Omnibus Stock Plan 2006 Long-Term Incentive Program

Exhibit10 AAA

 

OMNIBUS STOCK PLAN

2006 LONG-TERM INCENTIVEPROGRAM

 

RESTRICTED STOCK UNIT AWARDAGREEMENT

 

 

                AGREEMENT, made effective as of March 29, 2006 by andbetween Mercantile Bankshares Corporation, a Maryland corporation (“Company”), and                                        (“AwardRecipient”):

 

                WHEREAS, the Compensation Committee (“Committee”) of theBoard of Directors (“Board”) approved the 2006 Long-Term Incentive Program (“LTIP”),the objectives of which are to (i) create a meaningfullong-term wealth creation component to the compensation structure for seniormanagement of the Company and its affiliates to be used in concert with salary,annual cash bonus and option awards, (ii) create an incentive for those whowill be the key motivators of operating income improvement at the Company, and(iii) align the interests of senior management with the interests of Companyshareholders by tying payments under the LTIP to the achievement of specificperformance goals; and

 

                WHEREAS, the Company maintains the Mercantile BanksharesCorporation 1999 Omnibus Stock Plan (“Omnibus Stock Plan”) under which the Committeemay, among other things, award restricted stock units (referred to under theOmnibus Stock Plan as Phantom Stock Units), each of which represents the rightto receive one share of the Company’s Common Stock of $2.00 par value (“CommonStock”) to such members of the Company’s management team as the Committee maydetermine, subject to such terms, conditions (including performance conditions),or restrictions as the Committee may deem appropriate; and

 

                WHEREAS, pursuant to the LTIP and the Omnibus Stock Plan,the Committee, with the approval of the Board, has granted to the AwardRecipient a restricted stock unit award subject to this Agreement setting forththe terms and conditions applicable to such award in accordance with Article 6of the Omnibus Stock Plan; and

 

                WHEREAS, the Award Recipient desires to accept said award inaccordance with the terms and provisions of the Omnibus Stock Plan and thisAgreement.

 

                NOW, THEREFORE, inconsideration of the premises and mutual covenants and agreements containedherein, the Company and Award Recipient agree as follows:

 

1.             AWARDOF RESTRICTED STOCK UNITS:

 

                Under the terms ofthe Omnibus Stock Plan, the Committee has granted to the Award Recipient arestricted stock unit award made on March 29, 2006 (“Award Date”),

 

 



 

of                      restricted stock units (“Performance Award Units”) subject to the terms,conditions, and restrictions set forth in this Agreement.  The Performance Award Units granted representthe maximum number of shares of Common Stock (not including accrued dividends)which may be issued hereunder if the Award Recipient receives a 150% payoutpursuant to Section 2.

 

2.             PERFORMANCEAWARDS:

 

                (a)           Performance Period.  The period overwhich the performance goals set forth herein must be met is the period fromJanuary 1, 2006 to December 31, 2008 (“Performance Period”).

 

                (b)           Target Award, PerformanceGoals and Payout Percentage. A target award level (“Target Award Units”) has been established for theAward Recipient by the Committee, expressed as a specified number of  Performance Award Units. The award to aParticipant for the Performance Period shall be based on a percentage (“PerformancePayout Percentage”) of the Target Award Units determined under a performancegrid established by the Committee. The performance grid is constructed toreflect the improvement (not compounded) in the pre-tax operating income of theCompany on a consolidated basis (“Pre-Tax Operating Income”) with respect tothe 2008 fiscal year as compared to the 2005 fiscal year, calculated on a pureGAAP basis, with no adjustments for acquisitions or other extraordinary events.  Subject to meeting the requirements herein,the actual award to the Award Recipient for the Performance Period shallconsist of Performance Award Units equal to the number of Target Award Unitsmultiplied by the Performance Payout Percentage for the Performance Perioddetermined by the Committee under the performance grid. The Target Award Unitsfor the Award Recipient, the Performance Payout Percentage and the performancegrid are attached hereto as Appendix A.

 

                (c)           Determination of EarnedAward.  At the end of thePerformance Period, the Committee shall determine whether and to what extentthe pre-established performance goals have been met and shall calculate thenumber of Performance Share Units that the Award Recipient has earned.  Any Performance Share Units (and accrueddividends, as described in Section 5) which have not been  earned by the Award Recipient shall beforfeited.  Such results shall becertified in writing by the Committee prior to any Common Stock being issuedhereunder.

