful" un-

less it is done, or omitted to be done, by the Executive in

bad faith or without reasonable belief that the Executive's

action or omission was in the best interests of the Company.

Any act, or failure to act, based upon authority given pur-

suant to a resolution duly adopted by the Board or upon the

instructions of the Chief Executive Officer or a senior of-

ficer of the Company or based upon the advice of counsel for

the Company shall be conclusively presumed to be done, or

omitted to be done, by the Executive in good faith and in

the best interests of the Company.  The cessation of

employment of the Executive shall not be deemed to be for

Cause unless and until there shall have been delivered to

 

 

 

the Executive a copy of a resolution duly adopted by the

affirmative vote of not less than three-quarters of the

entire membership of the Board at a meeting of the Board

called and held for such purpose (after reasonable notice is

provided to the Executive and the Executive is given an

opportunity, together with counsel, to be heard before the

Board), finding that, in the good faith opinion of the

Board, the Executive is guilty of the conduct described in

clauses (i) or (ii) above, and specifying the particulars

thereof in detail.

 

         (c) Good Reason.  The Executive's employment may be

terminated by the Executive for Good Reason.  For purposes

of this Agreement, "Good Reason" shall mean:

 

        (i)   the assignment to the Executive of any duties

    inconsistent in any respect with the Executive's

    position (including status, offices, titles and

    reporting requirements), authority, duties or

    responsibilities as contemplated by Section 4(a) of

    this Agreement, or any other action by the Company

    which results in a diminution in such position,

    authority, duties or responsibilities, excluding for

    this purpose an isolated, insubstantial and inadvertent

    action not taken in bad faith and which is remedied by

    the Company promptly after receipt of notice thereof

    given by the Executive;

 

        (ii)  any failure by the Company to comply with any

    of the provisions of Section 4(b) of this Agreement,

    other than an isolated, insubstantial and inadvertent

    failure not occurring in bad faith and which is

    remedied by the Company promptly after receipt of

    notice thereof given by the Executive;

 

        (iii) the Company's requiring the Executive to be

    based at any office or location other than as provided

    in Section 4(a)(i)(B) hereof or the Company's requiring

    the Executive to travel on Company business to a

    substantially greater extent than required immediately

    prior to the Effective Date;

 

        (iv)  any purported termination by the Company of

    the Executive's employment otherwise than as expressly

    permitted by this Agreement; or

 

        (v)   any failure by the Company to comply with and

    satisfy Section 11(c) of this Agreement.

 

For purposes of this Section 5(c), any good faith determina-

tion of "Good Reason" made by the Executive shall be conclu-

sive.  Anything in this Agreement to the contrary notwith-

 

 

 

 

standing, a termination by the Executive for any reason dur-

ing the 30-day period immediately following the first an-

niversary of the Effective Date shall be deemed to be a ter-

mination for Good Reason for all purposes of this Agreement.

 

    (d)  Notice of Termination.  Any termination by the

Company for Cause, or by the Executive for Good Reason,

shall be communicated by Notice of Termination to the other

party hereto given in accordance with Section 12(b) of this

Agreement.  For purposes of this Agreement, a "Notice of

Termination" means a written notice which (i) indicates the

specific termination provision in this Agreement relied

upon, (ii) to the extent applicable, sets forth in

reasonable detail the facts and circumstances claimed to

provide a basis for termination of the Executive's

employment under the provision so indicated and (iii) if the

Date of Termination (as defined below) is other than the

date of receipt of such notice, specifies the termination

date (which date shall be not more than thirty days after

the giving of such notice).  The failure by the Executive or

the Company to set forth in the Notice of Termination any

fact or circumstance which contributes to a showing of Good

Reason or Cause shall not waive any right of the Executive

or the Company, respectively, hereunder or preclude the

Executive or the Company, respectively, from asserting such

fact or circumstance in enforcing the Executive's or the

Company's rights hereunder.

 

    (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 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 of Termination shall

be the date on which the Company notifies the Executive of

such termination and (iii) if the Executive's employment is

terminated by reason of death or Disability, the Date of

Termination shall be the date of death of the Executive or

the Disability Effective Date, as the case may be.

 

    6.  Obligations of the Company upon Termination.  (a)

Good Reason; Other Than for Cause, Death or Disability.  If,

during the Employment Period, the Company shall terminate

the Executive's employment other than for Cause or

Disability or the Executive shall terminate employment for

Good Reason:

 

        (i)   the Company shall pay to the Executive in a

    lump sum in cash within 30 days after the Date of

    Termination the aggregate of the following amounts:

 

 

 

 

 

              A.  the sum of (1) the Executive's Annual

        Base Salary through the Date of Termination to the

        extent not theretofore paid, (2) the product of (x)

        the higher of (I) the Recent Annual Bonus and (II)

        the Annual Bonus paid or payable, including any

        bonus or portion thereof which has been earned but

        deferred (and annualized for any fiscal year

        consisting of less than twelve full months or

        during which the Executive was employed for less

        than twelve full months), for the most recently

        completed fiscal year during the Employment Period,

        if any (such higher amount being referred to as the

        "Highest Annual Bonus") and (y) a fraction, the

        numerator of which is the number of days in the

        current fiscal year through the Date of

        Termination, and the denominator of which is 365

        and (3) any compensation previously deferred by the

        Executive (together with any accrued interest or

        earnings thereon) and any accrued vacation pay, in

        each case to the extent not theretofore paid (the

        sum of the amounts described in clauses (1), (2),

        and (3) shall be hereinafter referred to as the

        "Accrued Obligations"); and

 

              B.  the amount equal to the product of (1)

        three and (2) the sum of (x) the Executive's Annual

        Base Salary and (y) the Highest Annual Bonus; and

 

