| • | For 2019, the Compensation Committee established performance metrics under the Chemical Financial Corporation Executive Annual Incentive Plan, which we refer to as our annual incentive plan, including corporate financial metrics (adjusted core net income and adjusted efficiency ratio) and adjusted efficiency ratio, as well as individual performance objectives.
Cash incentive payouts in 2018 under our annual incentive plan for all employees, including our NEOs, were earned at 127.5% of target based on our performance and each executive's individual performance, but included the application of negative discretion by the Committee reducing cash payments to 102% of target, as follows:
| | ◦• | Specifically,Each of our NEOs participated in our annual incentive plan in 2019 (except for Messrs. Dahl and Maass, whose employment began on the Merger Date, and whose cash incentive awards were determined by Legacy TCF’s compensation committee as described below). | | • | For 2019, under our annual incentive plan, 80% of each participating NEO’s cash incentive awards were tied to the corporate financial metrics established by the Compensation Committee notedand were measured through June 30, 2019, the most recently completed quarter before the Merger Date, and were earned at 139.1% of target based on our performance through that whiledate. | | • | The remaining 20% of the cash incentive awards were based on individual performance objectives and were determined based on the Compensation Committee’s qualitative assessment of each participating NEO’s performance relative to their individual goals for the year and were earned at 150% of target. | | • | Messrs. Dahl and Maass were awarded a cash incentive award for 2019 under Legacy TCF’s 2019 Management Incentive Plan (the “MIP”), based on Legacy TCF’s 2019 net income.In connection with the Merger, Legacy TCF’s net income was calculated on a monthly basis through June 30, 2019, the last month practicable before the Merger Date, resulting in the maximum payout of 200% of target, as determined by the Legacy TCF compensation committee, or 200% and 150% of base salary earned for 2019 for Messrs. Dahl and Maass, respectively. |
Annual Long-Term Equity Incentive Awards | • | In February 2019, we granted annual long-term equity incentive awards to our NEOs (except for Messrs. Dahl and Maass, whose employment began on the Merger Date) under the Chemical Financial Corporation Stock Incentive Plan of 2017 (the “2017 Stock Plan”). These awards consisted of a mix of 60% performance-based restricted stock units, or PRSUs, and 40% time-based restricted stock units, or TRSUs, as set forth in the table below. The TRSUs vest in 20% annual increments over a period of five years. The performance metrics underlying the PRSUs were aggregate earnings per share and relative total shareholder return compared to our peer group over a three-year performance period, vesting on the last day of the performance period. | | • | Because the Merger resulted in a change in control of the Company, under the terms of all outstanding PRSUs, performance metrics were measured as of the latest practicable date before the Merger Date (which the Compensation Committee determined was the most recently completed calendar quarter before the Merger), and the number of PRSUs was fixed at the greater of the target (100%) performance level or TSR, overactual performance, which we refer to as the preceding five-year period“earned PRSUs,” and such earned PRSUs are now subject only to time-based vesting requirements based on the NEO’s continued service through the applicable performance period. For PRSUs granted in 2017, our adjusted diluted earnings per share was higher than$3.53 and our relative total shareholder return measured from January 2017 to June 30, 2019 was in the 16thpercentile compared to the KBW NASDAQNasdaq Regional Banking Index, each of which was below target performance. For PRSUs granted in 2018, our aggregate earnings per share was $5.95, which was above maximum performance and weighted at 75% of the general stock market declinepayout calculation, and our relative total shareholder return measured from January 2018 to June 30, 2019 on a relative basis was in the fourth quarter of 2018 resulted in a decline in our share value8thpercentile compared to the KBW Nasdaq Regional Banking Index, which was below target performance and weighted at year-end, causing the Committee to exercise its discretion to reduce actual incentive payouts despite our achievement25% of the financial metrics underpayout calculation. For PRSUs granted in 2019, our aggregate earnings per share was $2.03, which was above maximum performance and weighted at 75% of the plan (representing 80%payout calculation, and our relative total shareholder return measured from January 2019 to June 30, 2019 on a relative basis was in the 20thpercentile compared to the KBW Nasdaq Regional Banking Index, which was below target performance and weighted at 25% of total award for NEOs)the payout calculation. Consequently, the PRSUs granted in 2017, 2018 and 2019 were converted into earned PRSUs at a levelrates equal to 134.3%100%, 112.5% and 100% of the target number of shares, respectively, and vest(ed) on December 31, 2019, 2020 and 2021, subject to 102%the NEO’s continued service through the end of the applicable performance period. |
| 2020 Proxy Statement |  | 25 |
| • | In each of 2017, 2018, and 2019, Messrs. Dahl and Maass were each granted equity incentive awards by Legacy TCF under Legacy TCF’s 2015 Omnibus Incentive Plan, consisting of time-based restricted stock and PRSUs based on Legacy TCF’s three-year total shareholder return compared to its peer group for that year. Under the Merger Agreement, performance metrics were measured on all Legacy TCF PRSUs outstanding on the Merger Date and the number of earned PRSUs, which remain subject to time-based vesting requirements was fixed at the greater of the target (100%) performance level or actual performance measured through the latest practicable date before the Merger Date, subject to time-based vesting requirements, and assumed by us in the Merger (as adjusted for the Exchange Ratio). Legacy TCF total shareholder return through July 15, 2019 since January 1, 2017, 2018, and 2019, was 11.68%, 4.81% and 7.48%, respectively, ranking 4thof 21, 3rdof 21 and 13thof 20 among the 2017, 2018 and 2019 peer groups, respectively, and resulting in PRSUs granted in 2017 and 2018 converting into earned PRSUs at 150% of the target number of shares and PRSUs granted in 2019 being converted into earned PRSUs at 100% of the target number of shares. Since vesting was not accelerated, earned PRSUs granted by Legacy TCF in 2017, 2018 and 2019 will vest on December 31, 2019, 2020, and 2021, respectively, subject to the NEO’s continued service through the end of the applicable performance period. |
| | | Approximate Grant Date Fair Value | | | | | | | 2019 Annual LTI | | | | | Executive | | PRSUs(1) | | | TRSUs | | | 2019 Total LTI | | | Craig R. Dahl(2) | | | — | | | | — | | | | — | | | David T. Provost | | $ | 1,140,000 | | | $ | 760,000 | (3) | | $ | 1,900,000 | | | Dennis L. Klaeser | | $ | 360,000 | | | $ | 240,000 | | | $ | 600,000 | | | Gary Torgow | | $ | 1,140,000 | | | $ | 760,000 | (3) | | $ | 1,900,000 | | | Thomas C. Shafer | | $ | 570,000 | | | $ | 380,000 | | | $ | 950,000 | | | Brian W. Maass(2) | | | — | | | | — | | | | — | |
