SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of
October, 1996 by and between Commerce Bancshares, Inc., a
Missouri corporation (the "Company") and
(the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has approved
the Company entering into severance agreements with certain key
executives of the Company; and
WHEREAS, the Executive is a key executive of the Company;
and
WHEREAS, the Company desires assurance that it will have the
continued dedication of the Executive and the availability of his
advice and counsel notwithstanding any possibility or occurrence
of a Change in Control of the Company:
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the
receipt of which is acknowledged, the parties hereto agree as
follows:
1. Certain Definitions.
a. Base Salary. "Base Salary" means the salary of
record paid to Executive as annual salary, excluding amounts
received under incentive or other bonus plans, whether or
not deferred.
b. "Cause" means conduct of Executive which is
knowingly fraudulent, deliberately dishonest or willful
misconduct.
c. Change in Control. "Change in Control" shall mean
the happening of any of the following events:
i. any Person is or becomes the "beneficial
owner" (within the meaning of Rule 13d-3 promulgated
under Section 13 of the Securities Exchange Act of 1934
(the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing 20% or more of either the then
outstanding shares of common stock of the Company or
the combined voting power of the Company's then
outstanding securities; or
ii. the following individuals cease for any
reason to constitute a majority of the number of
directors then serving: individuals who, on the
Effective Date, as defined in Section 3 herein,
constitute the Board and any new director (other than a
director whose initial assumption of office is in
connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board
or nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office
who either were directors on the Effective Date or
whose appointment, election or nomination for election
was previously so approved; or
iii. there is consummated a merger or
consolidation of the Company (or any direct or indirect
subsidiary of the Company) with any other corporation,
other than (i) a merger or consolidation which would
result in the voting securities of the Company
outstanding immediately prior to such merger or
consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 80% of
the combined voting power of the voting securities of
the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or
becomes the beneficial owner, directly or indirectly,
of securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or its
subsidiaries other than in connection with the
acquisition by the Company or its subsidiaries of a
business) representing twenty percent (20%) or more of
either the then outstanding shares of common stock of
the Company or the combined voting power of the
Company's then outstanding securities; or
iv. the stockholders of the Company approve a
plan of complete liquidation or dissolution of the
Company or there is consummated a sale or disposition
by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by
the Company of all or substantially all of the
Company's assets to an entity at least eighty percent
(80%) of the combined voting power of the voting
securities of which are owned by Persons in
substantially the same proportions as their ownership
of the Company immediately prior to such sale.
For purposes of the above definition of Change in
Control, "Person" shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act, as
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modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
d. Code. "Code" means the Internal Revenue Code of
1986, as amended.
e. Disability. "Disability" means a physical or
mental condition of Executive which totally and permanently
prevents him from engaging in any occupation or employment
for remuneration or profit except for the purpose of
rehabilitation not incompatible with a finding of total and
permanent disability. The determination as to whether
Executive is totally and permanently disabled shall be made
based solely on evidence that he is eligible for disability
payments under an employee-sponsored long-term disability
program, if any such program is in effect.
f. Effective Date of Termination. "Effective Date of
Termination" means the date on which a Qualifying
Termination occurs which triggers the payment of Severance
Benefits hereunder.
g. Good Reason. "Good Reason" means, without
Executive's express written consent, the occurrence of any
one or more of the following:
i. a determination by Executive, in his
reasonable judgment, that his duties have been
materially reduced in terms of authority and
responsibility as an employee of the Company in
comparison to Executive's duties immediately prior to
the occurrence of a Change in Control;
ii. the Company's requiring Executive to be based
at a location which is at least thirty-five (35) miles
further from Executive's primary residence at the time
such requirement is imposed than is such residence from
the Company's office at which Executive is primarily
rendering services at such time, except for required
travel on the Company's business to an extent
substantially consistent with Executive's business
obligations in effect immediately prior to the
occurrence of a Change in Control;
iii. a reduction by the Company in Executive's
Base Salary as in effect 12 months before a Change in
Control; or
iv. a material reduction in Executive's level of
participation in any of the Company's short- and/or
long-term incentive compensation plans, or
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employee benefit or retirement plans, policies,
practices, or arrangements in which Executive
participated immediately prior to the occurrence of a
Change in Control; provided, however, that reductions
in the levels of participation in any such plans shall
not be deemed to be "Good Reason" if Executive's
reduced level of participation in each such program
remains substantially consistent with the average level
of participation of other executives who have positions
commensurate with Executive's position.
