EXHIBIT 10.6
EMPLOYMENT AGREEMENT
AGREEMENT by and between Firstar Corporation (f/k/a Firstar
(WI) Corporation), a Wisconsin corporation (the "Company") and Jerry A.
Grundhofer (the "Executive"), dated as of the 20th day of November,
1998.
1. Certain Definitions. The "Effective Date" shall mean
the first date after the date hereof 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 terminated prior to the date
on which the Change of Control occurs, 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.
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 35% 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 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 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 acquisition 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 Incum-
bent Board shall be considered as though such individual were 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; 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 outstanding 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 Combination (including,
without limitation, a corporation which 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 Out-
standing Company Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 35% 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 (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 an initial period commencing on the date hereof
and ending on the third annual anniversary of such date (the "Employment
Period"). On the first annual anniversary of the date of this Agreement
and on each annual anniversary of the date of this Agreement thereafter,
the Employment Period shall be extended automatically for an additional
one-year period unless either party gives written notice to the other
(the "Non-Renewal Notice") not less than 30 days prior to any such
anniversary that the Employment Period shall not thereafter renew or be
extended automatically, in which case the Employment Period shall expire
on the annual anniversary of the date of this Agreement that is the
scheduled date of expiration of the Employment Period on the date such
Non-Renewal Notice is given; provided, however, that the Employment
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Period shall not extend beyond, and shall in all events expire on the
day immediately following the date of the Executive's 65th birthday.
Notwithstanding the above, upon a Change of Control, if the Executive is
still employed by the Company, the Employment Period shall be extended
until the third anniversary of the Effective Date, or if the Executive
is still employed by the Company but the Employment Period has
terminated prior to the Change of Control, a new three year Employment
Period shall commence upon a Change of Control; provided, however, that
the Employment Period shall not extend beyond, and shall in all events
expire on the day immediately following the date of the Executive's 65th
birthday.
4. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, the Executive shall be President and Chief
Executive Officer of the Company and, in such capacity, the Executive
shall be responsible for the strategic direction and operations of the
Company, and shall serve on the Company's Board of Directors and shall
have such other duties, responsibilities and authority as shall be
consistent therewith. The Executive shall also be Chairman, President
and Chief Executive Officer of Star Bank, National Association and
Firstar Bank, Milwaukee, N.A. and shall serve on their respective Boards
of Directors. In addition to the above, the Executive shall become
Chairman of the Company upon the earlier of June 1, 2000 or termination
of Mr. Roger Fitzsimonds' employment with the Company.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote full attention and time during normal
business hours to the business and affairs of the Company and 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.
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(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of $800,000 until December 31, 1998 and $850,000 commencing
January 1, 1999 and thereafter until adjusted following any review of
the Annual Base Salary as hereinafter provided. The Annual Base Salary
shall be paid in equal monthly installments. During the Employment
Period, the Annual Base Salary shall be reviewed at least every 12
months. 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 below $850,000 or after any such
increase and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased.
(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") pursuant to the
Company's annual incentive plans, pro rated in the case of a bonus for
any year during which the Executive was employed for less than 12
months; provided, however, after the Effective Date, the Annual Bonus
shall be no less than 100% of the Executive's Annual Base Salary (the
"Minimum 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. For the 1999 fiscal
year, the Executive's target bonus for achieving target performance
levels under the Company's 1999 Executive Bonus Plan shall be 100% of
his 1999 Annual Base Salary, and his maximum bonus under such plan shall
be 200% of his 1999 Annual Base Salary. During the Employment Period,
the target and maximum Annual Bonus levels shall be reviewed at least
every 12 months. Any increase in such levels shall not serve to limit
or reduce any other obligation to the Executive under this Agreement and
the target and maximum Annual Bonus levels shall not be lowered after
any such increase and shall not be less than 100% and 200% of the
Executive's Annual Base Salary, respectively.