| (1) | Amount shown is the target amount of the 2019 Annual LTI award. | | (2) | Messrs. Dahl and Maass did not receive any long-term equity incentive grants from the Company in 2019 due to their employment beginning on the Merger Date. Messrs. Dahl and Maass each received long-term equity awards from Legacy TCF that were subsequently converted to TRSUs of the Company with a grant date fair value of $1,839,840 for Mr. KlaeserDahl and $546,212 for Mr. Shafer |
| Maass. Mr. Maass also received a long-term equity retention award with a grant date fair value of $2,500,011. See the discussion under “TCF and Legacy TCF Combined 2019 Total Compensation” in this CD&A. | ◦(3) | TheIn February 2019, the Compensation Committee further determined that to more closely align the interests of DavidMessrs. Provost our President and Chief Executive Officer, and Gary Torgow our Executive Chairman, with those of our shareholders, it would exercise its discretion under the annual incentive plan not to award a cash incentive payment for 2018 to either Mr.Messrs. Provost or Mr. Torgow in 2018. Instead,Torgow. At that time, the Compensation Committee awarded each of Mr.Messrs. Provost and Mr. Torgow 20,364 shares of time-vesting restricted stock units (“TRSUs”)TRSUs under the 2017 Stock Plan with a grant date fair value equal to approximately $950,000, which approximatesapproximated the target amount Mr. Provost and Mr. Torgoweach executive would have been eligible to receive in 2018 under the annual incentive plan despite corporate and individual performance earned at 127.5%plan. This award of targetTRSUs is not included in 2018. Under the restricted stock unit agreement, the TRSUs will vest in equal annual installments over a three-year-period, subject to each officer’s continued service through the vesting date, subject to certain exceptions.this table, as it was not part of our 2019 Annual LTI award. |
Long-Term Equity IncentiveRetention Awards We believe that retaining our key leadership and Metrics
Long-term equity incentive grants in 2018 consisted of annual grants and a strategic award, each consisting of a mix of 60% performance-based restricted stock units, or PRSUs, and 40% TRSUs, as set forth in the table below. The TRSUs vest over a period of five years. The performance metrics underlying the PRSUs are cumulative earnings per share and relative total shareholder return. Mr. Ryan’s long-term equity awards in 2018 were made pursuant to the terms of his employment agreement.
In granting the strategic award, the Committee looked at a number of factors, including each executive’s (a) evolving roles and additional responsibilities, (b) unique ability to drive businesstalent is critical to our bank, (c) abilitysuccessful integration and to build strategic partnerships that advancesupporting our key business objectives,future growth. Because the Merger was a merger of equals, certain of our NEOs, including Messrs. Shafer and (d)Maass, experienced a change in control event under their involvementemployment or change in control agreements, and visibility within our communities that elevates both our visibilitywould have been able to terminate their employment for “Good Reason”, which would have resulted in cash severance payments to Messrs. Shafer and standing. In light of these factors, the Committee also considered the unvested equity position of each executive in ChemicalMaass and the potential for disruption to our business, as well as the impact on shareholder value should anyloss of our named executive officers leave, particularly Mr. Provosttheir valuable expertise and Mr. Torgow, andservices.The Compensation Committee determined that it was inimportant not to incentivize key talent to leave based on payments that certain executives were entitled to receive if they voluntarily elected to terminate their employment following the best interests of ChemicalMerger. Separately, the Compensation Committee adopted an executive retention strategy to incentivize leaders to remain with the Company and our shareholders to grant additional equity-based awards. The strategic awards are not intended to be an ongoing componentfocus on working toward a successful integration and implementation of our named executive officer annual compensationkey strategic initiatives following the Merger. As part of this retention strategy, the Compensation Committee granted an equity retention award with a grant date fair value of $4,184,583 to Mr. Shafer which was determined by: (i) calculating his potential cash severance payment related to the Merger under his employment agreement, (ii) increasing that amount by 25%, and (iii) awarding him TRSUs in that amount, with 50% vesting based on his continued service through the 2019 target long-term annual incentive awards approved byfirst anniversary of the Committee in February 2019 (to be disclosed in next year’s proxy statement) were,Merger Date, and 50% vesting based on average (excludinghis continued service through the second anniversary of the Merger Date. Mr. Ryan), 33% less than the total target long-term annual incentive awards granted in 2018.
| | | | | | | | | | | | | | | | | | Approximate Grant Date Fair Value | | | | 2018 Annual LTI | | 2018 Strategic LTI | | 2018 Total LTI | | Executive | | PRSUs(1) | | TRSUs | | PRSUs(1) | | TRSUs | | | David T. Provost | | $600,000 |
| | $400,000 | | $1,200,000 |
| | $800,000 |
| | $3,000,000 | | Dennis L. Klaeser | | $264,000 |
| | $176,000 | | $ 336,000 |
| | $224,000 |
| | $1,000,000 | | Gary Torgow | | $600,000 |
| | $400,000 | | $1,200,000 |
| | $800,000 |
| | $3,000,000 | | Thomas C. Shafer | | $450,000 |
| | $300,000 | | $ 150,000 |
| | $100,000 |
| | $1,000,000 | | J. Brennan Ryan | | — |
| | $520,000 | | — |
| | — |
| | $ 520,000 |
| | (1) | Amount shown is the target amount of the award. The range of PRSUs actually earned can be in the range of 0% of target for below threshold performance, to 50% of target for threshold performance, to 150% of target for maximum performance. |
| | (2) | Under Mr. Ryan’s employment agreement, on July 9, 2018, he received TRSUs withShafer also executed a grant date fair value of $520,000 that vest on December 15, 2019. |
| | (3) | Not calculated for Mr. Ryan, since his 2018 award was made pursuant to his employment agreement. |
New Employment Agreements
On February 27, 2018, we entered into new employment agreementsagreement which excludes his right to receive a severance payment with David Provost, our Chiefrespect to the Merger or if he otherwise experiences a qualifying termination (as discussed below under “New Named Executive Officer and President, and Gary Torgow,Agreements”) within two years of the Merger Date. Similarly, in connection with Mr. Maass’ salary increase after being named our Executive Chairman, which, among other things, increased each of their base salaries from $1.00 to $950,000 effective July 1, 2018.
