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Exhibit 10.18
(Form 10-K)
CHANGE IN CONTROL AGREEMENT
This
Change in Control Agreement ("Agreement") is made by and
between
Citizens Banking Corporation, a Michigan
corporation ("Corporation"), and
Randall J. Peterson ("Executive").
The
Corporation anticipates the valuable services that the Executive
will
render on behalf of the Corporation and its
subsidiary banks and is desirous of
having some assurance that the Executive
will continue as an employee and that,
in the event of a possible Change in
Control of the Corporation, the Executive
will be able to perform his duties without
undue concern for the Executive's
personal financial well-being; and
The
Executive is willing to serve as an employee of the Corporation
but
desires assurance that in the event of a
Change in Control of the Corporation,
he will continue to have the responsibility
and status he has earned.
Accordingly, the Corporation and the Executive agree as
follows:
1. In
order to protect the Executive against the possible consequences
of
a Change in Control of the Corporation, as
defined in paragraph 2 of this
Agreement, and thereby to induce the
Executive to serve as an officer of the
Corporation or a subsidiary bank the
Corporation agrees that if (a) there is
such a Change in Control of the Corporation
and (b) the Executive's employment
with the Corporation or a subsidiary bank
is terminated under the circumstances
described in paragraph 3 of this Agreement,
then:
A. The
Corporation shall pay the Executive a lump sum amount in cash
equal
to the sum of (i) three times the
Executive's annual base salary immediately
prior to the Change in Control (or if
higher, the annual base salary on the date
the Executive's employment is terminated)
and (ii) three times the greater of
(x) the anticipated bonus amount under the
Citizens Banking Corporation
Management Incentive Plan to be earned in
accordance with the plan in the year
in which the termination occurs or (y) the
highest bonus paid to the Executive
in the last three full calendar years of
such employment. The applicable amount
shall be payable within 60 days following
the date of the Executive's
termination of employment.
B. The
Executive shall continue to be covered, at the Corporation's
cost,
by the medical, dental and life insurance
benefit plans that are in effect on
the date of his termination and that cover
executive employees, for a period of
thirty-six (36) months after his
termination of employment; provided, however,
that if during such time period the
Executive should enter into other employment
providing comparable benefits, his
participation in such plans of the
Corporation shall cease to the extent of
his coverage by his new employer's
plans. Any such non-cash benefit that is
tied to compensation shall be based on
the Executive's annual compensation
averaged over the same period as applicable
under paragraph A of this Agreement.
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C. If the
Executive was furnished with a club membership, that membership
will be transferred by the Corporation to
the Executive at no cost to the
Executive, who immediately following the
transfer shall become subject to
monthly dues charges of the club.
D. All
stock options and restricted stock previously granted by the
Corporation to the Executive, whether or
not then exercisable, shall become
immediately vested and exercisable.
E. For a
period of one year following termination of the Executive's
employment, the Executive shall be entitled
to outplacement services provided by
an outplacement service provider designated
by the Corporation. The cost of
providing the outplacement services shall
be borne solely by the Corporation,
and shall be equal to the lesser of (i) 10%
of the Executive's annual base
salary immediately prior to the Change in
Control (or, if higher, the
Executive's annual base salary as of the
date of termination of the Executive's
employment) and (ii) $20,000.
F. If the
payment of any of the foregoing amounts or benefits (when added
to any other payments or benefits provided
to the Executive in the nature of
compensation) will result in the payment of
an excess parachute payment as that
term is defined in Section 280G of the
Internal Revenue Code of 1986 ("Code"),
then in such event, the Corporation shall
pay the Executive an additional amount
for each calendar year in which an excess
parachute payment is received by the
Executive (the "Gross-Up Payment"). The
Gross-Up Payment is intended to cover
the Executive's liability for any parachute
tax under Code Section 4999 on such
excess parachute payment, as well as
federal and state income taxes and
parachute tax on the additional amount, and
shall be computed as follows:
A=Pt/(1 - T - t), where -
A is
the additional amount for any calendar year;
P is
the amount of the excess parachute payment for the calendar
year in excess of the allocable base amount as defined in Code
Section 28OG(b)(3);
T is
the effective marginal rate of federal and state income tax
applicable to the Executive for the calendar year; and
t is
the rate of parachute tax under Code Section 4999.
The effective marginal rate of federal and state income tax shall
be
computed as follows:
T =
F + S(l - 0.8F) + m, where -
F is
the highest marginal rate of federal income tax applicable
to the Executive for the calendar year; and
S is
the highest aggregate marginal rate of state income tax
applicable to the Executive for the calendar year in the state
or states and municipalities to
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which he is then required to pay income taxes as a result of
his employment by the Corporation; and
m is
the employee's portion of the Medicare tax, currently
1.45%.
Payment of the Gross-Up Payment shall be made to the Executive on
or
before December 31 of each calendar year for which an excess
parachute payment is received by the Executive.
G. Subject
to the provisions of paragraph G, all determinations required
to be made under these paragraphs E, F and
G, 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
Ernst & Young, LLP or such other
certified public accounting firm reasonably
acceptable to the Corporation as may be
designated by the Executive (the
"Accounting Firm") which shall provide
detailed supporting calculations both to
the Corporation and the Executive within 15
business days of the receipt of
notice from the Executive that there has
been an excess parachute payment, or
such earlier time as is requested by the
Corporation. All fees and expenses of
the Accounting Firm shall be borne solely
by the Corporation. Any determination
by the Accounting Firm shall be binding
upon the Corporation 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 Corporation
should have been made ("Underpayment"),
consistent with the calculations
required to be made hereunder. In the event
that the Corporation exhausts its
remedies pursuant to paragraph G 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 Corporation to or for
the benefit of the Executive.
H. The
Executive shall notify the Corporation in writing of any claim
by
the Internal Revenue Service that, if
successful, would require the payment by
the Corporation 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 Corporation 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 Corporation (or
such shorter period ending on the date that
any payment of taxes with respect to
such claim is due). If the Corporation
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 Corporation
any information reasonably requested
by the Corporation relating to such claim,
(ii) take such action in connection
with contesting such claim as the
Corporation 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 Corporation, (iii) cooperate with the
Corporation in good faith in order
effectively to contest such claim, and (iv)
permit the Corporation to
participate in any proceedings relating to
such claim; provided, however, that
the Corporation 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
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representation and payment of costs and
expenses. Without limitation on the
foregoing provisions of this subparagraph
H, the Corporation 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 o