              C.  an amount equal to the excess of (a) the

        actuarial equivalent of the benefit under the

        Company's qualified defined benefit retirement plan

        (the "Retirement Plan") (utilizing actuarial

        assumptions no less favorable to the Executive than

        those  in effect under the Company's Retirement

        Plan immediately prior to the Effective Date), and

        any excess or supplemental retirement plan in which

        the Executive participates (together, the "SERP")

        which the Executive would receive if the

        Executive's employment continued for three years

        after the Date of Termination assuming for this

        purpose that (x) all accrued benefits are fully

        vested, (y) the Executive is three years older and

        (z) the Executive is credited with three more years

        of service, and, assuming that the Executive's

        compensation in each of the three years is that

        required by Section 4(b)(i) and Section 4(b)(ii),

        over (b) the actuarial equivalent of the

        Executive's actual benefit (paid or payable), if

        any, under the Retirement Plan and the SERP as of

        the Date of Termination;

 

 

 

 

 

 

 

        (ii)  for three years after the Executive's Date of

    Termination, or such longer period as may be provided

    by the terms of the appropriate plan, program, practice

    or policy, the Company shall continue benefits to the

    Executive and/or the Executive's family at least equal

    to those which would have been provided to them in

    accordance with the plans, programs, practices and

    policies described in Section 4(b)(iv) of this

    Agreement if the Executive's employment had not been

    terminated or, if more favorable to the Executive, as

    in effect generally at any time thereafter with respect

    to other peer executives of the Company and its

    affiliated companies and their families, provided,

    however, that if the Executive becomes reemployed with

    another employer and is eligible to receive medical or

    other welfare benefits under another employer provided

    plan, the medical and other welfare benefits described

    herein shall be secondary to those provided under such

    other plan during such applicable period of

    eligibility.  For purposes of determining eligibility

    (but not the time of commencement of benefits) of the

    Executive for retiree benefits pursuant to such plans,

    practices, programs and policies, the Executive shall

    be considered to have remained employed until three

    years after the Date of Termination and to have retired

    on the last day of such period;

 

        (iii) the Company shall, at its sole expense as in-

    curred, provide the Executive with outplacement

    services the scope and provider of which shall be

    selected by the Executive in his sole discretion; and

   

        (iv)  to the extent not theretofore paid or pro-

    vided, the Company shall timely pay or provide to the

    Executive any other amounts or benefits required to be

    paid or provided or which the Executive is eligible to

    receive under any plan, program, policy or practice or

    contract or agreement of the Company and its affiliated

    companies (such other amounts and benefits shall be

    hereinafter referred to as the "Other Benefits").

 

    (b)  Death.  If the Executive's employment is termi-

nated by reason of the Executive's death during the Employ-

ment Period, this Agreement shall terminate without further

obligations to the Executive's legal representatives under

this Agreement, other than for payment of Accrued

Obligations and the timely payment or provision of Other

Benefits.  Accrued Obligations shall be paid to the

Executive's estate or beneficiary, as applicable, in a lump

sum in cash within 30 days of the Date of Termination.  With

respect to the provision of Other Benefits, the term Other

Benefits as utilized in this Section 6(b) shall include,

 

 

 

without limitation, and the Executive's estate and/or

beneficiaries shall be entitled to receive, benefits at

least equal to the most favorable benefits provided by the

Company and affiliated companies to the estates and

beneficiaries of peer executives of the Company and such af-

filiated companies under such plans, programs, practices and

policies relating to death benefits, if any, as in effect

with respect to other peer executives and their

beneficiaries at any time during the 120-day period

immediately preceding the Effective Date or, if more favor-

able to the Executive's estate and/or the Executive's

beneficiaries, as in effect on the date of the Executive's

death with respect to other peer executives of the Company

and its affiliated companies and their beneficiaries.

 

    (c)  Disability.  If the Executive's employment is

terminated by reason of the Executive's Disability during

the Employment Period, this Agreement shall terminate

without further obligations to the Executive, other than for

payment of Accrued Obligations and the timely payment or

provision of Other Benefits.  Accrued Obligations shall be

paid to the Executive in a lump sum in cash within 30 days

of the Date of Termination.  With respect to the provision

of Other Benefits, the term Other Benefits as utilized in

this Section 6(c) shall include, and the Executive shall be

entitled after the Disability Effective Date to receive,

disability and other benefits at least equal to the most

favorable of those generally provided by the Company and its

affiliated companies to disabled executives and/or their

families in accordance with such plans, programs, practices

and policies relating to disability, if any, as in effect

generally with respect to other peer executives and their

families at any time during the 120-day period immediately

preceding the Effective Date or, if more favorable to the

Executive and/or the Executive's family, as in effect at any

time thereafter generally with respect to other peer

executives of the Company and its affiliated companies and

their families.

 

    (d)  Cause, Etc.; Other than for Good Reason.  If the

Executive's employment shall be terminated for Cause during

the Employment Period, this Agreement shall terminate

without further obligations to the Executive other than the

obligation to pay to the Executive (x) his Annual Base

Salary through the Date of Termination, (y) the amount of

any compensation previously deferred by the Executive, and

(z) Other Benefits, in each case to the extent theretofore

unpaid.  If the Executive voluntarily terminates employment

during the Employment Period, excluding a termination for

Good Reason, this Agreement shall terminate without further

obligations to the Executive, other than for Accrued Obliga-

tions and the timely payment or provision of Other Benefits.

In such case, all Accrued Obligations shall be paid to the

 

 

 

Executive in a lump sum in cash within 30 days of the Date

of Termination.

