SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
March 31, 1995 1-10534
FIRST OF AMERICA BANK CORPORATION
(Exact name of Registrant as specified in its Charter)
Michigan 38-1971791
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
211 South Rose Street, Kalamazoo, Michigan 49007
(Address of principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code
616-376-9000
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
Common Stock, $10 Par Value 63,211,509
<PAGE>
FIRST OF AMERICA BANK CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page
No.
Consolidated Balance Sheets (Unaudited),
March 31, 1995 and December 31, 1994 . . 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended March 31, 2
1995 and 1994 . . . . . . . . . . . . .
Consolidated Statements of Cash Flows
(Unaudited) - Three Months Ended March 31, 3
1995 and 1994 . . . . . . . . . . . . .
Notes to Consolidated Financial Statements 4
(Unaudited) . . . . . . . . . . . . . .
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION . . . . . . . . . 16
<PAGE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Balance Sheets
(Unaudited)
March 31,
($ in thousands) 1995
------------
<S> <C>
ASSETS
Cash and due from banks $ 1,084,087
Federal funds sold and other short term investments 51,633
Securities:
Held to maturity, market value of $2,926,343 at
March 31, 1995 and $2,942,793 at Dec. 31, 1994 3,036,676
Available for sale, amortized cost of $2,621,673 at
March 31, 1995 and $2,694,929 at Dec. 31, 1994 2,573,243
Loans (net of unearned income):
Consumer 5,605,421
Commercial 2,414,191
Commercial real estate 3,488,153
Residential real estate 5,363,365
Loans held for sale, market value of $35,064 at
March 31, 1995 and $30,310 at Dec. 31, 1994 34,712
------------
Total loans 16,905,842
Less: Allowance for loan losses 230,524
------------
Net loans 16,675,318
Premises and equipment, net 474,995
Other assets 683,961
------------
Total assets $ 24,579,913
============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 2,672,665
Interest bearing 16,994,982
------------
Total deposits 19,667,647
Securities sold under repurchase agreements 1,081,515
Other short term borrowings 1,281,618
Long term debt 645,606
Other liabilities 251,509
------------
Total liabilities 22,927,895
------------
SHAREHOLDERS' EQUITY
Common equity 1,652,018
------------
Total liabilities and shareholders' equity $ 24,579,913
============
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Balance Sheets
(Unaudited)
December 31,
($ in thousands) 1994
------------
<S> <C>
ASSETS
Cash and due from banks $ 1,060,788
Federal funds sold and other short term investments 55,271
Securities:
Held to maturity, market value of $2,926,343 at
March 31, 1995 and $2,942,793 at Dec. 31, 1994 3,112,876
Available for sale, amortized cost of $2,621,673 at
March 31, 1995 and $2,694,929 at Dec. 31, 1994 2,587,626
Loans (net of unearned income):
Consumer 5,799,025
Commercial 2,344,969
Commercial real estate 3,423,268
Residential real estate 5,237,400
Loans held for sale, market value of $35,064 at
March 31, 1995 and $30,310 at Dec. 31, 1994 30,196
------------
Total loans 16,834,858
Less: Allowance for loan losses 228,115
-----------
Net loans 16,606,743
Premises and equipment, net 476,165
Other assets 669,233
-----------
Total assets $ 24,568,702
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 2,810,203
Interest bearing 17,390,063
-----------
Total deposits 20,200,266
Securities sold under repurchase agreements 583,184
Other short term borrowings 1,299,555
Long term debt 681,236
Other liabilities 225,573
-----------
Total liabilities 22,989,814
-----------
SHAREHOLDERS' EQUITY
Common equity 1,578,888
-----------
Total liabilities and shareholders' equity $ 24,568,702
===========
See accompanying notes to consolidated financial
statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Statements of Income
(Unaudited)
Three Months
Ended
March 31,
-------------
-------
($ in thousands, except per share data) 1995
---------
<S> <C>
INTEREST INCOME
Loans and fees on loans $ 370,925
Investment securities 84,360
Other interest income 1,108
---------
Total interest income 456,393
---------
INTEREST EXPENSE
Deposits 176,571
Short term borrowings 29,047
Long term debt 12,635
---------
Total interest expense 218,253
---------
NET INTEREST INCOME 238,140
Provision for loan losses 20,510
---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $ 217,630
---------
NON-INTEREST INCOME
Service charges on deposit accounts 24,310
Investment securities transactions, net (1,463)
Trust and financial services revenue 21,688
Bank card revenue 9,864
Mortgage banking revenue 4,582
Other operating income 10,621
---------
Total non-interest income $ 69,602
---------
NON-INTEREST EXPENSE
Personnel 115,360
Occupancy, net 16,318
Equipment 14,699
Outside data processing 4,795
Amortization of intangibles 5,253
Other operating expense 58,160
---------
Total non-interest expense $ 214,585
---------
INCOME BEFORE TAXES 72,647
Income tax expense 25,258
---------
NET INCOME $ 47,389
=========
PER COMMON AND COMMON EQUIVALENT SHARE $ 0.75
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Statements of Income
(Unaudited)
($ in thousands, except per share data) 1994
---------
<S> <C>
INTEREST INCOME
Loans and fees on loans $ 294,699
Investment securities 67,032
Other interest income 709
---------
Total interest income 362,440
---------
INTEREST EXPENSE
Deposits 124,654
Short term borrowings 6,174
Long term debt 4,631
---------
Total interest expense 135,459
---------
NET INTEREST INCOME 226,981
Provision for loan losses 20,608
---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $ 206,373
---------
NON-INTEREST INCOME
Service charges on deposit accounts 20,308
Investment securities transactions, net 7,499
Trust and financial services revenue 20,313
Bank card revenue 9,494
Mortgage banking revenue 8,925
Other operating income 10,062
---------
Total non-interest income $ 76,601
---------
NON-INTEREST EXPENSE
Personnel 104,622
Occupancy, net 15,336
Equipment 13,005
Outside data processing 4,259
Amortization of intangibles 2,561
Other operating expense 58,075
---------
Total non-interest expense $ 197,858
---------
INCOME BEFORE TAXES 85,116
Income tax expense 26,796
---------
NET INCOME $ 58,320
=========
PER COMMON AND COMMON EQUIVALENT SHARE $ 0.98
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Three
Months
Ended
March 31,
-----------
($ in thousands) 1995
----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 47,389
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 11,860
Provision for loan losses 20,510
Provision for deferred taxes (17,538)
Amortization of intangibles 5,253
(Gain) loss on the sale of securities 26
available for sale
(Gain) loss on the sale of mortgage loans (1,361)
held for sale
(Gain) loss on the sale of other assets (243)
Proceeds from the sales of mortgage loans (59,435)
held for sale
Net other decrease (increase) in mortgage 56,280
loans held for sale
Change in assets and liabilities net of
acquisitions:
(Increase)decrease in interest and other
income receivable (15,905)
(Increase)decrease in other assets 4,010
Increase(decrease) in taxes payable 24,108
Increase(decrease) in interest and
other expense payable 73,136
Increase(decrease) in other liabilities (64,988)
----------
NET CASH FROM OPERATING ACTIVITIES 83,102
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment
securities held
to maturity 71,359
Purchases of investment securities held to (78,047)
maturity
Proceeds from the sale of securities available 85,851
for sale
Proceeds from the maturities of securities 132,124
available for sale
Purchases of securities available for sale (63,899)
Net other (increase) decrease in loans & (84,569)
leases
Premises and equipment purchased (24,912)
Proceeds from the sale of premises and 14,465
equipment
(Acquisition)/sale of affiliates, net of cash 746
acquired
----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 53,118
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase(decrease) in short term (433,381)
deposits
Net increase(decrease) in time deposits (99,238)
Net increase(decrease) in short term 480,394
borrowings
Proceeds from issuance of long term debt --
Repayments of long term debt (33,175)
Proceeds from issuance of common stock (1,053)
Payments for purchase and retirement of --
common stock
Dividends paid (26,468)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (112,921)
----------
NET INCREASE (DECREASE) IN CASH AND CASH 23,299
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF 1,060,788
PERIOD
----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,084,087
==========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST OF AMERICA BANK CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
($ in thousands) 1994
---------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 58,320
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 10,777
Provision for loan losses 20,608
Provision for deferred taxes (1,209)
Amortization of intangibles 2,561
(Gain) loss on the sale of securities (7,499)
available for sale
(Gain) loss on the sale of mortgage loans held (6,099)
for sale
(Gain) loss on the sale of other assets 165
Proceeds from the sales of mortgage loans held 498,964
for sale
Net other decrease (increase) in mortgage (295,730)
loans held for sale
Change in assets and liabilities net of
acquisitions:
(Increase)decrease in interest and other
income receivable 15,529
(Increase)decrease in other assets 18,397
Increase(decrease) in taxes payable 26,796
Increase(decrease) in interest and
other expense payable 44,310
Increase(decrease) in other liabilities (42,419)
---------
NET CASH FROM OPERATING ACTIVITIES 343,471
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment
securities held
to maturity 92,647
Purchases of investment securities held to (1,057,925)
maturity
Proceeds from the sale of securities available 910,419
for sale
Proceeds from the maturities of securities 388,439
available for sale
Purchases of securities available for sale (439,963)
Net other (increase) decrease in loans & (198,747)
leases
Premises and equipment purchased (15,545)
Proceeds from the sale of premises and 322
equipment
(Acquisition)/sale of affiliates, net of cash 0
acquired
---------
NET CASH PROVIDED BY INVESTING ACTIVITIES (320,353)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase(decrease) in short term (116,857)
deposits
Net increase(decrease) in time deposits 26,435
Net increase(decrease) in short term 78,292
borrowings
Proceeds from issuance of long term debt 41,000
Repayments of long term debt (74,219)
Proceeds from issuance of common stock 97
Payments for purchase and retirement of (6,691)
common stock
Dividends paid (23,808)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (75,751)
---------
NET INCREASE (DECREASE) IN CASH AND CASH (52,633)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 903,517
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 850,884
=========
See accompanying notes to consolidated financial
statements.
</TABLE>
NOTE 1: GENERAL
The accompanying interim financial statements are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial statements have been
included and all such adjustments are of a normal recurring
nature. Certain amounts included in the prior period financial
statements have been reclassified to conform with the current
financial statement presentation.
NOTE 2: NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
March 31,
---------------------------
(in thousands) 1995 1994
----------------------------- ------------ -----------
<S> <C> <C>
Non-accrual loans $ 94,314 118,317
Restructured loans 4,784 9,886
Other real estate owned 40,349 46,417
------------ -----------
Total non-performing assets $ 139,447 174,620
============= ============
</TABLE>
NOTE 3: ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
(in thousands) 1995 1994
--------------------------------- -------- --------
<S> <C> <C>
Balance, beginning of period $228,115 188,664
Provision charged against income 20,510 20,608
Recoveries 12,830 8,673
Loans charged off (30,931) (23,200)
Allowance of acquired/(sold) banks -- --
------- -------
Balance, end of period $230,524 194,745
========= ========
</TABLE>
On January 1, 1995, First of America adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by Statement No. 118,
Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." First of America's nonperforming
loan policies, which address nonaccrual and restructured loans,
meet the definitions set forth for "impaired loans" in Statement
No. 114. Therefore, commercial and commercial mortgage loans
meeting the definition of nonaccrual and restructured, are
reported as impaired loans for disclosure purposes.
On January 1, 1995, First of America identified $82.8 million of
impaired loans under the guidelines of Statement No. 114. This
resulted in an allowance for impaired loan losses of $17.4
million which was transferred from the general allowance. At
March 31, 1995, the recorded investment in loans considered to be
impaired under Statement No. 114 was $78.3 million with an
average recorded investment in impaired loans during the first
quarter of approximately $80.6 million. Included in the impaired
loans total were $35.9 million of impaired loans for which the
related allowance for loan losses was $16.6 million. The
remaining $42.4 million of impaired loans did not have a specific
allowance for loan losses according to Statement No. 114. For
the quarter, First of America recognized interest income on
impaired loans of $562 thousand.
NOTE 4: COMMON STOCK AND CALCULATION OF EARNINGS PER SHARE
At March 31, 1995 and 1994, there were 63,189,419 and 59,351,610
common shares outstanding, respectively. At the same dates,
there were 100,000,000 authorized shares of $10 par value common
stock. Common and common equivalent earnings per share amounts
were calculated by dividing net income applicable to common stock
by the weighted average number of common and common equivalent
shares outstanding during the respective periods adjusted for
outstanding stock options.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
1995 1994
------- -----
<S> <C> <C>
Common and common equivalents
shares outstanding 63,326,582 59,773,756
</TABLE>
<TABLE>
<CAPTION>
($ in thousands) Total Assets
Date of Acquisition Acquired
------------------ -----------
<S> <C> <C>
Underwriting Consultants, Inc. February 1, 1995 $ 1,256
New England Trust Company January 1, 1995 1,576
Presidential Holding Corporation December 31, 1994 256,352
F&C Bancshares, Inc. December 31, 1994 379,791
First Park Ridge Corporation October 1, 1994 327,391
LGF Bancorp, Inc. May 1, 1994 412,336
Goldome Federal Savings Bank April 15, 1994 376,858
(Florida offices)
</TABLE>
<TABLE>
<CAPTION>
($ in thousands) Financial
Reporting Value
--------------
<S> <C>
Underwriting Consultants, Inc. $ --
New England Trust Company 1,092
Presidential Holding Corporation 6,714
F&C Bancshares, Inc. 35,064
First Park Ridge Corporation 75,890
LGF Bancorp, Inc. 61,902
Goldome Federal Savings Bank 60,015
(Florida offices)
</TABLE>
ITEM 2.
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary: The following table sets forth the period to period
changes in the principal items included in the consolidated
statement of income for the three months ended March 31, 1995
compared to the corresponding 1994 period. The bracketed
amounts represent decreases.
Three Months Ended
March 31,
1995 vs 1994
($ in thousands)
--------------------
Change Percent
--------- ---------
<S> <C> <C>
Interest and fee $ 76,226 25.9 %
income on loans
Interest income on 17,328 25.9
investments
Interest income on federal
funds sold and
other short term 399 56.3
investments
--------- ---------
Total interest 93,953 25.9
income
--------- ---------
Interest expense on 51,917 41.6
deposits
Interest expense on 30,877 285.8
borrowed funds
--------- ---------
Total interest 82,794 61.1
expense
--------- ---------
Net interest income 11,159 4.9
Provision for loan (98) (0.5)
losses
Non-interest income (6,999) (9.1)
Non-interest expense 16,727 8.5
--------- ---------
Income before tax (12,469) (14.6)
expense
Applicable income tax (1,538) (5.7)
expense
--------- ---------
Net income $ (10,931) (18.7)%
========= =========
</TABLE>
On January 1, 1995, First of America completed its acquisition of
the New England Trust Company of Providence, Rhode Island. This
acquisition added over $600 million in assets under management to
the $13.2 billion First of America had at December 31, 1994. The
acquisition was accounted for as a pooling of interests and
resulted in the issuance of 185,327 shares of First of America
Common Stock. On February 1, 1995, First of America also
completed the acquisition of Underwriting Consultants, Inc., an
insurance agency located in Grand Rapids, Michigan. This company
will allow First of America to expand its sale of insurance
products. The acquisition was accounted for as a pooling of
interests and resulted in the issuance of 148,417 shares of First
of America Common Stock. Also, during the first quarter, First
of America acquired a controlling partnership interest in
Gulfstream Global Investors, Ltd., an investment advisor based in
Dallas, Texas, with $160 million in assets under management.
Gulfstream provides international investment expertise, including
management of the Parkstone International Discovery Fund which
had approximately $290 million in net assets at December 31,
1994.
HIGHLIGHTS
Net income for the first quarter was $47.4 million, or $0.75 per
fully diluted share, compared with $58.3 million, or $0.98 per
fully diluted share a year ago. The lower earnings per share
were the result of severance charges related to the company's
ongoing restructuring which reduced earnings per share by $.06, a
difference of $.15 per share due to lower net gains on the sales
of securities and mortgage loans, and a net interest margin which
was down 52 basis points from a year ago.
Return on average assets for the quarter was 0.79 percent versus
1.13 percent a year ago. Return on average equity, also lower
for the quarter-to-quarter comparison, was 12.03 percent versus
15.47 percent.
Total assets were $24.6 billion, up 15.9 percent from a year ago.
Total loans increased 17.6 percent from the year ago quarter with
asset quality measures continuing to improve. Total deposits
also increased over a year ago, up 8.3 percent. Excluding
acquisitions, loans would have increased 10.4 percent and
deposits would have been down slightly.
INCOME ANALYSIS
Net interest income (FTE) increased 4.9 percent due to a higher
level of average earning assets, up 17.1 percent quarter-over-
quarter. The increased earning assets offset the lower net
interest margin, 4.29 percent versus 4.81 percent. The expansion
into Florida, which began in April, 1994 and included the
December 31, 1994 acquisition of two Florida thrifts, lowered the
current quarter's net interest margin by approximately 11 basis
points. Additionally, the rising interest rate environment over
the last twelve months compressed the net interest margin as
interest sensitive liabilities repriced faster than interest
sensitive assets. The average rate paid on deposits for the
quarter was 92 basis points higher than a year ago while the
average yield on interest earning assets increased only 54 basis
points. Table 1 provides detail on the yields earned on interest
earning assets and the average rates paid on interest-bearing
liabilities for the last six quarters.
The provision for loan losses was slightly lower than a year ago.
As a percent of average assets, the provision decreased to 0.34
percent from 0.40 percent. Net charge-offs increased $3.6
million, or 24.6 percent, and were 0.44 percent of average loans
versus 0.41 percent a year ago. Charge-offs and recoveries by
type are detailed in Table 3.
Total non-interest income decreased 9.1 percent for the quarter,
due to lower levels of net gains on the sale of loans, down $4.7
million, and securities, down $9.0 million. Excluding these net
gains, fee income increased 8.9 percent. Service charges on
deposit accounts, which had the largest growth among major fee
categories, increased 19.7 percent over the previous year.
Trust and financial services revenue for the quarter increased
6.8 percent to $21.7 million versus $20.3 million a year ago.
Its major component, traditional trust income, increased 8.1
percent as the managed assets upon which these fees are based
increased 11.0 percent to $10.9 billion. A portion of this
increase was due to the January 1, 1995, acquisition of New
England Trust Company which had over $600 million in assets under
management. Other financial services revenue was up 3.2 percent
over a year ago.
Mortgage servicing income continued to increase along with the
servicing portfolio and partially offset the lower gains on the
sale of residential mortgages experienced during the first
quarter of 1995. At March 31, 1995, the servicing portfolio for
outside investors was $3.2 billion, up 5.7 percent from a year
ago. Loan originations at $326 million, lagged last year's first
quarter total of $613 million, contributing to the lower level of
gains on the sale of loans.
Credit card servicing fees increased 3.9 percent, totalling $9.9
million. The increased fees were attributable to the growth in
merchant income, which was up 49.7 percent. The other components
of credit card fee income, annual fees and interchange income,
were down a combined 8.6 percent. Total credit card outstandings
totalled $1.3 billion at March 31, 1995, up 11.4 percent from a
year ago.
Total non-interest expense included $6.0 million in severance
costs related to First of America's internal restructuring during
the first quarter. First of America had incurred $3.9 million in
severance costs during the fourth quarter of 1994 and expects
another $5 to $7 million through the remainder of 1995, primarily
during the second quarter.
