<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1995
COMMISSION FILE NUMBER 0-10161
FIRSTMERIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1339938
(STATE OR OTHER JURSIDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO 44308
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(216) 384-8000
(TELEPHONE NUMBER)
SHARES OF COMMON STOCK, AS OF MARCH 31, 1995
33,344,247
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
<PAGE> 2
FIRSTMERIT CORPORATION
PART I - FINANCIAL STATEMENTS
ITEM 1 FINANCIAL STATEMENTS
The following statements included in the quarterly unaudited report to
shareholders are incorporated by reference:
Consolidated Balance Sheets as of March 31, 1995, December 31,
1994 and March 31, 1994
Consolidated Statements of Income for the three months ended
March 31, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity for
the year ended December 31, 1994 and for the three months ended
March 31, 1995
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements as of March 31,
1995, December 31, 1994 and March 31, 1994
Management's Discussion and Analysis of Financial Conditions as
of March 31, 1995, December 31, 1994 and March 31, 1994 and
Results of Operations for the quarter ended March 31, 1995 and
1994 and for the year ended December 31, 1994
<PAGE> 3
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - - -------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
------------------------------------------------------
March 31, December 31, March 31,
---------- ------------ ---------
1995 1994 1994
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities $1,544,894 1,610,360 1,563,422
Federal funds sold 10,335 13,700 93,117
Loans less unearned income 3,809,447 3,687,889 3,195,211
Less allowance for possible loan losses 37,426 35,834 35,676
---------- --------- ---------
Net loans 3,772,021 3,652,055 3,159,535
---------- --------- ---------
Total earning assets 5,327,250 5,276,115 4,816,074
Cash and due from banks 235,416 238,073 247,406
Premises and equipment, net 85,906 83,223 78,411
Accrued interest receivable and other assets 104,872 125,162 118,974
---------- --------- ---------
$5,753,444 5,722,573 5,260,865
========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $ 711,963 733,171 673,992
Demand-interest bearing 439,091 475,099 469,667
Savings 1,556,818 1,633,189 1,745,318
Certificates and other time deposits 1,768,595 1,699,998 1,590,601
---------- --------- ---------
Total deposits 4,476,467 4,541,457 4,479,578
Securities sold under agreements to repurchase
and other borrowings 701,944 612,624 217,550
---------- --------- ---------
Total funds 5,178,411 5,154,081 4,697,128
Accrued taxes, expenses, and other liabilities 50,497 45,173 57,484
---------- --------- ---------
Total liabilities 5,228,908 5,199,254 4,754,612
Shareholders' equity:
Series preferred stock, without par value:
authorized and unissued 7,000,000 shares - - -
Common stock, without par value:
authorized 80,000,000 shares; issued 33,344,247,
33,289,097 and 33,246,998 shares, respectively 100,061 99,882 95,948
Net unrealized holding gains(losses)
on available for sale securities (12,918) (23,205) (4,656)
Retained earnings 437,393 446,642 414,961
---------- --------- ---------
Total shareholders' equity 524,536 523,319 506,253
---------- --------- ---------
$5,753,444 5,722,573 5,260,865
========== ========= =========
</TABLE>
<PAGE> 4
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
- - - ----------------------------------------------------
(In thousands except ratios)
<TABLE>
<CAPTION>
Quarters
--------------------------------------------------------------------------------
1995 1994
------------ --------------------------------------------------------------
1st 4th 3rd 2nd 1st
- - - -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment securities $1,498,357 1,645,526 1,647,422 1,596,042 1,563,967
Federal funds sold 15,482 31,911 17,110 67,086 101,862
Loans less unearned income 3,807,842 3,611,012 3,354,209 3,225,272 3,149,913
Less allowance for possible
loan losses 36,450 35,902 35,907 36,188 35,672
---------- --------- --------- --------- ---------
Net loans 3,771,392 3,575,110 3,318,302 3,189,084 3,114,241
---------- --------- --------- --------- ---------
Total earning assets 5,285,231 5,252,547 4,982,834 4,852,212 4,780,070
Cash and due from banks 232,548 207,142 204,351 202,313 231,404
Premises and equipment, net 84,590 82,181 80,783 79,079 77,478
Accrued interest receivable
and other assets 109,206 109,163 112,377 119,203 102,988
---------- --------- --------- --------- ---------
$5,711,575 5,651,033 5,380,345 5,252,807 5,191,940
========== ========= ========= ========= =========
LIABILITIES
Deposits:
Demand-non-interest bearing $ 708,097 689,964 660,783 660,406 669,283
Demand-interest bearing 444,005 470,873 461,667 464,492 458,187
Savings 1,588,708 1,665,245 1,685,365 1,739,981 1,725,742
Certificates and other time
deposits 1,717,283 1,674,635 1,573,435 1,568,937 1,565,491
---------- --------- --------- --------- ---------
Total deposits 4,458,093 4,500,717 4,381,250 4,433,816 4,418,703
Securities sold under agreements to
repurchase and other borrowings 684,794 575,561 443,836 245,742 225,276
---------- --------- --------- --------- ---------
Total funds 5,142,887 5,076,278 4,825,086 4,679,558 4,643,979
Accrued taxes, expenses and
other liabilities 50,676 49,517 39,139 60,559 43,602
---------- --------- --------- --------- ---------
Total liabilities 5,193,563 5,125,795 4,864,225 4,740,117 4,687,581
SHAREHOLDERS' EQUITY 518,012 525,238 516,120 512,690 504,359
---------- --------- --------- --------- ---------
$5,711,575 5,651,033 5,380,345 5,252,807 5,191,940
========== ========= ========= ========= =========
RATIOS
Net income as a percentage of:
Average assets -0.08% 1.27% 1.30% 1.36% 1.40%
Average shareholders' equity -0.93% 13.61% 13.53% 13.97% 14.37%
</TABLE>
<PAGE> 5
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - - ------------------------------------------
<TABLE>
<CAPTION>
(In thousands except per share data)
------------------------------------
Quarters Ended March 31,
------------------------------------
1995 1994
- - - ----------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 78,112 63,589
Interest and dividends on securities:
Taxable 22,770 19,959
Exempt from Federal income taxes 1,670 1,958
Interest on Federal funds sold 314 803
--------- ------
Total interest income 102,866 86,309
--------- ------
Interest expense:
Interest on deposits:
Demand-interest bearing 2,448 2,631
Savings 10,321 10,573
Certificates and other time deposits 21,531 15,668
Interest on securities sold under agreements ---------
to repurchase and other borrowings 10,059 2,084
--------- ------
Total interest expense 44,359 30,956
--------- ------
Net interest income 58,507 55,353
Provision for possible loan losses 2,712 1,381
--------- ------
Net interest income after provision
for possible loan losses 55,795 53,972
--------- ------
Other income:
Trust department income 2,944 3,516
Service charges on depositors' accounts 5,187 5,281
Credit card fees 2,047 1,877
Securities gains-net 0 (12)
Other operating income 7,845 7,513
--------- ------
Total other income 18,023 18,175
--------- ------
73,818 72,147
--------- ------
Other expenses:
Salaries, wages, pension and employee benefits 25,790 23,724
Net occupancy expense 4,185 3,697
Equipment expense 3,089 2,908
Other operating expense 22,654 16,085
--------- ------
Total other expenses 55,718 46,414
--------- ------
Income before Federal income taxes 18,100 25,733
Federal income taxes 19,284 7,867
--------- ------
Net income $ (1,184) 17,866
========= ======
Per share data based on average number of
shares outstanding:
Net income (.04) .54
Dividends paid .25 .24
Weighted average number of shares
outstanding 33,334,368 33,241,336
</TABLE>
<PAGE> 6
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- - - ----------------------------------------------------------
Year Ended December 31, 1994 and
Three Months Ended March 31, 1995
<TABLE>
<CAPTION>
--------------------------------------------------------------
Net unrealized
holding gains
(losses) on Total
Common available for Retained Shareholders'
Stock sale securities Earnings Equity
-------- --------------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 95,992 - 404,129 500,121
Net Income - - 71,349 71,349
Cash dividends ($.98 per share) - - (28,836) (28,836)
Stock options exercised 3,890 - - 3,890
Market adjustment investment securities - (23,205) - (23,205)
-------- ------- ------- -------
Balance at December 31, 1994 99,882 (23,205) 446,642 523,319
Net Income - - (1,184) (1,184)
Cash dividends ($ .25 per share) - - (8,679) (8,679)
Stock options exercised 179 - - 179
Market adjustment investment securities - 10,287 - 10,287
Acquisiton adjustment of fiscal year - - 614 614
-------- ------- ------- -------
Balance at March 31, 1995 $100,061 (12,918) 437,393 524,536
======== ======= ======= =======
</TABLE>
<PAGE> 7
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Operating Activities
- - - --------------------
Net income ($1,184) 17,866
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 2,712 1,381
Provision for depreciation and amortization 2,438 1,946
Amortization of investment securities premiums, net 885 (2,380)
Amortization of income for lease financing 1,872 (1,271)
Losses on sales of investment securities, net - 12
Deferred federal income taxes 1,194 301
(Increase) decrease in interest receivable 56 (1,373)
Increase in interest payable 2,680 1,539
Amortization of values ascribed to acquired intangibles 819 893
Other increases (decreases) 16,081 (1,437)
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 27,553 17,477
--------- -------
Investing Activities
- - - --------------------
Dispositions of investment securities:
Available-for-sale - sales 56 14,901
Held-to-maturity - maturities 173,179 123,953
Available-for-sale - maturities 37,851 22,902
Purchases of investment securities held-to-maturity (7,199) (80,141)
Purchases of investment securities available-for-sale (123,621) (69,893)
Net (increase) decrease in federal funds sold 3,365 (18,529)
Net increase in loans and leases (124,550) (58,809)
Purchases of premises and equipment (8,147) (3,292)
Sales of premises and equipment 3,026 488
--------- -------
NET CASH USED BY INVESTING ACTIVITIES (46,040) (68,420)
--------- -------
Financing Activities
- - - --------------------
Net increase (decrease) in demand, NOW and
savings deposits (133,587) 25,979
Net increase in time deposits 68,597 23,918
Net increase in securities sold under repurchase
agreements and other borrowings 89,320 17,652
Cash dividends (8,679) (7,375)
Proceeds from exercise of stock options 179 297
--------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,830 60,471
Increase (decrease) in cash and cash equivalents (2,657) 9,528
Cash and cash equivalents at beginning of year 238,073 237,878
--------- -------
Cash and cash equivalents at end of year $ 235,416 247,406
========= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
- - - --------------------------------------------------
Cash paid during the year for:
Interest, net of amounts capitalized $ 30,040 20,642
Income taxes 31 2,451
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
FirstMerit Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1995, December 31, 1994
and March 31, 1994
1. FirstMerit Corporation is a bank holding company whose principal assets are
the common stock of its wholly owned subsidiaries, First National Bank of Ohio,
The Old Phoenix National Bank of Medina, EST National Bank, Citizens National
Bank, Peoples National Bank, Peoples Bank, N.A. and Life Savings Bank FSB. In
addition FirstMerit Corporation owns all of the common stock of FBOH Credit Life
Insurance Company and Bancorp Trust Co., N.A.
2. In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
statement requires debt and equity securities to be classified as
held-to-maturity, available-for-sale, or trading. Securities classified as
held-to-maturity are measured at amortized or historical cost, securities
available-for-sale and trading at fair value. Adjustment to fair value of the
securities available-for-sale, in the form of unrealized holding gains and
losses, is excluded from earnings and reported as a net amount in a separate
component of shareholders' equity. This statement was adopted during the first
quarter of 1994.
3. Management believes that the interim consolidated financial statements
reflect all adjustments consisting only of normal recurring accruals, necessary
for a fair presentation of the March 31, 1995 statement of condition and the
results of operations for the three months ended March 31, 1995 and 1994.
<PAGE> 9
FirstMerit Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1995, December 31, 1994
and March 31, 1994
4. ACQUISITION
The CIVISTA Corporation located in Canton, Ohio was acquired on January 31, 1995
in exchange for 6,157,809 shares of FirstMerit Corporation common stock. The
transaction was accounted for as a pooling-of-interests. The accompanying
consolidated financial statements for all periods presented have been restated
to account for the acquisition.
