Exhibit 10.4
BANKNORTH GROUP, INC.
RETENTION AGREEMENT
This Retention
Agreement (this “Agreement”) is made and entered into
as of the 25th of August, 2004, by and between Banknorth Group,
Inc., a Maine corporation (the “Company”) and
(the
“Executive”);
W I T N E S S E T H:
WHEREAS, the
Company, Berlin Delaware Inc., a Delaware corporation and wholly
owned subsidiary of the Company (“Berlin Delaware”),
The Toronto-Dominion Bank, a Canadian chartered bank,
(“TD”), and Berlin Merger Co., a Delaware corporation
and wholly owned subsidiary of TD (“Berlin Mergerco”),
have entered into an Agreement and Plan of Merger dated as of
August 25, 2004, whereby, among other things, Berlin Mergerco
will merge with and into Berlin Delaware (the
“Merger”); and
WHEREAS, the
Company wishes to continue to retain the services of the Executive
after the Effective Date for the benefit of its successor Berlin
Delaware;
NOW, THEREFORE, in
consideration of the foregoing, the mutual covenants and agreements
herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive hereby agree, contingent on completion of
the Merger, as follows:
1. Definitions
.
(a)
Accrued Benefits means:
(i)
all salary earned or accrued through the date the Executive’s
employment is terminated, and any unpaid amounts described in
Section 6(a);
(ii)
reimbursement for any and all monies advanced in connection with
the Executive’s employment for reasonable and necessary
expenses incurred by the Executive through the date the
Executive’s employment is terminated;
(iii)
any and all other compensation previously earned by the Executive
and deferred under or pursuant to any deferred compensation plan or
plans of the Company then in effect together with any interest or
deemed earnings thereon pursuant to, and to the extent consistent
with, the terms of such plan or plans;
(iv)
any bonus earned by the Executive for a Year or other performance
period ending prior to the Year or other performance period in
which employment terminates, but not yet paid to the Executive,
under any bonus or incentive compensation plan or plans in which
the Executive is a participant;
(v)
to the extent not previously paid or provided to the Executive, all
other payments and benefits to which the Executive may be entitled
under the terms of any applicable compensation or benefit plan,
program or arrangement of the Company except for any severance
plan, or any plan, program or arrangement that would result in any
duplication of benefits.
(b)
Affiliate of any specified person means any other person
that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under direct or indirect
common control with such specified person. For the purposes of this
definition, “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of voting securities, by contract or
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otherwise, and the terms
“controlling” and “controlled” have
meanings correlative to the foregoing.
(c)
Annual Bonus means any bonus or incentive award under any
bonus or incentive compensation plan, program or arrangement of the
Company in which the Executive is a participant the performance
period for which is or was initially scheduled to be one
(1) year or less.
(d) Base
Amount means an amount equal to the Executive’s
Annualized Includable Compensation for the Base Period as defined
in Section 280G(d)(1) and (2) of the Code (as hereinafter
defined).
(e)
Benefit Computation Base means either (i) the Benefit
Computation Base as defined in the Supplemental Retirement
Agreement between Executive and the Company or (ii) if there
is no Supplemental Retirement Agreement between the Executive and
the Company, the base annual compensation amount used in
calculating the Executive’s benefits under the Retirement
Plan.
(f)
Bonus (whether or not capitalized) means any bonus or
incentive award (including any Annual Bonus or Long-Term Incentive
Award) under any bonus or incentive compensation plan, program or
arrangement of the Company in which the Executive is a
participant.
(g)
Cause means:
(i)
the Executive’s conviction of, or plea of nolo contendere to,
a felony; or
(ii)
willful and intentional misconduct, willful neglect, or gross
negligence in the performance of the Executive’s duties,
which has caused a demonstrable and serious injury to the Company,
monetary or otherwise. The Executive shall be given written notice
that the Company intends to terminate the Executive’s
employment for Cause.
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Such
written notice shall specify the particular acts, or failures to
act, on the basis of which the decision to so terminate employment
was made.