Total non-interest expense, excluding severance charges,
increased 5.4 percent from the year ago quarter, mainly as a
result of acquisitions. Since the first quarter of 1994, First
of America has added 59 offices and over 750 employees from
acquisitions. Excluding severance costs, personnel costs and
total non-interest expense as a percent of average assets,
annualized, were 1.82 percent and 3.47 percent, respectively.
These ratios compare favorably with the 2.03 percent and 3.84
percent reported for the year ago quarter.
The burden ratio, excluding severance costs, was 2.31 percent
versus 2.35 percent for the quarter-to-quarter comparison. The
decrease in the burden ratio, excluding severance costs, was due
to the improvement in the non-interest expense to average assets
ratio. The efficiency ratio, excluding severance costs, over the
same periods was 66.88 percent versus 64.20 percent, due to the
lower net interest margin and a lower level of non-interest
income.
ASSET QUALITY AND CREDIT RISK PROFILE
First of America's loan portfolio has no significant industry
concentrations of credit, thereby minimizing credit risk
exposure. Also minimizing credit risk are First of America's
conservative lending policies and loan review process. In
addition, First of America's loan customers are largely
consumers, individual homeowners and small to mid-sized
businesses. At March 31, 1995, the loan portfolio was made up of
residential mortgages (31.9 percent), consumer loans (33.2
percent), commercial mortgages (20.6 percent) and commercial
loans (14.3 percent). Residential mortgages, which historically
have the highest asset quality of the four portfolios presented,
increased $1.4 billion over a year ago when they represented 27.6
percent of the total loan portfolio. The growth in residential
mortgages was primarily from acquisitions.
Total non-performing assets, which include non-accrual loans,
renegotiated loans and other real estate owned decreased $35.2
million, or 20.1 percent from a year ago (see Table 4). As a
percent of total assets, non-performing assets were 0.57 percent
versus 0.82 percent at March 31, 1994. Additionally, allowance
coverage of nonperforming loans rose to 232.62 percent and the
allowance as a percent of total loans was 1.36 percent, both
improvements over a year ago. Tables 3 and 4 provide further
detail on nonperforming and 90 day past due loans as well as
charge-offs and recoveries by loan category.
FUNDING, LIQUIDITY AND INTEREST RATE RISK
First of America continues to monitor appropriate interest rate
risk, provide liquidity and moderate changes in the market value
of the investment securities portfolio through a centralized
funds management division.
Liquidity is measured by a financial institution's ability to
raise funds through deposits, borrowed funds, capital and the
sale of assets. First of America relies primarily upon core
deposits for its liquidity. At March 31, 1995, core deposits
equalled 94.49 percent of total deposits. First of America does
not issue negotiated CD's in the national money markets, and the
level of purchased funds is strictly limited by corporate policy
to less than 10 percent of assets. The majority of negotiated
CD's and purchased funds originate from the core deposit customer
base, including downstream correspondents.
First of America's interest rate risk policy is to minimize the
effect on net income resulting from a change in interest rates
through asset/liability management at all levels in the company.
Each banking affiliate completes an interest analysis each
quarter using an asset/liability model, and a consolidated
analysis is then completed using the affiliates' data. The Asset
and Liability Committees, which exist at each banking affiliate
and at the consolidated level, review the analysis and as
necessary, take appropriate action to minimize changes in the net
interest spread.
At December 31, 1994, First of America adopted the provisions of
Financial Accounting Standards Board Statement No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments," effective December 31, 1994. First of
America and its subsidiaries have entered into interest rate
swaps as a hedge against certain debt and deposit liabilities, as
detailed in the table below, to manage interest rate sensitivity.
The contracts represent an exchange of interest payments and the
underlying principal balances of the assets or liabilities are
not affected. Net settlement amounts are reported as adjustments
to interest income or interest expense. Gains or losses on the
termination of interest rate swaps are deferred and amortized
over the remaining lives of the designated balance sheet
liability. When the swap becomes uncovered during the swap
agreement period, the swap is immediately marked-to-market with a
corresponding charge to current earnings.
Although the notional amounts are often used to express the
volume of these transactions, the amounts potentially subject to
credit risk are much smaller. The company minimizes this risk by
performing normal credit reviews of its counterparties and
collateralizing its exposure when its exceeds a predetermined
limit. The following table outlines First of America's
outstanding interest rate swaps at March 31, 1995.
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
($ in thousands)
Weighted
Notional Fair Market Average
Hedged Asset/Liability Amount Value Maturity (Mos.)
----------------------------------------------------------
<S> <C> <C> <C> <S>
Rising Rate CDs $ 25,131 (30) 3.1
Market Rate CDs * 22,066 (71) 9.0
FHLB advance 10,000 13 2.0
FirstRate Fund 12,000 88 17.0
deposits
Bank notes 30,000 136 9.6
Long term debt 95,000 (2,852) 16.8
----------------------------------------------------------
Total $194,197 (2,716) 12.3
===========================================================
</TABLE>
* This represents a basis swap.
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
($ in thousands)
Average Average
Rate Received Rate Paid
Hedged Asset/Liability Variable/Fixed Variable/Fixed
--------------------------------------------------
<S> <C> <C> <S>
Rising Rate CDs 5.91%/fixed 6.13/variable
Market Rate CDs * -- --
FHLB advance 6.13%/variable 5.35/fixed
FirstRate Fund 6.13%/variable 6.03/fixed
deposits
Bank notes 6.15%variable 5.88/fixed
Long term debt 5.10%/fixed 6.31/variable
-------------------------
Total
=====================================================
</TABLE>
* This represents a basis swap.
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
($ in thousands)
Net Interest Income Impact
Three Months Ended
Hedged Asset/Liability March 31,
-----------------------------------------------
1995 1994
---------------- --------
<S> <C> <C>
Rising Rate CDs $ (1,177) 588
Market Rate CDs * (323) (147)
FHLB advance 19 --
FirstRate Fund -- --
deposits
Bank notes 11 --
Long term debt (294) 307
-----------------------------------------------
Total $(1,764) 748
================================================
</TABLE>
* This represents a basis swap.
At March 31, 1995, First of America had $4.9 million in deferred
swap losses from sales and terminations that are being amortized
into earnings over the remaining life of the hedged liabilities.
At March 31, 1994, outstanding swaps totalled $497.3 million in
notional amounts which added $748 thousand to net interest income
for the quarter. At December 31, 1994, First of America had
interest swap agreements totalling $707.8 million in notional
amounts which had a replacement value of a negative $17.2
million.
At March 31, 1995, First of America also had outstanding interest
rate cap agreements with notional amounts totalling $125 million,
which were designated to certain FirstRate Fund deposits.
Interest rate caps are agreements to make/receive payments for
interest rate differentials between an index rate and a specified
maximum rate, computed on notional amounts. First of America
also utilizes interest rate caps to manage its interest rate
risk. First of America had no outstanding interest rate cap
agreements at March 31, 1994.
The difference between rate sensitive assets and liabilities,
including the impact of off-balance sheet interest rate swaps, is
presented in Table 5. The GAP reports' reliability in measuring
the risk to income from a change in interest rates is tested
through the use of simulation models. The most recent simulation
models, using various interest rate shock scenarios, show that
less than three percent of First of America's annual net income
is at risk if interest rates were to move up or down an immediate
one percent. Management has determined that these simulation
models provide a more accurate measurement of the company's
interest rate risk position than the GAP tables.
At March 31, 1995, Securities Held to Maturity totalled $3.0
billion, with a market value of $2.9 billion and with resulting
net unrealized loss of $110.3 million. This compares with a net
unrealized loss in the Held to Maturity portfolio a year ago of
$37.6 million. In accordance with Financial Accounting Standards
Board Statement No. 115 "Accounting for Certain Investments in
Debt and Equity Securities," Securities Available for Sale are
carried at market which totalled $2.6 billion at March 31, 1995,
compared with an amortized book value of $2.6 billion. The $48.4
million net unrealized loss in Available for Sale securities
resulted in a corresponding negative market value adjustment to
equity of $42.2 million. At December 31, 1994, the negative
adjustments to securities and equity from the Securities
Available for Sale portfolio were $107.3 million and $92.3
million, respectively.
CAPITAL STRENGTH
Total shareholders' equity increased 8.4 percent from a year ago
to $1.7 billion at March 31, 1995. Earnings retention and equity
issued in acquisitions offset the stock repurchase program
implemented in the first quarter of 1994 and the negative $46.0
million change in the FAS 115 adjustment. The book value per
share rose to $26.14 from the $25.69 reported a year ago.
First of America continues to maintain, both on a consolidated
level and an affiliate basis, capital levels within the
parameters of "well capitalized" as defined by regulatory
guidelines. The consolidated total capital to risk adjusted
assets ratio at March 31, 1995 was 12.00 percent, the tier I
ratio was 8.60 percent and the tier I leverage ratio was 5.92
percent. On July 26, 1994, the company issued $200 million 7-
3/4% Subordinated Notes Due July 15, 2004, which are not subject
to redemption prior to maturity and which qualify as Tier II
capital. The increase in the total capital ratio was due to the
issuance of the subordinated debt, earnings retention and equity
issued in acquisitions combining to offset the impact of the
stock repurchase program and a higher level of risk-based assets.
IN CONCLUSION
First of America has made good progress on its internal
restructuring. The process of merging all its affiliate banks
into one bank in each state of operation and realigning the
management of the lines of business has proceeded smoothly. As
of March 31, 1995, the restructuring efforts have resulted in a
reduction of 1,500 full time equivalent employees, excluding the
effect of acquisitions, and the closing of 15 branch offices.
These moves, while lowering current earnings, should strengthen
future performance and provide First of America with the
opportunity to improve its position in the increasingly
competitive financial services market. The cost savings from the
restructuring should begin to be realized in the latter half of
1995, helping to produce quarterly earnings which exceed 1994.
Current estimates indicate that the restructuring should result
in a $35 to $40 million annual reduction to expenses.
<TABLE>
<CAPTION>
TABLE 1
FIRST OF AMERICA BANK CORPORATION
Consolidated Yield Analysis (a)
1995 1994
-------- ---------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
-------- --------
<S> <C> <C>
Average Prime Rate (b) 8.9 % 8.1
EARNING ASSETS
Money Market Investments 5.18 % 3.77
U.S. Government and agencies securities 5.90 5.81
State and municipal securities 8.71 8.57
Other securities 5.32 6.21
-------- --------
Total securities 6.08 5.98
-------- --------
Consumer loans 9.58 9.19
Commercial loans 9.25 8.70
Commercial real estate loans 9.35 8.99
Residential real estate loans 7.84 7.76
-------- --------
Total loans 8.95 8.65
-------- --------
Total earning assets 8.20 % 7.94
======== ========
INTEREST-BEARING LIABILITIES
Time deposits:
CD's - less than 12 months 4.79 % 4.46
CD's - 12 months or more 5.26 4.79
CD's - $100,000 or more 5.72 5.05
Other time deposits 5.46 5.27
Other core deposits:
Savings deposits and NOW 1.70 1.84
Money market savings and checking 4.01 3.39
-------- --------
Total deposits 4.16 3.81
-------- --------
Short term borrowings 5.96 5.32
Long term debt 7.66 7.15
-------- --------
Total borrowed funds 6.39 5.93
-------- --------
Total interest-bearing liabilities 4.45 % 4.06
======== ========
NET INTEREST MARGIN
Interest income to average earning assets 8.20 % 7.94
Interest expense to average earning assets 3.91 % 3.55
Net interest margin 4.29 % 4.39
(a) Fully taxable equivalent, based on a marginal federal income
tax rate of 35%.
(b) The First National Bank of Chicago Corporate Base Rate.
</TABLE>
<TABLE>
<CAPTION>
TABLE 1
FIRST OF AMERICA BANK CORPORATION
Consolidated Yield Analysis (a)
1994
----------------------
3rd Qtr. 2nd Qtr.
Sept. 30 June 30
-------- --------
<S> <C> <C>
Average Prime Rate (b) 7.5 6.9
EARNING ASSETS
Money Market Investments 3.51 2.83
U.S. Government and agencies securities 5.70 5.61
State and municipal securities 8.73 8.43
Other securities 6.16 6.00
-------- --------
Total securities 5.89 5.79
-------- --------
Consumer loans 9.14 8.98
Commercial loans 8.32 7.99
Commercial real estate loans 8.69 8.47
Residential real estate loans 7.71 7.66
-------- --------
Total loans 8.51 8.36
-------- --------
Total earning assets 7.77 7.63
======== ========
INTEREST-BEARING LIABILITIES
Time deposits:
CD's - less than 12 months 4.20 4.29
CD's - 12 months or more 4.55 4.43
CD's - $100,000 or more 4.53 3.71
Other time deposits 5.17 5.07
Other core deposits:
Savings deposits and NOW 1.49 1.49
Money market savings and checking 3.06 2.50
-------- --------
Total deposits 3.51 3.31
-------- --------
Short term borrowings 4.71 4.13
Long term debt 6.78 6.86
-------- --------
Total borrowed funds 5.23 4.70
-------- --------
Total interest-bearing liabilities 3.72 3.44
======== ========
NET INTEREST MARGIN
Interest income to average earning assets 7.77 7.63
Interest expense to average earning assets 3.26 2.98
Net interest margin 4.51 4.65
(a) Fully taxable equivalent, based on a marginal federal income
tax rate of 35%.
(b) The First National Bank of Chicago Corporate Base Rate.
</TABLE>
<TABLE>
<CAPTION>
TABLE 1
FIRST OF AMERICA BANK CORPORATION
Consolidated Yield Analysis (a)
1994 1993
-------- --------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
-------- --------
<S> <C> <C>
Average Prime Rate (b) 6.0 6.0
EARNING ASSETS
Money Market Investments 2.95 3.37
U.S. Government and agencies securities 5.45 5.40
State and municipal securities 7.56 6.62
Other securities 6.40 8.29
-------- --------
Total securities 5.67 5.60
-------- --------
Consumer loans 9.29 9.50
Commercial loans 7.48 7.66
Commercial real estate loans 8.24 8.37
Residential real estate loans 7.79 8.00
-------- --------
Total loans 8.39 8.53
-------- --------
Total earning assets 7.66 7.75
======== ========
INTEREST-BEARING LIABILITIES
Time deposits:
CD's - less than 12 months 4.28 4.53
CD's - 12 months or more 4.56 4.69
CD's - $100,000 or more 3.30 3.30
Other time deposits 5.02 5.10
Other core deposits:
Savings deposits and NOW 1.55 1.76
Money market savings and checking 2.17 2.28
-------- --------
Total deposits 3.24 3.41
-------- --------
Short term borrowings 3.38 3.22
Long term debt 7.02 6.78
-------- --------
Total borrowed funds 4.35 4.14
-------- --------
Total interest-bearing liabilities 3.31 3.46
======== ========
NET INTEREST MARGIN
Interest income to average earning assets 7.66 7.75
Interest expense to average earning assets 2.85 2.98
Net interest margin 4.81 4.77
(a) Fully taxable equivalent, based on a marginal federal income
tax rate of 35%.
(b) The First National Bank of Chicago Corporate Base Rate.
</TABLE>
<TABLE>
<CAPTION>
TABLE 2
FIRST OF AMERICA BANK CORPORATION
Analysis of Net Interest Income
First Quarter 1995 Versus
First Quarter 1994
($ in thousands) ----------------------------
CHANGES IN RATE AND Total Change Due To
VOLUME
INCREASE (DECREASE) : Change Volume Rate
-------- -------- --------
<S> <C> <C> <C>
Interest Income
Loans (FTE) $ 76,766 55,823 20,943
Taxable securities 19,225 13,525 5,700
Tax exempt securities (2,887) (3,956) 1,069
(FTE)
Money market 399 (31) 430
investments
-------- -------- --------
Total Interest Income 93,503 65,361 28,142
Interest Expense
Interest-bearing 51,917 14,071 37,846
deposits
Short term borrowings 22,873 15,679 7,194
Long term borrowings 8,004 7,544 460
-------- -------- --------
Total Interest Expense 82,794 37,294 45,500
-------- -------- --------
Change in net interest $ 10,709 28,067 (17,358)
income (FTE)
======== ======== ========
NOTE: The change in income attributable to volume is calculated
by multiplying the change in volume times the
prior year's rate. The change in income attributable to rate is
calculated by multiplying the change in rate
times the prior year's volume. Any variance attributable jointly
to volume and rate changes is allocated to
volume and rate in proportion to the relationship of the absolute
dollar amount of the change in each. Fully
taxable equivalent income on certain tax exempt loans and
securities is calculated using a 35% tax rate.
</TABLE>
<TABLE>
<CAPTION>
TABLE 2
FIRST OF AMERICA BANK CORPORATION
Analysis of Net Interest Income
First Quarter 1995 Versus
Fourth Quarter 1994
($ in thousands) ----------------------------
CHANGES IN RATE AND Total Change Due To
VOLUME Change
INCREASE (DECREASE) : -------- Volume Rate
-------- --------
<S> <C> <C> <C>
Interest Income
Loans (FTE) $ 23,079 16,383 6,696
Taxable securities (401) (1,448) 1,047
Tax exempt securities (469) (558) 89
(FTE)
Money market 481 158 323
investments
-------- -------- --------
Total Interest Income 22,690 14,535 8,155
Interest Expense
Interest-bearing 13,398 2,379 11,019
deposits
Short term borrowings 8,986 6,765 2,221
Long term borrowings (666) (1,285) 619
-------- -------- --------
Total Interest Expense 21,718 7,859 13,859
-------- -------- --------
Change in net interest $ 972 6,676 (5,704)
income (FTE)
======== ======== ========
NOTE: The change in income attributable to volume is calculated
by multiplying the change in volume times the
prior year's rate. The change in income attributable to rate is
calculated by multiplying the change in rate
times the prior year's volume. Any variance attributable jointly
to volume and rate changes is allocated to
volume and rate in proportion to the relationship of the absolute
dollar amount of the change in each. Fully
taxable equivalent income on certain tax exempt loans and
securities is calculated using a 35% tax rate.
</TABLE>
<TABLE>
<CAPTION>
TABLE 3
FIRST OF AMERICA BANK CORPORATION
Summary of Loan Loss Experience
($ in thousands) 1995 1994
----------- ----------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
ALLOWANCE FOR LOAN LOSSES ----------- ---------
<S> <C> <C>
Balance, at beginning of period $ 228,115 213,596
Provision charged against income 20,510 22,224
Allowance of acquired (sold) banks -- 9,200
Recoveries:
Commercial 1,626 2,243
Commercial mortgage 884 426
Residential mortgage 27 40
Consumer installment 8,093 3,891
Consumer revolving 2,200 3,153
----------- ---------
Total recoveries 12,830 9,753
----------- ---------
Charge-offs:
Commercial 1,119 2,621
Commercial mortgage 627 2,882
Residential mortgage 226 212
Consumer installment 16,401 7,778
Consumer revolving 12,558 13,165
----------- ---------
Total charge-offs 30,931 26,658
----------- ---------
Net charge-offs 18,101 16,905
----------- ---------
Balance, at end of period $ 230,524 228,115
=========== =========
Average loans outstanding (net of
unearned income) $ 16,855,909 16,112,582
----------------------------------- --- ----------- -- ---------
CHARGE-OFFS AND RECOVERIES RATIOS
Net charge-offs to average loans (a) 0.44 % 0.42
Net charge-offs to period end allowance (a) 31.84 29.40
Earnings coverage of net charge-offs 5.15 x 5.89
Recoveries to total charge-offs 41.48 % 36.59
Provision to average loans (a) 0.49 0.55
Allowance to total period end loans 1.36 1.36
(a) Annualized
----------------------------------- --- ----------- -- ---------
ALLOWANCE FOR LOAN LOSS SUMMARY
At December 31, 1994 1993
----------- ---------
Balance, at beginning of period $ 188,664 176,793
Provision charged against income 86,571 84,714
Allowance of acquired/(sold) banks 11,420 50
Recoveries 38,134 35,863
Less: Charge-offs 96,674 108,756
----------- ---------
Balance, at end of period $ 228,115 188,664
=========== =========
</TABLE>
<TABLE>
<CAPTION>
TABLE 3
FIRST OF AMERICA BANK CORPORATION
Summary of Loan Loss Experience
($ in thousands)
3rd Qtr. 2nd Qtr.