 

    7.   Non-exclusivity of Rights.  Nothing in this

Agreement shall prevent or limit the Executive's continuing

or future participation in any plan, program, policy or

practice provided by the Company or any of its affiliated

companies and for which the Executive may qualify, nor,

subject to Section 12(f), shall anything herein limit or

otherwise affect such rights as the Executive may have under

any contract or agreement with the Company or any of its af-

filiated companies.  Amounts which are vested benefits or

which the Executive is otherwise entitled to receive under

any plan, policy, practice or program of or any contract or

agreement with the Company or any of its affiliated

companies at or subsequent to the Date of Termination shall

be payable in accordance with such plan, policy, practice or

program or contract or agreement except as explicitly

modified by this Agreement.

 

    8.   Full Settlement.  The Company's obligation to make

the payments provided for in this Agreement and otherwise to

perform its obligations hereunder shall not be affected by

any set-off, counterclaim, recoupment, defense or other

claim, right or action which the Company may have against

the Executive or others.  In no event shall the Executive be

obligated to seek other employment or take any other action

by way of mitigation of the amounts payable to the Executive

under any of the provisions of this Agreement and such

amounts shall not be reduced whether or not the Executive

obtains other employment.  The Company agrees to pay as

incurred, to the full extent permitted by law, all legal

fees and expenses which the Executive may reasonably incur

as a result of any contest (regardless of the outcome

thereof) by the Company, the Executive or others of the

validity or enforceability of, or liability under, any

provision of this Agreement or any guarantee of performance

thereof (including as a result of any contest by the Execu-

tive about the amount of any payment pursuant to this Agree-

ment), plus, in each case, interest on any delayed payment

at the applicable Federal  rate provided for in Section

7872(f)(2)(A) of the Internal Revenue Code of 1986, as

amended (the "Code").

 

    9.   Certain Additional Payments by the Company.

         ------------------------------------------

    (a)  Anything in this Agreement to the contrary not-

withstanding and except as set forth below, in the event it

shall be determined that 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 9) (a "Payment") would be subject to the excise tax

imposed by Section 4999 of the Code or any interest or

penalties are incurred by the Executive with respect to such

excise tax (such excise tax, together with any such interest

and penalties, are hereinafter collectively referred to as

the "Excise Tax"), then the Executive shall 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 interest or penalties imposed with respect to

such taxes), including, without limitation, any income taxes

(and any interest and penalties imposed with respect

thereto) and Excise Tax imposed upon the Gross-Up Payment,

the Executive retains an amount of the Gross-Up Payment

equal to the Excise Tax imposed upon the Payments.

Notwithstanding the foregoing provisions of this Section

9(a), if it shall be determined that the Executive is

entitled to a Gross-Up Payment, but that the Payments do not

exceed 110% of the greatest amount (the "Reduced Amount")

that could be paid to the Executive such that the receipt of

Payments would not give rise to any Excise Tax, then no

Gross-Up Payment shall be made to the Executive and the

Payments, in the aggregate, shall be reduced to the Reduced

Amount.

 

    (b)  Subject to the provisions of Section 9(c), all

determinations required to be made under this Section 9, in-

cluding whether and when a Gross-Up Payment is required and

the amount of such Gross-Up Payment and the assumptions to

be utilized in arriving at such determination, shall be made

by Ernst & Young LLP or such other certified public ac-

counting firm as may be designated by the Executive (the

"Accounting Firm") which shall provide detailed supporting

calculations both to the Company and the Executive within 15

business days of the receipt of notice from the Executive

that there has been a Payment, or such earlier time as is

requested by the Company.  In the event that the Accounting

Firm is serving as accountant or auditor for the individual,

entity or group effecting the Change of Control, the

Executive shall appoint another nationally recognized ac-

counting firm to make the determinations required hereunder

(which accounting firm shall then be referred to as the Ac-

counting Firm hereunder).   All fees and expenses of the Ac-

counting Firm shall be borne solely by the Company.  Any

Gross-Up Payment, as determined pursuant to this Section 9,

shall be paid by the Company to the Executive within five

days of the receipt of the Accounting Firm's determination.

Any determination by the Accounting Firm shall be binding

upon the Company and the Executive.  As a result of the

uncertainty in the application of Section 4999 of the Code

at the time of the initial determination by the Accounting

Firm hereunder, it is possible that Gross-Up Payments which

 

 

 

will not have been made by the Company should have been made

("Underpayment"), consistent with the calculations required

to be made hereunder.  In the event that the Company

exhausts its remedies pursuant to Section 9(c) and the

Executive thereafter is required to make a payment of any

Excise Tax, the Accounting Firm shall determine the amount

of the Underpayment that has occurred and any such

Underpayment shall be promptly paid by the Company to or for

the benefit of the Executive.

 

    (c)  The Executive shall notify the Company in writing

of any claim by the Internal Revenue Service that, if

successful, would require the payment by the Company of the

Gross-Up Payment.  Such notification shall be given as soon

as practicable but no later than ten business days after the

Executive is informed in writing of such claim and shall ap-

prise the Company of the nature of such claim and the date

on which such claim is requested to be paid.  The Executive

shall not pay such claim prior to the expiration of the 30-day

period following the date on which it gives such notice

to the Company (or such shorter period ending on the date

that any payment of taxes with respect to such claim is

due).  If the Company notifies the Executive in writing

prior to the expiration of such period that it desires to

contest such claim, the Executive shall:

 

         (i)   give the Company any information reasonably

    requested by the Company relating to such claim,

 

         (ii)  take such action in connection with

    contesting such claim as the Company shall reasonably

    request in writing from time to time, including,

    without limitation, accepting legal representation with

    respect to such claim by an attorney reasonably

    selected by the Company,

 

         (iii) cooperate with the Company in good faith in

    order effectively to contest such claim, and

 

         (iv)  permit the Company to participate in any

    proceedings relating to such claim;