In
the case of a termination for Cause as described in clause (ii),
above, the Executive shall be given the opportunity within thirty
(30) days of the receipt of such notice to meet with the Board
of Directors of the Company to defend such acts, or failures to
act, prior to termination. The Company may suspend the
Executive’s title and authority pending such meeting, and
such suspension shall not constitute Good Reason, as defined in
subsection (o) below.
(h)
Change of Control means a change of control, as that term is
defined in TD’s Performance Based Restricted Share Unit Plan
(Outside Canada) (as in effect from time to time, or any successor
plan), of either TD or the Company, with such definition being
appropriately adjusted, where necessary, to refer to the
Company.
(i)
Code means the Internal Revenue Code of 1986, as
amended.
(j)
Deferred Compensation Plan means a deferred compensation
plan approved by the Compensation Committee of the
Board.
(k)
Disability means a disability entitling the Executive to
payments under the Company’s long-term disability plan
applicable to the Executive, provided that in no event shall the
Executive’s employment be terminable by reason of Disability
unless the Executive shall have been absent from the
Executive’s duties with the Company on a full-time basis for
one hundred and twenty (120) consecutive business days as a
result of incapacity due to mental or physical illness that is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive’s legal representative.
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(l) Early
Retirement Benefit means either (i) the “Early
Retirement Benefit” or “Early Retirement/Termination of
Service Benefit” as defined in the SERP Agreement or
(ii) if there is no Supplemental Retirement Agreement between
the Executive and the Company, the early retirement benefit as
defined in the Retirement Plan.
(m)
Effective Date means the date on which the Effective Time
(as defined in the Merger Agreement) occurs.
(n)
EIP means the Banknorth Group, Inc. Executive Incentive Plan
as amended and in effect on the Merger Agreement Date.
(o) Good
Reason means:
(i)
any breach of this Agreement by the Company, including without
limitation, (A) any reduction during the Retention Period in
the amount of the Executive’s Base Salary, incentive
compensation opportunities or aggregate welfare and pension
benefits as in effect on the Effective Date, or (B) failure to
provide the Executive with the same fringe benefits that were
provided to the Executive immediately prior to the Effective Date,
or with a package of fringe benefits (including paid vacations)
that, though one or more of such benefits may vary from those in
effect immediately prior to the Effective Date, is substantially
comparable in all material respects to such fringe benefits taken
as a whole;
(ii)
without the Executive’s express written consent, the
assignment to the Executive of any duties that are materially
inconsistent with the Executive’s positions, duties,
responsibilities and status immediately following the Effective
Date, a material change in the Executive’s reporting
responsibilities, titles or offices as an employee and as in effect
immediately following the Effective Date, or a significant
reduction in the
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Executive’s title, duties, or
responsibilities, as in effect immediately prior to the Effective
Date, but without regard to the Executive’s normal and
appropriate interaction with executives of TD as a result of the
Company’s status as an Affiliate of TD;
(iii)
the relocation of the Executive’s principal place of
employment, without the Executive’s written consent, to a
location outside the same metropolitan area in which the Executive
was employed at the time of the Effective Date, or the imposition
of any requirement that the Executive spend more than ninety
(90) business days per year at a location other than such
principal place of employment; or
(iv)
any purported termination of the Executive’s employment for
Cause or Disability which is not effected pursuant to a
satisfactory Notice of Termination.
In
the event of the occurrence of any of the events described in (i),
(ii), (iii), or (iv) above, the Executive may, within three
(3) months after the Executive has knowledge of the occurrence
of such event, give the Company written notice that such event
constitutes Good Reason, and the Company shall thereafter have
thirty (30) days in which to cure. If the Company has not
cured in that time, the event shall constitute Good Reason. If the
Executive has not given notice of Good Reason during such three
(3) month period, such event shall not constitute Good
Reason.
(p)
Long-Term Incentive Award means an incentive award under the
EIP the performance period for which is or was initially scheduled
to be in excess of one (1) year.