On July 1, 2018, we entered into new employment agreements with Thomas C. Shafer, Chief Executive Officer of Chemical Bank, and Dennis Klaeser, ourfuture Chief Financial Officer which, among other things, provide foreffective October 1, 2020, Mr. Maass was also granted an annual base salaryequity retention award of $950,000 for Mr. Shafer and $750,000 for Mr. Klaeser.
Hiring of J. Brennan Ryan as Chief Operating Officer
We hired J. Brennan Ryan to serve as our Chief Operating Officer and Executive Vice President on July 9, 2018. Under his employment agreement, for 2018, he received an annual base salary of $650,000, a guaranteed incentive payment of $520,000 in 2018, and TRSUs with a grant date fair value of $520,000$2,500,011 that will vest equally in 2020 and 2021, subject to his continued service through the vesting date. Mr. Maass also executed a new employment agreement on December 15, 2019.13, 2019 which excludes his right to terminate his employment and receive a change in control-related severance payment with respect to the Merger.Messrs. Dahl, Torgow, Provost and Klaeser did not receive equity retention awards. New Named Executive Officer Agreements In 2019, we entered into new employment agreements, letter agreements or retention agreements with each of our NEOs with terms that we believe are in the best interests of the Company and our shareholders. Despite doubling in size following our Merger and increases in responsibility and complexity, our executive compensation has remained largely unchanged. In attracting and retaining a talented executive team, we believe we have positioned TCF to successfully execute our growth strategy and vision. | 2020 Proxy Statement | | 26 |
Overview| • | On January 27, 2019, in connection with the Merger, we entered into retention agreements with Messrs. Provost and Torgow, which became effective on the Merger Date and replaced their prior employment agreements. These retention agreements provide, among other things, that Mr. Provost will serve as Executive Vice Chair of the Board of the Company and Chair of the Board of TCF Bank, and Mr. Torgow will serve as the Executive Chair of the Board of the Company, each of their base salaries were left unchanged at $950,000, and each executive will receive certain severance payments and benefits in the event either executive (i) experiences a “Termination Without Cause” (as defined in each retention agreement), (ii) terminates his employment for “Good Reason” (as defined in each retention agreement), or (iii) terminates his employment without Good Reason at least 18 months following the Merger Date (as set forth below, this last provision was eliminated in March 2020). | | In March 2020, the Compensation Committee determined that it was in the best interests of the Company and shareholders to eliminate the right of Messrs. Provost and Torgow to voluntarily resign without Good Reason after 18 months following the Merger Date and receive full compensation for the remaining contract term. As a result, on March 10, 2020, we entered into amended and restated retention agreements with them eliminating the provisions of the retention agreements related to cash severance payments and accelerated equity benefits upon retirement after 18 months following the Merger Date. | | • | On July 31, 2019, we entered into a new employment agreement with Mr. Shafer that replaced his prior employment agreement. Under his new employment agreement, in the event of a termination by TCF without “Cause,” or by Mr. Shafer with “Good Reason” (each as defined in his new employment agreement and each a “qualifying termination”), he is entitled to receive certain severance payments and benefits; except that, he will not be entitled to such severance payments if he experiences a qualifying termination within two years of the Merger Date. If Mr. Shafer experiences an otherwise qualifying termination within two years following a “Change in Control” (as defined in his new employment agreement, and excluding the Merger), or within six months before the date of a Change in Control, we will pay him certain severance payments and benefits. Mr. Shafer’s employment agreement provides he will serve as Chief Operating Officer of TCF Financial, and President and Chief Operating Officer of TCF Bank, and left unchanged his base salary of $950,000. | | • | On November 6, 2019, we amended and restated our agreement with Mr. Dahl to align certain terms related to termination benefits with those of other executive officers of the Company. Mr. Dahl’s agreement provides that he will serve as President and Chief Executive Officer of the Company and as Chief Executive Officer of TCF Bank, and left unchanged his base salary of $1,050,000. | | • | On December 13, 2019, we entered into a letter agreement with Mr. Klaeser that supplements his current employment agreement dated as of July 1, 2018, and provides that Mr. Klaeser will remain employed by TCF as TCF’s Chief Financial Officer through October 1, 2020, at which time (unless his employment is earlier terminated for cause or due to death or disability), he will incur a “Termination Without Cause” (as defined in his employment agreement) and he will be entitled to receive his “Change in Control Severance Pay” (as defined in and previously provided for in his employment agreement). Under the letter agreement, Mr. Klaeser will also receive equity grants in 2020 at a level not less than the target levels set forth in his employment agreement, and his outstanding equity awards will vest on October 1, 2020. In addition, Mr. Klaeser will receive a pro rata bonus for 2020. | | • | On December 13, 2019, in connection with the retention of Mr. Maass, and his appointment as Chief Financial Officer to be effective on October 1, 2020, we entered into an employment agreement with Mr. Maass that replaced his prior change in control agreement with Legacy TCF. Under the employment agreement, he receives an annual base salary of $575,000 effective as of December 13, 2019, subject to annual review and adjustment, and is entitled to participate in our equity-based compensation programs and annual incentive programs. Under his new employment agreement, in the event of a termination by TCF without “Cause,” or by Mr. Maass with “Good Reason” (each as defined in his employment agreement), he is entitled to receive certain severance payments and benefits. |
These agreements with our NEOs are described in more detail below under “Employment, Retention and Equity Award Agreements” and “Grants of Our Executive Compensation Program
Plan-Based Awards Table.” As noted above, each of these agreements includes certain severance payments upon termination of employment, and our employment agreements with Messrs. Dahl, Klaeser, Shafer and Maass include “double trigger” severance benefits in connection with a change in control of the Company if we terminate the officer’s employment without cause or the executive terminates his employment for good reason in connection with a change in control. For a detailed description of the severance and change in control benefits applicable to our NEOs, see the discussion below under “Potential Payments Upon Termination or Change in Control.”| Overview of Our Executive Compensation Program | | |
Our executive compensation program is aligned with our growth-oriented business strategy and is designed to drive short- and medium-term performance results as well as long-term, shareholder value creation. We provide pay packages to our executives that are intended to compensate fairly, attract the best leaders into the banking industry,Company, and engage and motivate them to deliver strong results.