 

provided, however, that the Company shall bear and pay di-

rectly all costs and expenses (including additional interest

and penalties) incurred in connection with such contest and

shall indemnify and hold the Executive harmless, on an

after-tax basis, for any Excise Tax or income tax (including

interest and penalties with respect thereto) imposed as a

result of such representation and payment of costs and

 

 

 

expenses.  Without limitation on the foregoing provisions of

this Section 9(c), the Company shall control all proceedings

taken in connection with such contest and, at its sole op-

tion, may pursue or forgo any and all administrative

appeals, proceedings, hearings and conferences with the

taxing authority in respect of such claim and may, at its

sole option, either direct the Executive to pay the tax

claimed and sue for a refund or contest the claim in any

permissible manner, and the Executive agrees to prosecute

such contest to a determination before any administrative

tribunal, in a court of initial jurisdiction and in one or

more appellate courts, as the Company shall determine;

provided, however, that if the Company directs the Executive

to pay such claim and sue for a refund, the Company shall

advance the amount of such payment to the Executive, on an

interest-free basis and shall indemnify and hold the Execu-

tive harmless, on an after-tax basis, from any Excise Tax or

income tax (including interest or penalties with respect

thereto) imposed with respect to such advance or with

respect to any imputed income with respect to such advance;

and further provided that any extension of the statute of

limitations relating to payment of taxes for the taxable

year of the Executive with respect to which such contested

amount is claimed to be due is limited solely to such

contested amount.  Furthermore, the Company's control of the

contest shall be limited to issues with respect to which a

Gross-Up Payment would be payable hereunder and the

Executive shall be entitled to settle or contest, as the

case may be, any other issue raised by the Internal Revenue

Service or any other taxing authority.

 

    (d)  If, after the receipt by the Executive of an

amount advanced by the Company pursuant to Section 9(c), the

Executive becomes entitled to receive any refund with

respect to such claim, the Executive shall (subject to the

Company's complying with the requirements of Section 9(c))

promptly pay to the Company the amount of such refund

(together with any interest paid or credited thereon after

taxes applicable thereto).  If, after the receipt by the

Executive of an amount advanced by the Company pursuant to

Section 9(c), a determination is made that the Executive

shall not be entitled to any refund with respect to such

claim and the Company does not notify the Executive in

writing of its intent to contest such denial of refund prior

to the expiration of 30 days after such determination, then

such advance shall be forgiven and shall not be required to

be repaid and the amount of such advance shall offset, to

the extent thereof, the amount of Gross-Up Payment required

to be paid.

 

 

    10.  Confidential Information.  The Executive shall

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 shall have been ob-

tained by the Executive during the Executive's employment by

the Company or any of its affiliated companies and which

shall not be or become public knowledge (other than by acts

by the Executive or representatives of the Executive in vio-

lation of this Agreement).  After termination of the

Executive's employment with the Company, the Executive shall

not, without the prior written consent of the Company or as

may otherwise be required by law or legal process, communi-

cate 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 10 constitute a basis for deferring or

withholding any amounts otherwise payable to the Executive

under this Agreement.

 

    11.  Successors.  (a)  This Agreement is personal to

the Executive and without the prior written consent of the

Company shall not be assignable by the Executive otherwise

than by will or the laws of descent and distribution.  This

Agreement shall inure to the benefit of and be enforceable

by the Executive's legal representatives.

 

    (b)  This Agreement shall inure to the benefit of and

be binding upon the Company and its successors and assigns.

 

    (c)  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 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.  As used in this

Agreement, "Company" shall mean the Company as hereinbefore

defined and any successor to its business and/or assets as

aforesaid which assumes and agrees to perform this Agreement

by operation of law, or otherwise.

 

    12.  Miscellaneous.  (a)  This Agreement shall be

governed by and construed in accordance with the laws of the

State of Delaware, without reference to principles of con-

flict of laws.  The captions of this Agreement are not part

of the provisions hereof and shall have no force or effect.

This Agreement may not be amended or modified otherwise than

 

 

 

 

by a written agreement executed by the parties hereto or

their respective successors and legal representatives.

 

    (b)  All notices and other communications hereunder

shall be in writing and shall be given by hand delivery to

the other party or by registered or certified mail, return

receipt requested, postage prepaid, addressed as follows:

 

         If to the Executive:

         -------------------

 

         Ralph W. Babb Jr.

         2360 Heronwood Drive

         Bloomfield Hills, Michigan 48302

 

         If to the Company:

         -----------------

         Comerica Incorporated

         Comerica Tower at Detroit Center

         500 Woodward Avenue, 33rd Floor

         Detroit, Michigan 48226               

         Attention: Executive Vice President

                    and General Counsel

 

or to such other address as either party shall have

furnished to the other in writing in accordance herewith.

Notice and communications shall be effective when actually

received by the addressee.

 

    (c)  The invalidity or unenforceability of any pro-

vision of this Agreement shall not affect the validity or

enforceability of any other provision of this Agreement.

 

    (d)  The Company may withhold from any amounts payable

under this Agreement such Federal, state, local or foreign

taxes as shall be required to be withheld pursuant to any

applicable law or regulation.

 

    (e)  The Executive's or the Company's failure to insist

upon strict compliance with any provision of this Agreement

or the failure to assert any right the Executive or the

Company may have hereunder, including, without limitation,

the right of the Executive to terminate employment for Good

Reason pursuant to Section 5(c)(i)-(v) of this Agreement,

shall not be deemed to be a waiver of such provision or

right or any other provision or right of this Agreement.

 

    (f)  The Executive and the Company acknowledge that,

except as may otherwise be provided under any other written

 

 

 

agreement between the Executive and the Company, the employ-

ment of the Executive by the Company is "at will" and, sub-

ject to Section 1(a) hereof, prior to the Effective Date,

the Executive's employment and/or this Agreement may be

terminated by either the Executive or the Company at any

time prior to the Effective Date, in which case the

Executive shall have no further rights under this Agreement.

