Exhibit 10O
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of January 18, 1995, by and between First
Bank System, Inc., a Delaware corporation ("Employer"), and John F. Grundhofer
("Executive").
In consideration of the respective undertakings of Employer and
Executive set forth below, Employer and Executive agree as follows:
1. Employment. Employer hereby employs Executive, and Executive
accepts such employment and agrees to perform services for the Employer, for the
period and upon the other terms and conditions set forth in this Agreement.
2. Term of Employment. The term of Executive's employment pursuant to this
Agreement will commence on January 30, 1995 (the "Commencement Date") and,
unless terminated at an earlier date in accordance with Section 5 of this
Agreement, shall continue in effect until the third anniversary of the
Commencement Date; and, commencing on the first anniversary of the Commencement
Date and on each anniversary thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later than 30 days
prior to any such date of automatic extension of this Agreement, Employer or
Executive shall have given the other party to this Agreement written notice that
the Agreement will not be so extended. The term of Executive's employment
commencing on the Commencement Date and ending pursuant to the terms hereof is
hereinafter referred to as the "Period of Employment."
3. Position and Duties.
3.01 Service with Employer. During the Period of Employment,
Executive agrees to perform such reasonable executive employment duties as
Employer shall assign to him from time to time and shall have the title of
Chairman of the Board, President and Chief Executive Officer. Executive also
agrees to serve, for any period for which he is elected, as a director on the
Board of Directors of Employer and to serve as a member of any committee of the
Board of Directors of Employer to which Executive may be elected or appointed.
3.02 Performance of Duties. Executive agrees to serve Employer
faithfully and to the best of his ability and to devote his full business time,
attention and efforts to the business and affairs of Employer during the Period
of Employment; provided, however, that Executive may engage in other activities,
such as activities involving charitable, educational, religious and similar
types of organizations, speaking engagements, membership on the boards of
directors of other organizations (as Employer may from time to time approve),
management of Executive's personal investments, and similar types of activities
to the extent that such other activities do not inhibit in any material way or
prohibit the performance of Executive's duties under this Agreement, or
inhibit in any material way or conflict with the business of Employer and its
subsidiaries.
4. Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement, Employer will pay to Executive
during the Period of Employment a base annual salary to be paid in substantially
equal installments in accordance with Employer's standard payroll procedures and
policies. The initial base annual salary will be at least $620,000, but the
base annual salary may be increased (but not reduced) from time to time in the
sole discretion of Employer; provided, however, that for any of the three years
beginning after a Change-in-Control, as defined in Section 8.13, during the
Period of Employment Executive's base annual salary shall be increased by a
percentage not less than the average percentage increase in the base annual
salary for each of the next five highest paid officers of Employer for such
year.
4.02 Annual Bonus. During the Period of Employment, Executive will
be entitled to participate in the Employer's Executive Incentive Plan (or, if
such Plan shall cease to exist, Employer's annual bonus award program, if any,
for Employer's executives at Executive's grade level). The award of an annual
bonus is highly discretionary and is subject to the terms and provisions of the
Executive Incentive Plan (or, if such Plan shall cease to exist, Employer's
annual bonus award program, if any, for Employer's executives at Executive's
grade level).
4.03 Options and Restricted Stock. During the Period of Employment,
Executive will be eligible to receive grants of Employer's stock options and
restricted stock, or other awards pursuant to equity-based plans of Employer.
Such grants are highly discretionary and would be subject to the terms of the
applicable agreements prescribed by Employer from time to time.
4.04 Participation in Other Benefit Plans. During the Period of
Employment, Executive will be entitled to participate in such retirement plans,
major medical, hospital, surgical and dental plans, executive disability plans
and other Employer benefits not described elsewhere in this Section 4 as are
being provided by Employer to executives at Executive's grade level from time to
time to the extent that Executive's age, positions and other factors qualify him
for such benefits. If, for any period during the Period of Employment,
Executive is not eligible by reason of length of service to participate in such
plans maintained by Employer, Employer shall provide Executive with benefits
equivalent to those provided under such plans and, with respect to benefits
provided by Employer equivalent to those provided under Employer's major
medical, hospital, surgical and dental plans, shall compensate Executive on an
after-tax basis for any additional income taxes payable by Executive by reason
of Employer providing such benefits directly rather than through such plans.
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4.05 Long-Term Disability Benefits. During the Period of Employment,
Executive's annual benefit under Employer's long-term disability plan will not
be less than 60% of the total of (i) Executive's base annual salary at the date
of disability plus (ii) the annual average of bonuses received by Executive
during the three prior Executive Incentive Plan years (or, if such Plan shall
cease to exist, such other annual bonus award program, if any, pursuant to which
Executive received annual bonus payments), and Employer agrees to pay Executive
(at the time benefits are payable under the long-term disability plan) the
excess, if any, of such annual benefit over the annual benefit provided by
Employer's long-term disability plan.