h. Retirement. "Retirement" means the Executive's
"Normal Retirement Date," as such term is defined in the
Company's tax-qualified, defined benefit plan (or any
successor or substitute plan or plans of the Company put
into effect prior to a Change in Control).
i. Tax Rate. "Tax Rate" means Executive's effective
tax rate based upon the combined federal and state and local
income, earnings, Medicare and any other tax rates
applicable to Executive, net of the reduction in federal
income taxes which could be obtained by deduction of such
state and local taxes.
j. Qualifying Termination. "Qualifying Termination"
shall have the meaning ascribed to it in Section 5 herein.
2. Right to Terminate. The Company or Executive may
terminate Executive's employment at any time for any reason. The
Company is obligated to provide the benefits hereinafter
specified only if such benefits are due in accordance with the
terms hereof.
3. Term of Agreement. This Agreement shall commence on
the date hereof (the "Effective Date") and shall continue until
the date that is the third anniversary of the Effective Date;
provided, however, that the term of this Agreement shall
automatically be extended for one additional year on each
anniversary, unless at least 30 days prior to such anniversary,
the Company, with approval of the Board of Directors, or
Executive shall have given notice that this Agreement shall not
be extended; and provided that, notwithstanding the delivery of
any such notice, this Agreement shall continue in effect for a
period of thirty-six (36) months after a Change in Control of the
Company, as defined in Section 1 herein, if such Change in
Control shall have occurred during the term of this Agreement, as
it may be extended; and provided that in any event this Agreement
shall expire upon the Executive's sixty-fifth (65th) birthday.
4. Right to Severance Benefits. Executive shall be
entitled to receive from the Company Severance Benefits, as
described in Section 6 herein, upon the occurrence of a
Qualifying Termination, as defined in Section 5 herein.
Executive shall not be entitled to receive Severance
Benefits, and the Company shall have no obligation under this
Agreement, if his employment is terminated under circumstances
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that do not constitute a Qualifying Termination, including, but
not limited to, Disability, Retirement, death, termination for
Cause or termination by Executive other than for Good Reason.
5. Qualifying Termination. "Qualifying Termination" means
the occurrence of any one or more of the following events:
a. within twelve (12) months prior to a Change in
Control, an involuntary termination of Executive's
employment by the Company that is in contemplation of, and
caused by, such Change in Control, such Change in Control is
pending at the time of such termination and such Change in
Control actually occurs; provided that such termination
shall not be a Qualifying Termination if circumstances
constituting Cause exist;
b. within three (3) years following a Change in
Control, an involuntary termination of Executive's
employment by the Company for reasons other than Cause, the
failure or refusal by a successor company to assume the
Company's obligations under this Agreement, as required by
Section 14 herein, or a breach by the Company or any
successor company of any of the provisions of this
Agreement;
c. a voluntary termination of employment by Executive
for Good Reason within three (3) years following a Change in
Control; or
d. a voluntary termination of employment by Executive
for any reason within the period beginning on the first
anniversary of a Change in Control and ending thirty (30)
days after such date.