Details of the results of operations of the previously separate corportions for
the periods prior to combination are as follows:
<TABLE>
<CAPTION>
The
FirstMerit CIVISTA
Corporation Corporation Combined
----------- ----------- --------
<S> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1994
Interest income $316,809 54,209 371,018
Net interest income 200,932 29,905 230,837
Net income 60,301 11,048 71,349
FOR THE THREE MONTHS
ENDED MARCH 31, 1994
Interest income $ 72,486 13,823 86,309
Net interest income 47,701 7,652 55,353
Net income 14,885 2,981 17,866
FOR THE YEAR ENDED
DECEMBER 31, 1993
Interest income $304,589 56,619 361,208
Net interest income 194,802 31,257 226,059
Net income 55,560 13,072 68,632
</TABLE>
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Average Consolidated Balance Sheet, Fully-tax Equivalent Interest Rates and
Interest Differential (Dollars in thousands)
<TABLE>
<CAPTION>
Quarters ended March 31, Year ended December 31,
----------------------------- ----------------------------
1995 1994
----------------------------- ----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
- - - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities $1,498,357 25,237 6.68% 1,624,724 97,952 6.03%
Federal funds sold 15,482 314 8.05% 55,126 2,168 3.93%
Loans, net of unearned income 3,807,842 78,333 8.16% 3,350,162 275,488 8.22%
Less allowance for possible loan losses 36,450 36,040
---------- ------- --------- -------
Net loans 3,771,392 78,333 8.24% 3,314,122 275,488 8.31%
Cash and due from banks 232,548 - - 204,513 - -
Other assets 193,796 - - 187,273 - -
---------- ------- --------- -------
Total assets $5,711,575 103,884 - 5,385,758 375,608 -
========== ======= ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing $ 708,097 - - 666,469 - -
Demand-
interest bearing 444,005 2,448 2.19% 460,994 10,429 2.26%
Savings 1,588,708 10,321 2.58% 1,710,909 43,372 2.54%
Certificates and other time deposits 1,717,283 21,531 4.97% 1,607,616 68,528 4.26%
---------- ------- --------- -------
Total deposits 4,458,093 34,300 3.05% 4,445,988 122,329 2.75%
Federal funds purchased, securities sold
under agreements to repurchase and 684,794 10,059 5.83% 374,351 17,853 4.77%
other borrowings
Other liabilities 50,676 - 50,559 -
Shareholders' equity 518,012 - 514,860 -
---------- ------- --------- -------
Total liabilities and shareholders' equity $5,711,575 44,359 - 5,385,758 140,182 -
========== ======= ========= =======
Total earning assets $5,285,231 103,884 7.80% 4,993,972 375,608 7.52%
========== ======= ========= =======
Total interest bearing liabilities $4,434,790 44,359 3.97% 4,153,870 140,182 3.37%
========== ======= ========= =======
Net yield on earning assets 59,525 4.47% 235,426 4.71%
======= ==== ======= ====
Interest rate spread 3.83% 4.15%
==== ====
</TABLE>
<TABLE>
<CAPTION>
Quarters ended March 31,
----------------------------
1994
----------------------------
Average Average
Balance Interest Rate
- - - ----------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities 1,563,967 22,871 5.80%
Federal funds sold 101,862 803 3.13%
Loans, net of unearned income 3,149,913 63,888 8.05%
Less allowance for possible loan losses 35,672
--------- ------
Net loans 3,114,241 63,888 8.14%
Cash and due from banks 231,404 - -
Other assets 180,466 - -
--------- ------
Total assets 5,191,940 87,562 -
========= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing 669,283 - -
Demand-
interest bearing 458,187 2,631 2.28%
Savings 1,725,742 10,573 2.43%
Certificates and other time deposits 1,565,491 15,668 3.97%
--------- ------
Total deposits 4,418,703 28,872 2.59%
Federal funds purchased, securities sold
under agreements to repurchase and 225,276 2,084 3.67%
other borrowings
Other liabilities 43,602 -
Shareholders' equity 504,359 -
--------- ------
Total liabilities and shareholders' equity 5,191,940 30,956 -
========= ======
Total earning assets 4,780,070 87,562 7.27%
========= ======
Total interest bearing liabilities 3,974,696 30,956 3.09%
========= ======
Net yield on earning assets 56,606 4.70%
====== ====
Interest rate spread 4.18%
====
</TABLE>
<PAGE> 11
*Interest income on tax-exempt securities and loans have been adjusted to a
fully taxable equivalent basis.
*Non-accrual loans have been included in the average balances.
<PAGE> 12
RESULTS OF OPERATIONS
FirstMerit Corporation's net loss for the quarter ended March 31, 1995
was $1,184,000 compared to net income of $17,866,000 for the same period one
year ago. Return on average assets equaled (0.08)% for the first quarter of 1995
compared to 1.40% for the same quarter one year ago. The first quarter of 1995
return on average equity was (0.93)% compared to 14.37% in 1994. Significantly
affecting the first quarter net loss was the one time charge of $16,200,000
related to the acquisition of The CIVISTA Corporation, a unitary savings and
loan holding company whose principal asset was the common stock of its wholly
owned subsidiary, Citizens Savings Bank, Canton, Ohio. Approximately $12,400,000
of the $16,200,000 charge is the loss of the tax benefit related to the
recapture of the bad debt reserve as Citizens Savings Bank's charter was
converted to a national bank through a merger with a subsidiary of the
Corporation. The remaining charge relates to fees paid to financial advisors and
severance payments. Excluding the effect of the one time charges, net income
totaled $15,000,000 or $.45 per share of common stock. The adjusted return on
average assets was 1.07% and adjusted return on average equity was 11.77%.
In February, the Corporation offered an early retirement program to
employees who met certain age and years of service requirements. Employees who
elected to retire under this plan had an effective retirement date of May 1,
1995. The Corporation's estimated cost associated with the early retirement
program, expected to be incurred in the second quarter of 1995, is approximately
$3,300,000 on a pre-tax basis and $2,100,000 after tax, or $.06 per share of
common stock.
In March, management began developing a plan for increasing the
profitability of the Corporation on a long term basis. In addition to increasing
revenue opportunities, in order to increase efficiencies and reduce operating
costs, the plan currently contemplates the consolidation of much of the
back-room operations of the Corporation's subsidiaries into one location.
Although the plan is not yet complete and will continue to be developed, it
calls for implementation of the initial portions of the plan during the second
quarter of 1995 and to continue throughout the balance of 1995 and into 1996.
Related to this plan there are expected to be certain restructuring charges for
employee displacement, system changes, replacement of equipment and other
related costs which have yet to be determined in both amount or timing of such
charges.
<PAGE> 13
On a per share basis, net loss for the quarter ended March 31, 1995 was
$(.04) per share compared to net income of $.54 per share one year ago. The
components of change in per share income for the quarters ended March 31,1995
and 1994 are summarized in the following table.
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------
CHANGES IN EARNINGS PER SHARE
Three Months
Ended March 31,
1995/1994
- - - --------------------------------------------------------------------------------
<S> <C>
Net income for the quarter
March 31, 1994 $ .54
Increases (decreases)
attributable to:
Net interest income-
taxable equivalent .08
Provision for possible
loan loss (.04)
Other income (.01)
Other expenses (.28)
Federal income taxes-
taxable equivalent (.33)
-----
Net change in net income .58
-----
Net income for the quarter ended
March 31, 1995 $(.04)
=====
</TABLE>
NET INTEREST INCOME
Net interest income, the Corporation's principal source of earnings, is
the difference between the interest income generated by earning assets
(primarily loans and investment securities) and the total interest paid on
interest bearing funds (deposits and other borrowings). For the purpose of this
discussion, net interest income is presented on a fully-taxable equivalent
("FTE") basis, to provide a comparison among types of interest earning assets.
Interest on tax-free securities and tax-exempt loans has been restated as if
such interest were taxed at the statutory Federal income tax rate of 35%,
adjusted for the non-deductible portion of interest expense incurred to acquire
the tax-free assets.
Net interest income FTE for the quarter ended March 31, 1995 was
$59,525,000 compared to $56,606,000 for the same period one year ago, an
increase of $2,919,000 or 5.2%.
<PAGE> 14
As summarized in the schedule below, total interest income FTE
increased $16,322,000 for the quarter ended March 31, 1995. An increase in loan
volume accounted for $13,535,000 of the increase. In addition to the increase in
volume, higher market interest rates accounted for $5,644,000 of the total
increase. Higher market interest rates increased the yield on earning assets
from 7.27% to 7.80% for the quarters ending March 31, 1994 and 1995,
respectively.
CHANGES IN NET INTEREST DIFFERENTIAL -
FULLY-TAX EQUIVALENT RATE/VOLUME ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
Quarters ended
March 31,
1995 and 1994
- - - --------------------------------------------------------------------------------
Increase (Decrease)
Interest Income Expense
-----------------------
Yield
Volume Rate Total
-------- -------- ------
<S> <C> <C> <C>
INTEREST INCOME
Investment securities $ (1,105) 3,471 2,366
Loans 13,535 910 14,445
Federal funds sold (1,752) 1,263 (489)
-------- ----- ------
Total interest income $ 10,678 5,644 16,322
INTEREST EXPENSE
Interest on deposits:
Demand-interest bearing $ (78) (105) (183)
Savings (890) 638 (252)
Certificates and other
time deposits 1,903 3,960 5,863
Federal funds purchased,
securities sold under
agreements to repurchase
and other borrowings 6,750 1,225 7,975
-------- ----- ------
Total interest expense $ 7,685 5,718 3,403
-------- ----- ------
Net interest income $ 2,993 (74) 2,919
======== ===== ======
</TABLE>
Total interest expense increased $13,403,000 for the quarter ended
March 31, 1995. An increase in the volume of federal funds purchased and other
borrowings accounted for $6,750,000 of the increase. In addition to the increase
in volume, higher market interest rates accounted for $5,718,000 of the total
increase. As higher market interest rates increased the yield on earning assets,
it also increased the Corporation's cost of funds. The average rate for interest
bearing liabilities was 3.97% for the first quarter of 1995 compared to 3.09%
for the same period one year ago.
<PAGE> 15
NET INTEREST MARGIN
The net interest margin, net interest income FTE divided by average
earning assets, is affected by changes in the level of earning assets, the
proportion of earning assets funded by non-interest bearing liabilities, the
interest rate spread, and changes in the corporate tax rates. A meaningful
comparison of the net interest margin requires an adjustment for the changes in
the statutory Federal income tax rate noted above. The schedule below shows the
relationship of the tax equivalent adjustment and the net interest margin.
NET INTEREST MARGIN (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Quarters Ended
March 31,
------------------------------
1995 1994
---------- ---------
<S> <C> <C>
Net interest income per
financial statements $ 58,507 55,353
Tax equivalent adjustment 1,018 1,253
---------- ---------
Net interest income-FTE $ 59,525 56,606
========== =========
Average Earning Assets $5,285,231 4,780,070
========== =========
Net Interest Margin 4.47% 4.70%
==== ====
</TABLE>
The Tax Reform Act of 1986 ("Act") reduced the tax benefit available to
banks acquiring tax exempt assets which has resulted in the reduction of the
tax-equivalent adjustment since the Act's adoption.
Average loans outstanding for the quarter ended March 31, 1995
increased 20.9% to $3,807,842 compared to $3,149,913 for the same period one
year ago. Average loans outstanding for the first quarter of 1995 equaled 72% of
average earning assets.
Average certificates and other time deposits have decreased from 39.4%
of total interest bearing funds in the first quarter of 1994 to 38.7% in the
first quarter of 1995, while average savings deposits decreased form 43.4% in
the first quarter of 1994 to 35.8% in the first quarter of 1995. Interest
bearing deposits decreased from 11.5% to 10.0% of interest bearing funds and
other borrowings increased from 5.7% to 15.5% of interest bearing funds.
Interest bearing liabilities funded 83.9% of average earning assets for
the first quarter of 1995 compared to 83.2% one year ago. Maximizing the use of
non-interest liabilities helps reduce the cost of funds, thus improving the net
interest margin.
NON-INTEREST INCOME
Non-interest income for the quarter ended March 31, 1995 was
$18,023,000 compared to $18,175,000 for the same period one year ago, a decrease
of .8%.
Trust department income decreased 16.3% or $572,000, service charges on
depositors' accounts decreased 1.8% or $94,000, credit card fees increased 9.1%
or $170,000 and other operating income increased 4.4% or $332,000 for the three
month period compared to
<PAGE> 16
one year ago. The Corporation continues to examine new sources of non-interest
income as well as the current pricing of existing products and services which
provide a source of revenues not sensitive to the interest rate environment.
NON-INTEREST EXPENSE
Non-interest expense was $55,718,000 for the first quarter of 1995
compared to $46,414,000 for the same quarter of 1994, an increase of 20%.