4.06 Survivor Benefit Programs; Life Insurance. During the Period of
Employment, Executive will be entitled to participate in survivor benefit
programs covering Employer's executives at Executive's grade level in effect on
the Commencement Date or as modified or supplemented by Employer from time to
time. If, for any period during the Period of Employment, Executive is not
eligible to participate in such survivor benefit programs, Employer shall
provide Executive with benefits equivalent to those provided under such
programs. In addition, during the Period of Employment Employer shall continue
to provide a life insurance policy with a face value of at least $1 million for
the benefit of a beneficiary designated by Executive (or, if no beneficiary is
designated, for the benefit of Executive's spouse). Such insurance policy shall
be in addition to the amount of group term insurance, if any, provided to
Executive under an insurance plan maintained by Employer for its employees
generally. Executive hereby represents to Employer that Executive is insurable
on normal terms and conditions.
4.07 Vacation and Sick Leave. During the Period of Employment,
Executive will be entitled to reasonable paid vacation periods each year, will
be entitled to carry over to subsequent years unused vacation periods, and upon
termination of employment will be entitled to be paid for unused vacation
periods, in each case in accordance with Employer's policy for executives at
Executive's grade level from time to time. Executive will also be entitled to
reasonable sick leave in accordance with Employer's policy for executives at
Executive's grade level from time to time.
4.08 Perquisites. During the Period of Employment, Employer will
provide Executive with such perquisites as Employer from time to time provides
to executives at Executive's grade level including, without limitation, (a) an
automobile or an automobile allowance consistent with Employer's policies for an
executive at Executive's grade level, (b) reimbursement of initiation fees, if
any, and dues for one country club and one business club of Executive's choice,
and (c) the reimbursement of the cost of financial and tax counseling (subject
to an annual limit of two percent of current base annual salary). Additionally,
during the Period of Employment, Employer will reimburse Executive for the
difference between (i) interest payments made by Executive on Executive's real
estate mortgage loan for his personal
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residence (with the loan amount not to exceed 80% of the purchase price for such
residence) and (ii) the interest payments that would apply to such loan if the
interest rate on such loan were one percentage point less than the interest rate
generally prevailing in the market at the time the loan was entered into.
4.09 Expenses. Employer will reimburse Executive for all expenses
and disbursements reasonably incurred by Executive in the performance of his
duties during the Period of Employment, and such other facilities or services as
Employer and Executive may, from time to time, agree are reimbursable, subject
to the presentment of appropriate vouchers in accordance with the Employer's
normal policies for expense verification.
4.10 [This Section is intentionally omitted.]
4.11 Indemnity and Hold Harmless. Except to the extent inconsistent
with Employer's charter or bylaws, Employer will indemnify Executive and hold
Executive harmless to the fullest extent permitted by law with respect to acts
of Executive as an officer and director of Employer during the Period of
Employment. Employer further agrees that if and to the extent Employer in its
sole discretion maintains directors' and officers' insurance policies, Executive
will be covered by such policies with respect to acts of Executive as an officer
and director of Employer during the Period of Employment to the same extent as
all other officers and directors of Employer under such policies.
4.12 Payments on Account of Restricted Stock Relating to Former
Employment. Employer has established and is maintaining a bookkeeping account
for Executive (the "Bookkeeping Account"), which account was initially credited
with $305,074, representing the amount agreed to be paid to Executive and not
paid to date in respect of shares of Wells Fargo & Company ("Wells Fargo")
Common Stock transferred by Wells Fargo to Executive, but not vested, as of
January 30, 1990. The amount credited to the Bookkeeping Account shall be
deemed to have been invested in such stock, bonds or other securities as
Executive shall, from time to time, designate in writing to Employer's Executive
Vice President, Human Resources, or such other individual as Employer shall
designate, which deemed investments must be reasonably acceptable to Employer
and must be of a type that Employer would be permitted to make under applicable
laws and regulations. The Bookkeeping Account shall be credited or debited, as
the case may be, with gains or losses deemed incurred as a result of such
designated, deemed investments.
Certain debits have been made to the Bookkeeping Account as provided
in the Employment Agreement dated December 30, 1992 by and between Employer and
Executive (the "Prior Employment Agreement"). The balance of the Bookkeeping
Account shall become payable to, or with respect to, Executive upon the earliest
of the following events (i) January 30, 2003, (ii) Executive's death or (iii)
Executive's termination of employment for any reason within 24 months after a
Change in Control. In the event the balance of the Bookkeeping Account becomes
payable upon Executive's
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termination of employment for any reason other than death within 24 months after
a Change in Control, the entire balance shall be paid within 30 days of such
event. In the event the balance of the Bookkeeping Account becomes payable upon
Executive's death, the entire balance shall be paid by December 31 of the
calendar year in which Executive dies. Upon the occurrence of any other event
giving rise to Employer's obligation to pay Executive the balance of the
Bookkeeping Account, on January 30 of each year beginning in the year 2003 and
for each of the next nine consecutive years, after taking into account any
amount credited or debited to the Bookkeeping Account as a result of the deemed
investment thereof or otherwise pursuant to the terms of this Section 4.12, the
following proportions of the Bookkeeping Account shall be paid to Executive:
1/10, 1/9, 1/8, 1/7, 1/6, 1/5, 1/4, 1/3, 1/2 and the entire remaining balance
thereof.