(q)
Merger Agreement means the Agreement and Plan of Merger,
dated as of August 25, 2004 among the Company, Berlin
Delaware, TD and Berlin Mergerco.
(r)
Merger Agreement Date means the date upon which the Merger
Agreement was executed by the parties thereto.
(s)
Non-Competition and Retention Amount shall be:
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(i)
a lump sum payment equal to $1,046,964; and
(ii)
for purposes of determining the Executive’s benefit under the
SERP Agreement an additional thirty-six (36) months of age and
of service shall be credited, determined as follows:
(A) The
additional thirty-six (36) months of age and service shall be
applied for purposes of benefit accrual, vesting, eligibility for
early retirement, subsidized early retirement factors, actuarial
equivalence and any other purposes under the SERP
Agreement.
(B) Any
provision under the SERP Agreement prohibiting the accrual of any
additional benefits after the Executive has been credited with more
than a stated number of years of service shall be
disregarded.
(C) For
purposes of determining the amount of the Executive’s benefit
under the SERP Agreement, the reduction in respect of the benefit
paid under the Retirement Plan shall be based on the
Executive’s actual Retirement Plan benefit (that is, without
any additional deemed service).
(D) For
purposes of determining the Early Retirement Benefit and other
forms of benefit under the SERP Agreement, if the Executive is less
than fifty-five (55) years of age, the Executive shall be
deemed to be at least fifty-five (55) years of age on the date
the Executive’s employment with the Company terminates,
notwithstanding the Executive’s actual age, if
less.
(E) The
Benefit Computation Base (as defined in the SERP Agreement) shall
be determined as if it were being calculated at the end of the
thirty-six (36) month period of service credited to the Executive
under this paragraph (ii) and as if during such thirty-six
(36) additional month period the Executive’s annualized
compensation was the same as such
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compensation for (I) the
Year during which the Executive’s employment is terminated,
or, (II) any Year before the Effective Date occurred,
whichever is greater. The parties hereto agree that (i) any
bonus amount that would normally be payable in 2005, but is
accelerated into 2004 shall be taken into account in determining
the Executive’s Benefit Computation Base under this paragraph
(E) as if it had been paid in 2005, (ii) no amounts payable
pursuant to Sections 6, 7 and 8 shall be taken into account in
determining the Executive’s benefits under the SERP
Agreement, and (iii) the SERP Agreement shall be amended
accordingly, if necessary.
(F) Any
amendment to the Retirement Plan after the date hereof shall be
disregarded to the extent that the application of such amendment
would decrease the total amount of the benefits provided for in
this paragraph (ii).
(G) The
Executive shall be entitled to a lump sum distribution of SERP
Agreement benefits in all events, and the Company shall not be
entitled to require payment over a longer period. If the Executive
elects a lump sum payment (i) the actuarial equivalent benefit
shall be determined in accordance with the provisions of the
Retirement Plan as in effect immediately prior to the Effective
Date, or as in effect on termination of the Executive’s
employment, whichever creates the greater benefit, and
(ii) the lump sum payment shall, unless deferred in advance by
the Executive pursuant to reasonable criteria consistent with the
requirements of the Code, be made within thirty (30) days
following the termination of the Executive’s
employment
(H) An
example of the SERP calculation described by this Agreement will be
appended hereto as Exhibit A as soon as reasonably practicable
following the Merger Agreement Date.
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(t)
Notice of Termination means a notice which shall indicate
the specific termination provision relied upon in this Agreement
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.
(u) Plan
Year with respect to any of the Retirement Plan or the 401(k)
Plan, the “plan year” as defined in such
plan.
(v)
Post-Retention Period Severance means a severance payment
consisting of twenty-four (24) months of continuation of the
Executive’s then base salary.
(w)
Pre-Merger Option means any option to purchase common stock
of the Company that was granted prior to the date on which the
Merger Agreement was executed by the parties thereto.