The Compensation Committee considers peer group market data and the advice of its independent consultant when establishing compensation packages for executives or making decisions related to incentive plan design. We seek to create and annually calibrate an appropriate mix of cash and non-cash compensation, short and long-term incentives, and fixed and at-risk compensation to balance internal priorities with shareholder expectations, short-term | 2020 Proxy Statement | | 27 |
results with long-term vision and stability with innovation. The Compensation Committee believes that performance expectations should be clearly articulated and directly tied to compensation outcomes. Our executive pay program consists of three major elements and a number of practices explicitly designed to promote good governance. Each component helps us attractgovernance and retain high-performing executives. In addition,is comprised of three major elements: base salary, annual cash incentive awards, and long-term equity incentive awards. For a detailed description of these compensation elements haveand the objectives described below:
of each element, see the discussion below under “Compensation of Named Executive Officers”.Compensation Program Governance | | | | | | | 2018 Key Compensation Elements | ComponentWHAT WE DO | | | Objective | | PeriodWHAT WE DON’T DO | Base Salary | | l | Provide a measure of income stability to allow executives to focus on the execution of our strategic goals
| | Annual | Annual Cash Incentives | | l | Encourage, recognize and reward achievement of annual corporate financial goals and individual performance objectives
| | Annual | Long-term Equity Incentive Compensation | | l
l
| Align executive and shareholder goals by providing management with a direct interest in our future success
Reward achievement of sustained long-term performance while providing adequate exposure to equity performance risk
| | Long-term |
| | | | | | Compensation Program Governance | What We Do | | What We Don't Do | ü | We tie the majority of our named executive officerNEO compensation toperformance | | û | Our incentive programs do not encourage excessive risk taking | ü | Our change-in-control provisions require a double-trigger | | û | We prohibit hedging or pledging of our securities by our executives | ü | We maintain strong stock ownership guidelines of 5xsalary for our CEO,Chief Executive Officer, and 3x salary for ourforour other named executive officersNEOs | | û | Our equity plan does not allow repricing of underwater options without shareholder approval | ü | We have stock holding guidelines, until minimum share ownership requirements are achieved | | û | We do not provide excise tax-gross ups | ü | We have adopted a clawback policy | | û | We do not provide significant executive perquisites | ü | We have appropriate caps on incentive plan payouts | | | We do not provide excise tax gross-ups | ü | Our Compensation Committee is comprised entirely ofindependent directors | | | | ü | Our Compensation Committee engages an independentconsultant | | | | ü | Our Compensation Committee regularly meets inexecutive session without management present | | | | ü | We perform an annual risk assessment of the ourcompensation program | | | |
Objectives and Philosophy
Our philosophy on executive compensation is to align the interests of our executive management with the interests of our shareholders and to ensure that the total compensation paid to our executive officers is reasonable, motivating and competitive. We also recognize the need to differentiate compensation by individual, reflecting on his or her role, experience, performance, and expected contributions.
| | Guiding Principles | | | | Guiding Principles | Align Executive Compensation with Shareholder ValueShareholderValue Creation
| | Within our overall compensation strategy, we use equity-based compensation tocompensationto align the financial interests and objectives of our named executive officersNEOs with those of ourofour shareholders. In addition, our annual and long-term incentive goals and payoutsandpayouts are designed so that target and above-target compensation levels arelevelsare achieved only when our financial and relative market performance indicate thatindicatethat intrinsic value has been created.
| Attract, Retain and Motivate High-Performing ExecutiveHigh-PerformingExecutive Talent
| | We operate in a competitive employment environment and our employees,led by our named executive officers,NEOs, are essential to our success. The compensation of our named executive officers,ourNEOs, while designed to be competitive within the marketplace for similar positionssimilarpositions with bank holding companies of comparable size, is also designed todesignedto motivate the named executive officersNEOs to maximize our performance. We believeachieve high performance for the Company. Webelieve that our high-performing executives should receive compensation that reflectsthatreflects their value to our organization and retains them in our service.
| Link Pay to Performance
| | Our compensation program is designed to provide a strong correlation betweencorrelationbetween the performance of the named executive officersNEOs and the compensation the named executive officers receive.NEOsreceive. We accomplish this by including compensation elements that are designedaredesigned to reward our named executive officersNEOs based on our overall performance and the executives’ abilities to achievetheexecutives’ achievement of the performance priorities established by thetheCompensation Committee.
| Manage Risk
| | We employ features to mitigate against our executives taking excessive risk inriskin order to maximize pay-outs,payouts, including varied and balanced performance targets,performancetargets, discretionary authority of the Compensation Committee to reduce awardreduceaward pay-outs, maximum caps on annual incentive payments, and an incentiveanincentive compensation recoupment, policy, or “clawback” policy. |
| 2020 Proxy Statement | | 28 |
20182019 Say-on-Pay Vote Results
At our 20182019 annual meeting of shareholders, approximately 96% of the votes cast on the Say-on-Pay proposal were in favor of approving the resolution. The Compensation Committee considers the results of this advisory resolution when evaluating and establishing our executive compensation programs. The Compensation Committee believes that these voting results reflect strong confidence in our board to exercise good judgment in structuring a thoughtful executive compensation program that benefits our shareholders. The Compensation Committee intends to continuously improve our executive compensation arrangements and programs to meet evolving business conditions, address retention concerns and ensure consistent alignment with shareholder interests.
Compensation Decision-Making Process
| Compensation Decision-Making Process | | |
Role of the Compensation and Pension Committee
The Compensation Committee assists the boardBoard of directorsDirectors in discharging its responsibilities relating to executive compensation and in fulfilling its responsibilities relating to our compensation and benefit programs and policies. Under the Compensation and Pension Committee Charter, the Compensation Committee is responsible for reviewing and approving total compensation, including base salary, bonus, annual cash incentive awards, long-term incentive awards, benefits and other compensation of our Chief Executive Officer and all other executive officers of the Corporation.Company. The Compensation Committee also is also responsible for, among other things:
Annually reviewing and approving the corporate and individual goals and objectives relevant to the compensation of our Chief Executive Officer;
Annually reviewing and approving the compensation of our other executive officers;
Reviewing, recommending and approving the design of retirement, stock incentive, cash incentive, welfare and other compensation and benefit plans and administering such plans as approved by the board, subject to the provisions of each plan; and
Reviewing, recommending and approving employment agreements and other arrangements for executive officers.
| • | Annually reviewing and approving the corporate and individual goals and objectives relevant in setting the compensation of our Chief Executive Officer; | | • | Annually reviewing and approving the compensation of our other executive officers; | | • | Reviewing, recommending and approving the design of retirement, stock incentive, cash incentive, welfare and other compensation and benefit plans and administering such plans as approved by the board, subject to the provisions of each plan; and | | • | Reviewing, recommending and approving employment agreements and other arrangements for executive officers. |
The Compensation Committee currently consists of fivesix directors, all of whom are independent under NASDAQNasdaq listing rules.