Employer, in its sole and absolute discretion, may alter the timing or
manner of payment of the balance of the Bookkeeping Account in the event that
Executive establishes to the satisfaction of Employer severe financial hardship.
Severe financial hardship will be deemed to have occurred in the event of
Executive's impending bankruptcy, a dependent's long and serious illness or
other events of similar magnitude. Executive may designate a beneficiary or
beneficiaries who, upon his death, are to receive distributions that otherwise
would have been paid to Executive. All designations shall be in writing and
shall be effective only if and when delivered to Employer during the lifetime of
Executive.
Employer shall have the right to deduct from all payments made
pursuant to this Section 4.12 any federal, state or local taxes required by law
to be withheld with respect to such payments. Executive and Employer understand
and agree that the timetable set forth above with respect to the payment of the
balance of the Bookkeeping Account is irrevocable and shall not be subject to
any amendment or modification. Further, Executive and Employer understand and
agree that Employer is under a contractual obligation to make payments to
Executive in accordance with this Section 4.12. Such payments shall not be
financed from any trust fund, insurance or otherwise and shall be paid solely
out of the general funds of Employer, and Executive shall have no interest
whatsoever in any investments made by Employer on account of Executive's request
with respect to deemed investments of the Bookkeeping Account. Executive will
not have any interest whatsoever in any specific asset of Employer as a result
of this Agreement, and Executive's rights to payments hereunder shall be no
greater than the right of any other general, unsecured creditor of Employer. In
no event shall Employer make any payment hereunder to any assignee or creditor
of Executive or a beneficiary. Prior to the time of payment hereunder,
Executive or a beneficiary thereof shall have no rights by way of anticipation
or otherwise to assign or otherwise dispose of any interest under this Section
4.12, nor shall such rights be assigned or transferred by operation of law.
4.13 Reimbursement of Professional Fees. Employer will pay to (or
reimburse Executive for) the reasonable fees and
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expenses of Executive's personal professional advisors for professional services
rendered to Executive in connection with this Agreement and matters related
thereto; provided, however, that payment by Employer pursuant to this Section
4.13 will not exceed $5,000.
5. Termination.
5.01 Grounds for Termination. The Period of Employment will
terminate prior to the expiration of the term set forth in Section 2 of this
Agreement in the event that:
(a) Executive shall die.
(b) Executive shall qualify for and accrue payments under Employer's
Disability Program for a period covering 90 consecutive days.
(c) Employer shall terminate the Period of Employment for Cause. "Cause"
means termination upon (i) the willful and continued failure by
Executive to substantially perform his duties with Employer (other
than any such failure resulting from his disability or from
termination by Executive for Good Reason), after a written demand for
substantial performance is delivered to Executive that specifically
identifies the manner in which Employer believes that Executive has
not substantially performed his duties, and Executive has failed to
resume substantial performance of his duties on a continuous basis
within 14 days of receiving such demand, (ii) the willful engaging by
Executive in conduct which is demonstrably and materially injurious to
Employer, monetarily or otherwise, (iii) Executive's conviction of a
felony which impairs his ability substantially to perform his duties
with Employer or (iv) the issuance of an order under Section 8(e)(4)
or 8(g)(1) of the Federal Deposit Insurance Act ("FDIC") by which
Executive is removed and/or permanently prohibited from participating
in the conduct of the affairs of Employer and/or any other affiliate
of Employer. For purposes of this paragraph, no act, or failure to
act, on Executive's part will be deemed "willful" unless done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that his action or omission was in the best interest
of Employer. Failure to perform Executive's duties with Employer
during any period of disability shall not constitute Cause.
(d) Executive shall terminate the Period of Employment for Good Reason.