Salaries and benefits increased 8.7% for the three months ended March 31, 1995
compared to the same period one year ago, or $25,790,000 compared to $23,724,000
and represented 46.3% of the first three months' total operating expenses
compared to 51.1% in 1994. Other operating expense increased 40.8% or $6,569,000
for the three months ended March 31, 1995 compared to the same period one year
ago. Included in both the salaries and benefits expense and the other operating
expense for the three months ended March 31, 1995 are one time charges relating
to the acquisition of The CIVISTA Corporation. Approximately $5,850,000 are fees
paid to the financial advisors of both The CIVISTA Corporation and FirstMerit
Corporation to effect the acquisition, as well as the cost of severance payments
to certain individuals as part of the acquisition.
FINANCIAL CONDITIONS
INVESTMENT SECURITIES
To comply with SFAS #115, in 1994, the Corporation placed its core
investment portfolio in held-to-maturity and its remaining investments into
available-for-sale. The core portfolio is held till maturity and should provide
the Corporation with earnings and liquidity over a relatively wide band of
interest rate movements. The available-for-sale portfolio represents the
non-core segment of the Corporation's investment portfolio. This non-core
segment will provide flexibility if under certain circumstances disposition is
prudent. The Corporation's investment strategy focuses on high quality
investments that provide earnings, liquidity and assists in asset/liability
management. The Corporation does not engage in the trading of investment
securities. Investment securities continue to be a source of liquidity in the
funding of loan growth.
The book value and market value of investment securities classified as
held-to-maturity are as follows:
<TABLE>
<CAPTION>
March 31,
------------------------------------------
1995
------------------------------------------
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government agency
obligations $481,297 136 10,517 476,916
Obligations of state and
political subdivisions 127,239 1,354 601 127,992
Mortgage-backed
securities 143,739 1,268 3,065 141,942
Other securities 32,859 50 286 32,623
-------- ----- ------ -------
$791,134 2,808 14,469 779,473
=================================================================================
<CAPTION>
Book Market
Value Value
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $228,104 227,702
Due after one year through five years 315,927 310,321
Due after five years through ten years 125,537 121,430
Due after ten years 121,566 120,020
-------- -------
$791,134 779,473
=================================================================================
</TABLE>
<PAGE> 17
The book value and market value of investment securities
classified as available-for-sale are as follows:
<TABLE>
<CAPTION>
March 31,
------------------------------------------
1995
------------------------------------------
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government agency
obligations $544,818 1,029 15,691 530,156
Obligations of state and
political subdivisions -- -- -- --
Mortgage-backed
securities 151,998 168 4,097 148,069
Other securities 76,964 517 1,946 75,535
-------- ----- ------ -------
$773,780 1,714 21,734 753,760
=================================================================================
<CAPTION>
Book Market
Value Value
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 70,367 70,256
Due after one year through five years 199,261 193,959
Due after five years through ten years 31,296 30,320
Due after ten years 472,856 459,225
-------- -------
$773,780 753,760
=================================================================================
</TABLE>
The book value and market value of investment securities including
mortgage-backed securities and derivatives at March 31, 1995, by contractual
maturity, are shown above. Expected maturities will differ from contractual
maturities based on the issuers' right to call or prepay obligations with or
without call or prepayment penalties.
The carrying value of investment securities pledged to secure trust and
public deposits and for purposes required or permitted by law amounted to
approximately $854,746,000,000 at March 31, 1995, $883,320,000 at December 31,
1994 and $619,223,000 at March 31, 1994.
As noted in prior periods, securities with remaining maturities over
five years reflected in the foregoing schedule consist of U.S. agencies and
mortgage backed securities. This is part of a strategy to maximize future
earnings. While the maturities of the mortgage backed securities are beyond five
years, these instruments provide periodic principal payments and include
securities with adjustable interest rates, reducing the interest rate risk
associated with longer term investments.
LOANS
Total loans outstanding at March 31, 1995 amounted to $3,809,447,000
compared to $3,687,889,000 at December 31, 1994 and $3,195,211,000 at March 31,
1994. Loans have increased $121,558,000 since year end 1994, for an annualized
growth rate of approximately 13%. The loan to deposit ratio at March 31, 1995
equaled 85.1% compared to 81.2% and 71.3% at December 31, 1994 and March 31,
1994, respectively.
<PAGE> 18
ASSET QUALITY
Total non performing assets (non-accrual and restructured and other
real estate owned) amounted to $17,681,000 at March 31, 1995 or .46% of total
loans outstanding. At December 31, 1994 non performing assets equaled .71% of
total loans or $26,044,000 compared to 1.10% or $35,285,000 at March 31, 1994.
<TABLE>
<CAPTION>
(Dollars in thousands)
-------------------------------
March December March
31, 31, 31,
1995 1994 1994
- - - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans $13,371 13,625 19,444
Restructured loans 1,745 2,026 3,874
Other real estate owned 2,565 10,393 12,967
------- ------ ------
$17,681 26,044 35,285
======= ====== ======
Past due loans
(90 days or more) $ 3,268 3,569 1,703
======= ====== ======
Total Non-Performing
assets as a percent of
total loans .46% .71% 1.10%
=== === ====
</TABLE>
As of this report, there were no loans outstanding which in total could
be considered a concentration of lending in any particular industry or group of
industries. Most of the Corporation's business activity is with customers
located within the state of Ohio.
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan losses at March 31, 1995 amounted to
$37,426,000 or .98% of total loans outstanding compared to $35,834,000 or .97%
at December 31, 1994 and $35,676,000 at March 31, 1994 or 1.12%.
<TABLE>
<CAPTION>
(Dollars in thousands)
-------------------------------
March December March
31, 31, 31,
1995 1994 1994
- - - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning
of year $35,834 35,030 35,030
Provision charged to
operating expenses 2,711 4,624 1,376
Loans charged off 2,177 7,695 1,670
Recoveries on loans
previously charged off 1,058 3,875 940
------- ------ ------
$37,426 35,834 35,676
======= ====== ======
Net charge offs as a percent
of average loans .12% .11% .09%
Allowance for possible
loan losses:
As a percent of loans
outstanding at end of
period .98% .97% 1.12%
As a multiple of net
charge offs 8.25X 9.38X 12.05X
</TABLE>
<PAGE> 19
The Credit Risk Management Division of the Corporation is responsible
for determining the adequacy of the allowance for possible loan losses through
internal review, analysis of delinquency trends and ratios, changes in the
composition and level of various loan categories, historical loss experience,
and current economic conditions.
DEPOSITS
The following schedule illustrates the change in composition of the
average balances of deposits and average rates paid for the noted periods.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three Months Ended and Year Ended
----------------------------------------------------------------
March 31, December 31, March 31,
1995 1994 1994
-------------------- ------------------- -------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits -
non-interest bearing $ 708,097 - 689,964 - 669,283 -
Demand deposits -
interest bearing 444,005 2.24% 470,873 1.97% 458,187 2.33%
Savings deposits 1,588,708 2.63 1,665,245 2.68 1,725,742 2.48
Certificates and other
time deposits 1,717,283 5.08 1,674,635 4.63 1,565,491 4.06
---------- --------- ---------
$4,458,093 3.12 4,500,717 2.92 4,418,703 2.65
========== ========= =========
</TABLE>
The following table summarizes the certificates and other time deposits in
amounts of $100,000 or more as of March 31, 1995 by time remaining until
maturity.
<TABLE>
<CAPTION>
(Dollars in Thousands) Amount
------------------------------------------------
<S> <C>
Maturing in:
Under 3 months $105,134
3 to 12 months 58,244
Over 12 months 66,149
--------
$229,527
</TABLE>
<PAGE> 20
CAPITAL RESOURCES
Shareholders' equity at March 31, 1995 totaled $524,536,000 compared to
$523,319,000 at December 31, 1994 and $506,253,000 at March 31, 1994.
The following table reflects the various measures of capital:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------------
As Of As Of As Of
March December March
31, 1995 31, 1994 31, 1994
- - - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
In millions
Total equity $524,536 9.12% 523,319 9.14% 506,253 9.62%
Common equity 524,536 9.12% 523,319 9.14% 506,253 9.62%
Tangible common
equity (a) 506,586 8.83% 504,337 8.84% 485,338 9.26%
Tier 1 capital
(b) 529,511 14.63% 537,999 15.32% 501,044 16.46%
Total risk-based
capital (c) 566,937 15.66% 573,833 16.34% 536,720 17.63%
Leverage (d) 529,511 9.28% 537,999 9.53% 501,044 9.67%
<FN>
(a) Common equity less all intangibles; computed as a ratio to total assets
less intangible assets.
(b) Shareholders equity minus net unrealized holding gains on equity
securities, plus or minus net unrealized holding losses or gains on
available for sale debt securities, less goodwill; computed as a ratio
to risk-adjusted assets, as defined in the 1992 risk-based capital
guidelines.
(c) Tier 1 capital plus qualifying loan loss allowance, computed as a ratio
to risk-adjusted assets, as defined in the 1992 risk-based capital
guidelines.
(d) Tier 1 capital; computed as a ratio to the latest quarters average
assets less goodwill.
</TABLE>
The risk-based capital guidelines issued by the Federal Reserve Bank in
1988 require banks to maintain capital equal to 8% of risk-adjusted assets. At
March 31, 1995 the Corporation's risk-based capital equaled 15.66% of risk
adjusted assets, far exceeding the minimum guidelines.
The cash dividend of $.25 paid in the first quarter has an indicated
annual rate of $1.00 per share.
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 (a) Employment Agreement of John R. Cochran
(b) Membership Agreement of John R. Cochran with respect to the
FirstMerit Corporation Executive Supplemental Retirement Plan
(c) Stock Option Agreement of John R. Cochran dated March 1, 1995
(d) FirstMerit Corporation 1995 Restricted Stock Plan
(e) Restricted Stock Award Agreement for John R. Cochran
(f) Termination Agreement of John R. Cochran
27 Financial Data Schedule
(b) Form 8-K
On February 15, 1995, FirstMerit Corporation filed a Form 8-K for
the purpose of reporting the completion of its acquisition of The CIVISTA
Corporation and to file the audited financial statements of The CIVISTA
Corporation.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRSTMERIT CORPORATION
(Registrant)
By:/s/GARY J. ELEK
----------------------------
Signature
Senior Vice President/Treasurer
Authorized to sign for the
Corporation
By:/s/GARY J. ELEK
----------------------------
Signature
GARY J. ELEK
Senior Vice President/Treasurer
Principal Financial Officer and
Principal Accounting Officer
Date: May 15, 1995
<PAGE> 1
Exhibit 10(a)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT entered into this 16th day of February, 1995, by
and between JOHN R. COCHRAN ("Executive") and FIRSTMERIT CORPORATION, an Ohio
corporation ("FirstMerit").
R E C I T A L S :
A. FirstMerit desires to employ Executive for a period certain,
subject, however, to the terms and conditions of this Agreement.
IN CONSIDERATION OF THE FOREGOING, the mutual covenants contained
herein, and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. Employment
----------
FirstMerit hereby employs Executive, and Executive hereby accepts
employment, according to the terms and conditions set forth in this Agreement
and for the period specified in Section 3 of this Agreement.
2. Duties
------
During the Term (as defined in Section 3), Executive shall serve
FirstMerit as its President and Chief Executive Officer in accordance with
directions from FirstMerit's Board of Directors and in accordance with
FirstMerit's Amended and Restated Articles of Incorporation and Amended and
Restated Code of Regulations, as both may be amended from time to time.
Executive will report directly to the Board of Directors. While Executive is
employed by FirstMerit as a full-time employee, Executive shall serve
FirstMerit, faithfully, diligently, competently and to the best of his ability,
and will exclusively devote his full time, energy and attention to the business
of FirstMerit and to the promotion of its interests. Executive shall not,
without the written consent of the Board of Directors of FirstMerit, render
services to or for any person, firm, corporation or other entity or
organization in exchange for compensation, regardless of the form in which such
compensation is paid and whether or not it is paid directly or indirectly to
Executive. Nothing in this Section 2 shall preclude Executive from managing
his personal investments and affairs, provided that such activities in no way
interfere with the proper performance of his duties and responsibilities as
President and Chief Executive Officer.
3. Term of Employment
------------------
The term of this Agreement (the "Term") shall commence as of March 1,
1995, and shall continue for a period of four years ending on February 28,
1999, unless this Agreement has been earlier terminated in accordance with the
provisions of Section 7 hereof. Following expiration of the Term, Executive's
employment status will be "at will."