The Committee, along with the entire board of directors, believes that an empowered leadership team is critical to our ability to respond efficiently and successfully to important business issues. As such, the Committee has delegated limited reasonable authority for certain decisions and activities, as permitted by the Compensation Committee Charter, to the Chief Executive Officer, the Vice Chair, President and Chief Executive Officer of Chemical Bank, and other members of our executive leadership team. In that regard, the Committee has delegated to certain executive officers, by means of our Equity Grant Delegation Policy, the authority to award a limited number of TRSUs to employees who are not executive officers as defined by Rule 3b-7 under the Securities Exchange Act of 1934.
The Committee calls upon our executive leadership team from time to time to support the Compensation Committee in the fulfillment of its duties. Executive leadership provides recommendations related to a number of matters that are subject to the Compensation Committee’s review and approval, including the compensation of executive officers other than the Chief Executive Officer, the design of our incentive plans and the financial goals on which these incentive plans are based. The Compensation Committee retains absolute discretion in determining whether to approve recommendations made by our executive leadership.
Role of Compensation Consultants
From 2011 until SeptemberSince November 2018, the Compensation Committee engaged Aon Hewitt, which we refer to as Aon, to serve as independent compensation consultant to advise the Committee on matters related to executive and director compensation. Specifically, Aon assisted the Committee in the design of the Chemical Financial Corporation Executive Annual Incentive Plan adopted in February 2018. Aon also helped the Committee select performance objectives under the plan and gave the Committee an analysis of compensation practices of peer companies so the Committee could analyze how our programs fit within industry standards.
In September 2018, the Committee concluded its relationship with Aon and engagedhas retained Pay Governance LLC (“Pay Governance”) to serve as independent compensation consultant. In its role, Pay Governance has consulted with the Compensation Committee and has provided information on peer group selection, market analysis for executive compensation, and has reviewed our incentive plans.
Pay Governance also consulted with the Compensation Committee on post-Merger compensation for NEOs and Directors of the combined company. Representatives of Pay Governance attend Compensation Committee meetings and communicate with the Chair of the Compensation Committee between meetings as necessary. The Compensation Committee makes all final decisions with respect to compensation matters. Pay Governance has been and will only be engaged for compensation-related services performed for the Compensation Committee.The Compensation Committee conducted a review of its relationships with Aon and Pay Governance in 2018 and determined that their work did not create any conflicts of interest. The Compensation Committee also determined that both Aon and Pay Governance areis independent under the criteria included in NASDAQNasdaq listing standards. During 2019, the Compensation Committee used compensation analyses prepared by Pay Governance in determining NEO compensation before and after our Merger, which analyzed each element of compensation, as well as total compensation and included comparisons to peer data to assist with determining whether the objectives of our executive compensation program are being met. The Compensation Committee reviewed the analyses to ensure that the compensation of each NEO was sufficiently tied to our financial performance, and made adjustments to compensation as it deemed appropriate. In light of the Merger, the Compensation Committee also reviewed outstanding equity and change in control severance payments that each NEO would receive in the event of various termination and change in control scenarios to determine retention bonuses. | 2020 Proxy Statement | | 29 |
Compensation Risk Assessment
The Compensation Committee annually evaluates our compensation programs to assess whether our programs, by design or administrative process, would facilitate or encourage excessive risk-taking by executives or other employees. In 2018,2019, following the Merger, the Compensation Committee reviewed materials regarding both our and Legacy TCF compensation programs, including an internala report of our incentive compensation risk assessment,officer, and concluded that our compensation programs are not reasonably likely to have a material adverse effect on the Corporation.Company. With respect to our executive compensation programs specifically, the Compensation Committee based its conclusion, in part, on the fact that our programs contain the following design elements:
| • | the amounts that may be earned under annual and long-term incentive awards are capped, which diminishes the potential reward of excessive risk taking; | | • | financial metrics for incentive awards are aligned with our financial goals and strategic plan and are both challenging and reasonable, which motivates our executives to take appropriate actions, rather than risky or excessive ones, to achieve those goals; and | | • | stock ownership guidelines require executives to have significant “skin-in-the-game,” creating a disincentive for imprudent decision-making. |
In addition to the amounts that may be earned under annual and long-term incentive awards are limited, which diminishes the potential reward of excessive risk taking;
financial metrics for incentive awards are aligned with our financial goals and strategic plan and are both challenging and reasonable, which motivates our executives to take appropriate, rather than risky or excessive, actions to achieve those goals; and
stock ownership guidelines require executives to have significant “skin-in-the-game,” creating a disincentive for imprudent decision-making.
Additionalabove considerations, best practices we employ to mitigate executive compensation risk include: an anti-hedginga policy prohibiting the hedging and pledging of stock by executives and directors, multi-year vesting of equity awards, a formal clawback policy and double-trigger change of control arrangements.
Competitive Market Analysis
Our Compensation Committee compares our executive compensation levels and programs to a group of like peer companies with whom we compete for talent.companies. The Compensation Committee reviews peer group market data and practices at least annually, and evaluates it as one important reference point when making decisions. The Compensation Committee meets at least once annually in executive session to review market assessments provided by its independent consultant for Mr. Torgow, Mr. Provost and Mr. Shafer. The Committee also reviews
market assessments for our other executive officers, and in conjunction with Mr. Shafer’s recommendations, makes appropriate adjustments to their compensation, as needed.
2018certain executives, including NEOs.2019 Peer Group
Each year the Compensation Committee works with our independent compensation consultant to review compensation for executive positions within a designated peer group of companies to ensure the overall appropriateness and competitiveness of our compensation levels and programs, although theprograms. The Compensation Committee didgenerally does not, benchmark the amount of 2018however, set compensation or otherwise target our compensationcomponents to anymeet specific benchmarks as compared to a peer group, such as targeting salaries at a specific percentile or range with respect to our peer group.