6. Description of Severance Benefits. In the event that
Executive becomes entitled to receive Severance Benefits, as
provided in Section 4 herein, the Company shall pay to Executive
and provide him with the following:
a. a payment equal to the product of: (i) the lesser
of -- (a) [_____] or (b) the quotient of the number of
months following termination until the Executive attains age
65, divided by twelve; multiplied by (ii) the sum of -- (a)
the Executive's Base Salary in effect on the date that is
12-months prior to the Change in Control and (b) Executive's
average bonus for the three completed fiscal years of the
Company preceding the fiscal year in which the Change in
Control occurs;
b. a payment equal to the greater of -- (a)
Executive's actual bonus for the fiscal year of the Company
preceding the fiscal year in which the Change in Control
occurs or (b) Executive's target bonus for the fiscal year
of the Company in which the Effective Date of Termination
occurs, calculated assuming that both the Company and
Executive achieved the performance objectives required to
earn the target bonus, and
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prorated based on the number of days elapsed in the
Company's fiscal year during which his employment
terminates;
c. for the lesser of -- (i) [____] years following
the Effective Date of Termination; or (ii) until both
Executive and his spouse (if covered by any of the following
plans) are both sixty-five (65), all insured and
self-insured medical, life insurance and disability benefit
plans in which Executive participated as of the earlier of
-- (a) immediately prior to the Effective Date of
Termination; or (b) immediately prior to any change to such
benefits that could have constituted Good Reason to
terminate, shall continue to be made available to Executive
and his dependents, at a cost to Executive and his
dependents equal to such rates paid from time to time by
active Company employees whose position is similarly
situated to the position held by Executive immediately prior
to the earliest event that could have constituted Good
Reason to terminate. In the event that Executive's
participation in any such plan is barred or the cost thereof
or benefits thereunder would be taxable, the Company, for no
additional cost to Executive, shall arrange to have issued
for the benefit of Executive and his dependents individual
policies of insurance providing benefits substantially
similar to those which Executive otherwise would have been
entitled to receive under such plans if such benefits or the
cost thereof were not taxable or, if such insurance is not
available at a reasonable cost to the Company, the Company
shall otherwise provide Executive and his dependents with
benefits that, after taxes calculated at the Tax Rate, are
equivalent to the benefits Executive otherwise would have
been entitled to receive under such plans if such benefits
or the cost thereof were not taxable;
d. the opportunity to borrow from the Company or an
affiliate thereof, for an interest rate set by Executive
(which may be zero), an amount equal to the sum of the
exercise price of Executive's outstanding stock options and
taxes resulting from such exercise and the vesting of
Executive's restricted stock, with repayment required upon
the passage of 180 consecutive days of Executive being able
to sell stock acquired by exercise of such options and being
able to sell vested, restricted stock, in both cases without
any restriction; and
e. reimbursement for the costs, if any, of all
outplacement services obtained by Executive following a
Qualifying Termination.
7. Notice of Termination. Any Qualifying Termination
shall be communicated by Notice of Termination. For purposes of
this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated.
8. Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 6(a) and 6(b) herein shall be paid
in cash to Executive in a single lump sum as soon
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as practicable following the Effective Date of Termination, but
in no event beyond three (3) days from such date. The loan
option described in Section 6(d) shall be provided to Executive
within three (3) days of demand for such loan by Executive.
9. Offset of Severance Benefits. The Severance Benefits
provided Executive under this Agreement shall be reduced by any
other severance benefits or damages for termination paid or owed
to Executive by the Company. However, it is expressly agreed
that payments or benefits to Executive under any retirement,
supplemental retirement, deferred compensation, pension, stock
option, restricted stock, incentive or bonus plan or arrangement
shall not be offset against or reduce in any way any payments or
benefits to which Executive is entitled under this Agreement.