From and after the Effective Date this Agreement shall

supersede any  other agreement between the parties with

respect to the subject matter hereof.

 

    IN WITNESS WHEREOF, the Executive has hereunto set the

Executive's hand and, pursuant to the authorization from its

Board of Directors, the Company has caused these presents to

be executed in its name on its behalf, all as of the day and

year first above written.

 

                             

                              /s/ Ralph W. Babb Jr.

                            -------------------------------

                                    RALPH W. BABB JR.

 

 

                            COMERICA INCORPORATED

 

 

                            By /s/ Richard S. Collister

                              -----------------------------

                              

 

 

 

Date: May 29, 1998

 

 

EX-10.42 4 a2196615zex-10_42.htm EXHIBIT 10.42

Exhibit 10.42

 

CHANGE OF CONTROL EMPLOYMENT AGREEMENT (BE4 AND HIGHER)

 

CHANGE OF CONTROL EMPLOYMENT AGREEMENT, dated as of the          day of                       , 20       (this “Agreement”), by and between COMERICA INCORPORATED, a Delaware corporation (the “Company”), and                                    (the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein).  The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that provide the Executive with compensation and benefits arrangements that are competitive with those of other corporations.  Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

Section 1.                                                  Certain Definitions.  (a) “Effective Date” means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs.  Notwithstanding anything in this Agreement to the contrary, if (A) the Executive’s employment with the Company is terminated by the Company, (B) the Date of Termination is prior to the date on which a Change of Control occurs, and (C) it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control (such a termination of employment, an “Anticipatory Termination”), then for all purposes of this Agreement, the “Effective Date” means the date immediately prior to such Date of Termination.

 

(b)                                 “Change of Control Period” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

 

(c)                                  “Affiliated Company” means any company controlled by, controlling or under common control with the Company.

 

(d)                                 “Change of Control” means:

 



 

(1)                                  Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 1(d), the following acquisitions shall not constitute a Change of Control:  (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C);

 

(2)                                  Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(3)                                  Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business

 

2



 

Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(4)                                  Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

Section 2.                                                  Employment Period.  The Company hereby agrees to continue the Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the last day of the thirtieth consecutive month following the Effective Date (the “Employment Period”).  The Employment Period shall terminate upon the Executive’s termination of employment for any reason.

 

Section 3.                                                  Terms of Employment.  (a)  Position and Duties.

 

(1)                                  During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date, and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or at any office or location less than 60 miles from such location.

 

(2)                                  During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement.  It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

 

(b)                                 Compensation.  (1)  Base SalaryDuring the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 26 times the highest bi-weekly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the one-year period immediately preceding the month in which the Effective Date occurs.  The Annual Base Salary shall be paid to the Executive at such intervals as the Company pays executive salaries generally, unless the Executive shall elect to defer the receipt of such Base Salary pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12

 

3



 

months after the last salary increase awarded to the Executive prior to the Effective Date.  Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.  The Annual Base Salary shall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased.

 

(2)                                  Annual Bonus.  In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the aggregate of the Executive’s highest bonus under each of

 

(i)                                     the Company’s  Management Incentive Plan; and

 

(ii)                                  any business unit incentive plan of the Company in which the Executive has participated during any portion of the last three fiscal years (or any predecessor or successor plan to any thereof), as applicable, for the last three full fiscal years prior to the Effective Date, including any bonus or portion thereof that has been earned but deferred (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year and not otherwise paid a full year’s bonus for such year) (the “Recent Annual Bonus”).  For purposes of determining the Recent Annual Bonus, the highest bonus under the Management Incentive Plan shall be determined by including bonuses earned for both the annual and multiyear performance periods ending in each of the last three full fiscal years prior to the Effective Date (or for such lesser number of full fiscal years prior to the Effective Date for which the Executive was eligible to earn such a bonus and annualized in the case of any pro rata bonus earned for a partial fiscal year).  Each such Annual Bonus shall be paid no later than two and a half months after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that meets the requirements of Section 409A of the Code.

 

(3)                                  Long-Term Equity Incentives, Savings and Retirement PlansDuring the Employment Period, the Executive shall be entitled to participate in all equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies.

 

(4)                                  Welfare Benefit PlansDuring the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans

 

4



 

and programs) to the extent applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies.

 

(5)                                  ExpensesDuring the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

 

(6)                                  Fringe BenefitsDuring the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

 

(7)                                  Office and Support StaffDuring the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the Affiliated Companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

 

(8)                                  VacationDuring the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

 

Section 4.                                                  Termination of Employment.  (a)  Death or Disability.  The Executive’s employment shall terminate automatically if the Executive dies during the Employment Period.  If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such

 

5



 

notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

 

(b)                                 CauseThe Company may terminate the Executive’s employment during the Employment Period with or without Cause.  “Cause” means:

 

(1)                                  the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive’s duties, or

 

(2)                                  the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company.

 

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon (A) authority given pursuant to a resolution duly adopted by the Board, or if the Company is not the ultimate parent corporation of the Affiliated Companies and is not publicly-traded, the board of directors of the ultimate parent of the Company (the “Applicable Board”), (B) the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or (C) the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.  The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Applicable Board (excluding the Executive, if the Executive is a member of the Applicable Board) at a meeting of the Applicable Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Applicable Board), finding that, in the good faith opinion of the Applicable Board, the Executive is guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.