Our 2018From January 1, 2019 through the Merger Date, our Peer Group consisted of the following 16 companies: | 2019 Legacy Chemical Peer Group | | • BancorpSouth, Inc. | • IBERIABANK Corporation | • Trustmark Corporation | BancorpSouth, Inc. | Hancock Holding Company | TFS Financial Corp | | • BankUnited, Inc. | IBERIABANK Corporation | Trustmark Corporation | F.N.B. Corporation | • MB Financial, Inc. | • UMB Financial Corporation | | • F.N.B. Corporation | • Old National Bancorp | • United Bankshares, Inc. | | • Flagstar Bancorp, Inc. | Old• TCF Financial Corporation | • Valley National Bancorp | United Bankshares, Inc. | | • Fulton Financial Corporation | TCF Financial Corporation | Valley National Bancorp | | • Texas Capital Bancshares, Inc. | | | • Hancock Holding Company | • TFS Financial Corp | |
In connection with the Merger, the Compensation Committee engaged Pay Governance to review our peer group and recommend a new peer group to account for changes in size and other aspects of the organization following the Merger. Our 2020 peer group was developed from a group of publicly traded financial institutions with assets between approximately 0.4 and 2.5 times that of TCF following the Merger. These companies were compared against TCF based on key metrics including assets, market capitalization, revenue, balance sheet composition, branch and employee profile, and other financial metrics. Each peer received a score for each metric based upon numerical criteria, the highest scoring companies that most closely resemble TCF on the evaluation criteria were selected to determine the final peer group. 2020 Peer Group Based on the application of the process described above, following the Merger we adopted the following 2020 Peer Group: | 2020 Peer Group | | • Associated Banc-Corp | • First Citizens BancShares, Inc. | • M&T Bank Corporation | | • BankUnited, Inc. | • First Horizon National Corporation | • People’s United Financial, Inc. | | • CIT Group Inc. | • First Republic Bank | • Regions Financial Corporation | | • Comerica Incorporated | • Huntington Bancshares Incorporated | • Synovus Financial Corp. | | • East West Bancorp, Inc. | • IBERIABANK Corporation | • Valley National Bancorp | | • F.N.B. Corporation | • Keycorp | • Zions Bancorporation, N. A. |
| 2020 Proxy Statement | | 30 |
As we evolve, we continueOur total assets as of December 31, 2019 were slightly below the median of the 2020 Peer Group while our total revenue in the fourth quarter of 2019 (annualized) was above the median of the 2020 Peer Group, as shown below. Total assets for the 2020 Peer Group ranged from $31.7 billion to revisit and refine our peer group, as needed. To select peers for 2018, we worked with Aon$145.0 billion while total revenue ranged from $0.9 billion to consider regional banks or chartered thrifts that generally fit within the following criteria:
Assets between $10 billion and $25 billion, based on fiscal year 2017 results; and
Source: S&P Global Market capitalization of at least $500 million.Intelligence Elements of Compensation
| Compensation of Named Executive Officers | | |
The compensation of our named executive officersNEOs primarily consists of base salary, annual incentive awardscash incentives and annual grants oflong-term equity awards. The amount and mix of these elements are individually calibrated to each executive based on his or her level of responsibility and expected effectimpact on our results. Executives also participate in our retirement plans, and may receive discretionary awards to recognize extraordinary performance as approved by the Compensation Committee. Each component of compensation is intended to accomplish one or more of the compensation objectives discussed earlier.
Base Salary
Annual base salaries are establishedbelow.Compensation
Component | Objective | Determination | | Base Salary | Provide a measure of income stabilitycompetitive with organizations ofcomparable size and complexity toallow executives to focus on theexecution of our strategic goals and toattract and retain highly qualified NEOs. | The Compensation Committee reviews base salary market practicesat least annually through the use of a peer group comparativeanalysis and an analysis prepared by its compensation consultant.The Compensation Committee reviews the base salaries of theNEOs individually and uses a variety of peer data in determiningsalary levels. | | Annual Cash IncentiveAwards | Designed to (i) encourage, recognizeand reward achievement of annualcorporate financial metrics andindividual performance objectives,(ii) reward NEOs for shareholdervalue creation, and (iii) align NEO andshareholder interests. | Annual cash incentive awards are contingent upon TCF and/orindividuals achieving predetermined performance metrics. Theperformance metrics are based on one or more performance criteriachosen by the Compensation Committee from a list of measuresset forth in the annual incentive plan. | | Long-Term EquityIncentive Awards | Designed to reward NEOs forshareholder value creation, to align NEOand shareholder interests, and to retainand motivate talented NEOs. Long-termincentives are equity-based and areprovided under shareholder-approvedplans that permit us to grant a variety ofequity-based awards, including restrictedstock, restricted stock units, and stockoptions. | Long-term incentives are generally determined using a formula-based approach further described below under “Compensationof Named Executive Officers – NEO Pay Determinations – 2019Long-Term Equity Compensation.” The size, form and performancecriteria, if any, of long-term incentive awards are determined by theCompensation Committee based on a number of factors, includingits evaluation of market practice, base salary, length of service,responsibilities of the NEO, ownership of TCF common stock andthe quantity, amount, and vesting schedule of previous grants. |
NEO Pay Determinations In overseeing executive compensation, the Compensation Committee seeks to provide fairconstruct a compensation structure that will attract and retain highly qualified executives by providing compensation that is competitive relative to those companies with which we compete for executive talent. The Compensation Committee also believes strongly in linking compensation paid to each NEO to performance. In determining compensation, the Compensation Committee considers a number of factors, including, among others, overall performance in the areas of scope of responsibility, management and communication skills, department objectives, leadership qualities, innovation and creative abilities, risk controls and difficulties encountered in achieving results, as well as specified corporate financial metrics. The Compensation Committee uses competitive market data as a reference point when setting each component of compensation and target compensation levels, but ultimately uses its own business judgment and expertise to determine the appropriate components and levels of compensation for our executive officers, including the NEOs. After evaluating these factors and taking the Chief Executive | 2020 Proxy Statement | | 31 |
Officer’s recommendations into consideration, the Compensation Committee establishes base salary levels, annual cash incentive opportunities and long-term incentive awards for each NEO other than the Chief Executive Officer. A similar process is followed by the Compensation Committee in determining the Chief Executive Officer’s compensation. Base Salary The Compensation Committee generally attempts to set base salaries at levels which it believes are appropriate to attract and retain highly qualified executives with exceptional abilitiesusing data provided by its compensation consultant and talent.other sources, as appropriate. In 2018,2019, we entered into new employment agreements, letter agreements, or retention agreements with each of our named executive officers.NEOs. Each of these employment agreements or retention agreements, as applicable, set the officer’sexecutive’s base salary, subject to annual review by the Committee.Compensation Committee (other than Mr. Klaeser, whose base salary remained unchanged). When determining the base salaries under each executive’s new employment agreement or retention agreement, as applicable, the Compensation Committee also considered a variety of factors for each executive, including:
| • | individual performance, skills and achievements; level of experience and corresponding current compensation, if applicable; and
ability to contribute to our performance.