"Good Reason" means termination by Executive upon the occurrence,
without Executive's consent, of any one or more of the following: (i)
the assignment to Executive of any duties inconsistent in any respect
with Executive's position (including status, offices, titles, and
reporting requirements), authorities, duties, or other
responsibilities as in
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effect immediately prior to such assignment or any other action of
Employer which results in a diminishment in such position, authority,
duties, or responsibilities, other than an insubstantial and
inadvertent action which is remedied by Employer promptly after
receipt of notice thereof given by Executive; (ii) a reduction by
Employer in Executive's base salary as in effect on the Commencement
Date or as the same shall be increased from time to time; (iii)
Employer's requiring Executive to be based at a location in excess of
30 miles from the location of Executive's principal office immediately
prior to such requirement; (iv) the failure by Employer to provide
Executive with compensation and benefits at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for
under each compensation or benefit plan, program, policy and practice
as in effect at the Commencement Date (or as in effect following the
Commencement Date, if greater); (v) the failure of Employer to obtain
a satisfactory agreement from any successor to Employer to assume and
agree to perform this Agreement; (vi) a material breach by Employer of
its obligations under this Agreement after notice in writing from
Executive and a reasonable opportunity for Employer to correct such
conduct; and (vii) any purported termination by Employer of
Executive's employment that is not effected pursuant to a Notice of
Termination (as hereinafter defined). Executive's right to terminate
the Period of Employment for Good Reason shall not be affected by
Executive's incapacity due to physical or mental illness. Executive's
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason.
Termination by Executive of the Period of Employment for Good Reason
shall constitute termination for Good Reason for all purposes of this
Agreement, notwithstanding that Executive may also thereby be deemed
to have "retired" under any applicable retirement programs of
Employer.
(e) Employer terminates the Period of Employment other than for "Cause."
(f) Executive terminates the Period of Employment for any reason not
constituting Good Reason.
Notwithstanding any termination of the Period of Employment, Executive, in
consideration of his employment hereunder to the date of such termination, will
remain bound by the provisions of this Agreement that specifically relate to
periods, activities or obligations upon or subsequent to the termination of
Executive's employment.
5.02 Effect of Termination.
(a) In the event of termination of the Period of Employment pursuant to
the provisions of Section 5.01(a) above,
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Executive's trust estate or estate, as the case may be (as determined
in accordance with Section 8.02 of this Agreement), will be entitled
to be paid the base annual salary otherwise payable to Executive
pursuant to Section 4.01 of this Agreement only through the date of
such termination. Additionally, Executive's survivors will be entitled
to any benefits provided under Employer's survivor benefit program.
(b) In the event of termination of the Period of Employment pursuant to
the provisions of Section 5.01(b) above, Executive will be entitled to
be paid the base annual salary otherwise payable to Executive pursuant
to Section 4.01 of this Agreement only through the date of such
termination. Executive will be entitled to benefits under Employer's
Disability Program and to the benefits provided for in Section 4.05 in
connection with Employer's Disability Plan. If Executive shall cease
to be eligible for long-term disability payments pursuant to the
Disability Plan within three years following the date of such
termination, Employer will pay Executive a lump sum payment in the
amount of Executive's annual base salary at the time of such
termination.
(c) In the event of termination of the Period of Employment pursuant to
the provisions of Section 5.01(c) or (f) above, Employer will have no
further obligations hereunder except that Employer will pay Executive
his base salary, at the rate then in effect, and continue to provide
Executive his health and welfare benefits through the date of such
termination. Executive will not be paid any annual bonus pursuant to
Section 4.02 of this Agreement for the calendar year in which the
termination occurs or any subsequent calendar year.
(d) In the event of termination of the Period of Employment pursuant to
the provisions of Sections 5.01(d) or 5.01(e) above, Employer will (i)
pay Executive his full base salary through the date of termination at
the rate in effect at the time Notice of Termination is given; (ii)
pay as damages to Executive, not later than 30 days following the date
of termination, a lump sum payment equal to three times the sum of (A)
Executive's annual base salary in effect at the time Notice of
Termination is given and (B) the annual target bonus potential
available to Executive at the time Notice of Termination is given (or,
in the event of termination within 24 months following a Change-in-
Control, if either of the following amounts is greater, the bonus
earned in the last fiscal year prior to the date of termination or the
average bonus earned in the last three fiscal years prior to the date
of termination, whichever is larger), (iii) continue to provide the
employee benefits described in Sections 4.04, 4.05 (with disability
benefits to be calculated as of the date of termination), and 4.06 to
which Executive was entitled
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on the date of such termination for a period of three years from the
date of such termination, (iv) continue to provide the perquisites
described in Section 4.08 to which Executive was entitled on the date
of such termination for a period of three years from the date of such
termination, (v) cause the acceleration of the exercisability of any
stock option or the vesting of any restricted stock grants (other than
those pursuant to Employer's Restricted Stock and Performance Plan)
that would have become exercisable or vested, as the case may be,
during the remaining Period of Employment had no such termination
occurred, (vi) cause the acceleration of vesting of restricted stock
grants under Employer's Restricted Stock and Performance Plan if the
vesting schedule has been determined at the time of such termination
and such vesting would have occurred during the remaining Period of
Employment had no such termination occurred, (vii) give Executive
credit for three additional years of service (or five additional years
of service in the event of termination within 24 months following a
Change-in-Control) under Employer's Nonqualified Supplemental
Executive Retirement Plan (the "SERP"), provided, however, that
Executive shall not receive any such credit if Executive has
previously received five additional years of service at age 60 under
the terms of the SERP, (viii) in the event of termination within 24
months following a Change-in-Control, pay Executive the full amount of
any long-term cash incentive award for any plan periods then in
progress to the extent not provided for in any Employer long-term cash
incentive plan or plans; and (ix) pay for individual outplacement
counseling services to Executive up to a maximum of $60,000.