Sept. 30 June 30
ALLOWANCE FOR LOAN LOSSES --------- ---------
<S> <C> <C>
Balance, at beginning of period $ 204,465 194,745
Provision charged against income 21,238 22,501
Allowance of acquired (sold) banks 26 2,194
Recoveries:
Commercial 1,555 2,265
Commercial mortgage 403 480
Residential mortgage 95 75
Consumer installment 5,963 4,803
Consumer revolving 2,060 2,009
--------- ---------
Total recoveries 10,076 9,632
--------- ---------
Charge-offs:
Commercial 3,612 3,449
Commercial mortgage 1,121 2,619
Residential mortgage 373 254
Consumer installment 7,598 8,831
Consumer revolving 9,505 9,454
--------- ---------
Total charge-offs 22,209 24,607
--------- ---------
Net charge-offs 12,133 14,975
--------- ---------
Balance, at end of period $ 213,596 204,465
========= =========
Average loans outstanding (net of
unearned income) $ 15,484,765 14,777,048
----------------------------------- --- --------- -- ---------
CHARGE-OFFS AND RECOVERIES RATIOS
Net charge-offs to average loans (a) 0.31 0.41
Net charge-offs to period end allowance (a) 22.54 29.38
Earnings coverage of net charge-offs 8.58 6.69
Recoveries to total charge-offs 45.37 39.14
Provision to average loans (a) 0.54 0.61
Allowance to total period end loans 1.35 1.34
(a) Annualized
--------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSS SUMMARY
At December 31, 1992 1991
--------- ---------
Balance, at beginning of period $ 174,882 137,012
Provision charged against income 78,809 71,030
Allowance of acquired/(sold) banks (372) 27,094
Recoveries 33,640 30,280
Less: Charge-offs 110,166 90,534
--------- ---------
Balance, at end of period $ 176,793 174,882
========= =========
</TABLE>
<TABLE>
<CAPTION>
TABLE 3
FIRST OF AMERICA BANK CORPORATION
Summary of Loan Loss Experience
($ in thousands) 1994 1993
---------- ---------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
ALLOWANCE FOR LOAN LOSSES --------- ---------
<S> <C> <C>
Balance, at beginning of period $ 188,664 186,579
Provision charged against income 20,608 20,386
Allowance of acquired (sold) banks -- --
Recoveries:
Commercial 1,213 1,707
Commercial mortgage 862 744
Residential mortgage 75 126
Consumer installment 4,804 4,521
Consumer revolving 1,719 1,592
--------- ---------
Total recoveries 8,673 8,690
--------- ---------
Charge-offs:
Commercial 3,938 3,690
Commercial mortgage 1,199 2,584
Residential mortgage 245 275
Consumer installment 8,410 9,922
Consumer revolving 9,408 10,520
--------- ---------
Total charge-offs 23,200 26,991
--------- ---------
Net charge-offs 14,527 18,301
--------- ---------
Balance, at end of period $ 194,745 188,664
Average loans outstanding (net of
unearned income) $ 14,292,647 14,252,372
----------------------------------- --- --------- -- ---------
CHARGE-OFFS AND RECOVERIES RATIOS
Net charge-offs to average loans (a) 0.41 0.51
Net charge-offs to period end allowance (a) 30.25 38.48
Earnings coverage of net charge-offs 7.28 6.07
Recoveries to total charge-offs 37.38 32.20
Provision to average loans (a) 0.58 0.57
Allowance to total period end loans 1.35 1.31
(a) Annualized
----------------------------------- --- --------- -- ---------
ALLOWANCE FOR LOAN LOSS SUMMARY
At December 31, 1990 1989
--------- ---------
Balance, at beginning of period $ 126,175 133,609
Provision charged against income 44,782 43,805
Allowance of acquired/(sold) banks 11,185 2,324
Recoveries 28,470 27,728
Less: Charge-offs 73,600 81,291
--------- ---------
Balance, at end of period $ 137,012 126,175
========= =========
</TABLE>
<TABLE>
<CAPTION>
TABLE 4
FIRST OF AMERICA BANK CORPORATION
Measurement of Asset Quality
($ in thousands) 1995 1994
--------- --------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
NON-PERFORMING ASSETS --------- ---------
<S> <C> <C>
Non-accrual loans:
Commercial $ 21,203 22,156
Commercial mortgage 53,270 56,917
Residential mortgage 18,368 16,118
Revolving mortgage 492 482
Consumer installment 981 1,141
Consumer revolving -- --
--------- ---------
Total non-accrual loans $ 94,314 96,814
--------- ---------
Renegotiated loans:
Commercial $ 514 411
Commercial mortgage 3,310 3,327
Residential mortgage 960 1,056
Revolving mortgage -- --
Consumer installment -- 58
Consumer revolving -- --
--------- ---------
Total renegotiated loans $ 4,784 4,852
--------- ---------
Total non-performing loans $ 99,098 101,666
--------- ---------
Other real estate owned $ 40,349 38,662
--------- ---------
Total non-performing assets $ 139,447 140,328
========= =========
Loans past due 90 days or more:
Commercial $ 674 1,709
Commercial mortgage 1,838 1,956
Residential mortgage 2,593 711
Revolving mortgage 395 370
Consumer installment 5,947 7,178
Consumer revolving 6,276 6,284
--------- ---------
Total loans past due 90 days $ 17,723 18,208
or more
========= =========
ASSET QUALITY RATIOS
Non-performing assets as a % of total 0.57 % 0.57
assets
Non-performing assets as a % of
total loans + OREO 0.82 % 0.83
Allowance coverage of non-performing 232.62 % 224.38
loans
NONPERFORMING ASSET SUMMARY
At December 31, 1994 1993
--------- ---------
Non-accrual loans $ 96,814 121,186
Renegotiated loans 4,852 10,879
Other real estate owned 38,662 50,595
--------- ---------
Total non-performing assets $ 140,328 182,660
========= =========
Loans past due 90 days or more $ 18,208 23,462
</TABLE>
<TABLE>
<CAPTION>
TABLE 4
FIRST OF AMERICA BANK CORPORATION
Measurement of Asset Quality
($ in thousands) 1994
----------------------
3rd Qtr. 2nd Qtr.
Sept. 30 June 30
NON-PERFORMING ASSETS --------- ---------
<S> <C> <C>
Non-accrual loans:
Commercial $ 22,884 24,584
Commercial mortgage 68,294 75,316
Residential mortgage 16,709 14,739
Revolving mortgage 389 333
Consumer installment 662 1,131
Consumer revolving -- --
--------- ---------
Total non-accrual loans $ 108,938 116,103
--------- ---------
Renegotiated loans:
Commercial $ 427 469
Commercial mortgage 4,335 8,084
Residential mortgage 1,065 1,074
Revolving mortgage -- --
Consumer installment 58 59
Consumer revolving -- --
--------- ---------
Total renegotiated loans $ 5,885 9,686
--------- ---------
Total non-performing loans $ 114,823 125,789
--------- ---------
Other real estate owned $ 40,669 42,467
--------- ---------
Total non-performing assets $ 155,492 168,256
========= =========
Loans past due 90 days or more:
Commercial $ 1,578 915
Commercial mortgage 2,120 1,680
Residential mortgage 1,189 2,027
Revolving mortgage 542 434
Consumer installment 4,839 780
Consumer revolving 5,168 4,927
--------- ---------
Total loans past due 90 days or $ 15,436 10,763
more
========= =========
ASSET QUALITY RATIOS
Non-performing assets as a % of total 0.66 0.73
assets
Non-performing assets as a % of
total loans + OREO 0.98 1.10
Allowance coverage of non-performing loans 186.02 162.55
NONPERFORMING ASSET SUMMARY
At December 31, 1992 1991
--------- ---------
Non-accrual loans $ 126,619 116,995
Renegotiated loans 20,669 16,837
Other real estate owned 48,699 34,601
--------- ---------
Total non-performing assets $ 195,987 168,433
========= =========
Loans past due 90 days or more $ 20,887 32,499
</TABLE>
<TABLE>
<CAPTION>
TABLE 4
FIRST OF AMERICA BANK CORPORATION
Measurement of Asset Quality
($ in thousands) 1994 1993
-------- ---------
1st Qtr. 4th Qtr.
Mar. 31 Dec. 31
NON-PERFORMING ASSETS --------- ---------
<S> <C> <C>
Non-accrual loans:
Commercial $ 26,486 28,483
Commercial mortgage 76,911 76,129
Residential mortgage 13,469 15,727
Revolving mortgage 331 71
Consumer installment 1,120 776
Consumer revolving -- --
--------- ---------
Total non-accrual loans $ 118,317 121,186
--------- ---------
Renegotiated loans:
Commercial $ 477 257
Commercial mortgage 8,303 9,272
Residential mortgage 1,106 1,350
Revolving mortgage -- --
Consumer installment -- --
Consumer revolving -- --
--------- ---------
Total renegotiated loans $ 9,886 10,879
--------- ---------
Total non-performing loans $ 128,203 132,065
--------- ---------
Other real estate owned $ 46,417 50,595
--------- ---------
Total non-performing assets $ 174,620 182,660
========= =========
Loans past due 90 days or more:
Commercial $ 2,756 2,351
Commercial mortgage 10,289 4,589
Residential mortgage 8,955 8,951
Revolving mortgage 521 611
Consumer installment 1,093 1,683
Consumer revolving 4,980 5,277
--------- ---------
Total loans past due 90 days $ 28,594 23,462
or more
========= =========
ASSET QUALITY RATIOS
Non-performing assets as a % of total 0.82 0.86
assets
Non-performing assets as a % of
total loans + OREO 1.21 1.26
Allowance coverage of non-performing 151.90 142.86
loans
NONPERFORMING ASSET SUMMARY
At December 31, 1990 1989
--------- ---------
Non-accrual loans $ 76,533 55,556
Renegotiated loans 12,234 14,762
Other real estate owned 17,620 16,759
--------- ---------
Total non-performing assets $ 106,387 87,077
========= =========
Loans past due 90 days or more $ 31,380 20,901
</TABLE>
<TABLE>
<CAPTION>
TABLE 5
FIRST OF AMERICA BANK CORPORATION
Interest Rate Sensitivity
March 31, 1995
0 to 0 to
($ in millions) 30 Days 60 Days
--------- ---------
<S> <C> <C>
ASSETS
Other earning assets $ 17 20
Investment securities (1) 378 464
Loans, net of unearned income (2) 4,439 4,915
--------- ---------
Total rate sensitive assets (RSA) $ 4,834 5,399
========= =========
LIABILITIES AND EQUITY
Money market type deposits $ 2,573 2,629
Other core savings and time deposits 779 1,204
Negotiated deposits 577 856
Borrowings 2,132 2,290
Interest rate swap agreements (3) (48) 44
Interest rate cap agreements (3) (125) (125)
--------- ---------
Total rate sensitive liabilities $ 5,888 6,898
(RSL)
========= =========
GAP (RSA - RSL) $ (1,053) (1,499)
========= =========
RSA divided by RSL 82.10 % 78.27
GAP divided by total assets (4.29) (6.10)
Assumptions:
(1) Maturities of rate sensitive securities are based on
contractual maturities and estimated prepayments.
(2) Maturities of rate sensitive loans are based on contractual
maturities, estimated prepayments and
estimated repricing impact.
(3) Maturities of rate sensitive liabilities, interest rate swaps
and interest rate caps are based on contractual
maturities and estimated repricing.
</TABLE>
<TABLE>
<CAPTION>
TABLE 5
FIRST OF AMERICA BANK CORPORATION
Interest Rate Sensitivity
March 31, 1995
0 to 0 to
($ in millions) 90 Days 180 Days
--------- ---------
<S> <C> <C>
ASSETS
Other earning assets $ 24 31
Investment securities (1) 537 711
Loans, net of unearned income (2) 5,568 6,529
--------- ---------
Total rate sensitive assets (RSA) $ 6,129 7,271
========= =========
LIABILITIES AND EQUITY
Money market type deposits $ 2,684 2,850
Other core savings and time deposits 1,543 2,683
Negotiated deposits 940 1,005
Borrowings 2,384 2,555
Interest rate swap agreements (3) 43 33
Interest rate cap agreements (3) (125) (125)
--------- ---------
Total rate sensitive liabilities $ 7,469 9,001
(RSL)
========= =========
GAP (RSA - RSL) $ (1,341) (1,730)
========= =========
RSA divided by RSL 82.05 % 80.78
GAP divided by total assets (5.45) (7.04)
Assumptions:
(1) Maturities of rate sensitive securities are based on
contractual maturities and estimated prepayments.
(2) Maturities of rate sensitive loans are based on contractual
maturities, estimated prepayments and
estimated repricing impact.
(3) Maturities of rate sensitive liabilities, interest rate swaps
and interest rate caps are based on contractual
maturities and estimated repricing.
</TABLE>
<TABLE>
<CAPTION>
TABLE 5
FIRST OF AMERICA BANK CORPORATION
Interest Rate Sensitivity
March 31, 1995
0 to
($ in millions) 365 Days
---------
<S> <C>
ASSETS
Other earning assets $ 37
Investment securities (1) 1,042
Loans, net of unearned income (2) 8,053
---------
Total rate sensitive assets (RSA) $ 9,132
=========
LIABILITIES AND EQUITY
Money market type deposits $ 3,181
Other core savings and time deposits 4,397
Negotiated deposits 1,065
Borrowings 2,621
Interest rate swap agreements (3) 133
Interest rate cap agreements (3) (125)
---------
Total rate sensitive liabilities $ 11,272
(RSL)
GAP (RSA - RSL) $ (2,140)
=========
RSA divided by RSL 81.02 %
GAP divided by total assets (8.71)
Assumptions:
(1) Maturities of rate sensitive securities are based
on contractual maturities and estimated prepayments.
(2) Maturities of rate sensitive loans are based on
contractual maturities, estimated prepayments and
estimated repricing impact.
(3) Maturities of rate sensitive liabilities, interest
rate swaps and interest rate caps are based on
contractual
maturities and estimated repricing.
</TABLE>
II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
10.1 Form of Management Continuity Agreement
between the Registrant and each of the
following executive officers: Daniel R.
Smith, Richard F. Chormann, Thomas W.
Lambert, David B. Wirt, John B. Rapp and
Donald J. Kenney.
10.2 Form of Management Continuity Agreement
between subsidiaries of the Registrant
and the following executive officers:
William R. Cole and Robert K. Kinning.
10.3 Management Continuity Agreement between
First of America Bank-Indiana and
Malcolm C. Pownall, an executive officer
of the Registrant.
10.4 Management Continuity Agreement between
First of America Bank-Florida, FSB and
Lee J. Cieslak, an executive officer of
the Registrant.
(11) Statement regarding computation of per share
earnings.
The computation of common and common
equivalents per share is described in Note 4
to the Consolidated Financial Statements on
page 5 of this report.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Registrant during the three months ended March 31,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, First of America has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
FIRST OF AMERICA BANK CORPORATION
REGISTRANT
Date: May 10, 1995
/s/ THOMAS W. LAMBERT
Thomas W. Lambert
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
EXHIBIT INDEX
(10) Material Contracts
10.1 Form of Management Continuity Agreement between the
Registrant and each of the following executive
officers: Daniel R. Smith, Richard F. Chormann, Thomas
W. Lambert, David B. Wirt, John B. Rapp and Donald J.
Kenney.
10.2 Form of Management Continuity Agreement between
subsidiaries of the Registrant and the following
executive officers: William R. Cole and Robert K.
Kinning.
10.3 Management Continuity Agreement between First of
America Bank-Indiana and Malcolm C. Pownall, an
executive officer of the Registrant.
10.4 Management Continuity Agreement between First of
America Bank-Florida, FSB and Lee J. Cieslak, an
executive officer of the Registrant.
(27) Financial Data Schedule
<PAGE>
Exhibit 10.1
MANAGEMENT CONTINUITY AGREEMENT
The Amendment and Renewal of this Agreement is effective as
of February 15, 1995 between FIRST OF AMERICA BANK CORPORATION,
N.A., a Michigan Corporation with an office at 211 S. Rose St.,
Kalamazoo, Michigan 49007 (the "Company") and
whose address is:
(the "Officer")
W I T N E S S E T H
WHEREAS, the Officer is employed by the Company as an
officer of the Company with the title and salary current at the
effective date of this Agreement as set forth in Appendix A; and
WHEREAS, the Officer and the Company are parties to a
Management Continuity Agreement effective July 18, 1990, and the
Officer and the Company wish to amend and renew said Management
Continuity Agreement; and
WHEREAS, the Company wishes to attract and retain highly
qualified executives and to achieve this goal it is in the best
interests of the Company to secure the continued services of the
Officer regardless of a change in control of the Company; and
WHEREAS, the Company is willing, in order to provide the
Officer a measure of security with respect to his employment with
the Company in the event of a change in control of the Company so
that the Officer will be in a position to act with respect to a
possible change in control of the Company in the interests of
First of America Bank Corporation and its shareholders, without
concern as to the Officer's own financial security, and in order
to induce the Officer to remain in employment with the Company,
to agree that employment of the Officer shall be terminable only
for cause for a limited period after a change in control of the
Company.
NOW, THEREFORE, the Company and the Officer agree as
follows:
SECTION 1
EMPLOYMENT
1.1 TERM. The Company shall employ the Officer and the
Officer shall remain in employment with the Company for a period
of five years from the effective date of this Agreement (the
"Initial Term") unless terminated prior to the expiration of the
Initial Term pursuant to Section 2.
1.2 COMPENSATION. As compensation for services provided to
the Company by the Officer pursuant to this Agreement, the
Company shall pay the Officer the salary set forth in Appendix A,
which salary may be increased from time to time by the Company.
The Officer shall also be eligible to actively participate in any
other compensation and benefit plans generally available to
executive employees of the Company of like grade and salary
including, but not limited to, retirement plans, group life,
disability, accidental death and dismemberment, travel and
accident, health and dental insurance plans, incentive
compensation plans, stock option plans, deferred compensation
plans, supplemental retirement plans and excess benefit plans.
Such other compensation and benefit plans are hereinafter
referred to collectively as the "Compensation and Benefit Plans".
1.3 DUTIES. The Officer shall perform such duties and
functions as are assigned to him by the bylaws of the Company, as
amended or restated, the Board of Directors of the Company, or by
a duly authorized committee of the Board of Directors of the
Company, or by an officer of more senior rank than the Officer.