 

                (d)           Continued Employment:  The Award Recipient must remain in thecontinued employment of the Company or its affiliates from the beginning of thePerformance Period through the end of the Performance Period to qualify for anaward hereunder for the Performance Period. Notwithstanding the foregoing, if aParticipant does not remain in continued employment during the PerformancePeriod solely because of normal retirement, death or total disability (asdefined in MBC’s long-term disability plan), the Participant (or his or herestate, in the event of his or her death) shall nevertheless be entitled toreceive an award hereunder at the end of the Performance Period on the samebasis as if he or she had remained in continued employment during thePerformance Period, subject

 

 



 

to whether and to what extent thepre-established performance goals have been met. In no event shall the AwardRecipient be deemed to be vested in any Performance Award Units prior to theend of the Performance Period and certification of the Committee as providedabove.

 

 

3.             ADDITIONALVESTING REQUIREMENTS:

 

                Notwithstandingthat the Award Recipient may have earned Performance Share Units pursuant toSection 2, those units will continue to be subject to forfeiture until December31, 2009.  The Award Recipient mustremain in the continued employment of the Company or its affiliates from theend of the Performance Period through such date to qualify for an awardhereunder, unless such condition is waived for the Award Recipient in the solediscretion of the Committee.  In no eventwill the Award Recipient be entitled to receive any shares of Common Stockissued hereunder if he or she is terminated for cause prior to the issuance ofsuch stock.

 

4.             EARLYVESTING  UPON CHANGE OF CONTROL:

 

                In the event of a Sale of the Company, the target percentageof growth in Pre-Tax Operating Income established for the Performance Period bythe Committee shall be deemed to have been achieved and 100% of the TargetAward Units for the Performance Period shall be payable to each Participant whoremained in the continued employment of the Company or its affiliates from thebeginning of the Performance Period through the date of such Sale; provided,however, that if the Performance Period had ended prior to the Date of Sale, thissentence shall not operate to increase the Performance Share Units earned bythe Award Recipient during the Performance Period.  The Performance Share Units thus credited tothe Award Recipient Participant be fully vested at the date of the Sale andpayable as provided in Section 6. For purposes of this Agreement, “Sale” shallmean:

 

                (a)           Acquisition.  The acquisition by any person,entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of theExchange Act, (excluding for this purpose, the Company or its affiliates, and excludingany acquisition of securities by any employee benefit plan of the Company orits affiliates) of beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act) of 50% or more of either the thenoutstanding shares of common stock of the Company or the combined voting powerof the Company’s then outstanding voting securities entitled to vote generallyin the election of directors (such common stock or then outstanding votingsecurities being referred to herein as “Voting Securities”), calculated on thedate of the transaction causing the foregoing 50% test to be met, withoutregard to any limitation upon the voting rights of any acquiring person underMaryland statutes and without regard to the potential exercisability of rights,not exercised on such date, pursuant to any Stockholder Protection RightsAgreement of the Company then in effect; or

 

 



 

 

                (b)           Other Corporate Change.  Consummation of (1) a reorganization, merger,consolidation or statutory share exchange, in each case, with respect to whichpersons who are the holders of the outstanding Voting Securities of the Companyimmediately prior to such reorganization, merger, consolidation or statutoryshare exchange do not, immediately thereafter, own more than 50% of thecombined voting power entitled to vote generally in the election of directorsof the entity resulting from such reorganization, merger, consolidation orstatutory share exchange, or (2) a liquidation or dissolution of the Company orthe sale of all or substantially all of the assets of the Company to an entityother than an affiliate.

 

5.             RIGHTS OF AWARD RECIPIENT REGARDING UNITS:

 

                (a)           No Rights ofStockholder.  The AwardRecipient shall not have the rights of a stockholder with respect to any PerformanceShare Units granted to the Award Recipient until shares of Common Stock havebeen distributed to the Award Recipient pursuant to Section 6, and the AwardRecipient’s name has been entered as a stockholder of record on the books ofthe Company with respect to such distributed shares of Common Stock.