<PAGE> 2
4. Compensation
------------
4.1 BASE SALARY. While employed under this Agreement, Executive
will receive as his compensation for the performance of his duties and
obligations to FirstMerit under this Agreement a basic salary of Four Hundred
Thousand Dollars per year, which will be payable in semi-monthly installments,
and which will be subject to annual review by the Compensation Committee as
approved by the Board of Directors (the base salary, as may be adjusted from
time to time, is referred to herein as the "Base Salary").
4.2 BONUS. In addition to the Base Salary, Executive will receive
with respect to each calendar year a bonus in accordance with FirstMerit's
Incentive Compensation Plan ("ICP"), a copy of which has been delivered to
Executive, as may be amended from time to time. Notwithstanding the preceding
sentence, Executive's bonus with respect to the calendar year 1995 will be One
Hundred Forty Thousand Dollars, and shall be paid on or before December 31,
1995. Thereafter, bonuses will be determined by FirstMerit's Compensation
Committee in accordance with the terms of the ICP, subject to approval by the
Board of Directors, and ordinarily will be paid during the first quarter of the
year following the year to which the bonus relates.
4.3 WITHHOLDING. All compensation payable to Executive pursuant
to this Section 4 shall be paid net of amounts withheld for federal, state,
municipal or local income taxes, the Executive's share, if any, of any payroll
taxes and such other federal, state, municipal or local taxes as may be
applicable to amounts paid by an employer to its employee or to the
employer/employee relationship.
5. Other Benefits of Employment
----------------------------
5.1 Retirement Benefits.
--------------------
(A) PENSION PLAN. Executive will participate in the
FirstMerit Corporation Pension Plan (the "Pension Plan"), a copy of
which has been provided to Executive, in accordance with the
provisions of the Plan, as amended from time to time.
(B) EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN. Executive
will be entitled to participate in the FirstMerit Corporation
Employees Salary Savings Retirement Plan (the "Retirement Plan"), a
copy of which has been provided to Executive, in accordance with the
provisions of the Plan, as amended from time to time.
(C) SERP. Executive will participate in FirstMerit
Corporation's Executive Supplemental Retirement Plan (the "SERP"), a
copy of which has been provided to Executive, in accordance with the
provisions of the SERP, as may be amended from time to time and as may
be modified by the provisions of the Membership Agreement entered
-2-
<PAGE> 3
into by FirstMerit and Executive in connection with the SERP. The
Membership Agreement will include the following provisions:
(i) If Executive's employment terminates prior to
his attaining age 55 (a) due to death or Disability, (b) upon
Termination Without Cause during the Term or Termination for
Good Reason during the Term, or (c) following a Change of
Control, then Executive shall be deemed to have attained age
55; in which case Executive may elect to begin receiving
accrued benefits prior to age 55, and, if such election is
made, the amount of his monthly benefit will be calculated as
if Executive had attained age 55 on the date his SERP benefit
commences. No benefits will commence under the SERP, however,
until all payments to be made under Section 7.5(A) of this
Agreement have been made.
(ii) Executive will have no right to receive
payments in the form of a lump sum, and Executive hereby
waives any such right to receive payments under the SERP in
the form of a lump sum.
(D) TOP HAT PLAN. Executive will be entitled to
participate in the FirstMerit Corporation Unfunded Supplemental
Benefits Plan (the "Top Hat Plan"), a copy of which has been provided
to Executive, in accordance with the provisions of the Plan, as
amended from time to time.
5.2 CHANGE OF CONTROL TERMINATION AGREEMENT. Following
commencement of the Term, FirstMerit and Executive will enter into a Change of
Control Termination Agreement in the form previously delivered to Executive,
the terms of which will provide for the continuation of compensation and
certain benefits in the event of certain terminations of employment of
Executive following a Change of Control. The terms of such Agreement will
provide, subject to certain limitations, for continuation of the Base Salary,
incentive compensation, medical, life, and accidental death and dismemberment
insurance under FirstMerit plans, and payment of premiums as provided in
Section 5.3 for a period of thirty-six months, and will provide for
reimbursement of outplacement fees for a period of one year. The Change of
Control Termination Agreement will also provide that if any compensation or
benefits payable under such agreement, alone or in conjunction with other
compensation or benefits received by Executive, constitute "Parachute Payments"
within the meaning of Section 280G of the Internal Revenue Code (the "Code") or
the regulations adopted or proposed thereunder, then the compensation and
benefits payable under the Agreement will be reduced to the extent necessary so
that no portion shall be subject to the excise tax imposed by Section 4999 of
the Code.
5.3 EXECUTIVE LIFE INSURANCE. During such time as Executive is
employed by FirstMerit, FirstMerit shall pay the premiums, plus 40% of such
premiums as a gross up amount, on a permanent whole life insurance policy which
shall be owned by Executive and which shall provide Executive with One Million
Dollars in life insurance. Executive will be responsible for the payment of
all taxes associated with the payment of the premiums and the gross up amount.
FirstMerit's obligations under this Section 5.3 will cease upon the termination
-3-
<PAGE> 4
of Executive's employment for any reason, except to the extent provided
otherwise in the Change of Control Termination Agreement or pursuant to Section
7.5(A). Executive acknowledges that a physical examination will be required by
the insurer.
5.4 DISABILITY. Executive will be entitled to participate in
FirstMerit's Long Term Disability program applicable to executive level
employees of FirstMerit, and in FirstMerit's Short Term Illness Program, all in
accordance with the provisions of such programs as may be amended from time to
time.
5.5 MISCELLANEOUS BENEFITS. Executive will be entitled to
participate in such hospitalization, life insurance, and other employee benefit
plans and programs, if any, as may be adopted by FirstMerit from time to time,
in accordance with the provisions of such plans and programs and on the same
basis as other full-time salaried employees of FirstMerit who participate in
such employee benefit plans (except to the extent that the benefits provided
under any of such plans or programs are expressly offset by any of the benefits
provided under or pursuant to this Agreement).
5.6 Stock Options and Grants.
-------------------------
(A) Stock Options.
--------------
(i) NQSOs. Immediately following the
commencement of the Term, FirstMerit will make an award to
Executive under and pursuant to the terms of the FirstMerit
1992 Stock Option Program (the "1992 Program"), a copy of
which has been provided to Executive, of non-qualified stock
options ("NQSOs") for 60,000 shares of FirstMerit Corporation
common stock. The award will be made pursuant to a Stock
Option Agreement in the form and subject to the terms
customarily used by FirstMerit, but the terms of which will
include the following: The NQSOs will be issued at fair
market value on the date of grant. The NQSOs will become
exercisable with respect to one third of the shares on each of
the anniversaries of the date of grant in 1996, 1997 and 1998,
respectively, except that all NQSOs under this grant will
become exercisable if Executive's employment is terminated by
reason of Death, Disability or, following a Change of Control,
Termination Without Cause or Termination for Good Reason.
Once vested, the NQSOs will remain exercisable until the date
which is ten years from the date of grant.
(ii) ISOs. During the calendar year 1995,
FirstMerit will make an award to Executive, under and pursuant
to the terms of the 1992 Program, of a combination of
incentive stock options ("ISOs") and/or NQSOs for an aggregate
15,000 shares of FirstMerit Corporation common stock. The
terms of such awards shall be determined by the Compensation
Committee and subject to approval by the Board of Directors.
-4-
<PAGE> 5
(B) RESTRICTED STOCK. Immediately following the
commencement of the Term, FirstMerit will make a restricted stock
award to Executive of 12,500 shares of FirstMerit Corporation common
stock. The award will be made pursuant to a Restricted Stock
Agreement the terms of which will include the following: The
restrictions on one third of the shares will lapse on each of the
anniversaries of the date of grant in 2001, 2002 and 2003, except that
all restrictions will lapse if Executive's employment is terminated by
reason of Death, Disability, following a Change of Control,
Termination Without Cause or Termination for Good Reason. The shares
subject to such restricted stock award shall be registered on the
books of FirstMerit in Executive's name, and Executive shall have all
rights of a shareholder with respect thereto (including, without
limitation, voting and dividend rights), other than the right to
transfer such shares during the restricted period, and such other
limitations as may be provided by law or customary for restricted
stock awards.
5.7 INCOME TAX PREPARATION. FirstMerit will reimburse Executive
for fees incurred in connection with personal income tax preparation and
financial planning during the calendar year 1995 in an amount not to exceed Two
Thousand Five Hundred Dollars. For calendar years beginning with 1996,
Executive will be reimbursed for income tax preparation and financial planning
fees in accordance with the policies of FirstMerit then in effect with respect
thereto.
5.8 CLUB DUES. FirstMerit will pay, or reimburse Executive for,
all membership dues and special assessments, and any sales tax assessed or
payable with respect to such dues or assessments, incurred in connection with
the Executive's membership in a country club chosen by the Executive in his
sole discretion.
5.9 Miscellaneous Expense Reimbursement.
------------------------------------
(A) TRAVEL AND LIVING EXPENSES. FirstMerit will pay or
reimburse Executive for travel and living expenses (including meals
and lodging) incurred by Executive until such time as Executive's
family is relocated to Summit County, to the extent such expenses are
(i) incurred prior to September 30, 1995, and (ii) approved for
reasonableness by the Chairman of the Board of FirstMerit.
(B) RELOCATION EXPENSES. FirstMerit will pay or
reimburse Executive for relocation expenses incurred by Executive
according to existing policies of FirstMerit.
(C) CONSULTANT FEES. FirstMerit will reimburse Executive
for attorney and other professional fees incurred by him in connection
with the negotiation and consummation of this Agreement and the
employment relationship contemplated hereby; provided, however, that
such reimbursement shall not exceed the sum of Ten Thousand Dollars.
-5-
<PAGE> 6
5.10 TAXES AND WITHHOLDING. Executive shall be responsible for
paying all federal, state, municipal or local taxes payable by him with respect
to any benefits provided under this Section 5, and FirstMerit will, when
required by law or when otherwise appropriate or customary, withhold from the
benefits or other compensation amounts sufficient to satisfy such taxes.
6. Other Provisions Relating to Employment.
----------------------------------------
6.1 EXECUTIVE PHYSICAL EXAMINATION. Approximately every two
years, Executive will have an executive physical examination performed on him
by physicians (not including any physicians who have performed or are then
performing medical services for Executive) of the Cleveland Clinic or
comparable facility. The expenses of the physical examinations required under
this Section 6.1 (but not any treatment in connection therewith), which are not
otherwise covered by FirstMerit-sponsored medical plans will be borne by
FirstMerit.
6.2 VACATION. Executive will be entitled to five weeks paid
vacation and ten bank holidays.
6.3 BOARD OF DIRECTORS. FirstMerit has proposed to its
shareholders that, at the annual meeting to be held in April, 1995, an
additional seat be added to the Board of Directors. If the proposal is adopted
by the shareholders, the Board of Directors agrees to appoint Executive to the
Board of Directors. If the proposal is not adopted by shareholders, the Board
of Directors will appoint Executive, or nominate Executive for election, to the
Board of Directors to fill the first vacancy that shall occur after the date
hereof. Once Executive has become a Director, FirstMerit will agree to
nominate the Executive at such times as necessary so that Executive remains a
director of FirstMerit during his employment by FirstMerit. Nothing in this
Section 6.3 shall require FirstMerit or its Board to decline to nominate an
existing Director at the expiration of such Director's term.
7. Termination
-----------
7.1 Definitions.
------------
(A) "CHANGE OF CONTROL" means a change in control of a
nature that would be required to be reported by persons or entities
subject to the reporting requirements of Section 14(a) of the
Securities Exchange Act of 1934 in response to item 5(f) of Schedule
14A of Regulation 14(A) as in effect on the date hereof, or successor
provisions thereto, provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any unaffiliated
"person," "entity," or "group" (as defined in Rule 13(d)-3 issued
under the Securities Exchange Act of 1934) directly or indirectly
becomes the owner of securities of the Company representing 30% or
more of the combined voting power of FirstMerit's then outstanding
securities or (ii) at any time during any period of two consecutive
calendar years individuals, who at the beginning of such period
constitute the Board of Directors of FirstMerit cease for any reason
to constitute at least
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<PAGE> 7
the majority of such Board, unless the election, or the nomination for
election, by FirstMerit's shareholders of each new director was
approved by a vote of at least two-thirds of the directors still in
office who were directors of FirstMerit at the beginning of such
two-year period.
(B) "DISABILITY" or "DISABLED" means eligibility for
disability benefits under the terms of FirstMerit's Long-Term
Disability Plan for executive level employees in effect at the time of
termination of Executive's employment.
(C) "TERMINATION DATE" means the date on which
Executive's employment with FirstMerit terminates.