Executive will not be paid any annual bonus pursuant to Section 4.02
of this Agreement for the calendar year in which the termination
occurs.
5.03 Notice of Termination. Any purported termination by Employer or
Executive of the Period of Employment shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in Section 5.01 above relied upon.
5.04 Offsets. Executive shall have no duty to seek other employment.
However, in the event of termination of the Period of Employment pursuant to the
provisions of Sections 5.01(d) or 5.01(e), the following offsets will apply to
reduce the payments and benefits which Executive shall be entitled to receive
pursuant to Section 5.02(d): (i)(A) in the event of termination within 24 months
following a Change-in-Control, the amount payable to Executive pursuant to
Section 5.02(d)(ii) will be offset by any salary, cash bonus and other earned
income (within the meaning of Section 911(d)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code")) received by Executive for services rendered by
Executive to persons or entities other than the Employer during
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or with respect to the 36-month period after the date of termination, or (B) in
the event of termination at any time not within 24 months following a Change-in-
Control, one-third of the amount payable to Executive pursuant to Section
5.02(d)(ii)(A) and the entire amount payable to Executive pursuant to Section
5.02(d)(ii)(B) shall be offset by amounts received by Executive which are
described in subparagraph (A) above; (ii) the benefits payable to Executive
pursuant to Section 5.02(d)(iii) and (iv) shall be discontinued if Executive
obtains full-time employment providing welfare benefits during the 36-month
period following the date of termination; and (iii) in the event of termination
at any time within 24 months following a Change-in-Control, any additional
benefits under Employer's SERP pursuant to Section 5.02(d) will be reduced by
the amount of vested defined benefit pension benefits and vested defined benefit
non-qualified supplemental retirement benefits actually payable to Executive
without any risk of forfeiture from persons or entities other than Employer
which are attributable to services rendered by Executive to such other persons
or entities during the 36 months following the date of termination of
Executive's employment. Such reduction shall be calculated based on the vested
benefits payable at age 65 under the single life annuity form of payment under
the applicable plans which are accrued by Executive during such period. The
foregoing calculations for a particular plan shall be made by the actuary for
such plan in accordance with generally accepted actuarial principles. The amount
of such reduction at age 65 shall be actuarially reduced if Executive's benefits
under the Employer's SERP commence before Executive attains age 65.
Not less frequently than annually (by December 31 of each year),
Executive shall account to Employer with respect to all payments and benefits
received by Executive which are required hereunder to be offset against payments
or benefits received by Executive from Employer. If the Employer has paid
amounts in excess of those to which Executive is entitled (after giving effect
to the offsets provided above), Executive shall reimburse Employer for such
excess by December 31 of such year. The requirements imposed under this
paragraph shall terminate on December 31 of the calendar year which includes the
third anniversary of the date of termination.
5.05 Additional Payments. In the event Executive becomes entitled to
payments under Article 5 of this Agreement, Employer shall cause its independent
auditors promptly to review, at Employer's sole expense, the applicability of
Section 4999 of the Code to such payments. If such auditors shall determine that
any payment or distribution of any type by Employer to Executive or for his
benefit, whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by Section 4999 of the Code, or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are collectively referred to as the "Excise Tax"), then
Executive shall be entitled to receive an additional cash payment (a "Gross-Up
Payment") within 30 days of such determination equal to an amount such that
after payment by
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Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up Payment,
Executive would retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments. For purposes of the foregoing determination,
Executive's tax rate shall be deemed to be the highest statutory marginal state
and Federal tax rate (on a combined basis) then in effect. If no determination
by Employer's auditors is made prior to the time a tax return reflecting the
Total Payments is required to be filed by Executive, Executive will be entitled
to receive a Gross-Up Payment calculated on the basis of the Total Payments
reported by Executive in such tax return, within 30 days of the filing of such
tax return. In all events, if any tax authority determines that a greater Excise
Tax should be imposed upon the Total Payments than is determined by the
Company's independent auditors or reflected in Executive's tax return pursuant
to this Section 5.05, Executive shall be entitled to receive the full Gross-Up
Payment calculated on the basis of the amount of Excise Tax determined to be
payable by such tax authority from Employer within 30 days of such
determination.