(x)
Prorated Bonus means a lump sum cash payment payable within
ten (10) business days of the date of termination equal to the
product of (x) the average Annual Bonus paid (whether deferred
or paid in equity) to the Executive under the annual bonus plan of
the Company for the last three (3) full fiscal years of the
Company ending prior to the date of termination or such shorter
number of years that the Executive has been employed by the Company
and eligible to receive a full year 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 three hundred and sixty-five (365).
(y)
Retention Period means a period commencing on the Effective
Date and ending on the third (3 rd ) anniversary of the
date on which the Effective Date occurs.
(z)
Retirement Plan means the Banknorth Group, Inc. Retirement
Plan, as amended and in effect from time to time and any successor
plan.
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(aa)
RSUs means restricted stock units.
(bb) SERP
Agreement means either (i) the Supplemental Retirement
Agreement between the Executive and the Company or (ii) if
there is no Supplemental Retirement Agreement between the Executive
and the Company, the Banknorth Group, Inc. Supplemental Retirement
Plan, as amended.
(cc)
Year means a calendar year unless otherwise specifically
provided.
(dd)
401(k) Plan means the Banknorth Group, Inc. 401(k) Plan
dated January 1, 2001, as amended, or any successor
plan.
2. Term of Agreement
.
This Agreement
shall begin on the Effective Date and shall terminate on the third
anniversary of such date. If the Effective Date does not occur,
this Agreement shall be null and void ab initio .
3. Duties .
During the
Retention Period, the Executive shall serve the Company in such
capacities and positions as may be assigned by the Company
consistent with the Executive’s capacities and positions
immediately prior to the Effective Date and shall devote the
Executive’s best efforts and all of the Executive’s
business time, attention and skill to the business and affairs of
the Company, as such business and affairs now exist and as they may
hereafter be conducted.
4. Compensation
.
During the
Retention Period, the Executive shall be compensated by the Company
as follows:
(a) the
Executive shall receive, at such intervals and in accordance with
such standard policies of the Company from time to time, an annual
base salary not less than the Executive’s
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annual base salary as in effect
immediately prior to the Effective Date, subject to adjustment as
hereinafter provided, and shall be entitled to such increases in
Executive’s base salary, if any, as may be determined from
time to time in the sole discretion of the Board, provided that in
no event may the Executive’s annual base salary be
decreased;
(b) the
Executive shall be included in all plans providing incentive
compensation to executives, including but not limited to bonus,
deferred compensation, annual or other incentive compensation,
supplemental pension, stock ownership, stock option, stock
appreciation, stock bonus and similar or comparable plans as any
such plans are extended by the Company from time to time to senior
corporate officers, key employees and other employees of comparable
status, provided that in no event shall the Executive’s
incentive compensation opportunities be less favorable than the
Executive’s incentive compensation opportunities immediately
prior to the Effective Date;
(c) the
Executive shall be reimbursed, at such intervals and in accordance
with such standard policies as may be in effect on the Effective
Date, for any and all monies advanced in connection with the
Executive’s employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Company, including
travel expenses;
(d) the
Executive shall enjoy the fringe benefits normally afforded to the
Company’s executive officers. Such fringe benefits may vary
from those in effect immediately prior to the Effective Date,
provided that such fringe benefits taken as a whole are
substantially comparable in all material respects to those in
effect immediately prior to such date;
(e) the
Executive shall be allowed to participate, on the same basis as
applicable to other employees of comparable status and position, in
any and all plans, programs or arrangements covering employee
benefits or fringe benefits, including but not limited to the
following: group
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medical insurance,
hospitalization benefits, disability benefits, medical benefits,
dental benefits, pension benefits, profit sharing and stock bonus
plans, but excluding severance and any similar plans, programs or
arrangements, and, in any event, such plans, programs or
arrangements shall be no less favorable, in the aggregate, than
those in effect as of immediately prior to the Effective Date;
and
(f) the
Executive shall receive annually not less than the amount of paid
vacation and not fewer than the number of paid holidays received
annually immediately prior to the Effective Date or, if greater,
available annually to other employees of comparable status and
position with the Company.