 

(c)                                  Good ReasonThe Executive’s employment may be terminated during the Employment Period by the Executive for Good Reason or by the Executive voluntarily without Good Reason.  “Good Reason” means:

 

(1)                                  the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority,

 

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duties or responsibilities as contemplated by Section 3(a), or any action by the Company that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(2)                                  any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(3)                                  the Company’s requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;

 

(4)                                  any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or

 

(5)                                  any failure by the Company to comply with and satisfy Section 10(c).

 

For purposes of this Section 4(c) of this Agreement, any good faith determination of Good Reason made by the Executive shall be conclusive.  The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect the Executive’s ability to terminate employment for Good Reason.

 

(d)                                 Notice of TerminationAny termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b).  “Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice).  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respective rights hereunder.

 

(e)                                  Date of Termination. “Date of Termination” means (1) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or such later date specified in the Notice of Termination, as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (3) if the Executive resigns without Good Reason, the date on which the Executive notifies the Company of such termination, and (4) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.  Notwithstanding the foregoing, in no event

 

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shall the Date of Termination occur until the Executive experiences a “separation from service” within the meaning of Section 409A of the Code, and notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the “Date of Termination.”

 

Section 5.                                                  Obligations of the Company upon Termination.  (a)  By the Executive for Good Reason; By the Company Other Than for Cause, Death or Disability.  If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause, Death or Disability or the Executive terminates employment for Good Reason:

 

(1)                                  the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts:

 

(A)                              the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid or deferred pursuant to an irrevocable election under any deferred compensation arrangement subject to Section 409A, (ii) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in subclauses (i) and (ii), the “Accrued Obligations”) and (iii) an amount equal to the product of (x) the higher of (I) the Recent Annual Bonus and (II) the aggregate Annual Bonus under each of the Company’s  Management Incentive Plan and any business unit incentive plan of the Company in which the Executive has participated (or any predecessor or successor plan to any thereof) paid or payable, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months), for the most recently completed fiscal year during the Employment Period, if any, (it being understood that, such Annual Bonus shall be determined by including bonuses earned for both the annual and multiyear performance periods ending in such recently completed fiscal year during the Employment Period)  (such higher amount, the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365 (the “Pro Rata Bonus”); and

 

(B)                                the amount equal to the product of (i) three and (ii) the sum of (x) the Executive’s Annual Base Salary and (y) the Highest Annual Bonus.

 

(2)                                  [FOR THE AGREEMENTS OF EXECUTIVES COMMENCING EMPLOYMENT PRIOR TO JANUARY 1, 2007:  the Company shall pay to the Executive, at such time as such amounts are payable under the terms of each applicable SERP (as defined below), or, if the Executive does not participate in a SERP, in a lump sum in cash within 30 days after the Date of Termination, an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Retirement Plan immediately prior to the Effective Date) and any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the SERP immediately prior to the

 

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Effective Date) that the Executive would receive if the Executive’s employment continued for three years after the Date of Termination, assuming for this purpose that (x) the accrued benefit is fully vested, (y) the Executive’s age is increased by the number of years (including partial years) that the Executive is deemed to be so employed and (z) the Executive’s compensation in each of the three years is that required by Sections 3(b)(1) and 3(b)(2) payable in equal biweekly installments over such three-year period, over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination;]

 

[FOR THE AGREEMENTS OF EXECUTIVES COMMENCING EMPLOYMENT ON OR AFTER JANUARY 1, 2007:  the Company shall pay to the Executive, at such time as such amounts are payable under the terms of each applicable SERP (as defined below), or, if the Executive does not participate in a SERP, in a lump sum in cash within 30 days after the Date of Termination, an amount equal to the excess of (i) the account balance under the Company’s qualified defined contribution retirement plan (the “Defined Contribution Plan”) and any excess or supplemental defined contribution plan in which the Executive participates (collectively, the “SERP”) that the Executive would receive if the Executive’s employment continued for three years after the Date of Termination, assuming for this purpose that (x) the account balance is fully vested, (y) the Company makes a nonelective employer contribution to the SERP for each year in such three-year period in an amount equal to the greatest nonelective employer contribution made to such plan during the last three full fiscal years prior to the Effective Date and (z) the Executive’s compensation in each of the three years is that required by Section 3(b)(1) and Section 3(b)(2) payable in equal biweekly installments for such three-year period, over (ii) the account balance (paid or payable), if any, under the Defined Contribution Plan and the SERP as of the Date of Termination;]

 

(3)                                  during the three year period following the Date of Termination (the “Benefits Period”), the Company shall provide the Executive, his spouse and his eligible dependents with medical and dental insurance coverage (the “Health Care Benefits”) and life insurance benefits no less favorable to those which the Executive, his spouse and his eligible dependents were receiving immediately prior to the Date of Termination or, if more favorable to such persons, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies; provided, however, that the Health Care Benefits shall be provided during the Benefits Period in such a manner that such benefits are excluded from the Executive’s income for federal income tax purposes; provided, further, however, that if the Executive becomes re-employed with another employer and is eligible to receive health care benefits under another employer-provided plan, the health care benefits provided hereunder shall be secondary to those provided under such other plan during such applicable period of eligibility.  The receipt of the Health Care Benefits shall be conditioned upon the Executive continuing to pay the monthly premium as in effect at the Company from time to time for coverage provided to former employees under Section 4980B of the Code in respect of the maximum level of coverage that the Executive could otherwise elect to receive for the Executive, his spouse and eligible dependents if the Executive were still an employee of the Company during the Benefits Period (i.e., single, single plus one, or family) (the “Applicable COBRA Premium”) regardless of what level of coverage is

 