5.06 Nonexclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive from continuing or future participation in any benefit,
bonus, incentive, retirement or other plan or program provided by Employer and
for which Executive may qualify, nor, except as expressly provided in this
Agreement, shall anything herein limit or reduce such rights as Executive may
have under any other agreement with, or plan, program, policy or practice of,
Employer. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any agreement with, or plan, program, policy or
practice of, Employer (including, without limitation, the cashout of unused
vacation days upon termination of employment) shall be payable in accordance
with such agreement, plan, program, policy or practice, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if Executive becomes
entitled to benefits under Article 5 of this Agreement, Executive shall not be
entitled to receive payments under the First Bank System Severance Pay Plan, the
First Bank System, Inc. Senior Management Change-in-Control Severance Pay Plan,
the First Bank System, Inc. Middle Management Change-in-Control Severance Pay
Plan, the First Bank System, Inc. Broad-Based Change-in-Control Severance Pay
Plan or any other severance pay plan of Employer.
6. Non-Competition and Unfair Competition.
6.01 Agreement Not to Compete. Without the approval by resolution of
the Board of Directors of Employer, upon termination of Executive's employment
with Employer by Employer for Cause pursuant to Section 5.01(c) or by Executive
without Good Reason pursuant to Section 5.01(f), Executive will not, for a
period of three years thereafter, become an officer, employee, agent, partner,
director or substantial stockholder (holding more than 5% of the voting
securities) of any bank, savings bank, trust company, bank and trust company,
savings and loan association or holding company thereof, in each case if such
entity conducts
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business in the State of Colorado, the State of Minnesota, the State of Montana,
the State of North Dakota, the State of South Dakota, the State of Wisconsin or
any other State in which Employer has substantial operations.
6.02 Agreement Not to Solicit. Without the approval by resolution of
the Board of Directors of Employer, upon termination of Executive's employment
with Employer for any reason whatsoever, Executive will not, for the remainder
of the Period of Employment if no termination had occurred (or, if longer, for
the one-year period following such termination), (i) solicit or aid in
soliciting as a customer or client of banking or related financial services
(including, without limitation trust, credit card and investment management
services) any person, firm, corporation, association or other entity (A) that
was a customer or client of Employer or any other affiliate of Employer, and for
which Executive or anyone under Executive's supervision performed any services
or with which substantial business relations were maintained by Employer or any
other affiliate of Employer at any time during the five years prior to the
termination of the Period of Employment or (B) whose identity or particular
needs Executive otherwise discovered as a result of his employment with
Employer, or (ii) solicit or aid in soliciting any employees of Employer or any
other affiliate of Employer to leave their employment. Without the approval by
resolution of the Board of Directors of Employer, upon termination of
Executive's Employment with Employer for any reason whatsoever, Executive agrees
never to copy, remove from Employer or its affiliates, dispose or make any use
of any confidential customer list, confidential business information with
respect to customers, confidential materials relating to the practices or
procedures of Employer or its affiliates, or any other proprietary information.
7. Taxes. All payments to be made to Executive under this Agreement
will be net of required withholding of federal, state and local income and
employment taxes. Whenever under this Agreement Executive is to be compensated
or reimbursed on an "after-tax basis," Executive will be assumed to be subject
to federal income taxes at the highest marginal rate applicable to individuals
and to state income taxes at the highest marginal effective rate for residents
of Minneapolis, Minnesota.
8. Miscellaneous.
8.01 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Minnesota.
8.02 Successors. This Agreement shall be binding upon and inure
to the benefit of Employer and its successors. This Agreement will inure to the
benefit of, be enforceable by, and any amounts and benefits owed to Executive at
the time of Executive's death, unless otherwise provided herein, will be paid
to, the Trustee under the John F. and Beverly J. Grundhofer Living Trust
Agreement, or, if such Trust is not then in existence, the personal
representative or personal representatives of Executive's
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estate. Reference to the "John F. and Beverly J. Grundhofer Living Trust
Agreement" means that certain Declaration of Trust, John F. and Beverly J.
Grundhofer Living Trust, dated February 22, 1988, by and between John F. and
Beverly J. Grundhofer, as donors and as original Trustees, as amended and
existing at John F. Grundhofer's death. Reference to the Trustee under the John
F. and Beverly J. Grundhofer Living Trust Agreement means the then acting
Trustee or Trustees under the John F. and Beverly J. Grundhofer Living Trust
Agreement and any successor Trustees.
Employer 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 Employer or of any division or subsidiary thereof
employing Executive to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that Employer would be required to
perform if no such succession had taken place. Failure of Employer to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to compensation
from Employer in the same amount and on the same terms as Executive would be
entitled to hereunder if Executive terminated his employment for Good Reason
following a Change-in-Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of termination and notice of termination shall be deemed to have
been given on such date. In any case where a successor assumes the Employer's
obligations under this Agreement by operation of law, the requirements imposed
in this paragraph will be satisfied if the successor acknowledges to Executive
in writing that it has assumed the Employer's obligations under this Agreement
by operation of law within 30 days of receipt of a written notice from Executive
requesting such acknowledgment.