In the event of an actual or potential Change in Control (as
defined in Section 2.8), the Officer shall perform his duties and
functions in a manner that is consistent with the best interest
of the Company and its shareholders, without regard to the effect
that the potential or actual Change in Control may have on the
Officer personally.
1.4 DUTY OF LOYALTY. The Officer shall work full-time for
the Company only, provided that:
(a) he may also engage in charitable, civic and other
similar activities;
(b) with the consent of the Board of Directors or the
Chief Executive Officer of the Company, he may
serve as a director of a business organization not
competing with the Company; and
(c) he may make such investments and reinvestment in
business activities as shall not require a
substantial portion of his time.
1.5 DUTY NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The
Officer acknowledges that his relationship with the Company is
one of high trust and confidence, and that he has access to
Confidential Information (as hereinafter defined) of the Company.
The Officer shall not, directly or indirectly, communicate,
deliver, exhibit or provide any Confidential Information to any
person, firm, partnership, corporation, organization or entity,
except as required in the normal course of the Officer's duties.
The duties contained in this paragraph shall be binding upon the
Officer during the time that he is employed by the Company and
following the termination of such employment. Such duties will
not apply to any such Confidential Information which is or
becomes in the public domain through no action on the part of the
Officer, is generally disclosed to third parties by the Company
without restriction on such third parties, or is approved for
release by written authorization of the Board of Directors of the
Company. The term "Confidential Information" shall mean any and
all confidential, proprietary, or secret information relating to
the Company's business, services, customers, business operations,
or activities and any and all trade secrets, products, methods of
conducting business, information, skills, knowledge, ideas, know-
how or devices used in, developed by, or pertaining to the
Company's business and not generally known, in whole or in part,
in any trade or industry in which the Company is engaged.
SECTION 2
TERMINATION
2.1 TERMINATION OF AGREEMENT. Unless sooner terminated in
accordance with the terms of this Section 2, this Agreement shall
terminate at the expiration of the Initial Term, and all
obligations hereunder shall terminate except as specifically set
forth in Section 2.5. The Officer may, with the consent of the
Company, continue in the employ of the Company after the
expiration of the Initial Term on such terms and conditions as
may be agreed upon by the Company and the Officer.
2.2 TERMINATION BY THE OFFICER. The Officer may
voluntarily terminate this Agreement by providing two weeks
notice to the Company, in which event the Company shall have no
further obligation to the Officer hereunder from the date of such
termination and the Officer shall have no further obligation to
the Company hereunder except the duty to not disclose
Confidential Information in accordance with Section 1.5. In the
event the Officer's employment with the Company is terminated due
to the Officer's death, the Company shall have no further
obligation to the Officer, his heirs or legatees hereunder from
the date of such termination, except for a period of one year
from the date of the Officer's death, to pay to the Officer's
surviving spouse the salary payments described in Section 1.2, in
the amount in effect on the Officer's date of death. In the
event the Officer's employment with the Company is terminated due
to the Officer's permanent disability, the Company shall have no
further obligation to the Officer, hereunder from the date of
such termination, except, for a period of six months from the
date salary continuation payments under the Company's short term
disability policy cease, to pay to the Officer the salary
payments described in Section 1.2, in the amount in effect on the
date the Officer becomes permanently disabled, but less the
amount of any benefits received by the Officer during such period
from the Company's long-term disability plan, and, for a period
of one year from the date of the Officer's permanent disability,
to provide benefits to the Officer under the Company's dental and
health plans.
For purposes of this Agreement, the term "Permanent
Disability" means a physical or mental condition of the Officer
which:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) is determined by the Company to render the Officer
incapable of adequately performing his duties
under Section 1.3 of this Agreement.
2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
may terminate this Agreement without cause prior to a Change in
Control, as defined in Section 2.8, by providing two weeks notice
to the Officer. In such event, the Officer shall have no further
obligation to the Company hereunder, except the duty to not
disclose Confidential Information in accordance with Section 1.5,
and the Company shall have no further obligation to the Officer
hereunder from the date of such termination except the obligation
to make salary payments and to permit the Officer to continue
active participation in employee benefit plans, in accordance
with the Company's severance program in effect on the date of
such termination.
2.4 TERMINATION BY THE COMPANY WITH CAUSE. The Company, by
resolution of its Board of Directors, may terminate this
Agreement by providing the Officer with notice, which may be
provided as late as the effective date of such termination, if
the Officer:
(a) willfully engages in conduct that materially
injures the Company; or
(b) willfully and materially breaches the provisions
of this Agreement.
In such event, the Company will have no further obligation to the
Officer under the Agreement from the date of such termination.
No action, or failure to act, shall be considered "willful" if it
is done by the executive in good faith and with reasonable belief
that his action or omission was in the best interest of the
Company.
2.5 TERMINATION FOLLOWING CHANGE IN CONTROL. In the event
there is a Change in Control of the Company, as defined in
Section 2.8, during the Initial Term, and within the three year
period commencing upon the date of the Change in Control (the
"Firm Term"), either:
(a) the Officer's employment hereunder is terminated
by the Company other than with cause under Section
2.4; or
(b) the Officer resigns from his employment hereunder
upon thirty days written notice given to the
Company within thirty days following a material
change in the Officer's title, authorities or
duties, in effect immediately prior to the Change
in Control, a reduction in the compensation or a
reduction in benefits provided pursuant to this
Agreement or the Compensation and Benefit Plans
(other than a reduction resulting from the
computation of incentive award payments pursuant
to the Compensation and Benefit Plans) below the
amount of compensation and benefits in effect
immediately prior to the Change in Control, or a
change of the Officer's principal place of
employment without his consent to a city different
from the city which is the principal place of the
Officer's employment immediately prior to the
Change in Control, then:
(i) the Officer shall, for the applicable
Continuation Period following such
termination of employment, (A) continue to
receive salary under Section 1.2 at the
greater of the rate in effect at the time of
his termination of employment or the rate in
effect immediately prior to the Change in
Control, and (B) continue to actively
participate in the Compensation and Benefit
Plans, except as otherwise provided below,
that he actively participated in at the time
of such termination of employment as though
he continued in the employment of the Company
(without regard to any amendment or
termination of the Compensation and Benefit
Plans made on or after the date of a Change
in Control); provided, however, that any
benefit to be provided by a Compensation and
Benefit Plan under subclause (B) above may be
provided by the Company through cash of
equivalent value or through a nonqualified
arrangement or arrangements if, in the
judgment of the Company, permitting the
Officer to participate in such plan after his
termination of employment would adversely
affect the tax status of such plan; and
(ii) after his termination of employment, the
Officer shall be entitled to receive an
incentive compensation award equal to the
greater of the Officer's annual target award
for the calendar year coincident with or
immediately preceding the date of the Change
in Control under the Company's Annual
Incentive Compensation Plan or the pro-rata
award based on the Company's actual year-to-
date performance payable to the Officer for
the portion of the year preceding the
Officer's termination of employment under the
Company's Annual Incentive Compensation Plan
or any annual incentive compensation plan
maintained by the Company's successor; and
(iii) after his termination of employment, the
Officer shall be entitled to receive an
additional incentive compensation award
(which shall be in lieu of any pro-rata
award payable to the Officer pursuant to
the terms and conditions of the
Company's Long-term Incentive
Compensation Plan) equal to the greater
of the target award under the Company's
Long-term Incentive Compensation Plan
for the performance period ending in the
year of the Officer's termination of
employment, provided that such award
shall be determined by reference to the
greater of the Officer's base salary as
of the Officer's termination of
employment or the Officer's base salary
immediately preceding the date of the
Change in Control; or the pro-rata long-
term incentive compensation award
payable to the Officer under any long-
term incentive compensation plan of the
Company's successor; and
(iv) after his termination of employment, the
Officer shall no longer participate in the
Company's Stock Option Plan (except that
options giving the Officer the right to
purchase any stock of the Company or any
affiliate of the Company, which had been
granted prior to the Officer's termination of
employment, shall become immediately and
fully exercisable without regard to any
limits in such plan).
The term Continuation Period shall mean (i) three
years, if the Officer's termination of employment
occurs during the first year of the Firm Term;
(ii) two years, if the Officer's termination of
employment occurs during the second year of the
Firm Term; (iii) one year, if the Officer's
termination of employment occurs during the third
year of the Firm Term. Notwithstanding the
foregoing provisions, in no event shall the
Continuation Period extend beyond the Officer's
Normal Retirement Date, as defined in the Company
Employees' Retirement Plan.
The Company's obligation to make payments under Section
2.5(b) shall not be affected by the earnings or any other income
of the Officer, except to the extent provided in the non-compete
provisions contained in Section 2.6. To the extent benefits to
be provided pursuant to Section 2.5(b) are determined on the
basis of the Officer's compensation, the compensation to be used
to determine such benefits after the Officer's termination of
employment shall be the greater of the Officer's compensation
used to determine such benefits immediately prior to the Change
in Control or the Officer's compensation used to determine such
benefits immediately prior to the Officer's termination of
employment. To the extent that benefits to be provided by the
Company pursuant to Section 2.5(b) are matching contributions
pursuant to the Company Reserve Plus Retirement Savings Plan or
Supplemental Savings Plan, the amount of matching contributions
to be paid by the Company in any year following the date of the
Officer's termination of employment shall be the greater of the
amount of the matching contribution made by the Company for the
most recent plan year that ended prior to the Change in Control
or the amount of matching contributions made by the Company for
the most recent plan year that ended prior to the Officer's
termination of employment. To the extent benefits payable
pursuant to Section 2.5(b) are determined by reference to the
Officer's years of service with the Company, such as the
determination of the Officer's accrued benefits under the
Company's qualified or nonqualified retirement plans, such years
of service shall be determined by including years that occur
during the Continuation Period, regardless of whether the Officer
elects to receive salary payments payable to him pursuant to
Section 2.5(b)(i) in a lump-sum payment. In addition, to the
extent the Officer is less than 100% vested in any benefits
provided by the Compensation and Benefit Plans, he shall become
100% vested upon termination of employment described in Section
2.5(a) or (b) hereof.
For purposes of determining an Officer's right under Section
2.5(b)(i) to accrue benefits during the Continuation Period under
the Company Employees' Retirement Plan, Supplemental Retirement
Plan and Excess Benefit Plan, the Officer's accrued benefits
(including early retirement subsidies) shall be calculated by
taking into account the years of service that the Officer would
have accrued during the Continuation Period, the Officer's
compensation, as such term is defined in the Company Employees'
Retirement Plan (Compensation), payable for the Continuation
Period and the retirement points that the Officer would have
accumulated under the Company Employees' Retirement Plan based on
the Officer's projected age and years of service at the end of
the Continuation Period. The benefit accrued pursuant to Section
2.5(b)(i) and the above provisions shall include both the
additional benefit, based on the service, Compensation, and
retirement points that are credited during the Continuation
Period, and the increase in the retirement benefits accrued prior
to the Continuation Period due to the crediting of additional
service, Compensation and retirement points during the
Continuation Period. All of these retirement benefits shall be
paid in a single, lump-sum payment, pursuant to Section 2.7 of
this Agreement.
In addition to any cash equivalency payment or medical
benefit coverage provided to the Officer for the Continuation
Period, the Officer shall also be eligible to receive a lump-sum
cash payment equal to the difference between the amount of
retiree medical premium payments that would be paid by the
Company until the Officer's attainment of age 65 under the
Company Employees' Health Care Plan, as in effect immediately
prior to the Change in Control (the Health Care Plan), based on
the Officer's age and years of service on the date of the
Officer's termination of employment, and the amount of such
premium payments that would have been paid under the Health Care
Plan based on the projected age and years of service of the
Officer through the end of the Continuation Period. If, after
taking into consideration the Officer's projected age and years
of service through the end of the Continuation Period, the
Officer would not have been entitled to Company paid retiree
medical premium payments, but the Officer would have completed
five or more years of service with the Company and attained age
55 (thereby making the Officer eligible for retiree medical
coverage under the Health Care Plan), then the lump-sum payment
shall be calculated by assuming that the Company would have paid
25% of the cost of retiree medical premium payments until the
Officer's attainment of age 65. For purposes of determining the
amount of any lump-sum payment to the Officer under this
paragraph, amounts that the Company would have paid for retiree
medical premium payments shall be determined by assuming that the
Company's Health Care Plan premium costs would increase at the
rate of 7% per year. For purposes of determining the lump-sum
payment of retiree medical premium payments and cash equivalency
or medical benefit coverage to be provided to the Officer
pursuant to this Agreement, such amounts or benefits shall
include coverage for the Officer's spouse, provided that the
Officer's spouse was covered by the Health Care Plan immediately
prior to the Change in Control.
2.6 NON-COMPETE PROVISIONS. In the event of the
termination of the Officer's employment following a Change in
Control, and the Officer becomes entitled to compensation and
benefit payments under Section 2.5 of this Agreement, the Officer
agrees not to compete with the Company, pursuant to the following
terms and conditions.
For the period of eighteen months from and after the date of
such termination of employment following the Change in Control,
the Officer shall not engage in any employment activity or
directly or indirectly own (except for passive investments in
which the Officer owns less than a 50% ownership interest),
manage, operate, control or be employed by, participate in or be
connected in any manner with the ownership, operation or control
of any business that provides commercial, retail or mortgage
lending services or sells financial products or services, which
are competitive with or substantially similar to the commercial,
retail, mortgage, trust, investment or insurance services or
products of the Company, its subsidiaries and other affiliates,
at any location in the United States of America.
If any court shall determine that the duration or
geographical limit of any restriction contained in this covenant
not to compete (the "Covenant") is unenforceable under applicable
law, this Covenant shall not thereby be terminated, but shall be
deemed amended to the extent required to render it valid and
enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that
has made such determination.
Other than amendments that are deemed to be made pursuant to
the preceding paragraph of this Agreement, no change or
modification of this Covenant shall be valid unless the same be
in writing and signed by the Company and Officer.
Upon a breach by Officer of this Covenant, the Company shall
be entitled to recover, as liquidated damages, one and one half
times the greater of the Officer's annual base salary in effect
on the date of the Officer's termination of employment or the
Officer's base salary in effect immediately prior to the date of
the Change in Control. This amount shall be deducted from the
payments due to the Officer pursuant to Section 2.5(b) of this
Agreement. In the event that all payments pursuant to Section
2.5(b) have been made to the Officer, the Officer shall pay the
aforementioned amount to the Company.
If any legal action or proceeding is brought for the
enforcement of this Covenant, or because of an alleged dispute,
breach, default or misrepresentation in connection with this
Covenant, the successful or prevailing party in such action shall
be entitled to recover reasonable attorneys' fees and costs
connected with such action or proceeding in addition to all other
recovery or relief.
2.7 TIMING OF PAYMENTS. All salary payments to be made by
the Company pursuant to Section 2.5(b)(i) shall be made in
monthly installments during the Continuation Period, on the first
day of each month following the Officer's termination of
employment. Prior to the commencement of such payments, the
Officer may elect to receive any or all such salary payments in a
single lump-sum payment, payable within sixty days following the
Officer's termination of employment. The Officer's election to
receive a lump-sum payment of salary payments shall not affect in
any way the Officer's right to receive, or the calculation of,
other benefits payable to the Officer. All other payments to be
made in cash pursuant to Section 2.5(b) shall be paid in a single
lump-sum payment, payable within sixty days following the
Officer's termination of employment. Any lump-sum payment to be
made to the Officer shall be equal to the present value of the
payments otherwise payable to the Officer, using an interest rate
assumption equal to the annual, short-term, adjusted applicable
federal interest rate, as determined for the month during which
the lump-sum payment is made pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, except that the lump-sum payment
of any nonqualified retirement benefit (other than benefits from
the Company Supplemental Savings Plan or Reserve Plus Retirement
Savings Plan) payable to the Officer shall be calculated pursuant
to the actuarial assumptions of the Company Employees' Retirement
Plan in effect on the date the Officer's employment is
terminated. The Company shall withhold any applicable income and
employment taxes from any amounts payable to the Officer pursuant
to this Agreement.
2.8 CHANGE IN CONTROL DEFINED. A Change in Control of the
Company shall have occurred:
(a) on the fifth day preceding the scheduled
expiration date of a tender offer by, or exchange
offer by any corporation, person, other entity or
group (other than the Company or any of its wholly
owned subsidiaries), to acquire Voting Stock of
the Company if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity
or group has secured all required
regulatory approvals to own or control
25% or more of the Voting Stock of the
Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any
of its wholly owned subsidiaries will be the
surviving corporation, or to sell or otherwise
dispose of all or substantially all of the
Company's assets to any corporation, person, other
entity or group (other that the Company or any of
its wholly owned subsidiaries), and such
definitive agreement is consummated;
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of
Incorporation) of stock representing 25% or more
of the Voting Stock of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority
of the Company's Board of Directors.
The term "Continuing Director" means:
(a) any member of the Board of Directors of the
Company at the beginning of any period of two
consecutive years; and
(b) any person who subsequently becomes a member of
the Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company
entitled to vote generally in the election of directors.
2.9 NO OBLIGATION TO REIMBURSE FOR TAXES. The Company
shall not be obligated to reimburse the Officer due to the
Officer's liability to pay any applicable federal or state
income, employment or excise taxes which result from any payments
made pursuant to this Agreement.
2.10 OFFICER'S COSTS OF ENFORCEMENT. The Company shall pay
all expenses of the Officer, including but not limited to
attorney fees, incurred in enforcing payments by the Company
pursuant to this Agreement.
2.11 REDUCTION OF SALARY PAYMENTS. If payments or benefits
under this Agreement, after taking into account all other
payments or benefits to which the Officer is entitled from the
Company (and which are in whole or in part considered contingent
upon a Change in Control), are expected to result in an excise
tax to the Officer or the loss of certain tax deductions by the
Company by reason of Sections 280G and 4999 of the Internal
Revenue Code of 1986 or any successor provisions to those
Sections, salary payments under Section 2.5(b)(i) shall be
reduced by the least amount required to avoid such excise tax and
loss of deductions unless the failure to reduce such salary
payments would be financially beneficial to the Officer. The
failure to reduce such salary payments will be financially
beneficial to the Officer if it results in an after-tax value to
the Officer of all payments and benefits referenced in the
preceding sentence, despite the application of the excise tax and
income tax, which value is greater than the after-tax value the
Officer would realize if salary payments were reduced to avoid
the application of the excise tax. If the Officer and the
Company shall disagree as to whether a payment under this
Agreement could result in the loss of a deduction, the matter
shall be resolved by an opinion of Howard & Howard Attorneys, or
if Howard & Howard Attorneys is unable to provide such an
opinion, counsel selected by the Company, and agreed to by the
Officer. Counsel's opinion need not be unqualified. The Company
shall choose a consulting firm, agreed to by the Officer, which
shall provide counsel with a determination of the base amount
and excess parachute payments, as such terms are defined by
Section 280G of the Code or its successor. Counsel's opinion
shall be based on these determinations. The Company shall pay
the fees and expenses of such counsel and consulting firm, and
shall make available such information as may be reasonably
requested by such counsel and consulting firm to prepare the
opinion. If the maximum amount payable to the Officer pursuant
to this Section 2.11 cannot be determined prior to the due date
for such payment, the Company shall pay on the due date the
minimum amount which it in good faith determines to be payable,
and shall pay the remaining amount as soon as practicable after
such remaining amount is determined.