 

                (b)           Non-Assignable.  The Performance Share Units andall rights with respect to shares of Common Stock issued thereunder may not besold, assigned, transferred, pledged or encumbered in any way prior to the issuanceof such shares to the Award Recipient, other than by will or other instrumenttaking effect upon the Award Recipient’s death, or the laws of descent anddistribution.

 

                (c)           Accumulation ofDividends.  As long as the Award Recipient holds PerformanceShare Units granted pursuant to this Agreement, the Company shall credit to theAward Recipient, on each date that the Company pays a cash dividend to holdersof Common Stock generally, an additional number of Performance Share Units (“DividendAward Units”) determined by dividing (1) the aggregate dollar value of the cashdividends that the Award Recipient would have received during the period fromthe immediately preceding dividend payment date through the current dividendpayment date if the Award Recipient were the owner of record throughout suchperiod of a number of shares of Common Stock equal to the number of whole PerformanceShare Units and Dividend Award Units previously credited to the Award Recipientunder this Agreement as of such current dividend payment date (but prior to thecrediting of current Dividend Award Units), by (2) the Fair Market Value (asdefined in the Omnibus Stock Plan) of one share of Common Stock as of suchcurrent dividend payment date.  DividendAward Units may be credited in whole or fractional units as applicable.  The Dividend Award Units so credited shall besubject to the same terms and conditions as the Performance Share Units towhich they relate.

 

6.         DISTRIBUTION OF SHARES:

 

                Upon vesting inthe Performance Award Units, but no later than two and one-half monthsfollowing the last day of the calendar year in which the vesting date occurs, all

 

 



 

vested Performance Award Units shall beconverted into an equivalent number of shares of Common Stock which shall bedistributed to the Award Recipient (or to his designated beneficiary or legalrepresentative, as applicable, in the event of his death) as soon aspracticable; provided, however, that any fractional Performance Award Unitshall be distributed to the Award Recipient in cash.  Distribution shall be evidenced by theissuance of a stock certificate and the entry of the Award Recipient’s name (orin the name of his designated beneficiary or legal representative, asapplicable, in the event of his death) as a stockholder of record on the booksof the Company with respect to such distributed shares of Common Stock.  Upon receipt of such stock certificate, theholder shall be free to hold or dispose of such certificate at will, subject toany applicable securities laws or regulations governing transferability ofshares of the Company.

 

7.             WITHHOLDING TAXES

 

                TheCompany and any affiliate shall have the right to deduct from any compensationor any other payment of any kind (including withholding the issuance of sharesof Common Stock) due the Award Recipient the amount of any federal, state orlocal taxes required by law to be withheld as a result of the distribution ofCommon Stock hereunder; provided, however, that the value of the shares ofCommon Stock withheld may not exceed the statutory minimum withholding amountrequired by law.  In lieu of suchdeduction, the Company may require the Award Recipient to make a cash paymentto the Company or an affiliate equal to the amount required to bewithheld.  If the Award Recipient doesnot make such payment when requested, the Company may refuse to issue anyCommon Stock certificate under this Agreement until arrangements satisfactoryto the Committee for such payment have been made.

 

8.             IMPACTON OTHER BENEFITS:

 

                The value of theCommon Stock issued hereunder shall not be includable as compensation orearnings for purposes of any other benefit plan offered by the Company unlessspecifically provided in such plan.

 

9.             ADMINISTRATION:

 

                The Committee orthe Board shall have full authority and discretion (subject only to the expressprovisions of the Omnibus Stock Plan) to decide all matters relating to theadministration, interpretation and implementation of the Omnibus Stock Plan andthis Agreement.  All such Committeedeterminations shall be final, conclusive, and binding upon the Company, theAward Recipient, and any and all interested parties.

 

10.          RIGHTTO CONTINUED EMPLOYMENT:

 

                Nothing in theOmnibus Stock Plan or this Agreement shall be construed as a contract ofemployment between the Company or any affiliate and the Award Recipient, or asa contractual right of the Award Recipient to continue in the employ of theCompany or any affiliate.