(D) "TERMINATION OF EMPLOYMENT FOR CAUSE" means the
termination of Executive's employment by FirstMerit for any of the
following reasons:
(i) Felonious criminal activity whether or not
affecting FirstMerit;
(ii) Disclosure to unauthorized persons of
FirstMerit information which is believed by the Board of
Directors of FirstMerit, acting in good faith, to be
confidential; provided, however, that any such disclosure
shall not be considered to be "cause" for termination to the
extent that:
(a) it is required of Executive pursuant
to an order of a court having competent jurisdiction
or a subpoena from an appropriate government agency;
or
(b) it is made by Executive in the
ordinary course of business within the scope of his
authority;
(iii) Dishonesty or the breach of any contract with
or violation of any legal obligation to FirstMerit;
(iv) Gross negligence or insubordination in the
performance of duties held by the President and Chief
Executive Officer of FirstMerit.
(E) "TERMINATION OF EMPLOYMENT WITHOUT CAUSE" means the
termination of Executive's employment by FirstMerit for any reason
other than Death, Disability or For Cause.
(F) "TERMINATION OF EMPLOYMENT FOR GOOD REASON" means the
termination of Executive's employment by Executive for any of the
following reasons:
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<PAGE> 8
(i) Involuntary reduction in Executive's Base
Salary unless such reduction occurs simultaneously with a
company wide reduction in officers' salaries;
(ii) Involuntary discontinuance or reduction in
Executive's incentive compensation award opportunities under
FirstMerit's plan unless a company wide reduction of all
officers' incentive compensation awards occurs simultaneously
with such discontinuance or reduction;
(iii) Significant reduction in Executive's
responsibilities and status within the FirstMerit
organization, or a change in his title or office without
written consent of Executive;
(iv) Involuntary discontinuance of Executive's
participation in any employee benefit plans maintained by
FirstMerit unless such plans are discontinued by reason of law
or loss of tax deductibility to Firstmerit with respect to
contributions to such plans, or are discontinued as a matter
of FirstMerit policy applied equally to all participants in
such plans;
(v) A material breach of this Agreement, which
breach is not corrected within a reasonable time after notice.
7.2 TERMINATION OF EMPLOYMENT UPON DEATH. If Executive's
employment is terminated by reason of Death, his estate shall be entitled to
receive only Executive's Base Salary to which he was entitled through the
Termination Date, any unpaid bonus due with respect to a year prior to the year
in which the termination occurred, and such other benefits as may be available
to him or his estate through FirstMerit's benefit plans and policies (including
the Membership Agreement entered into in connection with the SERP as described
in Section 5.1(C)).
7.3 TERMINATION OF EMPLOYMENT UPON DISABILITY. If Executive's
employment is terminated due to his inability to perform his duties because of
Disability, Executive shall be entitled to receive only his Base Salary to
which he was entitled through the Termination Date, any unpaid bonus due with
respect to a year prior to the year in which the termination occurred, and such
other benefits as may be available to him through FirstMerit's benefit plans
and policies (including the Membership Agreement entered into in connection
with the SERP as described in Section 5.1(C)).
7.4 TERMINATION OF EMPLOYMENT BY FIRSTMERIT FOR CAUSE. If
Executive's employment is terminated For Cause, Executive shall be entitled to
receive only Executive's Base Salary to which he was entitled through the
Termination Date and such other benefits as may be available to him through
FirstMerit's benefit plans and policies in effect at the time of termination.
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<PAGE> 9
7.5 Termination Without Cause or Termination For Good Reason.
---------------------------------------------------------
(A) If there is a Termination of Employment Without Cause
or a Termination of Employment For Good Reason, and the Termination
Date is prior to the expiration of the Term, Executive's Base Salary
and benefits (including credit for Years of Service under the SERP)
shall continue for a period of three years from the Termination Date;
provided, however, that if Executive obtains employment (other than
self-employment) following such termination, then Executive's Base
Salary and benefits (including service credit under the SERP, and
including the payment of premiums under Section 5.3) shall continue
for a period of two years from the Termination Date or until
Executive's obtaining employment, whichever is later. Notwithstanding
the preceding sentence, if a termination of employment under this
Section 7.5(A) occurs following a Change of Control, and if the
compensation and benefits provided under this Section 7.5(A), alone or
in conjunction with other compensation or benefits received by
Executive, constitute "Parachute Payments" within the meaning of
Section 280G of the Internal Revenue Code (the "Code") or the
regulations adopted or proposed thereunder, then the compensation and
benefits payable under this Section 7.5(A) shall be reduced to the
extent necessary so that no portion shall be subject to the excise tax
imposed by Section 4999 of the Code.
(B) If there is a Termination of Employment Without Cause
or a Termination of Employment For Good Reason, and the Termination
Date is after the expiration of the Term, Executive shall be entitled
to receive only his Base Salary to which he was entitled through the
Termination Date and such other benefits as may be available to him
through FirstMerit's benefit plans and policies.
7.6 TERMINATION OF EMPLOYMENT OTHER THAN FOR GOOD REASON. If
Executive terminates employment with FirstMerit other than for Good Reason,
Executive shall be entitled to receive only his Base Salary to which he was
entitled through the Termination Date and such other benefits as may be
available to him through FirstMerit's benefit plans and policies.
7.7 EFFECT OF TERMINATION. Upon termination of Executive's
employment, the obligations of each of the parties under this Agreement shall
expire as of the Termination Date, including, without limitation, the
obligations of FirstMerit to pay any compensation to Executive, except to the
extent otherwise specifically provided in this Agreement. Notwithstanding the
foregoing, the obligations contained in Section 8 of this Agreement and the
provisions hereof relating to the obligations of FirstMerit described in the
preceding sentence, shall survive the termination or expiration of this
Agreement in accordance with the terms set forth therein.
8. Confidentiality and Non-Compete
-------------------------------
8.1 NON-DISCLOSURE. Executive expressly covenants and agrees that
he will not reveal, divulge or make known to any person, firm, company or
corporation any secret or confidential information of any nature concerning
FirstMerit or its business, or anything connected therewith; and
-9-
<PAGE> 10
8.2 RETURN OF MATERIALS. Executive agrees to deliver or return to
FirstMerit upon termination or expiration of this Agreement or as soon
thereafter as possible, all written information and any other similar items
furnished by FirstMerit or prepared by Executive in connection with his
services hereunder. Executive will retain no copies thereof after termination
of this Agreement or Executives employment.
8.3 NON-COMPETE. If executive terminates his employment other
than for Good Reason during the Term, or if FirstMerit terminates Executive's
employment for Cause during the Term, then, until the first anniversary of the
Termination Date, Executive shall not become associated, directly or
indirectly, with any entity, whether as a shareholder (other than as a holder
of not more than 1% of the outstanding voting shares of any publicly traded
company), principal, partner, employee or consultant (such activities
collectively referred to as an "Associate"), that is actively engaged in any
business which is in competition with Firstmerit or any of its subsidiaries in
any geographic area in which FirstMerit or any of its subsidiaries does
business at the date of such termination. If Executive incurs a Termination of
Employment for Good Reason or a Termination of Employment Without Cause during
the Term, then, until the cessation of payments under Section 7.5(A), Executive
shall not become an Associate of any entity that is actively engaged in any
business which is in competition with FirstMerit or any of its subsidiaries in
the State of Ohio, the west coast of the State of Florida (including, without
limitation, the cities of Clearwater, Ft. Myers, Naples, and such places in
between), and such other geographic area in the State of Florida as FirstMerit
or any of its subsidiaries may have begun doing business as of the Termination
Date.
8.4 INJUNCTIVE RELIEF. Executive acknowledges that it is
impossible to measure in money the damages that will accrue to FirstMerit by
reason of Executive's failure to observe any of the obligations imposed on him
by this paragraph 8. Accordingly, if FirstMerit shall institute an action to
enforce the provisions hereof, Executive hereby waives the claim or defense
that an adequate remedy at law is available to FirstMerit, and Executive agrees
not to urge in any such action the claim or defense that such remedy at law
exists.
9. Miscellaneous.
--------------
9.1 ASSIGNMENT. This Agreement shall be binding upon the parties
hereto, their respective heirs, personal representatives, executors,
administrators and successors; provided, however, that Executive shall not
assign this Agreement.
9.2 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of the State of Ohio. In the event that any
provision of this Agreement shall be held to be void or unenforceable by a
court of competent jurisdiction, this Agreement shall not be rendered null and
void thereby but shall be construed and enforced as if such void or
unenforceable provision was not originally a part of this Agreement.
-10-
<PAGE> 11
9.3 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties concerning the employment of Executive by FirstMerit,
and any oral or written statements, representations, agreements, or
understandings made or entered into prior to or contemporaneously with the
execution of this Agreement, are hereby rescinded, revoked, and rendered null
and void by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year above first written.
FIRSTMERIT CORPORATION
By: /s/ Howard L. Flood
--------------------------------------------
Its: President & CEO
--------------------------------------------
/s/ John R. Cochran
--------------------------------------------
JOHN R. COCHRAN
-11-
<PAGE> 1
Exhibit 10(b)
MEMBERSHIP AGREEMENT
WITH RESPECT TO THE
FIRSTMERIT CORPORATION
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
--------------------------------------
MEMBERSHIP AGREEMENT, effective the 1st day of March, 1995, by and
between FirstMerit Corporation, an Ohio corporation (the "Employer"), and John
R. Cochran, an individual, (the "Employee").
R E C I T A L S:
A. The Employer maintains the FirstMerit Corporation Supplemental
Retirement Plan (the "Plan"), a copy of which is attached hereto as Exhibit A
and is incorporated herein by reference, and has selected the Employee for
participation in the Plan.
B. Section 9.07 of the Plan provides that the Employer and any
participant in the Plan may, by written agreement, amend the provisions of the
Plan as to only such participant.
C. The Employer and the Employee have entered into a certain
Employment Agreement, effective March 1, 1995, (the "Employment Agreement").
D. In accordance with the terms of the Employment Agreement, the
Employer desires that the Employee participate in the Plan, subject to the
modifications set forth in this Agreement, and the Employee desires to accept
membership in the Plan subject to such modifications.
IN CONSIDERATION OF THE FOREGOING, and for good and valuable
consideration, receipt of which is hereby acknowledged, the Employer and
Employee agree as follows:
1. Definitions
-----------
Capitalized terms used in this Membership Agreement shall have the
same meaning ascribed to them in the Plan unless expressly provided otherwise
herein.
2. Participation in the Plan
-------------------------
The Employee shall become a Member in the Plan effective as of March
1, 1995.
3. Form of Distribution of Benefits Under the Plan
-----------------------------------------------
Notwithstanding any of the provisions of Section 4.04 of the Plan to
contrary, the Employee may not elect to receive any Monthly Retirement Income
payable to him under the terms of the Plan in the form of a lump sum
distribution.
<PAGE> 2
4. Deferred Vested Benefit
-----------------------
(a) Notwithstanding anything to the contrary contained in Section
4.05 of the Plan, if the Employee's employment with the Employer terminates
prior to his attainment of age 55 (i) due to his death or Disability, (ii) upon
Termination of Employment Without Cause during the Term or Termination of
Employment for Good Reason during the Term, or (iii) following a Change of
Control, the Employee shall, for purposes of applying the provisions of
Sections 4.02 of the 4.05 of the Plan, be deemed to have attained age 55 on the
effective date of the termination of his employment, regardless of his actual
Attained Age as of such date.
(b) If the provisions of subparagraph (a) become applicable, the
Employee shall be eligible to elect Early Retirement under the Plan and to
commence receiving his Monthly Retirement Income, calculated under the
provisions of Section 4.02 and 4.05 of the Plan (using the greater of his
Attained Age as of his Retirement Date or age 55), on or after the later of (i)
the effective date of the termination of his Employment with the Employer or
(ii) the first day of the first month following the month in which he has
received the last installment of the payments, if any, that are required to be
made to him under Section 7.5(A) of the Employment Agreement.
(c) For purposes of applying the provisions of this paragraph 4, the
terms "Disability," "Termination of Employment Without Cause," "Termination of
Employment for Good Reason," "Term," and "Change of Control" shall have the
meanings ascribed to them in the Employment Agreement.
5. Except as expressly modified by this Membership Agreement, all of
the provisions of the Plan shall apply to the Employee.
IN WITNESS WHEREOF, the Employer and the Employee have duly executed
this Agreement the day and year above first written.