During the
Retention Period, the Board of Directors of the Company, or an
appropriate committee thereof, will consider and appraise, at least
annually, the contributions of the Executive to the Company’s
operating efficiency, growth, production and profits and, in
accordance with past practice, due consideration shall be given to
the upward adjustment of the Executive’s compensation rate,
at least annually, commensurate with increases generally given to
other senior corporate officers and key employees and as the scope
of the Executive’s duties expands.
5. Equity-Based
Arrangements .
(a) As soon
as practicable after the Effective Date, the Company shall grant
the Executive the number of RSUs determined by dividing
$2 million by the per-share closing price of TD common stock
on the New York Stock Exchange (the “Closing Price”) on
the Effective Date. The RSUs shall vest on the third (3
rd ) anniversary of the Effective Date, provided that,
subject to the provisions of Section 7, the Executive has
remained continuously in the employ of the Company from the
Effective Date through such third (3 rd ) anniversary.
The RSUs shall be paid
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by the Company as soon as
practicable, in an amount of cash equal to the aggregate Closing
Price of such shares on such third (3 rd ) anniversary,
provided that the Executive may elect to defer such cash amount in
accordance with a Deferred Compensation Plan. The cash amount
payable pursuant to this Section 5 shall be adjusted upward or
downward (but not by more than 20%) to reflect the performance of
Berlin against an annual growth in operating earnings per share
target established each year by the Compensation Committee of the
Board, provided that such operating earnings per share target
(i) shall not increase by more than 10% annually and
(ii) shall exclude for all relevant years (x) costs
associated with the Merger, (y) costs, if any, related to the
expensing of stock options, and (z) extraordinary items.
Except as specifically provided in this Agreement (including,
without limitation, Section 5 and Section 7), the terms
of the RSUs shall be governed by the terms of a RSU agreement with
terms substantially similar to the terms applicable to grants of
restricted stock units under TD’s Performance Based
Restricted Share Unit Plan (Outside Canada) except that in no event
shall Sections 7.5, 7.6, 7.7 and 7.8 of the Performance Based
Restricted Share Unit Plan (Outside Canada) or provisions similar
thereto apply to the RSUs.
(b) Notwithstanding
the terms and conditions of the pre-Merger Options, whether set
forth in any option plan or option agreement, the transactions
contemplated by the Merger Agreement shall be deemed not to
constitute a change in control under such plans or agreement, and,
therefore, none of the pre-Merger Options shall vest and become
exercisable directly as a result of the Merger.
6. Initial Payment and
Non-Competition and Retention Amount .
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(a)
Initial Payment . Within ten (10) business days after
the Effective Date, the Executive shall be paid any unpaid portion
of a pro-rata Long Term Incentive Award in an amount determined as
described in Section 5 of the EIP.
(b)
Non-Competition and Retention Amount . Subject to the
provisions of Section 7 and in consideration for the
Executive’s agreement to remain employed by the Company and
to abide by the provisions of Sections 9(a), 9(b) and 10
hereof, within ten (10) business days following the third (3
rd ) anniversary of the Effective Date, provided that
the Executive has continuously been in the employ of the Company
from the Effective Date through such anniversary date, the
Executive shall be paid, or be credited with, as the case may be,
the Non-Competition and Retention Amount.
7. Termination of
Employment .
Any
termination by the Company or the Executive of the
Executive’s employment during the Retention Period shall be
communicated by written Notice of Termination to the Executive if
such notice is delivered by the Company, and to the Company if such
notice is delivered by the Executive. Any payments made under this
Section 7, other than due to death, shall be contingent on the
Executive’s prior execution and non-revocation of a mutual
release substantially in the form attached hereto as
Exhibit B; provided, however, that if the Company refuses to
execute such mutual release, the Executive’s obligation to
execute and not revoke the release as a precondition to receiving
severance benefits shall terminate. The Notice of Termination shall
comply with the requirements of Section 20 below.
(a)
Termination for Disability Prior to the End of the Retention
Period . If during the Retention Period