(iii) Stock Awards. On the date hereof, as part of
the Executive's compensation for the 1999 fiscal year, the Executive and
the Company shall enter into a separate written agreement providing for
the immediate grant to the Executive of a nonqualified stock option to
acquire 180,000 shares of the Company's common stock pursuant to the
terms of the Company's Stock Incentive Plan (the "Initial Option"), and
further providing that the Initial Option generally shall vest and
become exercisable in four equal annual installments on each of the
first four anniversaries of its date of grant, all as more particularly
provided in such agreement. On the date hereof, the Executive and the
Company shall enter into a separate written agreement providing for the
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immediate grant to the Executive of an additional nonqualified stock
option to acquire 200,000 shares of the Company's common stock pursuant
to the terms of the Company's Stock Incentive Plan (the "Performance
Option"), and further providing that the Performance Option generally
shall vest and become exercisable upon the fifth anniversary of the date
of grant of the Performance Option, all as more particularly provided in
such agreement. The agreement granting and governing the Initial Option
and the agreement granting and governing the Performance Option shall
also include provisions for accelerated vesting in the event of (1)
Executive's death or Disability, (2) any termination of Executive's
employment other than a termination by the Company for Cause or a
termination by Executive without Good Reason, or (3) a Change of
Control.
For each of the 2000 fiscal year and the 2001 fiscal year of
the Employment Period, the Executive shall be granted additional stock
incentive awards so that Executive's total direct compensation (Annual
Base Salary plus target Annual Bonus plus long-term incentives) is
maintained at approximately the 75th percentile of the total direct
compensation of chief executive officers at peer financial institutions
(which peers shall be selected based on comparable market capitalization
or comparable asset size or both, as determined by the Company's
independent compensation consultants and accepted by the Company's Board
of Directors). In each year of the Employment Period subsequent to the
2001 fiscal year, the Board of Directors shall have the discretion to
grant additional stock incentive awards commensurate with its assessment
of the Executive's and the Company's performance and prevailing levels
of market compensation.
(iv) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be eligible 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. The Executive shall participate in, and
shall be fully vested in his benefit under the Company's Non-Qualified
Retirement Plan (the "NQRP") under which the Executive shall be given
service credit for his service with BankAmerica Corporation, Security
Pacific Corporation and Wells Fargo N.A. (together, the "Prior
Employers"), provided that the Company's obligation under the NQRP shall
be offset by any pension benefits to which the Executive is entitled
from the Prior Employers, provided further that after the Effective Date
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 affiliated companies for the Executive under such plans, practices,
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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,
after taking into account the difference in age between the Executive
and the peer executives. For purposes of calculating the Executive's
supplemental pension benefit under the Company's NQRP, the amount of the
Annual Bonus used in computing final average pay under such plan shall
be the greater of (i) the Executive's target bonus under the Company's
Executive Bonus Plan, or (ii) the Annual Bonus actually earned by the
Executive.
(v) 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, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable gener-
ally to other peer executives of the Company and its affiliated
companies, provided that after the Effective Date 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. For
purposes of determining eligibility for retiree medical benefits
provided by the Company, the Executive shall be treated as though he is
at least age 55 and has at least 10 years of service with the Company.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by the Executive.
(vii) 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 a monthly car allowance of $1,000, net to the Executive after giving
effect to (x) all income taxes payable by Executive that are
attributable to such allowance, and (y) any benefits that result from
the deductibility by the Executive of any such taxes.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to four weeks of paid vacation.
5. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (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 Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (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 illegal
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" 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 authority given
pursuant to a resolution duly adopted by the Board 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 a majority 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 subparagraph (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 with the Executive's position (including
status, offices, titles and reporting requirements), au-
thority, 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;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement;
(iii) the Company's requiring the Executive to be
based at any office or location after the Effective Date
other than where the Executive was located immediately prior
to the Effective Date other than in connection with a change
of the Company's headquarters if the Executive is relocated
to such headquarters, or, after the Effective Date, 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.