SECTION 3
MISCELLANEOUS
3.1 ASSIGNMENT OF OFFICER'S RIGHTS. The Officer may not
assign, pledge or otherwise transfer any of the benefits of this
Agreement either before or after termination of employment, and
any purported assignment, pledge or transfer of any payment to be
made by the Company hereunder shall be void and of no effect. No
payment to be made to the Officer hereunder shall be subject to
the claims of creditors of the Officer.
3.2 AGREEMENTS BINDING ON SUCCESSORS. This Agreement shall
be binding and inure to the benefit of the parties hereto and
their respective successors, assigns, personal representatives,
heirs, legatees and beneficiaries.
3.3 NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing and sent
by first class mail to the Officer or the Company at his or its
address as set forth above, or to such other address of which
either the Officer or the Company shall notify the other in
writing.
3.4 WAIVER OF BREACH. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by either the
Officer or the Company.
3.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes the Management
Continuity Agreement between the Officer and the Company, which
was effective July 18, 1990. It may be modified or amended only
by an agreement in writing signed by the party against whom
enforcement of any change or amendment is sought.
3.6 SEVERABILITY OF PROVISIONS. If for any reason any
paragraph, term or provision of this Agreement is held to be
invalid or unenforceable, all other valid provisions herein shall
remain in full force and effect and all paragraphs, terms and
provisions of this Agreement shall be deemed to be severable in
nature.
3.7 GOVERNING LAW. This Agreement is made in, and shall be
governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
Officer
FIRST OF AMERICA BANK
CORPORATION, N.A.
Attest:
By:
Secretary
Its:
COMPOSITE*
APPENDIX A TO
MANAGEMENT CONTINUITY AGREEMENT
_____________
<TABLE>
<CAPTION>
Salary as of
Effective
Officer Title Date
---------------- ---------------------- ------------
<S> <C> <C>
Daniel R. Smith Chairman and Chief $675,000
Executive Officer
Richard F. President and Chief $453,600
Chormann Operating Officer
Thomas W. Lambert Executive Vice $265,000
President and Chief
Financial Officer
David B. Wirt Executive Vice $265,000
President and Secretary
John B. Rapp Executive Vice $230,000
President
Donald J. Kenney Executive Vice $260,000
President
</TABLE>
* This is a composite of the Appendix A to the Agreement with
each of the officers named above.
Exhibit 10.2
MANAGEMENT CONTINUITY AGREEMENT
The Amendment and Renewal of this Agreement is effective as
of February 15, 1995 among FIRST OF AMERICA BANK CORPORATION, a
Michigan Corporation with an office at 211 S. Rose St.,
Kalamazoo, Michigan 49007 (the "Company"), First of America Bank-
____________, N.A., a wholly owned subsidiary of the Company (the
"Bank") and
whose address is:
(the "Officer")
W I T N E S S E T H
WHEREAS, the Officer is employed by the Bank as an officer
of the Bank with the title and salary current at the effective
date of this Agreement as set forth in Appendix A; and
WHEREAS, the Company wishes to attract and retain highly
qualified executives and to achieve this goal it is in the best
interests of the Company to secure the continued services of the
Officer regardless of a change in control of the Company; and
WHEREAS, the Company is willing, in order to provide the
Officer a measure of security with respect to his employment with
the Bank in the event of a change in control of the Company so
that the Officer will be in a position to act with respect to a
possible change in control of the Company in the interests of
First of America Bank Corporation and its shareholders, without
concern as to the Officer's own financial security, and in order
to induce the Officer to remain in employment with the Bank, to
agree that employment of the Officer shall be terminable only for
cause for a limited period after a change in control of the
Company.
NOW, THEREFORE, the Company, the Bank and the Officer agree
as follows:
SECTION 1
EMPLOYMENT
1.1 TERM. The Bank shall employ the Officer and the
Officer shall remain in employment with the Bank for a period of
five years from the effective date of this Agreement (the
"Initial Term") unless terminated prior to the expiration of the
Initial Term pursuant to Section 2.
1.2 COMPENSATION. As compensation for services provided to
the Bank by the Officer pursuant to this Agreement, the Bank
shall pay the Officer the salary set forth in Appendix A, which
salary may be increased from time to time by the Bank. The
Officer shall also be eligible to actively participate in any
other compensation and benefit plans generally available to
executive employees of the Company and its affiliates of like
grade and salary including, but not limited to, retirement plans,
group life, disability, accidental death and dismemberment,
travel and accident, health and dental insurance plans, incentive
compensation plans, stock option plans, deferred compensation
plans, supplemental retirement plans and excess benefit plans.
Such other compensation and benefit plans are hereinafter
referred to collectively as the "Compensation and Benefit Plans".
1.3 DUTIES. The Officer shall perform such duties and
functions as are assigned to him by the bylaws of the Bank, as
amended or restated, the Board of Directors of the Company or the
Bank, or by a duly authorized committee of the Board of Directors
of the Company, or by an officer of more senior rank than the
Officer. In the event of an actual or potential Change in
Control (as defined in Section 2.8), the Officer shall perform
his duties and functions in a manner that is consistent with the
best interest of the Bank and the Company and its shareholders,
without regard to the effect that the potential or actual Change
in Control may have on the Officer personally.
1.4 DUTY OF LOYALTY. The Officer shall work full-time for
the Bank only, provided that:
(a) he may also engage in charitable, civic and other
similar activities;
(b) with the consent of the Board of Directors or the
Chief Executive Officer of the Company, he may
serve as a director of a business organization not
competing with the Company; and
(c) he may make such investments and reinvestment in
business activities as shall not require a
substantial portion of his time.
1.5 DUTY NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The
Officer acknowledges that his relationship with the Bank and the
Company is one of high trust and confidence, and that he has
access to Confidential Information (as hereinafter defined) of
the Bank and the Company. The Officer shall not, directly or
indirectly, communicate, deliver, exhibit or provide any
Confidential Information to any person, firm, partnership,
corporation, organization or entity, except as required in the
normal course of the Officer's duties. The duties contained in
this paragraph shall be binding upon the Officer during the time
that he is employed by the Bank and following the termination of
such employment. Such duties will not apply to any such
Confidential Information which is or becomes in the public domain
through no action on the part of the Officer, is generally
disclosed to third parties by the Company without restriction on
such third parties, or is approved for release by written
authorization of the Board of Directors of the Company. The term
"Confidential Information" shall mean any and all confidential,
proprietary, or secret information relating to the Bank's or the
Company's business, services, customers, business operations, or
activities and any and all trade secrets, products, methods of
conducting business, information, skills, knowledge, ideas, know-
how or devices used in, developed by, or pertaining to the Bank's
or the Company's business and not generally known, in whole or in
part, in any trade or industry in which the Bank or the Company
is engaged.
SECTION 2
TERMINATION
2.1 TERMINATION OF AGREEMENT. Unless sooner terminated in
accordance with the terms of this Section 2, this Agreement shall
terminate at the expiration of the Initial Term, and all
obligations hereunder shall terminate except as specifically set
forth in Section 2.5. The Officer may, with the consent of the
Bank or the Company, continue in the employ of the Bank after the
expiration of the Initial Term on such terms and conditions as
may be agreed upon by the Bank or the Company and the Officer.
2.2 TERMINATION BY THE OFFICER. The Officer may
voluntarily terminate this Agreement by providing two weeks
notice to the Company, in which event the Bank and the Company
shall have no further obligation to the Officer hereunder from
the date of such termination and the Officer shall have no
further obligation to the Bank and the Company hereunder except
the duty to not disclose Confidential Information in accordance
with Section 1.5. In the event the Officer's employment with the
Bank is terminated due to the Officer's death, the Bank and the
Company shall have no further obligation to the Officer, his
heirs or legatees hereunder from the date of such termination,
except for a period of one year from the date of the Officer's
death, to pay to the Officer's surviving spouse the salary
payments described in Section 1.2, in the amount in effect on the
Officer's date of death. In the event the Officer's employment
with the Bank is terminated due to the Officer's permanent
disability, the Bank and the Company shall have no further
obligation to the Officer, hereunder from the date of such
termination, except, for a period of six months from the date
salary continuation payments under the Company's short term
disability policy cease, to pay to the Officer the salary
payments described in Section 1.2, in the amount in effect on the
date the Officer becomes permanently disabled, but less the
amount of any benefits received by the Officer during such period
from the Company's long-term disability plan, and, for a period
of one year from the date of the Officer's permanent disability,
to provide benefits to the Officer under the Company's dental and
health plans.
For purposes of this Agreement, the term "Permanent
Disability" means a physical or mental condition of the Officer
which:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) is determined by the Company to render the Officer
incapable of adequately performing his duties
under Section 1.3 of this Agreement.
2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
may terminate this Agreement without cause prior to a Change in
Control, as defined in Section 2.8, by providing two weeks notice
to the Officer. In such event, the Officer shall have no further
obligation to the Bank and the Company hereunder, except the duty
to not disclose Confidential Information in accordance with
Section 1.5, and the Bank and the Company shall have no further
obligation to the Officer hereunder from the date of such
termination except the obligation to make salary payments and to
permit the Officer to continue active participation in employee
benefit plans, in accordance with the Company's severance program
in effect on the date of such termination.
2.4 TERMINATION BY THE COMPANY WITH CAUSE. The Company, by
resolution of its Board of Directors, may terminate this
Agreement by providing the Officer with notice, which may be
provided as late as the effective date of such termination, if
the Officer:
(a) willfully engages in conduct that materially
injures the Bank or the Company; or
(b) willfully and materially breaches the provisions
of this Agreement.
In such event, the Bank and Company will have no further
obligation to the Officer under the Agreement from the date of
such termination. No action, or failure to act, shall be
considered "willful" if it is done by the executive in good faith
and with reasonable belief that his action or omission was in the
best interest of the Bank and the Company.
2.5 TERMINATION FOLLOWING CHANGE IN CONTROL. In the event
there is a Change in Control of the Company, as defined in
Section 2.8, during the Initial Term, and within the three year
period commencing upon the date of the Change in Control (the
"Firm Term"), either:
(a) the Officer's employment hereunder is terminated
by the Bank or the Company other than with cause
under Section 2.4; or
(b) the Officer resigns from his employment hereunder
upon thirty days written notice given to the
Company within thirty days following a material
change in the Officer's title, authorities or
duties, in effect immediately prior to the Change
in Control, a reduction in the compensation or a
reduction in benefits provided pursuant to this
Agreement or the Compensation and Benefit Plans
(other than a reduction resulting from the
computation of incentive award payments pursuant
to the Compensation and Benefit Plans) below the
amount of compensation and benefits in effect
immediately prior to the Change in Control, or a
change of the Officer's principal place of
employment without his consent to a city different
from the city which is the principal place of the
Officer's employment immediately prior to the
Change in Control, then:
(i) the Officer shall, for the applicable
Continuation Period following such
termination of employment, (A) continue to
receive salary under Section 1.2 at the
greater of the rate in effect at the time of
his termination of employment or the rate in
effect immediately prior to the Change in
Control, and (B) continue to actively
participate in the Compensation and Benefit
Plans, except as otherwise provided below,
that he actively participated in at the time
of such termination of employment as though
he continued in the employment of the Bank
(without regard to any amendment or
termination of the Compensation and Benefit
Plans made on or after the date of a Change
in Control); provided, however, that any
benefit to be provided by a Compensation and
Benefit Plan under subclause (B) above may be
provided by the Bank or the Company through
cash of equivalent value or through a
nonqualified arrangement or arrangements if,
in the judgment of the Company, permitting
the Officer to participate in such plan after
his termination of employment would adversely
affect the tax status of such plan; and
(ii) after his termination of employment, the
Officer shall be entitled to receive an
incentive compensation award equal to the
greater of the Officer's annual target award
for the calendar year coincident with or
immediately preceding the date of the Change
in Control under the Company's Annual
Incentive Compensation Plan or the pro-rata
award based on the Company's and the Bank's
actual year-to-date performance payable to
the Officer for the portion of the year
preceding the Officer's termination of
employment under the Company's Annual
Incentive Compensation Plan or any annual
incentive compensation plan maintained by the
Company's successor; and
(iii) after his termination of employment, the
Officer shall be entitled to receive an
additional incentive compensation award
(which shall be in lieu of any pro-rata
award payable to the Officer pursuant to
the terms and conditions of the
Company's Long-term Incentive
Compensation Plan) equal to the greater
of the target award under the Company's
Long-term Incentive Compensation Plan
for the performance period ending in the
year of the Officer's termination of
employment, provided that such award
shall be determined by reference to the
greater of the Officer's base salary as
of the Officer's termination of
employment or the Officer's base salary
immediately preceding the date of the
Change in Control; or the pro-rata long-
term incentive compensation award
payable to the Officer under any long-
term incentive compensation plan of the
Company's successor; and
(iv) after his termination of employment, the
Officer shall no longer participate in the
Company's Stock Option Plan (except that
options giving the Officer the right to
purchase any stock of the Company or any
affiliate of the Company, which had been
granted prior to the Officer's termination of
employment, shall become immediately and
fully exercisable without regard to any
limits in such plan).
The term Continuation Period shall mean (i) three
years, if the Officer's termination of employment
occurs during the first year of the Firm Term;
(ii) two years, if the Officer's termination of
employment occurs during the second year of the
Firm Term; (iii) one year, if the Officer's
termination of employment occurs during the third
year of the Firm Term. Notwithstanding the
foregoing provisions, in no event shall the
Continuation Period extend beyond the Officer's
Normal Retirement Date, as defined in the Company
Employees' Retirement Plan.
The Bank and the Company's obligation to make payments under
Section 2.5(b) shall not be affected by the earnings or any other
income of the Officer, except to the extent provided in the non-
compete provisions contained in Section 2.6. To the extent
benefits to be provided pursuant to Section 2.5(b) are determined
on the basis of the Officer's compensation, the compensation to
be used to determine such benefits after the Officer's
termination of employment shall be the greater of the Officer's
compensation used to determine such benefits immediately prior to
the Change in Control or the Officer's compensation used to
determine such benefits immediately prior to the Officer's
termination of employment. To the extent that benefits to be
provided by the Bank or the Company pursuant to Section 2.5(b)
are matching contributions pursuant to the Company Reserve Plus
Retirement Savings Plan or Supplemental Savings Plan, the amount
of matching contributions to be paid by the Bank or the Company
in any year following the date of the Officer's termination of
employment shall be the greater of the amount of the matching
contribution made by the Bank or the Company for the most recent
plan year that ended prior to the Change in Control or the amount
of matching contributions made by the Bank or the Company for the
most recent plan year that ended prior to the Officer's
termination of employment. To the extent benefits payable
pursuant to Section 2.5(b) are determined by reference to the
Officer's years of service with the Bank, such as the
determination of the Officer's accrued benefits under the
Company's qualified or nonqualified retirement plans, such years
of service shall be determined by including years that occur
during the Continuation Period, regardless of whether the Officer
elects to receive salary payments payable to him pursuant to
Section 2.5(b)(i) in a lump-sum payment. In addition, to the
extent the Officer is less than 100% vested in any benefits
provided by the Compensation and Benefit Plans, he shall become
100% vested upon termination of employment described in Section
2.5(a) or (b) hereof.
For purposes of determining an Officer's right under Section
2.5(b)(i) to accrue benefits during the Continuation Period under
the Company Employees' Retirement Plan, Supplemental Retirement
Plan and Excess Benefit Plan, the Officer's accrued benefits
(including early retirement subsidies) shall be calculated by
taking into account the years of service that the Officer would
have accrued during the Continuation Period, the Officer's
compensation, as such term is defined in the Company Employees'
Retirement Plan (Compensation), payable for the Continuation
Period and the retirement points that the Officer would have
accumulated under the Company Employees' Retirement Plan based on
the Officer's projected age and years of service at the end of
the Continuation Period. The benefit accrued pursuant to Section
2.5(b)(i) and the above provisions shall include both the
additional benefit, based on the service, Compensation, and
retirement points that are credited during the Continuation
Period, and the increase in the retirement benefits accrued prior
to the Continuation Period due to the crediting of additional
service, Compensation and retirement points during the
Continuation Period. All of these retirement benefits shall be
paid in a single, lump-sum payment, pursuant to Section 2.7 of
this Agreement.
In addition to any cash equivalency payment or medical
benefit coverage provided to the Officer for the Continuation
Period, the Officer shall also be eligible to receive a lump-sum
cash payment equal to the difference between the amount of
retiree medical premium payments that would be paid by the Bank
or the Company until the Officer's attainment of age 65 under the
Company Employees' Health Care Plan, as in effect immediately
prior to the Change in Control (the Health Care Plan), based on
the Officer's age and years of service on the date of the
Officer's termination of employment, and the amount of such
premium payments that would have been paid under the Health Care
Plan based on the projected age and years of service of the
Officer through the end of the Continuation Period. If, after
taking into consideration the Officer's projected age and years
of service through the end of the Continuation Period, the
Officer would not have been entitled to Bank or Company paid
retiree medical premium payments, but the Officer would have
completed five or more years of service with the Bank and
attained age 55 (thereby making the Officer eligible for retiree
medical coverage under the Health Care Plan), then the lump-sum
payment shall be calculated by assuming that the Bank or the
Company would have paid 25% of the cost of retiree medical
premium payments until the Officer's attainment of age 65. For
purposes of determining the amount of any lump-sum payment to the
Officer under this paragraph, amounts that the Bank or the
Company would have paid for retiree medical premium payments
shall be determined by assuming that the Company's Health Care
Plan premium costs would increase at the rate of 7% per year.
For purposes of determining the lump-sum payment of retiree
medical premium payments and cash equivalency or medical benefit
coverage to be provided to the Officer pursuant to this
Agreement, such amounts or benefits shall include coverage for
the Officer's spouse, provided that the Officer's spouse was
covered by the Health Care Plan immediately prior to the Change
in Control.
2.6 NON-COMPETE PROVISIONS. In the event of the
termination of the Officer's employment following a Change in
Control, and the Officer becomes entitled to compensation and
benefit payments under Section 2.5 of this Agreement, the Officer
agrees not to compete with the Company, pursuant to the following
terms and conditions.
For the period of twelve months from and after the date of
such termination of employment following the Change in Control,
the Officer shall not engage in any employment activity or
directly or indirectly own (except for passive investments in
which the Officer owns less than a 50% ownership interest),
manage, operate, control or be employed by, participate in or be
connected in any manner with the ownership, operation or control
of any business that provides commercial, retail or mortgage
lending services or sells financial products or services, which
are competitive with or substantially similar to the commercial,
retail, mortgage, trust, investment or insurance services or
products of the Company, its subsidiaries and other affiliates,
at any location in the states of Michigan, Illinois or Indiana.
If any court shall determine that the duration or
geographical limit of any restriction contained in this covenant
not to compete (the "Covenant") is unenforceable under applicable
law, this Covenant shall not thereby be terminated, but shall be
deemed amended to the extent required to render it valid and
enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that
has made such determination.
Other than amendments that are deemed to be made pursuant to
the preceding paragraph of this Agreement, no change or
modification of this Covenant shall be valid unless the same be
in writing and signed by the Bank, the Company and Officer.