8.03 Prior Agreements. This Agreement contains the entire agreement
of the parties relating to the employment of Executive by Employer and the other
matters discussed herein and supersedes all prior agreements and understandings
with respect to such subject matter, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein. The Prior Employment Agreement is
hereby terminated and shall have no further force or effect. The Change in
Control Severance Pay Agreement entered into between Employer and Executive on
March 16, 1992, which was attached as Exhibit A to the Prior Employment
Agreement with Employer, is hereby terminated and shall have no further force or
effect.
8.04 Amendments. No amendment or modification of this Agreement
will be deemed effective unless made in writing and signed by each party hereto.
8.05 No Waiver. No term or condition of this Agreement will be
deemed to have been waived, nor will there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver will not be
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deemed a continuing waiver unless specifically stated, will operate only as to
the specific term or condition waived and will not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
8.06 Assignment. This Agreement is not assignable, in whole or
in part, by any party without the written consent of the other party.
8.07 Injunctive Relief. Executive agrees that it would be difficult
to compensate Employer fully for damages for any violation of the provisions of
this Agreement, including without limitation the provisions of Section 6.
Accordingly, Executive specifically agrees that Employer will be entitled to
temporary and permanent injunctive relief to enforce the provisions of this
Agreement and that such relief may be granted without the necessity of proving
actual damages. This provision with respect to injunctive relief will not,
however, diminish the right of Employer to claim and recover damages in addition
to injunctive relief.
8.08 Disputes and Legal Fees.
(a) Before a Change-in-Control. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, which is not
resolved by the parties will not sooner than 30 days after the dispute
shall arise, be settled by arbitration before three arbitrators in
accordance with the rules of the American Arbitration Association, and
judgment upon an award rendered by the arbitrators, or at least a
majority of them, may be entered in any court having jurisdiction
thereof; provided, however, that Employer will be entitled to seek
injunctive or other equitable relief in a court of law to enforce the
provisions of Section 6. Such arbitration shall be conducted in
Minneapolis, Minnesota. The expenses incurred in connection with any
arbitration, including but not limited to each party's legal fees and
the arbitrators' fees and expenses, will be allocated between the
parties according to the relative fault of each, as determined by the
arbitrators.
(b) After a Change-in-Control. Subparagraph (a) above shall not apply
after a Change-in-Control, and the provisions of this subparagraph (b)
shall apply instead. If Executive so elects, any dispute or
controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
If Executive does not elect arbitration, Executive may pursue any and
all legal remedies available to him. Employer shall pay to Executive
any legal fees and expenses incurred by him after a Change-in-Control
(i) as a result of successful
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litigation or arbitration against Employer for nonpayment of any
benefit hereunder or (ii) in connection with any dispute with any
Federal, state or local governmental agency with respect to benefits
claimed under this Agreement. If Executive elects arbitration,
Employer will pay all fees and expenses of the arbitrator.
8.09 Severability. To the extent that any provision of this Agreement
shall be determined to be invalid or unenforceable, the invalid or unenforceable
portion of such provision will be deleted from this Agreement, and the validity
and enforceability of the remainder of such provision and of this Agreement will
be unaffected. In furtherance of and not in limitation of the foregoing, it is
expressly agreed that should the duration of or geographical extent of, or
business activities covered by, the noncompetition covenant contained in Section
6 be determined to be in excess of that which is valid or enforceable under
applicable law, then such provision will be construed to cover only that
duration or extent, or those activities which may validly or enforceably be
covered. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement will be construed in a manner which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
8.10 Notices. All notices under this Agreement will be in writing and
will be deemed effective when delivered in person (in Employer's case, to its
Secretary) or twenty-four (24) hours after deposit thereof in the U.S. mails,
postage prepaid, for delivery as registered or certified mail -- addressed, in
the case of Executive, to him at his last residential address known by Employer
and, in the case of Employer, to its corporate headquarters, attention of its
Secretary, or to such other address as Executive or Employer may designate in
writing at any time or from time to time to the other party. In lieu of notice
by deposit in the U.S. mails, a party may give notice by telegram, telex or
telecopy, in which case such notice will be deemed effective upon receipt.
8.11 Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which will be deemed to be an original, but all
such counterparts will together constitute one and the same instrument.