10. Tax Issues.
a. All payments to be made to Executive under this
Agreement will be subject to required withholding of
federal, state and local income and employment taxes.
b. In the event that Executive becomes entitled to
any payments under this Agreement, then if any such payments
or any other compensation, benefit or other amount from the
Company for the benefit of Executive ("Parachute Payments")
will be subject to the tax imposed by Section 4999 of the
Code (including any applicable interest and penalties, the
"Excise Tax"), no Parachute Payment shall be reduced (except
for required tax withholdings) and the Company shall pay to
Executive by the earlier of the date such Excise Tax is
withheld from payments made to Executive or the date such
Excise Tax becomes due and payable by Executive, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by Executive, after deduction of any Excise
Tax on the Parachute Payments and taxes based upon the Tax
Rate and Excise Tax upon the payment provided for by this
Section 10(b), shall be equal to the amount the Executive
would have received if no Excise Tax had been imposed. The
Company shall determine in good faith whether any of the
Parachute Payments are subject to the Excise Tax and the
amount of any Excise Tax and shall notify Executive of its
determination. The Company and Executive shall file all tax
returns and reports regarding such Parachute Payments in a
manner consistent with the Company's reasonable good faith
determination. For purposes of determining the amount of
the Gross-Up Payment, Executive shall be deemed to pay taxes
at the Tax Rate applicable at the time of the Gross-Up
Payment. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account
hereunder at the time a Parachute Payment is made, Executive
shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at
the rate provided in Section 1274(d)(1) of the Code or other
applicable provision of the Code but only to the extent that
such interest is paid to Executive. In
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the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time a Parachute
Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an
additional gross-up payment in respect of such excess (plus
any interest or penalties payable in respect of such excess)
at the time that the amount of such excess is finally
determined. The Company shall reimburse Executive for all
reasonable fees, expenses, and costs related to determining
the reasonableness of any Company position in connection
with this paragraph, preparation of any tax return or other
filing that is affected by any matter addressed in this
paragraph and any audit, litigation or other proceeding that
is affected by any matter addressed in this paragraph.
c. Notwithstanding anything in this Agreement to the
contrary, if any portion of any payments to Executive by the
Company under this Agreement and any other present or future
plan of the Company or other present or future agreement
between Executive and the Company would not be deductible by
the Company for federal income tax purposes by reason of
application of Section 162(m) of the Code, then payment of
that portion to Executive shall be deferred until the
earliest date upon which payment thereof can be made to
Executive without being non-deductible pursuant to Section
162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred
amount at 120% of the applicable federal rate provided for
in Section 1274(d)(2) of the Code.
11. The Company's Payment Obligation.
a. The Company's obligation to make the payments and
the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which the
Company may have against Executive or anyone else. All
amounts payable by the Company hereunder shall be paid
without notice or demand. Each and every payment made
hereunder by the Company shall be final, and the Company
shall not seek to recover all or any part of such payment
from Executive or from whomsoever may be entitled thereto,
for any reasons whatsoever.
b. This Agreement establishes and vests in Executive
a contractual right to the benefits to which he is entitled
hereunder. However, nothing herein contained shall require
or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
12. No Obligation to Mitigate. Executive shall not be
required to mitigate the damages or the amount of any payment
provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided under
this Agreement
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be reduced by any compensation earned by Executive as a result of
employment by another employer after any Qualifying Termination,
or otherwise.
13. Other Rights. Except as specifically provided herein,
the provisions of this Agreement, and any payment provided
hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish Executive's existing rights or rights which
would accrue solely as a result of the passage of time, under any
benefit or incentive plan, employment arrangement or other
contact, plan or arrangement of the Company. As soon as
practicable following any Qualifying Termination, Executive shall
receive cash payment(s) for: (a) Executive's earned but unpaid
salary as of the Employment Termination Date; (b) the value of
Executive's earned but unused vacation time as of the Employment
Termination Date in accordance with the current Company policy,
and (c) the value of Executive's deferred compensation account(s)
under any Company or deferred compensation plan in accordance
with Executive's then current payment election.