Upon a breach by Officer of this Covenant, the Company shall
be entitled to recover, as liquidated damages, one times the
greater of the Officer's annual base salary in effect on the date
of the Officer's termination of employment or the Officer's base
salary in effect immediately prior to the date of the Change in
Control. This amount shall be deducted from the payments due to
the Officer pursuant to Section 2.5(b) of this Agreement. In the
event that all payments pursuant to Section 2.5(b) have been made
to the Officer, the Officer shall pay the aforementioned amount
to the Company.
If any legal action or proceeding is brought for the
enforcement of this Covenant, or because of an alleged dispute,
breach, default or misrepresentation in connection with this
Covenant, the successful or prevailing party in such action shall
be entitled to recover reasonable attorneys' fees and costs
connected with such action or proceeding in addition to all other
recovery or relief.
2.7 TIMING OF PAYMENTS. All salary payments to be made by
the Bank or the Company pursuant to Section 2.5(b)(i) shall be
made in monthly installments during the Continuation Period, on
the first day of each month following the Officer's termination
of employment. Prior to the commencement of such payments, the
Officer may elect to receive any or all such salary payments in a
single lump-sum payment, payable within sixty days following the
Officer's termination of employment. The Officer's election to
receive a lump-sum payment of salary payments shall not affect in
any way the Officer's right to receive, or the calculation of,
other benefits payable to the Officer. All other payments to be
made in cash pursuant to Section 2.5(b) shall be paid in a single
lump-sum payment, payable within sixty days following the
Officer's termination of employment. Any lump-sum payment to be
made to the Officer shall be equal to the present value of the
payments otherwise payable to the Officer, using an interest rate
assumption equal to the annual, short-term, adjusted applicable
federal interest rate, as determined for the month during which
the lump-sum payment is made pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, except that the lump-sum payment
of any nonqualified retirement benefit (other than benefits from
the Company Supplemental Savings Plan or Reserve Plus Retirement
Savings Plan) payable to the Officer shall be calculated pursuant
to the actuarial assumptions of the Company Employees' Retirement
Plan in effect on the date the Officer's employment is
terminated. The Bank or the Company shall withhold any
applicable income and employment taxes from any amounts payable
to the Officer pursuant to this Agreement.
2.8 CHANGE IN CONTROL DEFINED. A Change in Control of the
Company shall have occurred:
(a) on the fifth day preceding the scheduled
expiration date of a tender offer by, or exchange
offer by any corporation, person, other entity or
group (other than the Company or any of its wholly
owned subsidiaries), to acquire Voting Stock of
the Company if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity
or group has secured all required
regulatory approvals to own or control
25% or more of the Voting Stock of the
Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any
of its wholly owned subsidiaries will be the
surviving corporation, or to sell or otherwise
dispose of all or substantially all of the
Company's assets to any corporation, person, other
entity or group (other that the Company or any of
its wholly owned subsidiaries), and such
definitive agreement is consummated;
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of
Incorporation) of stock representing 25% or more
of the Voting Stock of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority
of the Company's Board of Directors.
The term "Continuing Director" means:
(a) any member of the Board of Directors of the
Company at the beginning of any period of two
consecutive years; and
(b) any person who subsequently becomes a member of
the Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company
entitled to vote generally in the election of directors.
2.9 NO OBLIGATION TO REIMBURSE FOR TAXES. The Bank and the
Company shall not be obligated to reimburse the Officer due to
the Officer's liability to pay any applicable federal or state
income, employment or excise taxes which result from any payments
made pursuant to this Agreement.
2.10 OFFICER'S COSTS OF ENFORCEMENT. The Bank or the
Company shall pay all expenses of the Officer, including but not
limited to attorney fees, incurred in enforcing payments by the
Bank or the Company pursuant to this Agreement.
2.11 REDUCTION OF SALARY PAYMENTS. If payments or benefits
under this Agreement, after taking into account all other
payments or benefits to which the Officer is entitled from the
Bank and the Company (and which are in whole or in part
considered contingent upon a Change in Control), are expected to
result in an excise tax to the Officer or the loss of certain tax
deductions by the Bank or the Company by reason of Sections 280G
and 4999 of the Internal Revenue Code of 1986 or any successor
provisions to those Sections, salary payments under Section
2.5(b)(i) shall be reduced by the least amount required to avoid
such excise tax and loss of deductions unless the failure to
reduce such salary payments would be financially beneficial to
the Officer. The failure to reduce such salary payments will be
financially beneficial to the Officer if it results in an after-
tax value to the Officer of all payments and benefits referenced
in the preceding sentence, despite the application of the excise
tax and income tax, which value is greater than the after-tax
value the Officer would realize if salary payments were reduced
to avoid the application of the excise tax. If the Officer and
the Company shall disagree as to whether a payment under this
Agreement could result in the loss of a deduction, the matter
shall be resolved by an opinion of Howard & Howard Attorneys, or
if Howard & Howard Attorneys is unable to provide such an
opinion, counsel selected by the Company, and agreed to by the
Officer. Counsel's opinion need not be unqualified. The Company
shall choose a consulting firm, agreed to by the Officer, which
shall provide counsel with a determination of the base amount
and excess parachute payments, as such terms are defined by
Section 280G of the Code or its successor. Counsel's opinion
shall be based on these determinations. The Company or the Bank
shall pay the fees and expenses of such counsel and consulting
firm, and shall make available such information as may be
reasonably requested by such counsel and consulting firm to
prepare the opinion. If the maximum amount payable to the
Officer pursuant to this Section 2.11 cannot be determined prior
to the due date for such payment, the Bank or the Company shall
pay on the due date the minimum amount which it in good faith
determines to be payable, and shall pay the remaining amount as
soon as practicable after such remaining amount is determined.
SECTION 3
MISCELLANEOUS
3.1 ASSIGNMENT OF OFFICER'S RIGHTS. The Officer may not
assign, pledge or otherwise transfer any of the benefits of this
Agreement either before or after termination of employment, and
any purported assignment, pledge or transfer of any payment to be
made by the Bank or the Company hereunder shall be void and of no
effect. No payment to be made to the Officer hereunder shall be
subject to the claims of creditors of the Officer.
3.2 AGREEMENTS BINDING ON SUCCESSORS. This Agreement shall
be binding and inure to the benefit of the parties hereto and
their respective successors, assigns, personal representatives,
heirs, legatees and beneficiaries.
3.3 NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing and sent
by first class mail to the Officer or the Company at his or its
address as set forth above, or to such other address of which
either the Officer or the Company shall notify the other in
writing.
3.4 WAIVER OF BREACH. The waiver by any party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by the Officer,
the Bank or the Company.
3.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties. It may be modified or amended only
by an agreement in writing signed by the party or parties against
whom enforcement of any change or amendment is sought.
3.6 SEVERABILITY OF PROVISIONS. If for any reason any
paragraph, term or provision of this Agreement is held to be
invalid or unenforceable, all other valid provisions herein shall
remain in full force and effect and all paragraphs, terms and
provisions of this Agreement shall be deemed to be severable in
nature.
3.7 GOVERNING LAW. This Agreement is made in, and shall be
governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
Officer
FIRST OF AMERICA BANK
CORPORATION
Attest:
By:
Secretary
Its:
FIRST OF AMERICA BANK-
_________________, N.A.
Attest:
By:
Secretary
Its:
COMPOSITE*
APPENDIX A TO
MANAGEMENT CONTINUITY AGREEMENT
_____________
<TABLE>
<CAPTION>
Salary as of
Effective
Officer Title Date
---------------- ---------------------- ------------
<S> <C> <C>
William R. Cole Chairman and Chief $305,000
Executive Officer,
First of America Bank-
Michigan, NA
Robert K. Kinning Chairman and Chief $240,000
Executive Officer,
First of America Bank-
Illinois, NA
</TABLE>
* This is a composite of the Appendix A to the Agreement with
each of the officers named above.
Exhibit 10.3
MANAGEMENT CONTINUITY AGREEMENT
The Amendment and Renewal of this Agreement is effective as
of February 15, 1995 among FIRST OF AMERICA BANK CORPORATION, a
Michigan Corporation with an office at 211 S. Rose St.,
Kalamazoo, Michigan 49007 (the "Company"), First of America Bank-
Indiana, a wholly owned subsidiary of the Company (the "Bank")
and
whose address is:
(the "Officer")
W I T N E S S E T H
WHEREAS, the Officer is employed by the Bank as an officer
of the Bank with the title and salary current at the effective
date of this Agreement as set forth in Appendix A; and
WHEREAS, the Company wishes to attract and retain highly
qualified executives and to achieve this goal it is in the best
interests of the Company to secure the continued services of the
Officer regardless of a change in control of the Company; and
WHEREAS, the Company is willing, in order to provide the
Officer a measure of security with respect to his employment with
the Bank in the event of a change in control of the Company so
that the Officer will be in a position to act with respect to a
possible change in control of the Company in the interests of
First of America Bank Corporation and its shareholders, without
concern as to the Officer's own financial security, and in order
to induce the Officer to remain in employment with the Bank, to
agree that employment of the Officer shall be terminable only for
cause for a limited period after a change in control of the
Company.
NOW, THEREFORE, the Company, the Bank and the Officer agree
as follows:
SECTION 1
EMPLOYMENT
1.1 TERM. The Bank shall employ the Officer and the
Officer shall remain in employment with the Bank for a period of
five years from the effective date of this Agreement (the
"Initial Term") unless terminated prior to the expiration of the
Initial Term pursuant to Section 2.
1.2 COMPENSATION. As compensation for services provided to
the Bank by the Officer pursuant to this Agreement, the Bank
shall pay the Officer the salary set forth in Appendix A, which
salary may be increased from time to time by the Bank. The
Officer shall also be eligible to actively participate in any
other compensation and benefit plans generally available to
executive employees of the Company and its affiliates of like
grade and salary including, but not limited to, retirement plans,
group life, disability, accidental death and dismemberment,
travel and accident, health and dental insurance plans, incentive
compensation plans, stock option plans, deferred compensation
plans, supplemental retirement plans and excess benefit plans.
Such other compensation and benefit plans are hereinafter
referred to collectively as the "Compensation and Benefit Plans".
1.3 DUTIES. The Officer shall perform such duties and
functions as are assigned to him by the bylaws of the Bank, as
amended or restated, the Board of Directors of the Company or the
Bank, or by a duly authorized committee of the Board of Directors
of the Company, or by an officer of more senior rank than the
Officer. In the event of an actual or potential Change in
Control (as defined in Section 2.8), the Officer shall perform
his duties and functions in a manner that is consistent with the
best interest of the Bank and the Company and its shareholders,
without regard to the effect that the potential or actual Change
in Control may have on the Officer personally.
1.4 DUTY OF LOYALTY. The Officer shall work full-time for
the Bank only, provided that:
(a) he may also engage in charitable, civic and other
similar activities;
(b) with the consent of the Board of Directors or the
Chief Executive Officer of the Company, he may
serve as a director of a business organization not
competing with the Company; and
(c) he may make such investments and reinvestment in
business activities as shall not require a
substantial portion of his time.
1.5 DUTY NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The
Officer acknowledges that his relationship with the Bank and the
Company is one of high trust and confidence, and that he has
access to Confidential Information (as hereinafter defined) of
the Bank and the Company. The Officer shall not, directly or
indirectly, communicate, deliver, exhibit or provide any
Confidential Information to any person, firm, partnership,
corporation, organization or entity, except as required in the
normal course of the Officer's duties. The duties contained in
this paragraph shall be binding upon the Officer during the time
that he is employed by the Bank and following the termination of
such employment. Such duties will not apply to any such
Confidential Information which is or becomes in the public domain
through no action on the part of the Officer, is generally
disclosed to third parties by the Company without restriction on
such third parties, or is approved for release by written
authorization of the Board of Directors of the Company. The term
"Confidential Information" shall mean any and all confidential,
proprietary, or secret information relating to the Bank's or the
Company's business, services, customers, business operations, or
activities and any and all trade secrets, products, methods of
conducting business, information, skills, knowledge, ideas, know-
how or devices used in, developed by, or pertaining to the Bank's
or the Company's business and not generally known, in whole or in
part, in any trade or industry in which the Bank or the Company
is engaged.
SECTION 2
TERMINATION
2.1 TERMINATION OF AGREEMENT. Unless sooner terminated in
accordance with the terms of this Section 2, this Agreement shall
terminate at the expiration of the Initial Term, and all
obligations hereunder shall terminate except as specifically set
forth in Section 2.5. The Officer may, with the consent of the
Bank or the Company, continue in the employ of the Bank after the
expiration of the Initial Term on such terms and conditions as
may be agreed upon by the Bank or the Company and the Officer.
2.2 TERMINATION BY THE OFFICER. The Officer may
voluntarily terminate this Agreement by providing two weeks
notice to the Company, in which event the Bank and the Company
shall have no further obligation to the Officer hereunder from
the date of such termination and the Officer shall have no
further obligation to the Bank and the Company hereunder except
the duty to not disclose Confidential Information in accordance
with Section 1.5. In the event the Officer's employment with the
Bank is terminated due to the Officer's death, the Bank and the
Company shall have no further obligation to the Officer, his
heirs or legatees hereunder from the date of such termination,
except for a period of one year from the date of the Officer's
death, to pay to the Officer's surviving spouse the salary
payments described in Section 1.2, in the amount in effect on the
Officer's date of death. In the event the Officer's employment
with the Bank is terminated due to the Officer's permanent
disability, the Bank and the Company shall have no further
obligation to the Officer, hereunder from the date of such
termination, except, for a period of six months from the date
salary continuation payments under the Company's short term
disability policy cease, to pay to the Officer the salary
payments described in Section 1.2, in the amount in effect on the
date the Officer becomes permanently disabled, but less the
amount of any benefits received by the Officer during such period
from the Company's long-term disability plan, and, for a period
of one year from the date of the Officer's permanent disability,
to provide benefits to the Officer under the Company's dental and
health plans.
For purposes of this Agreement, the term "Permanent
Disability" means a physical or mental condition of the Officer
which:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) is determined by the Company to render the Officer
incapable of adequately performing his duties
under Section 1.3 of this Agreement.
2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
may terminate this Agreement without cause prior to a Change in
Control, as defined in Section 2.8, by providing two weeks notice
to the Officer. In such event, the Officer shall have no further
obligation to the Bank and the Company hereunder, except the duty
to not disclose Confidential Information in accordance with
Section 1.5, and the Bank and the Company shall have no further
obligation to the Officer hereunder from the date of such
termination except the obligation to make salary payments and to
permit the Officer to continue active participation in employee
benefit plans, in accordance with the Company's severance program
in effect on the date of such termination.
2.4 TERMINATION BY THE COMPANY WITH CAUSE. The Company, by
resolution of its Board of Directors, may terminate this
Agreement by providing the Officer with notice, which may be
provided as late as the effective date of such termination, if
the Officer:
(a) willfully engages in conduct that materially
injures the Bank or the Company; or
(b) willfully and materially breaches the provisions
of this Agreement.
In such event, the Bank and Company will have no further
obligation to the Officer under the Agreement from the date of
such termination. No action, or failure to act, shall be
considered "willful" if it is done by the executive in good faith
and with reasonable belief that his action or omission was in the
best interest of the Bank and the Company.
2.5 TERMINATION FOLLOWING CHANGE IN CONTROL. In the event
there is a Change in Control of the Company, as defined in
Section 2.8, during the Initial Term, and within the three year
period commencing upon the date of the Change in Control (the
"Firm Term"), either:
(a) the Officer's employment hereunder is terminated
by the Bank or the Company other than with cause
under Section 2.4; or
(b) the Officer resigns from his employment hereunder
upon thirty days written notice given to the
Company within thirty days following a material
change in the Officer's title, authorities or
duties, in effect immediately prior to the Change
in Control, a reduction in the compensation or a
reduction in benefits provided pursuant to this
Agreement or the Compensation and Benefit Plans
(other than a reduction resulting from the
computation of incentive award payments pursuant
to the Compensation and Benefit Plans) below the
amount of compensation and benefits in effect
immediately prior to the Change in Control, or a
change of the Officer's principal place of
employment without his consent to a city different
from the city which is the principal place of the
Officer's employment immediately prior to the
Change in Control, then:
(i) the Officer shall, for the applicable
Continuation Period following such
termination of employment, (A) continue to
receive salary under Section 1.2 at the
greater of the rate in effect at the time of
his termination of employment or the rate in
effect immediately prior to the Change in
Control, and (B) continue to actively
participate in the Compensation and Benefit
Plans, except as otherwise provided below,
that he actively participated in at the time
of such termination of employment as though
he continued in the employment of the Bank
(without regard to any amendment or
termination of the Compensation and Benefit
Plans made on or after the date of a Change
in Control); provided, however, that any
benefit to be provided by a Compensation and
Benefit Plan under subclause (B) above may be
provided by the Bank or the Company through
cash of equivalent value or through a
nonqualified arrangement or arrangements if,
in the judgment of the Company, permitting
the Officer to participate in such plan after
his termination of employment would adversely
affect the tax status of such plan; and
(ii) after his termination of employment, the
Officer shall be entitled to receive an
incentive compensation award equal to the
greater of the Officer's annual target award
for the calendar year coincident with or
immediately preceding the date of the Change
in Control under the Company's Annual
Incentive Compensation Plan or the pro-rata
award based on the Company's and the Bank's
actual year-to-date performance payable to
the Officer for the portion of the year
preceding the Officer's termination of
employment under the Company's Annual
Incentive Compensation Plan or any annual
incentive compensation plan maintained by the
Company's successor; and
(iii) after his termination of employment, the
Officer shall be entitled to receive an
additional incentive compensation award
(which shall be in lieu of any pro-rata
award payable to the Officer pursuant to
the terms and conditions of the
Company's Long-term Incentive
Compensation Plan) equal to the greater
of the target award under the Company's
Long-term Incentive Compensation Plan
for the performance period ending in the
year of the Officer's termination of
employment, provided that such award
shall be determined by reference to the
greater of the Officer's base salary as
of the Officer's termination of
employment or the Officer's base salary
immediately preceding the date of the
Change in Control; or the pro-rata long-
term incentive compensation award
payable to the Officer under any long-
term incentive compensation plan of the
Company's successor; and
(iv) after his termination of employment, the
Officer shall no longer participate in the
Company's Stock Option Plan (except that
options giving the Officer the right to
purchase any stock of the Company or any
affiliate of the Company, which had been
granted prior to the Officer's termination of
employment, shall become immediately and
fully exercisable without regard to any
limits in such plan).
The term Continuation Period shall mean (i) two
years, if the Officer's termination of employment
occurs during the first or second year of the Firm
Term; (ii) one year, if the Officer's termination
of employment occurs during the third year of the
Firm Term. Notwithstanding the foregoing
provisions, in no event shall the Continuation
Period extend beyond the Officer's Normal
Retirement Date, as defined in the Company
Employees' Retirement Plan.