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actually elected.  During the portion of the Benefits Period in which the Executive, his spouse and his eligible dependents continue to receive coverage under the Company’s Health Care Benefits plans, the Company shall pay to the Executive a monthly amount equal to the excess of (x) the Applicable COBRA Premium over (y) the monthly employee contribution rate that is paid by Company employees generally for the same or similar coverage, as in effect from time to time (and which amount shall in no event be greater than the employee contribution rate for the applicable level of coverage as in effect immediately prior to the Effective Date), which payment shall be paid in advance on the first payroll day of each month, commencing with the month immediately following the Executive’s Date of Termination.  The Company shall use its reasonable best efforts to ensure that, following the end of the Benefit Period, the Executive shall be eligible to elect continued health coverage pursuant to Section 4980B of the Code or other applicable law (“COBRA Coverage”), as if the Executive’s employment with the Company had terminated as of the end of such period.  For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree welfare benefits pursuant to the Company’s retiree welfare benefit plans, if any, the Executive shall be considered to have remained employed until the end of the Benefit Period and to have retired on the last day of such period.  In order to comply with Section 409A of the Code, (i) the amount of benefits that the Company is obligated to provide under this Section 5(a)(3) in any given calendar year shall not affect the amount of such benefits that the Company is obligated to pay in any other calendar year; and (ii) the Executive’s right to have the Company provide such benefits may not be liquidated or exchanged for any other benefit; and

 

(4)                                  the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion, provided that such outplacement benefits shall end not later than the last day of the second calendar year that begins after the Date of Termination; and

 

(5)                                  except as otherwise set forth in the last sentence of Section 6, to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any Other Benefits (as defined in Section 6) in accordance with the terms of the underlying plans or agreements.

 

Notwithstanding the foregoing provisions of Sections 5(a)(1), (2) or (3), in the event that the Executive is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination) (a “Specified Employee”), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable and benefits that would otherwise be provided under Sections 5(a)(1), (2) or (3) during the six-month period immediately following the Date of Termination (other than the Accrued Obligations) shall instead be paid, with interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code (“Interest”) determined as of the Date of Termination, or provided on the first business day after the date that is six months following the Executive’s “separation from service” within the meaning of Section 409A of the Code (the “Delayed Payment Date”).

 

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(b)                                 Death.  If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the Accrued Obligations and the Pro Rata Bonus and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement.  The Accrued Obligations and the Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination.  With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Affiliated Companies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries.

 

(c)                                  DisabilityIf the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, the Company shall provide the Executive with the Accrued Obligations and Pro Rata Bonus and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no other severance obligations under this Agreement.  The Accrued Obligations and the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination, provided, that in the event that the Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the Executive on the Delayed Payment Date.  With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the Affiliated Companies and their families.

 

(d)                                 Cause; Other Than for Good ReasonIf the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide the Executive with the Executive’s Annual Base Salary through the Date of Termination, and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement.  If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the Pro Rata Bonus and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement.  In such case, all the Accrued Obligations and the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination, provided, that in the event that the Executive is a

 

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Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the Executive on the Delayed Payment Date.

 

Section 6.                                                  Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies.  Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination (“Other Benefits”) shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement.  Without limiting the generality of the foregoing, the Executive’s resignation under this Agreement with or without Good Reason, shall in no way affect the Executive’s ability to terminate employment by reason of the Executive’s “retirement” under, or to be eligible to receive benefits under, any compensation and benefits plans, programs or arrangements of the Company or the Affiliated Companies, including without limitation any retirement or pension plans or arrangements or substitute plans adopted by the Company, the Affiliated Companies or their respective successors, and any termination which otherwise qualifies as Good Reason shall be treated as such even if it is also a “retirement” for purposes of any such plan.  Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 5(a) of this Agreement, the Executive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies, unless otherwise specifically provided therein in a specific reference to this Agreement.  [FOR CEO AGREEMENT ONLY: Notwithstanding anything in this Agreement to the contrary, in no event shall the benefits provided in the Supplemental Pension and Retiree Medical Agreement dated as of the 29th day of May 1998 by and between the Company and the Executive (the “Supplemental Agreement”) be considered severance pay or benefits under any severance plan, program or policy of the Company for purposes of the immediately preceding sentence, and nothing in this Agreement shall limit the effectiveness of the Supplemental Agreement.]

 

Section 7.                                                  Full Settlement; Legal Fees.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and except as specifically provided in Section 5(a)(2), such amounts shall not be reduced whether or not the Executive obtains other employment.  The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), at any time from the Change of Control through the Executive’s remaining lifetime (or, if longer, through the 20th anniversary of the Change of Control) to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of

 

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any payment pursuant to this Agreement), plus, in each case, Interest determined as of the date such legal fees and expenses were incurred; provided, that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred (or, in connection with a contest related to an Anticipatory Termination, following the calendar year in which such contest is finally resolved).  The amount of such legal fees and expenses that the Company is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Company is obligated to pay in any other calendar year, and the Executive’s right to have the Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit.

 

Section 8.                                                  Certain Additional Reductions.

 

(a)                                  Anything in this Agreement to the contrary notwithstanding, in the event that the Accounting Firm shall determine that receipt of all Payments would subject an Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Agreement Payments meets the definition of “Reduced Amount.”  If the Accounting Firm determines that there is a Reduced Amount, then the aggregate Agreement Payments shall be reduced to such Reduced Amount.

 

(b)                                 If the Accounting Firm determines that the aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give the applicable Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in his or her sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Agreement Payments equals the Reduced Amount); provided, that the Executive shall not be permitted to elect to reduce any Agreement Payment that constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code,  and shall advise the Company in writing of his or her election within ten days of his or her receipt of notice.  If no such election is made by the Executive within such ten-day period, the Company shall reduce the Agreement Payments in the following order: (1) by reducing benefits payable pursuant to Section 5(a)(1)(B) of the Agreement and then (2) by reducing amounts payable pursuant to Section 5(a)(2) of the Agreement.  All determinations made by the Accounting Firm under this Section 8 shall be binding upon the Company and the Executive and shall be made within 60 days of the Executive’s Date of Termination.  In connection with making determinations under this Section 8, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the Change of Control, including any non-competition provisions that may apply to the Executive and the Company shall cooperate in the valuation of any such services, including any non-competition provisions.