FirstMerit Corporation
By: /s/ Howard L. Flood
---------------------------------
Its: Chairman
---------------------------------
EMPLOYER
/s/ John R. Cochran
----------------------------------
John R. Cochran
EMPLOYEE
2
<PAGE> 1
Exhibit 10(c)
FIRSTMERIT CORPORATION
1992 STOCK OPTION PROGRAM
EMPLOYEE STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into the day indicated on Exhibit
A, by and between FirstMerit Corporation and the undersigned ("Optionee").
WHEREAS, FirstMerit Corporation on April 8, 1992, by action of its
shareholders adopted and approved the 1992 Stock Option Program ("Plan"); and
WHEREAS, one of the purposes of the Plan is to enable selected key
employees of FirstMerit Corporation and its subsidiaries (the "Company") to
acquire a proprietary interest in the Company through the Plan, to provide
employees with a more direct stake in the future and welfare of the Company,
and to encourage them to remain with the Company.
NOW, THEREFORE, the Company and Optionee agree as follows:
1. AMOUNT OF STOCK SUBJECT TO OPTION; DIVIDEND UNITS. As of the
date of this Agreement, the Company hereby grants to the Optionee the right to
purchase that number of shares of authorized and unissued Common Stock (as
defined in the Plan) of the Company as indicated on Exhibit A, which Common
Stock is to be issued by the Company upon the exercise of this option.
The Company also hereby grants to Optionee one Dividend Unit with
respect to each share of stock for which this option has been granted.
2. PURCHASE PRICE.
(a) INCENTIVE STOCK OPTIONS. The purchase price per share
shall be the amount listed on Exhibit A, which for incentive stock options
shall not be less than 100% of the Fair Market Value (as defined in the Plan)
of the Common Stock at the time the option is granted, or not less 110% of the
Fair Market Value of the Common Stock at the time the option is granted if the
Optionee owns, within the meaning of Section 425(d) of the Internal Revenue
Code of 1986, as amended ("Code"), Common Stock representing more than 10% of
the total combined voting power of all classes of stock of the Company.
(b) NON-QUALIFIED STOCK OPTIONS. The purchase price per
share for non-qualified stock options shall be the amount listed on Exhibit A,
which may be less than 100% of the Fair Market Value of the Common Stock at the
time the option is granted.
<PAGE> 2
3. PERIOD OF OPTION. Notwithstanding anything otherwise stated
herein, this option may not be exercised prior to six months from the date of
its grant. The option may be exercised pursuant to the schedule for vesting
listed on the attached Exhibit A.
4. DIVIDEND UNITS.
(a) The terms of the Dividend Units granted herein shall be
ten years from the date of grant hereof, provided that the Dividend Units will
accrue dividends only for the first five years of that period.
(b) The amount payable to Optionee in respect of each
Dividend Unit awarded herein shall be equal to the aggregate dividends actually
paid on one share of the stock to which such Dividend Unit is attached of the
Company, to the extent Optionee held the Dividend Unit on the record date
established for payment of such dividends.
(c) Except as otherwise provided herein, the amount payable
to Optionee in respect of a Dividend Unit shall be paid to Optionee only at the
date of exercise of this option with respect to the share of stock to which the
Dividend Unit is attached.
(d) A Dividend Unit shall have no further force or effect
upon payment in respect thereof.
(e) In the event of a Change of Control of the Company (as
defined in the Plan), the Company shall promptly pay to Optionee an amount
equal to the aggregate amount accrued on the Dividend Units granted hereby.
After such Change of Control and for so long as Optionee holds any Dividend
Unit and dividends are accrued thereon, the Company shall make payments to
Optionee in respect of any such Dividend Unit at the same time as payments of
dividends on Company stock are made.
5. TERMS AND CONDITIONS. This Agreement is subject to the terms
and conditions of the FirstMerit Corporation 1992 Stock Option Plan, a copy of
which has been delivered to Optionee and is incorporated by reference herein.
6. EXERCISE OF OPTION.
In order to exercise this option or any part thereof, Optionee
shall give notice in writing to the Company of his intention to purchase all or
part of the shares of Common Stock subject to this option, and said notice
shall set forth the number of shares of Common Stock which he desires to
exercise.
Optionee shall pay for said shares of Common Stock in full at
the time of exercise in cash, by check, bank draft or money order payable to
the Company, or through the delivery of shares of Common Stock of the Company
having an aggregate Fair Market Value as determined on the date of exercise
equal to the option price. No shares of Common Stock shall
-2-
<PAGE> 3
be issued until final payment for said shares of Common Stock has been made,
and Optionee shall have none of the rights of a shareholder until said shares
of Common Stock are issued. Said notice to exercise this option shall set
forth that it is Optionee's present intention to acquire said shares of Common
Stock for investment, and not with a view to, or for sale in connection with,
any distribution thereof, if in the opinion of counsel for the Company it is
necessary or desirable.
7. WITHHOLDING. The Company may require a payment from Optionee
upon the exercise of this option to cover applicable withholding for income and
employment taxes. The Company reserves the right to offset such tax payment
from any funds which may be due Optionee by the Company.
8. THE RIGHT TO TERMINATE EMPLOYMENT. This option shall not
confer upon the Optionee any right with respect to being continued in the
employ of the Company or to interfere in any way with the right of the Company
to terminate his employment at any time, for any reason, with or without cause,
except as may otherwise be stated in a written employment agreement between the
Company and the Optionee.
9. LIMITATIONS. This option is subject to the requirement and
condition that if the Board of Directors shall determine that the listing,
registration or qualification upon any securities exchange under any state or
federal law, or the approval or consent of any governmental body is necessary
or desirable as a condition to the issuance or purchase of any shares subject
to this option, then this option may not be exercised in whole or in part
unless or until such listing, registration, qualification or approval has been
obtained, free of any conditions which are not acceptable to the Board of
Directors of the Company, and the sale and delivery of stock hereunder is also
subject to the above requirements and conditions.
10. NONTRANSFERABILITY OF OPTION; TERMINATION. This option
granted to Optionee is not transferable except pursuant to the terms of the
Plan. This option shall terminate upon the occurrence of such events as
contained in the Plan.
IN WITNESS WHEREOF, the parties hereto have set their hands hereof, as
of the day and year indicated on Exhibit A.
-3-
<PAGE> 4
EXHIBIT A
TO
FIRSTMERIT CORPORATION
1992 STOCK OPTION PROGRAM
EMPLOYEE STOCK OPTION AGREEMENT
1. NAME OF OPTIONEE: John R. Cochran
2. DATE OF GRANT: March 1, 1995
3. NUMBER OF SHARES SUBJECT TO OPTIONS AND PRICE:
0 shares as incentive stock options at $ N/A per share; and/or
60,000 shares as non-qualified stock options at $23.50 per share.
4. VESTING AND EXERCISE: The Optionee may not exercise the Options granted
hereunder prior to the expiration of six months following their date of grant.
Thereafter, the Optionee may exercise the Options in whole or in part, as
follows: (a) at any time after 12 months following the date of grant, not more
than 33 percent, or 20,000 shares; (b) at any time after 24 months following
the date of grant, an additional 33 percent but not more than 66 percent, or
40,000 shares; and (c) at any time after 36 months following the date of grant
an additional 34 percent or up to 100 percent, or 60,000 shares, except that
all such options must be exercised prior to the tenth anniversary of the date
of grant. Notwithstanding the foregoing and anything to the contrary
contained in the Plan, upon the termination of the Optionee's employment on or
after six months following the date of grant of the Options (1) as a result of
the Optionee's death or Disability, (2) following a Change of Control, or (3)
under circumstances that cause such termination to constitute a Termination of
Employment Without Cause or a Termination of Employment for Good Reason, all of
the then unexercised Options granted hereunder shall become exercisable at any
time after the effective date of such termination and before the tenth
anniversary of the date of grant. For purposes of the preceding sentence, the
terms "Disability," "Change of Control," "Termination of Employment Without
Cause," and "Termination of Employment for Good Reason" shall have the meanings
ascribed to such terms in the Employment Agreement, dated as of March 1, 1995,
between the Optionee and FirstMerit Corporation.
OPTIONEE: FIRSTMERIT CORPORATION
/s/ John R. Cochran By: /s/ Howard L. Flood
- - - ------------------------------------ -----------------------------------
John R. Cochran Howard L. Flood, Chairman
Date: March 1, 1995 Date: March 1, 1995
- - - ------------------------------------
(Social Security Number)
<PAGE> 1
Exhibit 10(d)
FIRSTMERIT CORPORATION
1995 RESTRICTED STOCK PLAN
1. PURPOSE. The purpose of the FirstMerit Corporation 1995
Restricted Stock Plan (the "Plan") is to enable FirstMerit Corporation (the
"Company") and its subsidiaries to provide present and prospective officers and
key employees with an opportunity to obtain an equity ownership interest in the
Company through the grant of restricted stock awards ("Award" or "Awards") of
the Company's common stock, no par value ("Common Stock").
2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company. A majority of members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by a majority of its members.
Any determination of the Committee under the Plan may be made without notice or
meeting, by a writing signed by a majority of the Committee members.
In accordance with and subject to the provisions of the Plan, the
Committee shall (A) select the Participants from those employees meeting the
eligibility criteria described in Section 4; (B) determine the number of Shares
to be subject to each Award; (C) determine the time at which Awards are made;
(D) determine the duration and nature of Award restrictions; (E) fix such other
provisions of the Awards as the Committee may deem necessary or desirable in
its sole discretion, consistent with the terms of the Plan; and (F) determine
the form or forms of agreement with Participants which shall evidence the
particular terms, conditions, rights and duties of the Company and the
Participants with respect to Awards (the "Award Agreements").
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, and revise such rules and regulations relating
to the Plan as it may deem necessary or desirable for the administration of the
Plan. Each determination, interpretation, or other action made or taken by the
Committee pursuant to the provisions of the Plan shall be conclusive and
binding for all purposes and on all persons, including, without limitation, the
Company, the stockholders of the Company, the Committee and each of the members
thereof, the Board of Directors, officers and employees of the Company, and the
Participants and their respective successors in interest.
3. COMMON STOCK SUBJECT TO THE PLAN. There is hereby reserved
for issuance as Awards under the Plan an aggregate of 12,500 shares of Common
Stock, which may be authorized but unissued or treasury shares.
Any shares subject to Awards may thereafter be subject to new Awards
under this Plan if shares of Common Stock are issued under such Awards and are
thereafter reacquired by the Company pursuant to rights reserved by the Company
upon issuance thereof, including, without limitation, the forfeiture of shares
subject to an Award prior to the lapse of restrictions.
<PAGE> 2
If the Company shall at any time change the number of issued shares of
Common Stock without new considerations to the Company (by stock dividends,
stock splits, or similar transactions), the total number of shares reserved for
issuance under the Plan shall be adjusted proportionately. Awards may also
contain provisions for their continuation or for other equitable adjustments
after changes in the Common Stock resulting from reorganization, sale, merger,
consolidation or similar circumstances.
4. PARTICIPANTS. Participants will consist of such key employees
(including officers) of the Company and any present or future subsidiary as the
Committee, in its sole discretion, determines to be mainly responsible for the
success and future growth and profitability of the Company and value to its
stockholders and whom the Committee may designate from time to time to receive
Awards under the Plan. Awards may be granted under this Plan to persons who
have previously received Awards or other benefits under this or other plans of
the Company.
5. AWARDS. Awards will consist of grants of restricted shares of
Common Stock ("Restricted Shares") to Participants as a bonus for service
rendered to the Company without other payment therefor. In addition to the
restrictions described in Section 6, any Award under the Plan may be subject to
such other provision (whether or not applicable to an Award to any other
Participant) as the Committee deems appropriate, including, without limitation,
provisions for the forfeiture of and restrictions on the sale, resale or other
disposition of shares acquired under any Award, provisions giving the Company
the right to repurchase shares acquired under any Award, provisions to comply
with federal and state securities laws, or understandings or conditions as to
the Participant's employment in addition to those specifically provided for
under the Plan.
6. RESTRICTIONS. A Participant shall not have a right to retain
any Restricted Shares granted under an Award unless and until such restrictions
have by their terms lapsed. The lapsing of such restrictions is referred to
herein as "Vesting," and the shares after Vesting has occurred are referred to
herein as "Vested Shares." The restrictions which the Committee may place on
the Awards include, without limitation, the Participant's continued employment
with the Company for certain periods of time as determined by the Committee and
the attainment of various performance goals by the Participant and/or the
Company as specified by the Committee with respect to such Award. The
Committee may, in its sole discretion, require different periods of employment
or different performance goals with respect to different Participants, with
respect to different Awards or with respect to separate, designated portions of
an Award. The Committee may, in its sole discretion, terminate restrictions on
shares issued pursuant to an Award prior to the time such restrictions
otherwise would have lapsed. Any Restricted Shares granted under an Award
which have not become Vested Shares on or before the termination date, if any,
set forth in the Award Agreement shall permanently be forfeited, and shall
thereafter become available for reissuance under the Plan.