The Bank and the Company's obligation to make payments under
Section 2.5(b) shall not be affected by the earnings or any other
income of the Officer, except to the extent provided in the non-
compete provisions contained in Section 2.6. To the extent
benefits to be provided pursuant to Section 2.5(b) are determined
on the basis of the Officer's compensation, the compensation to
be used to determine such benefits after the Officer's
termination of employment shall be the greater of the Officer's
compensation used to determine such benefits immediately prior to
the Change in Control or the Officer's compensation used to
determine such benefits immediately prior to the Officer's
termination of employment. To the extent that benefits to be
provided by the Bank or the Company pursuant to Section 2.5(b)
are matching contributions pursuant to the Company Reserve Plus
Retirement Savings Plan or Supplemental Savings Plan, the amount
of matching contributions to be paid by the Bank or the Company
in any year following the date of the Officer's termination of
employment shall be the greater of the amount of the matching
contribution made by the Bank or the Company for the most recent
plan year that ended prior to the Change in Control or the amount
of matching contributions made by the Bank or the Company for the
most recent plan year that ended prior to the Officer's
termination of employment. To the extent benefits payable
pursuant to Section 2.5(b) are determined by reference to the
Officer's years of service with the Bank, such as the
determination of the Officer's accrued benefits under the
Company's qualified or nonqualified retirement plans, such years
of service shall be determined by including years that occur
during the Continuation Period, regardless of whether the Officer
elects to receive salary payments payable to him pursuant to
Section 2.5(b)(i) in a lump-sum payment. In addition, to the
extent the Officer is less than 100% vested in any benefits
provided by the Compensation and Benefit Plans, he shall become
100% vested upon termination of employment described in Section
2.5(a) or (b) hereof.
For purposes of determining an Officer's right under Section
2.5(b)(i) to accrue benefits during the Continuation Period under
the Company Employees' Retirement Plan, Supplemental Retirement
Plan and Excess Benefit Plan, the Officer's accrued benefits
(including early retirement subsidies) shall be calculated by
taking into account the years of service that the Officer would
have accrued during the Continuation Period, the Officer's
compensation, as such term is defined in the Company Employees'
Retirement Plan (Compensation), payable for the Continuation
Period and the retirement points that the Officer would have
accumulated under the Company Employees' Retirement Plan based on
the Officer's projected age and years of service at the end of
the Continuation Period. The benefit accrued pursuant to Section
2.5(b)(i) and the above provisions shall include both the
additional benefit, based on the service, Compensation, and
retirement points that are credited during the Continuation
Period, and the increase in the retirement benefits accrued prior
to the Continuation Period due to the crediting of additional
service, Compensation and retirement points during the
Continuation Period. All of these retirement benefits shall be
paid in a single, lump-sum payment, pursuant to Section 2.7 of
this Agreement.
In addition to any cash equivalency payment or medical
benefit coverage provided to the Officer for the Continuation
Period, the Officer shall also be eligible to receive a lump-sum
cash payment equal to the difference between the amount of
retiree medical premium payments that would be paid by the Bank
or the Company until the Officer's attainment of age 65 under the
Company Employees' Health Care Plan, as in effect immediately
prior to the Change in Control (the Health Care Plan), based on
the Officer's age and years of service on the date of the
Officer's termination of employment, and the amount of such
premium payments that would have been paid under the Health Care
Plan based on the projected age and years of service of the
Officer through the end of the Continuation Period. If, after
taking into consideration the Officer's projected age and years
of service through the end of the Continuation Period, the
Officer would not have been entitled to Bank or Company paid
retiree medical premium payments, but the Officer would have
completed five or more years of service with the Bank and
attained age 55 (thereby making the Officer eligible for retiree
medical coverage under the Health Care Plan), then the lump-sum
payment shall be calculated by assuming that the Bank or the
Company would have paid 25% of the cost of retiree medical
premium payments until the Officer's attainment of age 65. For
purposes of determining the amount of any lump-sum payment to the
Officer under this paragraph, amounts that the Bank or the
Company would have paid for retiree medical premium payments
shall be determined by assuming that the Company's Health Care
Plan premium costs would increase at the rate of 7% per year.
For purposes of determining the lump-sum payment of retiree
medical premium payments and cash equivalency or medical benefit
coverage to be provided to the Officer pursuant to this
Agreement, such amounts or benefits shall include coverage for
the Officer's spouse, provided that the Officer's spouse was
covered by the Health Care Plan immediately prior to the Change
in Control.
2.6 NON-COMPETE PROVISIONS. In the event of the
termination of the Officer's employment following a Change in
Control, and the Officer becomes entitled to compensation and
benefit payments under Section 2.5 of this Agreement, the Officer
agrees not to compete with the Company, pursuant to the following
terms and conditions.
For the period of twelve months from and after the date of
such termination of employment following the Change in Control,
the Officer shall not engage in any employment activity or
directly or indirectly own (except for passive investments in
which the Officer owns less than a 50% ownership interest),
manage, operate, control or be employed by, participate in or be
connected in any manner with the ownership, operation or control
of any business that provides commercial, retail or mortgage
lending services or sells financial products or services, which
are competitive with or substantially similar to the commercial,
retail, mortgage, trust, investment or insurance services or
products of the Company, its subsidiaries and other affiliates,
at any location in the states of Michigan, Illinois or Indiana.
If any court shall determine that the duration or
geographical limit of any restriction contained in this covenant
not to compete (the "Covenant") is unenforceable under applicable
law, this Covenant shall not thereby be terminated, but shall be
deemed amended to the extent required to render it valid and
enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that
has made such determination.
Other than amendments that are deemed to be made pursuant to
the preceding paragraph of this Agreement, no change or
modification of this Covenant shall be valid unless the same be
in writing and signed by the Bank, the Company and Officer.
Upon a breach by Officer of this Covenant, the Company shall
be entitled to recover, as liquidated damages, one times the
greater of the Officer's annual base salary in effect on the date
of the Officer's termination of employment or the Officer's base
salary in effect immediately prior to the date of the Change in
Control. This amount shall be deducted from the payments due to
the Officer pursuant to Section 2.5(b) of this Agreement. In the
event that all payments pursuant to Section 2.5(b) have been made
to the Officer, the Officer shall pay the aforementioned amount
to the Company.
If any legal action or proceeding is brought for the
enforcement of this Covenant, or because of an alleged dispute,
breach, default or misrepresentation in connection with this
Covenant, the successful or prevailing party in such action shall
be entitled to recover reasonable attorneys' fees and costs
connected with such action or proceeding in addition to all other
recovery or relief.
2.7 TIMING OF PAYMENTS. All salary payments to be made by
the Bank or the Company pursuant to Section 2.5(b)(i) shall be
made in monthly installments during the Continuation Period, on
the first day of each month following the Officer's termination
of employment. Prior to the commencement of such payments, the
Officer may elect to receive any or all such salary payments in a
single lump-sum payment, payable within sixty days following the
Officer's termination of employment. The Officer's election to
receive a lump-sum payment of salary payments shall not affect in
any way the Officer's right to receive, or the calculation of,
other benefits payable to the Officer. All other payments to be
made in cash pursuant to Section 2.5(b) shall be paid in a single
lump-sum payment, payable within sixty days following the
Officer's termination of employment. Any lump-sum payment to be
made to the Officer shall be equal to the present value of the
payments otherwise payable to the Officer, using an interest rate
assumption equal to the annual, short-term, adjusted applicable
federal interest rate, as determined for the month during which
the lump-sum payment is made pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, except that the lump-sum payment
of any nonqualified retirement benefit (other than benefits from
the Company Supplemental Savings Plan or Reserve Plus Retirement
Savings Plan) payable to the Officer shall be calculated pursuant
to the actuarial assumptions of the Company Employees' Retirement
Plan in effect on the date the Officer's employment is
terminated. The Bank or the Company shall withhold any
applicable income and employment taxes from any amounts payable
to the Officer pursuant to this Agreement.
2.8 CHANGE IN CONTROL DEFINED. A Change in Control of the
Company shall have occurred:
(a) on the fifth day preceding the scheduled
expiration date of a tender offer by, or exchange
offer by any corporation, person, other entity or
group (other than the Company or any of its wholly
owned subsidiaries), to acquire Voting Stock of
the Company if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity
or group has secured all required
regulatory approvals to own or control
25% or more of the Voting Stock of the
Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any
of its wholly owned subsidiaries will be the
surviving corporation, or to sell or otherwise
dispose of all or substantially all of the
Company's assets to any corporation, person, other
entity or group (other that the Company or any of
its wholly owned subsidiaries), and such
definitive agreement is consummated;
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of
Incorporation) of stock representing 25% or more
of the Voting Stock of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority
of the Company's Board of Directors.
The term "Continuing Director" means:
(a) any member of the Board of Directors of the
Company at the beginning of any period of two
consecutive years; and
(b) any person who subsequently becomes a member of
the Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company
entitled to vote generally in the election of directors.
2.9 NO OBLIGATION TO REIMBURSE FOR TAXES. The Bank and the
Company shall not be obligated to reimburse the Officer due to
the Officer's liability to pay any applicable federal or state
income, employment or excise taxes which result from any payments
made pursuant to this Agreement.
2.10 OFFICER'S COSTS OF ENFORCEMENT. The Bank or the
Company shall pay all expenses of the Officer, including but not
limited to attorney fees, incurred in enforcing payments by the
Bank or the Company pursuant to this Agreement.
2.11 REDUCTION OF SALARY PAYMENTS. If payments or benefits
under this Agreement, after taking into account all other
payments or benefits to which the Officer is entitled from the
Bank and the Company (and which are in whole or in part
considered contingent upon a Change in Control), are expected to
result in an excise tax to the Officer or the loss of certain tax
deductions by the Bank or the Company by reason of Sections 280G
and 4999 of the Internal Revenue Code of 1986 or any successor
provisions to those Sections, salary payments under Section
2.5(b)(i) shall be reduced by the least amount required to avoid
such excise tax and loss of deductions unless the failure to
reduce such salary payments would be financially beneficial to
the Officer. The failure to reduce such salary payments will be
financially beneficial to the Officer if it results in an after-
tax value to the Officer of all payments and benefits referenced
in the preceding sentence, despite the application of the excise
tax and income tax, which value is greater than the after-tax
value the Officer would realize if salary payments were reduced
to avoid the application of the excise tax. If the Officer and
the Company shall disagree as to whether a payment under this
Agreement could result in the loss of a deduction, the matter
shall be resolved by an opinion of Howard & Howard Attorneys, or
if Howard & Howard Attorneys is unable to provide such an
opinion, counsel selected by the Company, and agreed to by the
Officer. Counsel's opinion need not be unqualified. The Company
shall choose a consulting firm, agreed to by the Officer, which
shall provide counsel with a determination of the base amount
and excess parachute payments, as such terms are defined by
Section 280G of the Code or its successor. Counsel's opinion
shall be based on these determinations. The Company or the Bank
shall pay the fees and expenses of such counsel and consulting
firm, and shall make available such information as may be
reasonably requested by such counsel and consulting firm to
prepare the opinion. If the maximum amount payable to the
Officer pursuant to this Section 2.11 cannot be determined prior
to the due date for such payment, the Bank or the Company shall
pay on the due date the minimum amount which it in good faith
determines to be payable, and shall pay the remaining amount as
soon as practicable after such remaining amount is determined.
SECTION 3
MISCELLANEOUS
3.1 ASSIGNMENT OF OFFICER'S RIGHTS. The Officer may not
assign, pledge or otherwise transfer any of the benefits of this
Agreement either before or after termination of employment, and
any purported assignment, pledge or transfer of any payment to be
made by the Bank or the Company hereunder shall be void and of no
effect. No payment to be made to the Officer hereunder shall be
subject to the claims of creditors of the Officer.
3.2 AGREEMENTS BINDING ON SUCCESSORS. This Agreement shall
be binding and inure to the benefit of the parties hereto and
their respective successors, assigns, personal representatives,
heirs, legatees and beneficiaries.
3.3 NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing and sent
by first class mail to the Officer or the Company at his or its
address as set forth above, or to such other address of which
either the Officer or the Company shall notify the other in
writing.
3.4 WAIVER OF BREACH. The waiver by any party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by the Officer,
the Bank or the Company.
3.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties. It may be modified or amended only
by an agreement in writing signed by the party or parties against
whom enforcement of any change or amendment is sought.
3.6 SEVERABILITY OF PROVISIONS. If for any reason any
paragraph, term or provision of this Agreement is held to be
invalid or unenforceable, all other valid provisions herein shall
remain in full force and effect and all paragraphs, terms and
provisions of this Agreement shall be deemed to be severable in
nature.
3.7 GOVERNING LAW. This Agreement is made in, and shall be
governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
Officer
FIRST OF AMERICA BANK
CORPORATION
Attest:
By:
Secretary
Its:
FIRST OF AMERICA BANK-
INDIANA
Attest:
By:
Secretary
Its:
APPENDIX A TO
MANAGEMENT CONTINUITY AGREEMENT
_____________
<TABLE>
<CAPTION>
Salary as of
Effective
Officer Title Date
---------------- ---------------------- ------------
<S> <C> <C>
Malcolm C. Chairman and Chief $185,500
Pownall Executive Officer,
First of America Bank-
Indiana
</TABLE>
Exhibit 10.4
MANAGEMENT CONTINUITY AGREEMENT
The Amendment and Renewal of this Agreement is effective as
of February 15, 1995 among FIRST OF AMERICA BANK CORPORATION, a
Michigan Corporation with an office at 211 S. Rose St.,
Kalamazoo, Michigan 49007 (the "Company"), First of America Bank-
Florida, FSB, a wholly owned subsidiary of the Company (the
"Bank") and
whose address is:
(the "Officer")
W I T N E S S E T H
WHEREAS, the Officer is employed by the Bank as an officer
of the Bank with the title and salary current at the effective
date of this Agreement as set forth in Appendix A; and
WHEREAS, the Company wishes to attract and retain highly
qualified executives and to achieve this goal it is in the best
interests of the Company to secure the continued services of the
Officer regardless of a change in control of the Company; and
WHEREAS, the Company is willing, in order to provide the
Officer a measure of security with respect to his employment with
the Bank in the event of a change in control of the Company so
that the Officer will be in a position to act with respect to a
possible change in control of the Company in the interests of
First of America Bank Corporation and its shareholders, without
concern as to the Officer's own financial security, and in order
to induce the Officer to remain in employment with the Bank, to
agree that employment of the Officer shall be terminable only for
cause for a limited period after a change in control of the
Company.
NOW, THEREFORE, the Company, the Bank and the Officer agree
as follows:
SECTION 1
EMPLOYMENT
1.1 TERM. The Bank shall employ the Officer and the
Officer shall remain in employment with the Bank for a period of
five years from the effective date of this Agreement (the
"Initial Term") unless terminated prior to the expiration of the
Initial Term pursuant to Section 2.
1.2 COMPENSATION. As compensation for services provided to
the Bank by the Officer pursuant to this Agreement, the Bank
shall pay the Officer the salary set forth in Appendix A, which
salary may be increased from time to time by the Bank. The
Officer shall also be eligible to actively participate in any
other compensation and benefit plans generally available to
executive employees of the Company and its affiliates of like
grade and salary including, but not limited to, retirement plans,
group life, disability, accidental death and dismemberment,
travel and accident, health and dental insurance plans, incentive
compensation plans, stock option plans, deferred compensation
plans, supplemental retirement plans and excess benefit plans.
Such other compensation and benefit plans are hereinafter
referred to collectively as the "Compensation and Benefit Plans".
1.3 DUTIES. The Officer shall perform such duties and
functions as are assigned to him by the bylaws of the Bank, as
amended or restated, the Board of Directors of the Company or the
Bank, or by a duly authorized committee of the Board of Directors
of the Company, or by an officer of more senior rank than the
Officer. In the event of an actual or potential Change in
Control (as defined in Section 2.8), the Officer shall perform
his duties and functions in a manner that is consistent with the
best interest of the Bank and the Company and its shareholders,
without regard to the effect that the potential or actual Change
in Control may have on the Officer personally.
1.4 DUTY OF LOYALTY. The Officer shall work full-time for
the Bank only, provided that:
(a) he may also engage in charitable, civic and other
similar activities;
(b) with the consent of the Board of Directors or the
Chief Executive Officer of the Company, he may
serve as a director of a business organization not
competing with the Company; and
(c) he may make such investments and reinvestment in
business activities as shall not require a
substantial portion of his time.
1.5 DUTY NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The
Officer acknowledges that his relationship with the Bank and the
Company is one of high trust and confidence, and that he has
access to Confidential Information (as hereinafter defined) of
the Bank and the Company. The Officer shall not, directly or
indirectly, communicate, deliver, exhibit or provide any
Confidential Information to any person, firm, partnership,
corporation, organization or entity, except as required in the
normal course of the Officer's duties. The duties contained in
this paragraph shall be binding upon the Officer during the time
that he is employed by the Bank and following the termination of
such employment. Such duties will not apply to any such
Confidential Information which is or becomes in the public domain
through no action on the part of the Officer, is generally
disclosed to third parties by the Company without restriction on
such third parties, or is approved for release by written
authorization of the Board of Directors of the Company. The term
"Confidential Information" shall mean any and all confidential,
proprietary, or secret information relating to the Bank's or the
Company's business, services, customers, business operations, or
activities and any and all trade secrets, products, methods of
conducting business, information, skills, knowledge, ideas, know-
how or devices used in, developed by, or pertaining to the Bank's
or the Company's business and not generally known, in whole or in
part, in any trade or industry in which the Bank or the Company
is engaged.
SECTION 2
TERMINATION
2.1 TERMINATION OF AGREEMENT. Unless sooner terminated in
accordance with the terms of this Section 2, this Agreement shall
terminate at the expiration of the Initial Term, and all
obligations hereunder shall terminate except as specifically set
forth in Section 2.5. The Officer may, with the consent of the
Bank or the Company, continue in the employ of the Bank after the
expiration of the Initial Term on such terms and conditions as
may be agreed upon by the Bank or the Company and the Officer.
2.2 TERMINATION BY THE OFFICER. The Officer may
voluntarily terminate this Agreement by providing two weeks
notice to the Company, in which event the Bank and the Company
shall have no further obligation to the Officer hereunder from
the date of such termination and the Officer shall have no
further obligation to the Bank and the Company hereunder except
the duty to not disclose Confidential Information in accordance
with Section 1.5. In the event the Officer's employment with the
Bank is terminated due to the Officer's death, the Bank and the
Company shall have no further obligation to the Officer, his
heirs or legatees hereunder from the date of such termination,
except for a period of one year from the date of the Officer's
death, to pay to the Officer's surviving spouse the salary
payments described in Section 1.2, in the amount in effect on the
Officer's date of death. In the event the Officer's employment
with the Bank is terminated due to the Officer's permanent
disability, the Bank and the Company shall have no further
obligation to the Officer, hereunder from the date of such
termination, except, for a period of six months from the date
salary continuation payments under the Company's short term
disability policy cease, to pay to the Officer the salary
payments described in Section 1.2, in the amount in effect on the
date the Officer becomes permanently disabled, but less the
amount of any benefits received by the Officer during such period
from the Company's long-term disability plan, and, for a period
of one year from the date of the Officer's permanent disability,
to provide benefits to the Officer under the Company's dental and
health plans.
For purposes of this Agreement, the term "Permanent
Disability" means a physical or mental condition of the Officer
which:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) is determined by the Company to render the Officer
incapable of adequately performing his duties
under Section 1.3 of this Agreement.
2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
may terminate this Agreement without cause prior to a Change in
Control, as defined in Section 2.8, by providing two weeks notice
to the Officer. In such event, the Officer shall have no further
obligation to the Bank and the Company hereunder, except the duty
to not disclose Confidential Information in accordance with
Section 1.5, and the Bank and the Company shall have no further
obligation to the Officer hereunder from the date of such
termination except the obligation to make salary payments and to
permit the Officer to continue active participation in employee
benefit plans, in accordance with the Company's severance program
in effect on the date of such termination.