The Committee also considered current competitive practices of companies in our peer group, the Committee’s philosophy of paying salaries that are competitive with organizations of comparable size and complexity, and the recommendations of our Chief Executive Officer and the Vice Chairman, President and Chief Executive Officer of Chemical Bank (for executives other than themselves). After considering all of these factors, the Committee determined that the employment agreement with each of Mr. Provost, Mr. Torgow, Mr. Klaeser, Mr. Shafer and Mr. Ryan provided an annual base salary at a level that the Committee considered reasonable, appropriate and in the best interest of the Corporation and our shareholders.
The following table details the base annual salary of our named executive officers under their employment agreements as in effect for the periods presented. See “Summary Compensation Table and Grants of Plan-Based Awards Table - Summary Compensation Table” below for the actual salary paid to each of our named executive officers for the 2017 and 2018 fiscal years.
| | | | | | | | | Named Executive Officer | | Year-End 2017 Base Annual Salary | | 2018 Base Annual Salary through June 30, 2018 | | 2018 Base Annual Salary beginning July 1, 2018 | | David T. Provost | | $1.00(1) | | $1.00 | | $950,000(3) | | Dennis L. Klaeser | | $550,000 | | $550,000 | | $750,000(3) | | Gary Torgow | | $1.00(1) | | $1.00 | | $950,000(3) | | Thomas C. Shafer | | $750,000(1) | | $750,000 | | $950,000(3) | | J. Brennan Ryan | | --(2) | | --(2) | | $650,000(3) |
| | (1)• | Represents salary provided for under his Employment Agreement entered into in September 2017. |
| level of experience and corresponding current compensation, if applicable; and | (2)• | We hired Mr. Ryan on July 9, 2018.ability to contribute to our performance. |
| | (3) | Represents salary provided for under his Employment Agreement entered into in 2018. |
2019 Annual Cash Incentive Plan
We provide an annual cash-based incentive plan in which our executive officers participate because we believe it is a critical tool for:
holding executive leadership accountable for the financial results of the organization;
rewarding and reinforcing the behaviors and achievements that produce positive financial results; and
hiring and retaining the best executive talent in the banking industry.
On February 27, 2018, based on the recommendation of the Committee,| • | holding executive leadership accountable for the financial results of the organization; | | • | rewarding and reinforcing the behaviors and achievements that produce positive financial results; and | | • | hiring and retaining the best executive talent in the banking industry. |
Under our board of directors approved the Chemical Financial Corporation Executive Annual Incentive Plan, which we refer to as the annual incentive plan. Under the annual incentive plan, each year the Compensation Committee selects eligible executives who will participate in the annual incentive plan and sets the amount of each participant’s threshold, target and maximum award that can be awarded under the annual incentive plan, determined as a percentage of the participant’s base salary. The Compensation Committee also establishes one or more performance measures and a formula to determine the amount of the award that will be earned at different levels of achievement of the performance measures. For 2018,2019, the Compensation Committee set the potential incentive payment, expressed as a percentage of base salary, as follows.
| | | | | | | | | | | | | | | Name | | Threshold (%) | |
Threshold Incentive Payment ($)(1) | |
Target (%) | | Target Incentive Payment ($)(1) | | Maximum (%) | |
Maximum Incentive Payment ($)(1) | | David T. Provost | | 50% | | $475,000 | | 100% | | $950,000 | | 150% | | $1,425,000 | | Dennis L. Klaeser | | 40% | | $300,000 | | 80% | | $600,000 | | 140% | | $900,000 | | Gary Torgow | | 50% | | $475,000 | | 100% | | $950,000 | | 150% | | $1,425,000 | | Thomas C. Shafer | | 50% | | $475,000 | | 100% | | $950,000 | | 150% | | $1,425,000 |
| Name | | Salary | | Threshold
(% of salary) | | Threshold
Incentive
Payment
($) | | Target
(% of salary) | | Target
Incentive
Payment
($) | | Maximum (%
of salary) | | Maximum
Incentive
Payment ($) | | Craig R. Dahl(1) | | $ | 1,019,615 | | 50% | | $ | 509,808 | | 100% | | $ | 1,019,615 | | 200% | | $ | 2,039,230 | | David T. Provost(2) | | $ | 950,000 | | 50% | | $ | 475,000 | | 100% | | $ | 950,000 | | 150% | | $ | 1,425,000 | | Dennis L. Klaeser(2) | | $ | 750,000 | | 40% | | $ | 300,000 | | 80% | | $ | 600,000 | | 120% | | $ | 900,000 | | Gary Torgow(2) | | $ | 950,000 | | 50% | | $ | 475,000 | | 100% | | $ | 950,000 | | 150% | | $ | 1,425,000 | | Thomas C. Shafer(2) | | $ | 950,000 | | 50% | | $ | 475,000 | | 100% | | $ | 950,000 | | 150% | | $ | 1,425,000 | | Brian W. Maass(1) | | $ | 482,885 | | 37.5% | | $ | 181,082 | | 75% | | $ | 362,164 | | 150% | | $ | 724,328 |
| (1) | Represents Form W-2 wages paid by Legacy TCF prior to the Merger Date and then by TCF following the Merger, Messrs. Dahl and Maass began their employment on August 1, 2019 and did not participate in our annual incentive plan for 2019. Each of their cash incentive payments was awarded by Legacy TCF pursuant to Legacy TCF’s 2019 MIP and is described below. | (1)(2) | Potential incentive payments are based on eachthe executive’s December 31, 20182019 base salary, as the Compensation Committee determined that each executive would receive the benefit, on a relative basis, for increases in base salary that occurred after the potential incentive payments were determined in February 2018.2019. |
Mr. Ryan was hired in July 2018 and therefore did not participate in the annual incentive plan. Under his employment agreement, he was entitled to a guaranteed incentive payment of $520,000 in 2018.