7. ENFORCEMENT OF RESTRICTIONS. The Committee in its sole
discretion, may employ one or more methods of enforcing the restrictions
referred to in Sections 6, 8, 9 and 11, including, without limitation, the
following: (A) placing a legend on the stock certificates
2
<PAGE> 3
referring to the restrictions; (B) requiring the Participant to keep stock
certificates, duly endorsed, in the custody of the Company or its designated
agent while the restrictions remain in effect; (C) not issuing certificates for
Restricted Shares until the shares become Vested Shares; or (D) retain a
possessory lien in the Award Shares as provided in Section 11 below.
8. PRIVILEGES OF SHAREHOLDER. Restricted Shares shall constitute
issued and outstanding shares of the Company for all corporate purposes, and
the Participant shall have all voting and (subject to any Award restrictions)
all dividend, liquidation and other rights with respect to Restricted Shares
while the corresponding Award remains in effect, as if such Participant were a
holder of record of unrestricted shares of Common Stock. Notwithstanding the
foregoing, prior to the time at which a Restricted Share becomes a Vested
Share, the Participant's right to assign or transfer such Restricted Share
shall be subject to the limitations of Section 9. Certificates representing
Restricted Shares shall bear a restrictive legend disclosing the restrictions,
the existence of the Plan, and the existence of the applicable Award.
9. NON-TRANSFERABILITY. No right or interest of any Participant
in any Award made pursuant to the Plan shall, prior to the satisfaction of all
restrictions applicable thereto, be assignable or transferable, in whole or in
part, during the lifetime of the Participant, either voluntarily or
involuntarily, or be made subject to any lien (except as provided in Sections 7
and 11), directly or indirectly, by operation of law or otherwise, including
execution, levy, garnishment, attachment, pledge or bankruptcy. In the event
of a Participant's death, a Participant's right and interest in any Award
shall, to the extent provided in the Award, be transferable by testamentary
will or the laws of descent and distribution, and the issuance of any shares
subject to an Award shall be made to the Participant's legal representatives,
heirs or legatees upon furnishing the Committee with evidence satisfactory to
the Committee of such status.
10. WITHHOLDING TAXES. The Company is entitled to (A) withhold
and deduct from future wages of the Participant, or make other arrangements for
the collection of, all legally required amounts necessary to satisfy any
federal, state, or local tax requirements attributable to the grant, vesting or
applicable tax elections (including, without limitation, elections under
Section 83(b) of the Code), with respect to the Restricted Shares, or the
payment of any dividends or other distributions with respect to the Restricted
Shares, or (B) require the Participant promptly to remit the amount of such
withholding to the Company as a condition to the continuation of such Award,
the delivery of certificates evidencing Vested Shares, or the payment of any
dividends paid on Restricted Shares.
11. LIEN ON SHARES. The Company may, in its sole discretion,
require that a Participant, as a condition to the receipt of an Award, grant to
the Company a possessory lien on the Restricted Shares in order to (A) secure
re-transfer of the Shares into the name of the Company, and (B) ensure adequate
provision for any tax withholding obligations arising with respect to such
Award, and to that end, may require that certificates evidencing Restricted
Shares be deposited by the Participant with the Company, together with stock
powers or other instruments of assignment, each endorsed in blank, which will
permit the transfer to the
3
<PAGE> 4
Company of all or any portion of the Restricted Shares which are forfeited or
required to be retained to satisfy the participant's withholding obligations to
the Company.
12. SHARE ISSUANCE AND TRANSFER RESTRICTIONS.
(A) SHARE ISSUANCE. Notwithstanding any other provision
of the Plan or any Award Agreement entered into pursuant hereto, the
Company shall not be required to issue or deliver any certificate for
shares under this Plan, unless and until both of the following are
satisfied:
(i) either:
(a) there shall be in effect with
respect to such shares a registration statement under
the Securities Act of 1933, as amended (the
"Securities Act") and any applicable state securities
laws, if the Committee, in its sole discretion, shall
have determined to file, cause to become effective
and maintain the effectiveness of such registration
statement; or
(b) if the Committee has determined not
to so register the shares, (1) exemptions from
registration under the Securities Act and applicable
state securities laws shall be available for such
issuance as determined by counsel for the Company and
(2) there shall have been received from the
Participant (or, in the event of death or disability,
the Participant's hear(s) or legal representative(s))
any representations or agreements requested by the
Company in order to permit such issuance to be made
pursuant to such exemptions; and
(ii) there shall have been obtained any other
consent, approval or permit from any state or federal
government agency which the Committee shall, in its sole
discretion and upon the advice of counsel, deem necessary or
advisable.
(B) TRANSFERS OF VESTED SHARES. Vested Shares may not be
sold, assigned, transferred, pledged, encumbered, or otherwise
disposed of (whether voluntarily or involuntarily) except pursuant to
registration under the Securities Act and applicable state securities
laws or pursuant to exemptions from such registrations. The Company
may condition the sale, assignment, transfer, pledge, encumbrance or
other disposition of such shares not issued pursuant to an effective
and current registration statement under the Securities Act and all
applicable state securities laws, on the receipt from the party to
whom the shares are to be so transferred of any representations or
agreements requested by the Company in order to permit such transfer
to be made.
4
<PAGE> 5
(C) LEGENDS. Unless a registration under the Securities
Act is in effect with respect to the issuance or transfer of Vested
Shares, each certificate representing such shares shall be endorsed
with a legend in substantially the following form, unless counsel for
the Company is of the opinion as to any such certificate that such
legend is unnecessary:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
STATE LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION STATEMENT
UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
13. TENURE. An Award shall not confer upon the Participant any
right with respect to being continued in the employ of the Company or to
interfere in any way with the right of the Company to terminate his employment
at any time, for any reason, with or without cause, except as may otherwise be
stated in a written employment agreement between the Company and the
Participant.
14. ACCELERATION ON CHANGE OF CONTROL. The Committee may provide,
in its sole discretion, in one or more Awards, that notwithstanding the
provisions of each Award which would result in a forfeiture as a result of the
Participant's termination of employment with the Company prior to the Vesting
of Restricted Shares, the Restricted Shares subject to such Award shall
immediately become Vested Shares as a result of a Change in Control as defined
in the Award Agreement, or the affected Participant's employment or separation
agreement with the Company at the time of reference. Notwithstanding anything
to the contrary in the Plan, unless expressly provided to the contrary in the
Award Agreement, if Restricted Shares experience an acceleration in Vesting on
a Change in Control as permitted by the preceding sentence, the portion of the
Restricted Shares which experience such acceleration will be limited to that
number which will not cause or contribute to an "excess parachute payment" with
respect to the Participant, as reasonably determined by the Committee in
accordance with Section 280G of the Code.
15. AMENDMENT, MODIFICATION AND TERMINATION. The Board of
Directors may amend the Plan from time to time or terminate the Plan at any
time. In addition, the Committee may amend the terms of any Award previously
granted under this Plan, prospectively or retroactively. However, no action
authorized by this Section 15 shall impair the rights of any Participant
without the Participant's consent.
5
<PAGE> 6
16. EFFECTIVE DATE AND DURATION. The Plan is effective as of
March 1, 1995. The Plan shall continue in effect until it is terminated by
action of the Board of Directors, but such termination shall not affect the
then outstanding terms of any Award. No Award shall be granted more than 10
years after the date of adoption of this Plan; provided, however, that the
terms and conditions applicable to any Award granted within such period may
thereafter be amended or modified by mutual agreement between the Company and
the Participant or such other persons as may then have an interest therein.
Also, by mutual agreement between the Company and a Participant, or under any
future plan of the Company, Awards may be granted to such Participant in
substitution and exchange for, and in cancellation of, any Awards previously
granted such Participant under this Plan, or any benefit previously or
thereafter granted to him under any future plan of the Company.
17. EXCLUSIVITY OF THE PLAN. Nothing contained in this Plan is
intended to amend, modify or rescind any previously approved compensation plans
or programs adopted by the Company. The Plan will be construed to be in
addition to any and all such other plans or programs. The adoption of the Plan
by the Company will not be construed as creating any limitations on the power
or authority of the Board of Directors to adopt such additional or other
compensation arrangements as the Board of Directors may deem necessary or
desirable.
[100347]
6
<PAGE> 1
Exhibit 10(e)
RESTRICTED STOCK
AWARD AGREEMENT
This Award Agreement is effective as of the 1st day of March, 1995
("Date of Award"), between FirstMerit Corporation, an Ohio corporation (the
"Company"), and John R. Cochran (the "Grantee"). In consideration of the
agreements set forth below, the Company and the Grantee agree as follows:
1. GRANT. A restricted stock award ("Award") of 12,500 shares
("Award Shares") of the Company's common stock, no par value ("Common Stock"),
is hereby granted by the Company to the Grantee subject to the following terms
and conditions and to the provisions of the FirstMerit Corporation 1995
Restricted Stock Plan (the "Plan"), the terms of which are hereby incorporated
by reference.
2. TRANSFER RESTRICTIONS. None of the Award Shares shall be
sold, assigned or transferred, in whole or in part, voluntarily or
involuntarily, by the Grantee, nor made subject to any lien (except as provided
in Section 6, below), directly or indirectly, by operation of law or otherwise,
including execution, levy, garnishment, attachment, pledge or bankruptcy.
3. RELEASE OF RESTRICTIONS.
(A) The restrictions set forth in Section 2 above shall
lapse as follows:
(i) with respect to 4,167 Award Shares, on the
anniversary of this Award Agreement in the year 2001;
(ii) with respect to 4,167 Award Shares, on the
anniversary of this Award Agreement in the year 2002;
(iii) with respect to 4,166 Award Shares, on the
anniversary of this Award Agreement in the year 2003;
(B) The restrictions set forth in Section 2 above with
respect to all of the Award Shares, to the extent they have not lapsed
in accordance with subsection 3(A) and to the extent not related to
shares which previously have been forfeited to the Company, shall
lapse on the first to happen of the following:
(i) the Grantee's employment with the Company is
terminated following a Change of Control, or by reason of
death, Disability, Termination of Employment Without Cause or
Termination of Employment for Good Reason(for purposes of this
subsection (i), the terms "Change of Control," "Disability,"
"Termination of Employment Without Cause," and "Termination of
Employment for Good Reason" shall have the same meanings
ascribed to such terms in the Employment Agreement, effective
as of March 1, 1995, between the Company and the Grantee (the
"Employment Agreement")); or
<PAGE> 2
(ii) an action by the Committee, in its sole
discretion, terminating such restrictions.
The provisions of the second sentence of Section 14 of the
Plan shall not apply to this Award and, therefore, the lapse
of the restrictions set forth in Section 2 upon the occurrence
of a Change of Control, as provided in Section 3(B)(i), shall
not be limited as otherwise provided in Section 14 of the
Plan.
4. FORFEITURE. The Award Shares shall be forfeited to the
Company upon the Grantee's termination of employment with the Company and its
subsidiaries unless on or prior to the date the restrictions lapse as provided
in Section 3 above.
5. RIGHTS AS SHAREHOLDER. The Grantee shall be entitled to all
of the rights of a shareholder with respect to the Award Shares including the
right to vote such shares and to receive dividends and other distributions
payable with respect to such shares since the Date of Award.
6. ESCROW OF SHARE CERTIFICATES. For the purposes of securing
the re-transfer of the shares into the name of the Company in the event of
forfeiture and to ensure adequate provision for any tax withholding obligations
arising with respect to the Award, certificates for the Award Shares shall be
issued in the Grantee's name and shall be held in escrow by, and subject to a
security interest in favor of, the Company until restrictions with respect to
such shares lapse and all withholding obligations have been satisfied or such
shares are forfeited as provided herein; provided, however, that the terms of
such escrow shall make allowance for the transactions contemplated by Section
3(B)(i) above. A certificate or certificates representing the Award Shares as
to which restrictions have lapsed shall be delivered to the Grantee upon such
lapse and the satisfaction of any withholding obligations.
7. GOVERNMENT REGULATIONS. Notwithstanding anything contained
herein to the contrary, the Company's obligation to issue or deliver
certificates evidencing the Award Shares shall be subject to all applicable
laws, rules and regulations and to such approvals by any governmental agencies
or national securities exchanges as may be required.