Notwithstanding the above, "Good Reason" shall exclude an isolated,
insubstantial and inadvertent action or failure to act not taken or
occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period immediately following
the first anniversary 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 Minimum 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. if the Date of Termination is on or after
the Effective Date, an amount equal to the difference
between (a) the actuarial equivalent of the benefit
(utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's
qualified defined benefit retirement plan (the
"Retirement Plan") immediately prior to the Effective
Date) under the Retirement Plan 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 all accrued
benefits are fully vested, 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),
and (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 Ter-
mination;
(ii) all stock options, restricted stock and other
stock-based compensation shall become immediately exer-
cisable or vested, as the case may be;
(iii) 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)(v) 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 wel-
fare 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;
(iv) 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 his sole discretion; and
(v) to the extent not theretofore paid or provided,
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 entitled 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 terminated by
reason of the Executive's death during the Employment 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 after the Effective Date, 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 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 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 after
the Effective Date, 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; 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 Obligations 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. Upon a termination of the Executive's employment for Cause
by the Company or by the Executive without Good Reason, the Executive
shall forfeit all stock options that are not vested on 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 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 affiliated 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
Executive about the amount of any payment pursuant to this Agreement),
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"); provided that the Company
shall have no such obligation if it is determined by a court that the
Company was not in breach of the Agreement and that the Executive's
claims were not made in good faith.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary not-
withstanding, 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 and any benefits that result from the
deductibility by the Executive of such taxes (including, in each case,
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.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
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 KPMG Peat Marwick or such other
certified public accounting 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 accounting firm to
make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting 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 Account-
ing 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
apprise 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 directly 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 ex-
penses. 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 option, 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
Executive 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(a) or 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; Covenant Not to Compete.
(a) 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 obtained 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 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 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.
(b) Covenant Not to Compete.
A. Executive agrees that for a period of one (1)
year following his termination of employment with the
Company for Cause or other than Good Reason, he will not in
any way engage in, represent, furnish consulting services
to, be employed by, or have any interest in any "Banking
Institution" (as hereinafter defined) that has headquarters
in Ohio or Wisconsin or states contiguous to Ohio or
Wisconsin. Further, Executive shall not (1) induce or
attempt to induce any person or entity which is a customer
of the Company or any of its affiliates as of the date of
termination of Executive's employment to cease or reduce
doing business with the Company or any of its affiliates, or
(2) solicit or endeavor to cause any employee of the Company
or its affiliates to leave the employ of the Company or any
of its affiliates. Notwithstanding the foregoing, the
Executive shall not be prevented from owning up to three
percent (3%) of the outstanding stock of any publicly traded
company which is a Banking Institution.
B. As used herein, the term "Banking Institution"
means any national or state chartered bank, bank holding
company, any other institution that engages as its principal
activity in taking deposits or making loans, or any
affiliates of any such institutions.
C. Executive agrees that this covenant is
reasonable with respect to its duration, geographic area and
scope, and acknowledges that compliance with Section 10(b)
is necessary to protect the business and goodwill of the
Company.
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 Ohio, 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. 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:
Jerry A. Grundhofer
c/o Wachtell, Lipton, Rosen & Katz
51 W. 52 Street
New York, New York 10019
Attention: Adam D. Chinn, Esq.
If to the Company:
Firstar Corporation
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Director-Human Resources
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 off 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 hereof or any other 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.
13. No Prohibited Payments. Notwithstanding anything in
this Agreement to the contrary, the Company shall not make any payment
to the Executive which, according to the opinion of the Company's
outside counsel, would violate Section 2523(k) of the Comprehensive
Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990
(codified at 12 U.S.C. 1828(k)), or any rules or regulations
promulgated thereunder.
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.
JERRY A. GRUNDHOFER
/s/ Jerry A. Grundhofer
FIRSTAR CORPORATION
By /s/ Laurance L. Browning, Jr.
---------------------------------------
Laurance L. Browning, Jr.
Chairman, Compensation Committee
By /s/ Jennie P. Carlson
---------------------------------------
Jennie P. Carlson
Senior Vice President, General
Counsel, and Secretary