2.4 TERMINATION BY THE COMPANY WITH CAUSE. The Company, by
resolution of its Board of Directors, may terminate this
Agreement by providing the Officer with notice, which may be
provided as late as the effective date of such termination, if
the Officer:
(a) willfully engages in conduct that materially
injures the Bank or the Company; or
(b) willfully and materially breaches the provisions
of this Agreement.
In such event, the Bank and Company will have no further
obligation to the Officer under the Agreement from the date of
such termination. No action, or failure to act, shall be
considered "willful" if it is done by the executive in good faith
and with reasonable belief that his action or omission was in the
best interest of the Bank and the Company.
2.5 TERMINATION FOLLOWING CHANGE IN CONTROL. In the event
there is a Change in Control of the Company, as defined in
Section 2.8, during the Initial Term, and within the three year
period commencing upon the date of the Change in Control (the
"Firm Term"), either:
(a) the Officer's employment hereunder is terminated
by the Bank or the Company other than with cause
under Section 2.4; or
(b) the Officer resigns from his employment hereunder
upon thirty days written notice given to the
Company within thirty days following a material
change in the Officer's title, authorities or
duties, in effect immediately prior to the Change
in Control, a reduction in the compensation or a
reduction in benefits provided pursuant to this
Agreement or the Compensation and Benefit Plans
(other than a reduction resulting from the
computation of incentive award payments pursuant
to the Compensation and Benefit Plans) below the
amount of compensation and benefits in effect
immediately prior to the Change in Control, or a
change of the Officer's principal place of
employment without his consent to a city different
from the city which is the principal place of the
Officer's employment immediately prior to the
Change in Control, then:
(i) the Officer shall, for the applicable
Continuation Period following such
termination of employment, (A) continue to
receive salary under Section 1.2 at the
greater of the rate in effect at the time of
his termination of employment or the rate in
effect immediately prior to the Change in
Control, and (B) continue to actively
participate in the Compensation and Benefit
Plans, except as otherwise provided below,
that he actively participated in at the time
of such termination of employment as though
he continued in the employment of the Bank
(without regard to any amendment or
termination of the Compensation and Benefit
Plans made on or after the date of a Change
in Control); provided, however, that any
benefit to be provided by a Compensation and
Benefit Plan under subclause (B) above may be
provided by the Bank or the Company through
cash of equivalent value or through a
nonqualified arrangement or arrangements if,
in the judgment of the Company, permitting
the Officer to participate in such plan after
his termination of employment would adversely
affect the tax status of such plan; and
(ii) after his termination of employment, the
Officer shall be entitled to receive an
incentive compensation award equal to the
greater of the Officer's annual target award
for the calendar year coincident with or
immediately preceding the date of the Change
in Control under the Company's Annual
Incentive Compensation Plan or the pro-rata
award based on the Company's and the Bank's
actual year-to-date performance payable to
the Officer for the portion of the year
preceding the Officer's termination of
employment under the Company's Annual
Incentive Compensation Plan or any annual
incentive compensation plan maintained by the
Company's successor; and
(iii) after his termination of employment, the
Officer shall be entitled to receive an
additional incentive compensation award
(which shall be in lieu of any pro-rata
award payable to the Officer pursuant to
the terms and conditions of the
Company's Long-term Incentive
Compensation Plan) equal to the greater
of the target award under the Company's
Long-term Incentive Compensation Plan
for the performance period ending in the
year of the Officer's termination of
employment, provided that such award
shall be determined by reference to the
greater of the Officer's base salary as
of the Officer's termination of
employment or the Officer's base salary
immediately preceding the date of the
Change in Control; or the pro-rata long-
term incentive compensation award
payable to the Officer under any long-
term incentive compensation plan of the
Company's successor; and
(iv) after his termination of employment, the
Officer shall no longer participate in the
Company's Stock Option Plan (except that
options giving the Officer the right to
purchase any stock of the Company or any
affiliate of the Company, which had been
granted prior to the Officer's termination of
employment, shall become immediately and
fully exercisable without regard to any
limits in such plan).
The term Continuation Period shall mean (i) two
years, if the Officer's termination of employment
occurs during the first or second year of the Firm
Term; (ii) one year, if the Officer's termination
of employment occurs during the third year of the
Firm Term. Notwithstanding the foregoing
provisions, in no event shall the Continuation
Period extend beyond the Officer's Normal
Retirement Date, as defined in the Company
Employees' Retirement Plan.
The Bank and the Company's obligation to make payments
under Section 2.5(b) shall not be affected by the earnings or any
other income of the Officer, except to the extent provided in the
non-compete provisions contained in Section 2.6. To the extent
benefits to be provided pursuant to Section 2.5(b) are determined
on the basis of the Officer's compensation, the compensation to
be used to determine such benefits after the Officer's
termination of employment shall be the greater of the Officer's
compensation used to determine such benefits immediately prior to
the Change in Control or the Officer's compensation used to
determine such benefits immediately prior to the Officer's
termination of employment. To the extent that benefits to be
provided by the Bank or the Company pursuant to Section 2.5(b)
are matching contributions pursuant to the Company Reserve Plus
Retirement Savings Plan or Supplemental Savings Plan, the amount
of matching contributions to be paid by the Bank or the Company
in any year following the date of the Officer's termination of
employment shall be the greater of the amount of the matching
contribution made by the Bank or the Company for the most recent
plan year that ended prior to the Change in Control or the amount
of matching contributions made by the Bank or the Company for the
most recent plan year that ended prior to the Officer's
termination of employment. To the extent benefits payable
pursuant to Section 2.5(b) are determined by reference to the
Officer's years of service with the Bank, such as the
determination of the Officer's accrued benefits under the
Company's qualified or nonqualified retirement plans, such years
of service shall be determined by including years that occur
during the Continuation Period, regardless of whether the Officer
elects to receive salary payments payable to him pursuant to
Section 2.5(b)(i) in a lump-sum payment. In addition, to the
extent the Officer is less than 100% vested in any benefits
provided by the Compensation and Benefit Plans, he shall become
100% vested upon termination of employment described in Section
2.5(a) or (b) hereof.
For purposes of determining an Officer's right under Section
2.5(b)(i) to accrue benefits during the Continuation Period under
the Company Employees' Retirement Plan, Supplemental Retirement
Plan and Excess Benefit Plan, the Officer's accrued benefits
(including early retirement subsidies) shall be calculated by
taking into account the years of service that the Officer would
have accrued during the Continuation Period, the Officer's
compensation, as such term is defined in the Company Employees'
Retirement Plan (Compensation), payable for the Continuation
Period and the retirement points that the Officer would have
accumulated under the Company Employees' Retirement Plan based on
the Officer's projected age and years of service at the end of
the Continuation Period. The benefit accrued pursuant to Section
2.5(b)(i) and the above provisions shall include both the
additional benefit, based on the service, Compensation, and
retirement points that are credited during the Continuation
Period, and the increase in the retirement benefits accrued prior
to the Continuation Period due to the crediting of additional
service, Compensation and retirement points during the
Continuation Period. All of these retirement benefits shall be
paid in a single, lump-sum payment, pursuant to Section 2.7 of
this Agreement.
In addition to any cash equivalency payment or medical
benefit coverage provided to the Officer for the Continuation
Period, the Officer shall also be eligible to receive a lump-sum
cash payment equal to the difference between the amount of
retiree medical premium payments that would be paid by the Bank
or the Company until the Officer's attainment of age 65 under the
Company Employees' Health Care Plan, as in effect immediately
prior to the Change in Control (the Health Care Plan), based on
the Officer's age and years of service on the date of the
Officer's termination of employment, and the amount of such
premium payments that would have been paid under the Health Care
Plan based on the projected age and years of service of the
Officer through the end of the Continuation Period. If, after
taking into consideration the Officer's projected age and years
of service through the end of the Continuation Period, the
Officer would not have been entitled to Bank or Company paid
retiree medical premium payments, but the Officer would have
completed five or more years of service with the Bank and
attained age 55 (thereby making the Officer eligible for retiree
medical coverage under the Health Care Plan), then the lump-sum
payment shall be calculated by assuming that the Bank or the
Company would have paid 25% of the cost of retiree medical
premium payments until the Officer's attainment of age 65. For
purposes of determining the amount of any lump-sum payment to the
Officer under this paragraph, amounts that the Bank or the
Company would have paid for retiree medical premium payments
shall be determined by assuming that the Company's Health Care
Plan premium costs would increase at the rate of 7% per year.
For purposes of determining the lump-sum payment of retiree
medical premium payments and cash equivalency or medical benefit
coverage to be provided to the Officer pursuant to this
Agreement, such amounts or benefits shall include coverage for
the Officer's spouse, provided that the Officer's spouse was
covered by the Health Care Plan immediately prior to the Change
in Control.
2.6 NON-COMPETE PROVISIONS. In the event of the
termination of the Officer's employment following a Change in
Control, and the Officer becomes entitled to compensation and
benefit payments under Section 2.5 of this Agreement, the Officer
agrees not to compete with the Company, pursuant to the following
terms and conditions.
For the period of twelve months from and after the date of
such termination of employment following the Change in Control,
the Officer shall not engage in any employment activity or
directly or indirectly own (except for passive investments in
which the Officer owns less than a 50% ownership interest),
manage, operate, control or be employed by, participate in or be
connected in any manner with the ownership, operation or control
of any business that provides commercial, retail or mortgage
lending services or sells financial products or services, which
are competitive with or substantially similar to the commercial,
retail, mortgage, trust, investment or insurance services or
products of the Company, its subsidiaries and other affiliates,
at any location in the state of Florida.
If any court shall determine that the duration or
geographical limit of any restriction contained in this covenant
not to compete (the "Covenant") is unenforceable under applicable
law, this Covenant shall not thereby be terminated, but shall be
deemed amended to the extent required to render it valid and
enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that
has made such determination.
Other than amendments that are deemed to be made pursuant to
the preceding paragraph of this Agreement, no change or
modification of this Covenant shall be valid unless the same be
in writing and signed by the Bank, the Company and Officer.
Upon a breach by Officer of this Covenant, the Company shall
be entitled to recover, as liquidated damages, one times the
greater of the Officer's annual base salary in effect on the date
of the Officer's termination of employment or the Officer's base
salary in effect immediately prior to the date of the Change in
Control. This amount shall be deducted from the payments due to
the Officer pursuant to Section 2.5(b) of this Agreement. In the
event that all payments pursuant to Section 2.5(b) have been made
to the Officer, the Officer shall pay the aforementioned amount
to the Company.
If any legal action or proceeding is brought for the
enforcement of this Covenant, or because of an alleged dispute,
breach, default or misrepresentation in connection with this
Covenant, the successful or prevailing party in such action shall
be entitled to recover reasonable attorneys' fees and costs
connected with such action or proceeding in addition to all other
recovery or relief.
2.7 TIMING OF PAYMENTS. All salary payments to be made by
the Bank or the Company pursuant to Section 2.5(b)(i) shall be
made in monthly installments during the Continuation Period, on
the first day of each month following the Officer's termination
of employment. Prior to the commencement of such payments, the
Officer may elect to receive any or all such salary payments in a
single lump-sum payment, payable within sixty days following the
Officer's termination of employment. The Officer's election to
receive a lump-sum payment of salary payments shall not affect in
any way the Officer's right to receive, or the calculation of,
other benefits payable to the Officer. All other payments to be
made in cash pursuant to Section 2.5(b) shall be paid in a single
lump-sum payment, payable within sixty days following the
Officer's termination of employment. Any lump-sum payment to be
made to the Officer shall be equal to the present value of the
payments otherwise payable to the Officer, using an interest rate
assumption equal to the annual, short-term, adjusted applicable
federal interest rate, as determined for the month during which
the lump-sum payment is made pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, except that the lump-sum payment
of any nonqualified retirement benefit (other than benefits from
the Company Supplemental Savings Plan or Reserve Plus Retirement
Savings Plan) payable to the Officer shall be calculated pursuant
to the actuarial assumptions of the Company Employees' Retirement
Plan in effect on the date the Officer's employment is
terminated. The Bank or the Company shall withhold any
applicable income and employment taxes from any amounts payable
to the Officer pursuant to this Agreement.
2.8 CHANGE IN CONTROL DEFINED. A Change in Control of the
Company shall have occurred:
(a) on the fifth day preceding the scheduled
expiration date of a tender offer by, or exchange
offer by any corporation, person, other entity or
group (other than the Company or any of its wholly
owned subsidiaries), to acquire Voting Stock of
the Company if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity
or group has secured all required
regulatory approvals to own or control
25% or more of the Voting Stock of the
Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any
of its wholly owned subsidiaries will be the
surviving corporation, or to sell or otherwise
dispose of all or substantially all of the
Company's assets to any corporation, person, other
entity or group (other that the Company or any of
its wholly owned subsidiaries), and such
definitive agreement is consummated;
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of
Incorporation) of stock representing 25% or more
of the Voting Stock of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority
of the Company's Board of Directors.
The term "Continuing Director" means:
(a) any member of the Board of Directors of the
Company at the beginning of any period of two
consecutive years; and
(b) any person who subsequently becomes a member of
the Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company
entitled to vote generally in the election of directors.
2.9 NO OBLIGATION TO REIMBURSE FOR TAXES. The Bank and the
Company shall not be obligated to reimburse the Officer due to
the Officer's liability to pay any applicable federal or state
income, employment or excise taxes which result from any payments
made pursuant to this Agreement.
2.10 OFFICER'S COSTS OF ENFORCEMENT. The Bank or the
Company shall pay all expenses of the Officer, including but not
limited to attorney fees, incurred in enforcing payments by the
Bank or the Company pursuant to this Agreement.
2.11 REDUCTION OF SALARY PAYMENTS. If payments or benefits
under this Agreement, after taking into account all other
payments or benefits to which the Officer is entitled from the
Bank and the Company (and which are in whole or in part
considered contingent upon a Change in Control), are expected to
result in an excise tax to the Officer or the loss of certain tax
deductions by the Bank or the Company by reason of Sections 280G
and 4999 of the Internal Revenue Code of 1986 or any successor
provisions to those Sections, salary payments under Section
2.5(b)(i) shall be reduced by the least amount required to avoid
such excise tax and loss of deductions unless the failure to
reduce such salary payments would be financially beneficial to
the Officer. The failure to reduce such salary payments will be
financially beneficial to the Officer if it results in an after-
tax value to the Officer of all payments and benefits referenced
in the preceding sentence, despite the application of the excise
tax and income tax, which value is greater than the after-tax
value the Officer would realize if salary payments were reduced
to avoid the application of the excise tax. If the Officer and
the Company shall disagree as to whether a payment under this
Agreement could result in the loss of a deduction, the matter
shall be resolved by an opinion of Howard & Howard Attorneys, or
if Howard & Howard Attorneys is unable to provide such an
opinion, counsel selected by the Company, and agreed to by the
Officer. Counsel's opinion need not be unqualified. The Company
shall choose a consulting firm, agreed to by the Officer, which
shall provide counsel with a determination of the base amount
and excess parachute payments, as such terms are defined by
Section 280G of the Code or its successor. Counsel's opinion
shall be based on these determinations. The Company or the Bank
shall pay the fees and expenses of such counsel and consulting
firm, and shall make available such information as may be
reasonably requested by such counsel and consulting firm to
prepare the opinion. If the maximum amount payable to the
Officer pursuant to this Section 2.11 cannot be determined prior
to the due date for such payment, the Bank or the Company shall
pay on the due date the minimum amount which it in good faith
determines to be payable, and shall pay the remaining amount as
soon as practicable after such remaining amount is determined.
SECTION 3
MISCELLANEOUS
3.1 ASSIGNMENT OF OFFICER'S RIGHTS. The Officer may not
assign, pledge or otherwise transfer any of the benefits of this
Agreement either before or after termination of employment, and
any purported assignment, pledge or transfer of any payment to be
made by the Bank or the Company hereunder shall be void and of no
effect. No payment to be made to the Officer hereunder shall be
subject to the claims of creditors of the Officer.
3.2 AGREEMENTS BINDING ON SUCCESSORS. This Agreement shall
be binding and inure to the benefit of the parties hereto and
their respective successors, assigns, personal representatives,
heirs, legatees and beneficiaries.
3.3 NOTICES. Any notice required or desired to be given
under this Agreement shall be deemed given if in writing and sent
by first class mail to the Officer or the Company at his or its
address as set forth above, or to such other address of which
either the Officer or the Company shall notify the other in
writing.
3.4 WAIVER OF BREACH. The waiver by any party of a breach
of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by the Officer,
the Bank or the Company.
3.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties. It may be modified or amended only
by an agreement in writing signed by the party or parties against
whom enforcement of any change or amendment is sought.
3.6 SEVERABILITY OF PROVISIONS. If for any reason any
paragraph, term or provision of this Agreement is held to be
invalid or unenforceable, all other valid provisions herein shall
remain in full force and effect and all paragraphs, terms and
provisions of this Agreement shall be deemed to be severable in
nature.
3.7 GOVERNING LAW. This Agreement is made in, and shall be
governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
Officer
FIRST OF AMERICA BANK
CORPORATION
Attest:
By:
Secretary
Its:
FIRST OF AMERICA BANK-
FLORIDA, FSB
Attest:
By:
Secretary
Its:
APPENDIX A TO
MANAGEMENT CONTINUITY AGREEMENT
_____________
<TABLE>
<CAPTION>
Salary as of
Effective
Officer Title Date
---------------- ---------------------- ------------
<S> <C> <C>
Lee J. Cieslak Chairman and Chief $179,000
Executive Officer,
First of America Bank-
Florida, FSB
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,084,087
<INT-BEARING-DEPOSITS> 37,046
<FED-FUNDS-SOLD> 14,587
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 3,036,676
<INVESTMENTS-MARKET> 2,926,343
<LOANS> 16,905,842
<ALLOWANCE> 230,524
<TOTAL-ASSETS> 24,579,913
<DEPOSITS> 19,667,647
<SHORT-TERM> 2,363,133
<LIABILITIES-OTHER> 251,509
<LONG-TERM> 645,506
<COMMON> 631,894
0
0
<OTHER-SE> 1,020,124
<TOTAL-LIABILITIES-AND-EQUITY> 24,579,913
<INTEREST-LOAN> 370,925
<INTEREST-INVEST> 84,360
<INTEREST-OTHER> 1,108
<INTEREST-TOTAL> 456,393
<INTEREST-DEPOSIT> 176,571
<INTEREST-EXPENSE> 41,681
<INTEREST-INCOME-NET> 238,140
<LOAN-LOSSES> 20,510
<SECURITIES-GAINS> (1,463)
<EXPENSE-OTHER> 214,585
<INCOME-PRETAX> 72,647
<INCOME-PRE-EXTRAORDINARY> 47,389
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,389
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 4.29
<LOANS-NON> 94,314
<LOANS-PAST> 17,723
<LOANS-TROUBLED> 4,784
<LOANS-PROBLEM> 37,591
<ALLOWANCE-OPEN> 228,115
<CHARGE-OFFS> 30,931
<RECOVERIES> 12,830
<ALLOWANCE-CLOSE> 230,524
<ALLOWANCE-DOMESTIC> 230,524
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 63,241
</TABLE>