8. WITHHOLDING TAXES. The Company shall have the right to
require the Grantee to remit to the Company, or to withhold from other amounts
payable to the Grantee, as compensation or otherwise, an amount sufficient to
satisfy all federal, state and local withholding tax requirements.
9. GOVERNING LAW. This Agreement shall be construed under the
laws of the State of Ohio.
2
<PAGE> 3
10. RIGHT TO TERMINATE EMPLOYMENT. This Award shall not confer
upon the Grantee any right with respect to being continued in the employ of the
Company or to interfere in any way with the right of the Company to terminate
his employment at any time, for any reason, with or without cause, except as
may otherwise be stated in the Employment Agreement.
IN WITNESS WHEREOF, the Company has caused the Award to be granted
pursuant to this Award Agreement on the date first above written.
FIRSTMERIT CORPORATION
By: /s/ Howard L. Flood
---------------------------------------
Howard L. Flood, Chairman
Accepted:
GRANTEE:
/s/ John R. Cochran
- - - ------------------------------------
John R. Cochran
Date: March 1, 1995
3
<PAGE> 1
Exhibit 10(f)
FIRSTMERIT CORPORATION TERMINATION AGREEMENT
AGREEMENT made as of this 1st day of March, 1995, by and between
FirstMerit Corporation, an Ohio corporation (the "Company"), and John R.
Cochran ("Employee").
R E C I T A L S :
A. The Board of Directors of the Company has determined that the
interests of FirstMerit Corporation stockholders will be best served by
assuring that its key corporate officers will adhere to the policy of the Board
of Directors with respect to any event by which another entity would acquire
effective control of the Company, including but not limited to a tender offer.
B. The Board of Directors has also determined that it is in the
best interest of the shareholders to promote stability among key officers and
employees.
IN CONSIDERATION OF THE FOREGOING, the mutual covenants hereinafter
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and Employee agree as follows:
1. DUTIES OF EMPLOYEE. Employee shall support the position of
the Board of Directors and shall take any action reasonably requested by the
Board of Directors with respect to any event by which another entity would
acquire effective control of the Company, including but not limited to a tender
offer.
2. CHANGE OF CONTROL. The term "Change of Control" shall mean a
change in control of a nature that would be required to be reported by persons
or entities subject to the reporting requirements of Section 14(a) of the
Securities Exchange Act of 1934 in response to item 5(f) of Schedule 14A of
Regulation 14(A) as in effect on the date hereof, or successor provisions
thereto, provided that, without limitation, such a change in control shall be
deemed to have occurred if (a) any unaffiliated "person," "entity," or "group"
(as defined in Rule 13(d)-3 issued under the Securities Exchange Act of 1934)
directly or indirectly becomes the owner of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities or (b) at any time during any period of two consecutive
calendar years individuals, who at the beginning of such period constitute the
Board of Directors of the Company, cease for any reason to constitute at least
the majority of such Board unless the election, or the nomination for election,
by the Company's shareholders of each new director was approved by a vote of at
least two-thirds of the directors still in office who were directors of the
Company at the beginning of such two-year period.
<PAGE> 2
3. COMPANY'S RIGHT TO TERMINATE. The Company may terminate the
Employee's employment at any time during the term of this Agreement, subject to
providing the benefits hereinafter specified if a Change of Control has
occurred.
4. TERMINATION FOLLOWING CHANGE OF CONTROL. If the Employee's
employment is terminated subsequent to a Change of Control and prior to the
expiration of the term of this Agreement, the Employee shall be entitled to the
benefits provided in paragraph 6 unless such termination is (a) because of the
Employee's death, Retirement or Disability, (b) by the Company for Cause, or
(c) by the Employee other than for Good Reason.
(a) DISABILITY OR RETIREMENT. Termination of employment
by the Company based on "Disability" shall mean termination because of
Total and Permanent Disability as defined in the Company's Long-Term
Disability Plan in effect from time to time. Termination of
employment based on "Retirement" shall mean termination of employment
by the Employee in accordance with the Company's retirement policy
(including early retirement policy) which is in effect from time to
time and is generally applicable to the Company's salaried employees,
excluding, however, a termination of employment by the Employee under
the Company's retirement policy which is for Good Reason.
(b) CAUSE. The term "Cause" shall mean termination upon
one or more of the following acts of the Employee:
(1) Felonious criminal activity whether or not
effecting the Company;
(2) Disclosure to unauthorized persons of Company
information which is believed by the Board of Directors of the
Company, acting in good faith, to be confidential; provided,
however, that any such disclosure shall not be considered to
be "cause" for termination to the extent that:
(a) it is required of the Employee pursuant
to an order of a court having competent jurisdiction
or a subpoena from an appropriate government agency;
or
(b) it is made by the Employee in the
ordinary course of business within the scope of his
authority;
- 2 -
<PAGE> 3
(3) Dishonesty or breach of any contract with or
violation of any legal obligation to the Company; or
(4) Gross negligence or insubordination in the
performance of duties held by the President and Chief
Executive Officer of the Company.
(c) GOOD REASON. The term "Good Reason" shall mean
voluntary termination of employment by the Employee, including his
retirement, based on any of the following:
(1) Involuntary reduction in the Employee's base
salary as in effect immediately prior to a Change of Control
unless such reduction occurs simultaneously with a
Company-wide reduction in officers' salaries;
(2) Involuntary discontinuance or reduction in
the Employee's incentive compensation award opportunities
under plans in existence at the time of a Change of Control,
unless a Company-wide reduction of all officers' incentive
award opportunities occurs simultaneously with such
discontinuance or reduction;
(3) Significant reduction in the Employee's
responsibilities and status within the Company's organization
or change in the Employee's title or office without prior
written consent of the Employee;
(4) Involuntary discontinuance of the Employee's
participation in any employee benefit plans maintained by the
Company unless such plans are discontinued by reason of law or
loss of tax deductibility to the Company with respect to
contributions to such plans, or are discontinued as a matter
of the Company's policy applied equally to all participants in
such plans;
(5) Failure to obtain an assumption of the
Company's obligations under this Agreement by any successor to
the Company, regardless of whether such entity becomes a
successor to the Company as a result of a merger,
consolidation, sale of the assets of the Company, or other
form of reorganization; or
- 3 -
<PAGE> 4
(6) Termination of employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of paragraph 5 herein.
5. NOTICE OF TERMINATION. Any purported termination of the
Employee's employment by the Company or by the Employee shall be communicated
by written Notice of Termination to the other party. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon, shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provisions so
indicated and shall specify a "Date of Termination."
6. COMPENSATION AND BENEFITS UPON TERMINATION. If, after a
Change of Control has occurred and prior to the expiration of the term of this
Agreement, the Employee's employment by the Company shall be terminated (a) by
the Company other than for Cause, Disability, Retirement, or Death or (b) by
the Employee for Good Reason, then the Employee shall be entitled to the
benefits provided below. Such compensation and benefits shall continue to be
paid or provided until the third (3rd) anniversary of the Date of Termination
of the Employee's employment by the Company. In no event, however, shall such
compensation and benefits continue beyond age sixty-five (65) or the Employee's
death, whichever first occurs. For the sole purpose of determining the
Employee's eligibility to participate in the Company's medical, life, and
disability insurance plans, the Employee shall be considered to be on a paid
leave of absence as long as he is receiving compensation or benefits under this
Agreement.
(a) BASE SALARY. The Company shall pay to the Employee
his full base salary at the rate in effect at the time Notice of
Termination is given or immediately preceding a Change of Control,
whichever is higher. Such payments shall be made periodically
according to the same schedule as salary payments are made to the
Company's salaried employees.
(b) INCENTIVE COMPENSATION. The Company shall annually
pay to the Employee an incentive award equal to the average of the
incentive compensation paid to the Employee in the two (2) calendar
years immediately preceding the year in which a Change of Control
occurs. Such amount shall be paid in equal monthly installments.
(c) STOCK PLANS. The Employee shall be entitled to
immediate vesting of all stock options, to the extent provided in the
Employee Stock Option Agreement, dated as of March 1, 1995, between
the Company and the Employee, restricted stock awards, to the extent
provided in the Restricted Stock Award Agreement, dated as of March 1,
1995, between the Company and the Employee, and other stock, phantom
stock, stock
- 4 -
<PAGE> 5
appreciation rights or similar arrangements in which he participates.
Notwithstanding any plan provisions to the effect that rights under
any such plan terminate upon termination of employment, the Employee
shall be given the longer of any period stated in such plan or
agreement under such plan or ninety (90) days after the Date of
Termination to realize or exercise all rights or options provided
under such plans.
(d) MEDICAL, DISABILITY AND LIFE INSURANCE. The
Company shall provide medical, health and accident, disability, and
life insurance (including conversion rights) with coverage and limits
identical to those in effect with respect to the Employee immediately
prior to the Change of Control.
(e) OUTPLACEMENT FEES. For a period not to exceed one
(1) year after the Date of Termination, the Company will pay the
reasonable expenses associated with outplacement of the Employee in a
position comparable to that held by the Employee prior to the Change
of Control through a professional placement firm and in an amount not
to exceed Thirty-five Thousand Dollars ($35,000).
Notwithstanding the foregoing, to avoid duplication of the benefits
provided under this Agreement, amounts payable, and benefits provided, to the
Employee pursuant to this paragraph 6 shall be reduced by amounts that are
paid, and benefits that are provided, to the Employee, following termination of
his employment with the Company (including a termination of employment as a
result of the Employee's retirement) and regardless of whether there is a
Change of Control, under any other employment agreement or employee benefit
plan or program to which the Employee is a party or in which he participates,
including, without limitation, amounts paid to the Employee upon termination of
his employment pursuant to Section 7.5 of the Employment Agreement, effective
as of March 1, 1995, between the Company and the Employee.
7. OVERALL LIMITATION ON BENEFITS. Notwithstanding any provision
in this Agreement to the contrary, if the compensation and benefits provided to
the Employee pursuant to or under this Agreement, either alone or with other
compensation and benefits received by the Employee, would constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue code (the
"Code"), or the regulations adopted or proposed thereunder, then the
compensation and benefits payable pursuant to or under this Agreement, and
under any other employment agreement to which the Employee is a party or
employee benefit plan or program in which the Employee is participating, shall
be reduced to the extent necessary so that no portion thereof shall be subject
to the excise tax imposed by Section 4999 of the Code. The Employee or any
other party entitled to receive the compensation or benefits hereunder may
request a determination as to whether the compensation or benefit would
constitute a parachute payment and, if requested, such
- 5 -
<PAGE> 6
determination shall be made by independent tax counsel selected by the Company
and approved by the party requesting such determination. In the event that any
reduction is required under this paragraph 7, the Company shall consult with
the Employee in determining the order in which compensation and benefits shall
be reduced.
8. LEGAL FEES. The Company shall pay all legal fees and expenses
incurred by the Employee in enforcing any right or benefit provided by this
Agreement.
9. OTHER EMPLOYMENT. The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment. Moreover, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned or benefits provided
as the result of employment of the Employee by another employer or as a result
of the Employee being self-employed after the Date of Termination.
10. TERM OF AGREEMENT. This Agreement shall continue in effect
until the earlier of (a) the third (3rd) Anniversary of the date that a Change
of Control occurs or (b) the date of the Employee's termination of employment
by the Company for Cause, Disability, Retirement or death or by the Employee
for other than Good Reason; provided that if prior to the termination of this
Agreement an event occurs which entitles the Employee to benefits under
paragraph 6 of this Agreement, such benefits will be paid or provided for the
period specified in paragraph 6 regardless of whether such period extends
beyond the expiration of the term of this Agreement pursuant to this paragraph
10.
11. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, provided that
all notices to the Company shall be directed to the attention of the President
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
12. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived, or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by the Employee and such officer as may be
specifically designated by the Board of Directors of the Company. No waiver by
either party hereto at any time or any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral and otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this
- 6 -
<PAGE> 7
Agreement; provided, however, that this Agreement shall not supersede or in any
way limit the rights, duties or obligations you may have under any other
written agreement with the Company. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Ohio.
13. VALIDITY. The validity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original by all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date above first written.
FIRSTMERIT CORPORATION
Attest: /s/ Philip A. Lloyd By: /s/ Howard L. Flood
------------------------- ---------------------------------------
Name: Howard L. Flood
------------------------------------
Title: Chairman
------------------------------------
COMPANY
Witness: /s/ Philip A. Lloyd /s/ John R. Cochran
------------------------ --------------------------------------------
John R. Cochran
EMPLOYEE
[1087451]
- 7 -
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