 

 



 

11.          UNFUNDEDOBLIGATION:

 

                The obligationof the Company to make payments with respect to Performance Award Units grantedhereunder shall be interpreted solely as an unfunded contractual obligation tomake such payments in the manner and under the conditions prescribed under thisAgreement.  Assets, if any, set asidewith respect to amounts payable under this Agreement shall be subject to theclaims of the Company’s general creditors, and no person other than the Companyshall, by virtue of the provisions of the Omnibus Plan or this Agreement, haveany interest in such assets.  Neither theAward Recipient nor any other person shall have any interest in any particularassets of the Company by reason of the right to receive a benefit under thisAgreement, and the Award Recipient or any such other person shall have only therights of a general unsecured creditor of the Company with respect to any rightsunder the Omnibus Stock Plan or this Agreement.

 

12.          AMENDMENTS:

 

                This Agreementcontains the entire agreement between the parties with respect to the subjectmatter contained herein and may not be modified, except as provided in theOmnibus Stock Plan or in a written document signed by each of the partieshereto.

 

13.          FORCEAND EFFECT:

 

                This Agreement isintended to conform in all respects with, and is subject to all applicableprovisions of, the Omnibus Stock Plan (including, without limitation, theantidilution and other provisions of Article 7), which is incorporated hereinby reference.  Inconsistencies betweenthe Agreement and the Omnibus Stock Plan shall be resolved in accordance withthe terms of the Omnibus Stock Plan.  Inthe event of any ambiguity in the Agreement or any matters as to which theAgreement is silent, the Omnibus Stock Plan shall govern.

 

14.          PREVAILINGLAWS:

 

                This Agreementshall be construed and enforced in accordance with and governed by the laws ofthe State of Maryland, without regard to the conflict of laws principlesthereof.

 

15.          SUCCESSORS:

 

                This Agreement shall be binding upon andinure to the benefit of the Company, its successors and assigns, and the AwardRecipient and his heirs, personal representatives and assigns.

 

16.          EXEMPTIONFROM SECTION 409A:

 

 



 

                It is intended that this Agreement beexempt from Section 409A of the Internal Revenue Code of 1986, as amended,pursuant to the short-term deferral exception thereunder.  However, if it is determined that thisAgreement is subject to Section 409A of the Code, then it is intended that it  comply in all respects with Section 409A ofthe Code, and this Agreement shall be interpreted and administered in suchmanner as to comply with such provisions and may be amended, retroactively ifnecessary, to conform to the requirements of Section 409A of the Code.

 

17.          COMPLIANCEWITH SECTION 162(m):

 

                It is intended that the awards under thisAgreement comply in all respects with Section 162(m) of the Code, and thisAgreement shall be interpreted and administered in such manner as to complywith such provisions.

 

                IN WITNESS WHEREOF, the Company has caused this Agreement tobe executed by its duly authorized officer, and the Award Recipient hashereunto set his hand and seal, as of the 29th day of March, 2006.

 

 

ATTEST:

 

Mercantile Bankshares Corporation

 

 

 

 

 

 

 

 

 

 

 

By:

 

John L. Unger, Secretary

 

 

 

 

 

WITNESS:

 

 

 

 

 

 

 

 

 

 

 



 

 

APPENDIXA

 

TARGETAWARD UNITS, PERFORMANCE GRID AND PERFORMANCE PAYOUT PERCENTAGES

 

 

Target Award Units:                 

Maximum Award Units :                           (150% of Target Award)

 

 

Performance Grid and PerformancePayout Percentages:

 

The performance metric shall be thepercentage improvement (not compounded) in Pre-Tax Operating Income (“PTOI”) ofMercantile Bankshares Corporation between the base year (2005) and 2008 andshall be calculated by subtracting the 2005 PTOI from the 2008 PTOI anddividing the result by the 2005 PTOI.

 

PTOI shall be determined on a pure GAAP basiswithout adjustments for acquisitions or other extraordinary events.

 

The following chart sets forth theperformance requirement calculation. Payout percentages shall be interpolated for percentage improvementsbetween benchmarks. 150% of Target Award is the maximum payout percentage.

 

Benchmarks (Improvement in Pre-Tax Operating Income)

 

Payout (As a Percentage of Target Award Units)

 

 

 

0% improvement

 

0% of Target Award

15% improvement

 

25% Target Award

18% improvement

 

50% Target Award

22.5% improvement

 

75% Target Award

27% improvement

 

100% Target Award

33% improvement

 

125% Target Award

45% and above improvement

 

150% Target Award