8.12 Headings. The headings of paragraphs herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
8.13 Change in Control. For purposes of this Agreement, a "Change-in-
Control" shall mean:
(A) a change-in-control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange
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Act of 1934, as amended (the "Exchange Act"), whether or not Employer
is then subject to such reporting requirement; or
(B) the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d)
of the Exchange Act) by Employer or any "person" (as such term is used
in Section 13(d) and 14(d) of the Exchange Act) that such person has
become the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of
Employer (w) representing 20% or more, but not more that 50%, of the
combined voting power of Employer's then outstanding securities unless
the transaction resulting in such ownership has been approved in
advance by the Continuing Directors (as hereinafter defined) or (x)
representing more than 50% of the combined voting power of Employer's
then outstanding securities (regardless of any approval by the
Continuing Directors); provided, however, that notwithstanding the
foregoing, no Change-in-Control shall be deemed to have occurred for
purposes of this Agreement by reason of ownership of 20% or more of
the total voting capital stock of Employer then issued and outstanding
by (y) Employer, any subsidiary of Employer or any employee benefit
plan of Employer or of any subsidiary of Employer or any entity
holding shares of the Common Stock organized, appointed or established
for, or pursuant to the terms of, any such plan (any such person or
entity described in this clause (y) is referred to herein as a
"Company Entity") or (z) Corporate Partners, L.P., Corporate Offshore
Partners, L.P., The State Board of Administration of Florida, their
respective "Affiliates" (including, for this purpose, their respective
limited partners) and/or any "Permitted Transferee" of such "Persons"
(collectively, the "Investors"), who have acquired or will acquire
such stock at any time pursuant to, in conformity with and as
contemplated by the terms of the fully executed version of that
certain Stock Purchase Agreement and related documents dated as of May
30, 1990, by Employer with the Investors (the terms "Affiliates,"
"Permitted Transferee" and "Persons" shall have the meanings given to
them in such Stock Purchase Agreement); or
(C) the announcement of a tender offer by any person or entity (other than
a Company Entity) for 20% or more of Employer's voting capital stock
then issued and outstanding, which tender offer has been approved by
the Board of Governors of the Federal Reserve System and has not been
approved by the Board, a majority of the members of which are
Continuing Directors (as hereinafter defined), and recommended to the
shareholders of Employer, or
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(D) the Continuing Directors (as hereinafter defined) cease to constitute
a majority of Employer's Board of Directors; or
(E) the shareholders of Employer approve (x) any consolidation or merger
of Employer in which Employer is not the continuing or surviving
corporation or pursuant to which shares of Employer stock would be
converted into cash, securities or other property, other than a merger
of Employer in which shareholders immediately prior to the merger have
the same proportionate ownership of stock of the surviving corporation
immediately after the merger; (y) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of Employer; or (z) any plan of
liquidation or dissolution of Employer.
For purposes of this definition, "Continuing Director" shall mean any
person who is a member of the Board of Directors of Employer, while such
person is a member of the Board of Directors, who is not an Acquiring
Person (as defined below) or an Affiliate or Associate (as defined below)
of an Acquiring Person, or a representative of an Acquiring Person or of
any such Affiliate or Associate, and who (x) was a member of the Board of
Directors on the date of this Agreement as first written above or (y)
subsequently becomes a member of the Board of Directors, if such person's
initial nomination for election or initial election to the Board of
Directors is recommended or approved by a majority of the Continuing
Directors. For purposes of this definition, "Acquiring Person" shall mean
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who or which, together with all Affiliates and Associates of
such person, is the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities
of Employer representing 20% or more of the combined voting power of
Employer's then outstanding securities, but shall not include the Investors
or any Company Entity; and "Affiliate" and "Associate" shall have their
respective meanings ascribed to such terms in Rule 12b-2 promulgated under
the Exchange Act.
8.14 Code Section 162(m). Notwithstanding any other provision of this
Agreement to the contrary, to the extent that Employer's tax deduction for
remuneration in respect of the payment of any amount under Sections 5.02, 5.05
or 8.02 of this Agreement would be disallowed under Code Section 162(m) by
reason of the fact that Executive's applicable employee remuneration, as defined
in Code Section 162(m)(4), either exceeds or, if such amount were paid, would
exceed the $1,000,000 limitation in Code Section 162(m)(1), Employer may, in its
sole discretion, defer the payment of such amount, but only to the extent that,
and for so long as, Employer's tax deduction in respect of the payment thereof
would be so disallowed under Code Section 162(m); provided that no payment may
be deferred beyond three months after the end of Employer's fiscal year in which
Executive's termination of
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employment occurs, and Employer may accelerate the payment of previously
deferred amounts if it determines that the amount of the tax deduction that
would be disallowed is not significant. Amounts which are deferred under this
Section 8.14 will be credited with interest at a rate determined by Employer
from time to time, but in no event less than the long-term applicable federal
rate under Code Section 1274(d) in effect from time to time.
IN WITNESS WHEREOF, Executive and Employer have executed this
Agreement as of the date set forth in the first paragraph hereof.
FIRST BANK SYSTEM, INC.
By /s/ R. H. Sayre
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Its EVP of Human Resources
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/s/ John F. Grundhofer
-----------------------
John F. Grundhofer
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