14. Successors; Binding Agreement.
a. This Agreement and the rights and obligations of
the parties hereto shall bind and inure to the benefit of
any successor or successors of the Company by way of
reorganization, merger, acquisition or consolidation, and
any assignee of all or substantially all of its business and
properties.
b. This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive
dies while any amount is still payable to Executive
hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee
or, if there be no such designee, to Executive's estate.
15. No Assignment. No benefit hereunder shall be subject
to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void.
16. Survival. The respective obligations of, and benefits
afforded to, the Company and Executive as provided in Sections
10, 14, 19 and 20 of this Agreement shall survive termination of
this Agreement.
17. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction, arbitrator or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in
force and effect and shall in no way be affected, impaired or
invalidated.
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18. Consultation with Counsel. Executive acknowledges (a)
that he has been given the opportunity to consult with counsel of
his own choice concerning this Agreement, and (b) that he has
read and understands the Agreement, is fully aware of its legal
effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
19. Arbitration. Executive shall have the option to elect
(in lieu of litigation) to have any dispute or controversy
arising under or in connection with this Agreement settled by
arbitration, conducted by a panel of three arbitrators in a
location selected by Executive within fifty (50) miles from the
location of his job with the Company, in accordance with the
rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrators' award in any court
having jurisdiction.
20. Attorney's Fees. Company shall pay Executive's
attorney's fees and costs incurred in connection with any dispute
concerning this Agreement unless each and every disputed claim by
the Executive is found to be wholly frivolous in arbitration or
by a court of competent jurisdiction.
21. Amendments; Waivers. This Agreement may not be
modified, amended or terminated except by an instrument in
writing, signed by Executive and by a duly authorized
representative of the Company other than the Executive. By an
instrument in writing similarly executed, either party may waive
compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply
with or perform, provided, however, that such waiver shall not
operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in
exercising any right, remedy or power hereunder shall operate as
a waiver thereof or as a waiver of any other right, remedy or
power, nor shall any single or partial exercise of any right,
remedy or power hereunder preclude any other or further exercise
of any other right, remedy, or other power provided herein or by
law or in equity.
22. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
23. Descriptive Headings. Descriptive headings of the
several sections and subsections of this Agreement are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
24. Integration. The parties understand and agree that the
preceding sections recite the sole consideration for this
Agreement; that no representation or promise has been made by
Company or Executive concerning the subject matter of this
Agreement, except as expressly set forth in this Agreement; and
that all agreements and understandings between the parties
concerning the subject matter of this Agreement are embodied and
expressed in this Agreement. This Agreement shall supersede all
prior agreements and understandings among
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the parties whether written or oral, express or implied, with
respect to the employment, termination and benefits of Employee
in the event of a Qualifying Termination, including without
limitation, any employment-related agreement or benefit plan,
except to the extent that the provisions of any such agreement or
plan have been expressly referred to in this Agreement as having
continued effect.
25. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of Missouri.
26. Notices. All notices hereunder shall be in writing,
and shall be delivered in person, by facsimile or by certified
mail-return receipt requested. Notices shall be delivered as
follows:
If to the Company:
Commerce Bancshares, Inc.
0000 Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: President
If to the Employee:
[NAME]
[ADDRESS]
Any party may change its address by notice giving notice to
the other party of a new address in accordance with the foregoing
provisions.
27. Employment Rights. Nothing contained in this Agreement
or any act done pursuant hereto shall be construed as giving any
person any legal or equitable right against the Company, unless
specifically provided herein, or as giving any person a right to
be retained in the employ of the Company. Executive shall remain
subject to assignment, reassignment, promotion, transfer, layoff,
reduction, suspension, and discharge to the same extent as if
this Agreement had never been executed.
28. Acknowledgment. Executive hereby acknowledges that he
shall have no rights hereunder unless and until all circumstances
constituting a Qualifying Termination shall have occurred.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
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PAGE>
COMMERCE BANCSHARES, INC.
By:
Name:
THIS CONTRACT CONTAINS A Title:
BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE
PARTIES [EXECUTIVE]
Name
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