 

(c)                                  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”), in each case, consistent with the calculation of the Reduced

 

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Amount hereunder.  In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be repaid by the Executive to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

 

(d)                                 All fees and expenses of the Accounting Firm in implementing the provisions of this Section 8 shall be borne by the Company.

 

(e)                                  Definitions.  The following terms shall have the following meanings for purposes of this Section 8.

 

(1)                                  A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise;

 

(2)                                  “Agreement Payment” shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section);

 

(3)                                  “Net After-Tax Receipt” shall mean the Present Value of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive shall certify, in the Executive’s sole discretion, as likely to apply to the Executive in the relevant tax year(s);

 

(4)                                  “Accounting Firm” shall mean such nationally recognized certified public accounting firm as may be designated by the Executive, other than the certified public accounting firm serving as the independent auditor of the Company or of another company that is a party to a Business Combination, if applicable;

 

(5)                                  “Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment; and

 

(6)                                  “Reduced Amount” shall mean the amount of Agreement Payments that (x) has a Present Value that is less than the Present Value of all Agreement Payments and (y) results

 

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in aggregate Net After-Tax Receipts for all Payments that are greater than the Net After-Tax Receipts for all Payments that would result if the aggregate Present Value of Agreement Payments were any other amount that is less than the Present Value of all Agreement Payments.

 

Section 9.                                                  Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or the Affiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or 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 persons designated by the Company.  In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

 

Section 10.                                           Successors.  (a)  This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.  Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company.

 

(c)                                  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 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.  “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.

 

Section 11.                                           Miscellaneous.  (a)  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  Subject to the last sentence of Section 11(h), this Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(b)                                 All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

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if to the Executive:

 

At the most recent address on file at the Company.

 

if to the Company:

 

Comerica Incorporated

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas  75201

Attention:  General Counsel

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

(c)                                  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

(d)                                 The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(e)                                  The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

(f)                                    The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement.  From and after the Effective Date, except as specifically provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof in effect immediately prior to the execution of this Agreement [FOR CEO AGREEMENT ONLY: other than the Supplemental Agreement]. [FOR PERSONS COVERED OR WHO MAY BE COVERED BY TARP: The Executive acknowledges, understands and agrees that the Executive is currently or may be in the future subject to the provisions of the Emergency Economic Stabilization Act of 2008, as modified or amended from time to time, including pursuant to the American Recovery and Reinvestment Act of 2009 (“EESA”) and the rules, regulations and guidance issued thereunder from time to time (including without limitation the rules and regulations issued from time to time by the

 

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Department of the Treasury (the “Department”), which shall include the TARP Standards for Corporate Governance issued under 31 CFR Part 30 as published in the Federal Register on June 15, 2009, as amended from time to time) (such rules, regulations and guidance, collectively, the “EESA Guidance”)) for the period required by EESA and the EESA Guidance.  In addition, the Executive agrees that the Executive’s rights to compensation under this Agreement and participation in the Company’s compensation and benefits arrangements (this Agreement and any and all such arrangements, collectively, the “Benefit Plans”) will or may in the future be limited to ensure that such Benefit Plans comply with and are administered in accordance with the provisions of EESA and the EESA Guidance.  Accordingly, the Executive hereby (A) acknowledges and understands that the compensation payable to the Executive under any Benefit Plan, including without limitation under this Agreement, may be subject to EESA and the EESA Guidance, including, without limitation, (x) the potential for clawback of any bonus, retention or incentive compensation paid or granted to the Executive under any Benefit Plan based on statements of earnings, revenues, gains or other criteria that are later found to be materially inaccurate or as otherwise provided under the EESA Guidance and (y) the potential for the reduction or elimination of the amounts payable to the Executive under this Agreement or otherwise as a result of the limitations on golden parachute payments under EESA and the EESA Guidance, (B) consents to any modifications and limitations prior to a Change of Control with respect to, and under, the Benefit Plans to the extent necessary to ensure compliance with EESA and the EESA Guidance, (C) voluntarily waives any claim against the Company and the Affiliated Companies for any changes prior to a Change of Control to the Executive’s compensation or benefits that are required to comply with the EESA Guidance in consideration for the benefits that the Executive will receive as a result of the Company’s participation in the Department’s Capital Purchase Program or any other program under EESA, and (E) agrees that such waiver and consent shall constitute a part of and be integrated with this Agreement.]

 

(g)                             The Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and shall in all respects be administered in accordance with Section 409A of the Code.  Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.  If the Executive dies following the Date of Termination and prior to the payment of the any amounts delayed on account of Section 409A of the Code, such amounts shall be paid to the personal representative of the Executive’s estate within 30 days after the date of the Executive’s death.  All reimbursements and in-kind benefits that constitute deferred compensation within the meaning of Section 409A provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided, that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide

 

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such in-kind benefits apply later than the Executive’s remaining lifetime (or if longer, through the 20th anniversary of the Effective Date).  Prior to the Effective Date but within the time period permitted by the applicable Treasury Regulations, the Company may, in consultation with the Executive, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of  taxes and penalties on the Executive pursuant to Section 409A of the Code.

 

Section 12.                                           Survivorship.  Upon the expiration or other termination of this Agreement or the Executive’s employment, the respective rights and obligations of the parties hereto shall survive to the extent necessary to carry out the intentions of the parties under this Agreement.

 

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

 

 

 

 

[Name of Executive]

 

 

 

 

 

COMERICA INCORPORATED

 

 

 

 

 

By:

 

 

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