20182019 Performance Metrics
Annual Incentive Plan Metrics Under the annual incentive plan, the Compensation Committee is responsible for establishing the corporate and individual performance measures that, when compared to actual results, determine the amount of payout that is earned with respect to the annual incentive plan. In setting these goals, the Compensation Committee considers a number of factors, including our annual budget, our short- and long-term business strategy, investor performance expectations, and guidance provided by our executive leadership team. In the first quarter of 2018,2019, the Compensation Committee determined that the performance measures under the annual incentive plan for each named executive officerNEO (except for Messrs. Dahl and Maass, whose employment began on the Merger Date and who participated in Legacy TCF’s 2019 MIP) would consist of corporate financial metrics weighted at 80% and individual performance metrics weighted at 20%.
The 20182019 corporate financial metrics, weighted at 80%, were (a) adjusted core net income (weighted at 80% of the corporate metrics), and (b) adjusted efficiency ratio.ratio (weighted at 20% of corporate metrics). The Compensation Committee believes these metrics reflect the most reliable, comprehensive financial indicators of our performance relative to our key 20182019 strategic priorities of increasing profitable loan growth and improving our operating efficiency.
The target corporate financial goalsmetrics were set at challenging levels representing significant growth and improvement over 2017,2018, and generally corresponded to or exceeded our budgeted financial plan. In 2018, adjusted core net income replaced earnings per share as the core financial metric underlying the annual incentive plan to avoid overlap with our PRSUs granted under our long-term incentive plan.| 2020 Proxy Statement | | 32 |
The Compensation Committee established threshold, target and maximum performance goals for each of the two corporate financial metrics for 2018,2019, with threshold representing the minimum level of performance for which the executive officer willwould earn a payment. IfFor performance is below the threshold level for one of the corporate financial metrics, the executive officer willwould not earn a payment for that metric; however, the executive officer will earn a paymenteach metric is independently evaluated for the other metric if the threshold performance level is achieved.purposes of determining payments. Maximum represents the maximum level of performance required to achieve the maximum (150%) payment on each of the metrics. If performance exceeds the maximum level for any corporate or individual performance metric, the executive officer will not earn a further incentive above the maximum incentive for such metric. Payments for achievement of the threshold, target and maximum goals are 50%, 100% and 150% of the target payment, respectively. Actual performance between threshold, target and maximum performance levels is interpolated linearly to determine the exact level of achievement.
achievement, as shown below:
In connection with the Merger, the 2019 corporate financial metrics, weighted at 80%, were determined as of the most recently completed quarter before the Merger. A 12-month target goal was established at the beginning of 2019. In anticipation of the Merger being completed mid-year, the Compensation Committee assessed quarterly targets due to seasonal volatility during the year and set a 6-month target as of June 30, 2019 in light of the first and second quarter targets (as opposed to taking a pro-rata portion of an annual target). The remaining 20% of each NEO’s possible payout under the annual incentive plan (excluding Messrs. Dahl and Maass) related to individual performance metrics and was evaluated at year-end. The individual performance metrics, weighted at 20%,objectives that the Compensation Committee considered were based on non-formulaic objectives, such as the implementation of actions to achieve revenue growth and profitability, by attracting new customers,managing the integration process, improving practices related to risk management, identifying potential merger and acquisition targets, engaging in leadership development, and continuing to build the ChemicalTCF brand and culture.
2018Legacy TCF MIP Metrics Messrs. Dahl and Maass did not participate in our annual incentive plan, but were awarded a cash incentive award for 2019 by Legacy TCF under Legacy TCF’s 2019 MIP, the amount of which was based on Legacy TCF’s net income achievement relative to incentive plan goals. Legacy TCF’s compensation committee determined that net income was the most appropriate metric due to operational and strategic uncertainties created by the potential Merger. Pursuant to the 2019 MIP, Legacy TCF net income was calculated on a monthly basis through June 30, 2019, the last month practicable before the Merger Date, and compared to monthly targets set by Legacy TCF’s compensation committee in January 2019. Because Legacy TCF experienced seasonally variable income during the year, financial targets were set by month rather than simply taking a pro-rata portion of an annual target. Based on these monthly targets, for the period ended June 30, 2019, the target achievement was $161.3 million, with the threshold and maximum amounts being $155.7 million (96.5% of target) and $166.9 million (103.5% of target), respectively. Through June 30, 2019, Legacy TCF’s net income was $171.4 million (excluding $10.4 million of Merger-related expenses) or 106.2% of target. As a result, Messrs. Dahl and Maass received awards of 200% and 150% of salary earned for 2019, respectively. 2019 Annual Incentive Payments
Our 2019 annual incentive plan, in which each of our NEOs with the exception of Messrs. Dahl and Maass participated, included corporate performance metrics of adjusted core net income and adjusted efficiency ratio. In FebruaryJuly 2019, before the Merger, the Compensation Committee determined the achievement level for each of our corporate financial metrics based on our pre-Merger performance in the first and second quarters of 2019. As noted above, the Compensation Committee converted our 12-month full year target to a 6-month target using the first and second quarter targets set by the Compensation Committee at the beginning of the year to determine our target as of June 30, 2019 to account for seasonal variability in our earnings. The Compensation Committee determined that we achieved the corporate metrics at the level detailedof $146.6 million in adjusted core net income, and a 51.5% adjusted efficiency ratio, resulting in a payout of 139.1% of target, as shown in the following table.
| | | | | | | | | | | | | | | | | | | 2018 Corporate Goal Levels (% payout opportunities) | | 2018 Actual Performance | | | | | Assigned Weight | | Threshold (50%) | | Target (100%) | | Maximum (150%) | | $ | | % | | Weighted Average Achievement(1) | Adjusted Core Net Income(1) | 80% | | $258.7M | | $272.3M | | $277.7M | | $276.9 | | 142.9% | | 114.3% | Adjusted Efficiency Ratio(2) | 20% | | 55% | | 52% | | 49% | | 52.0% | | 100.0% | | 20.0% | | Total | 100% | | | | | | | | 134.3% |
| 2020 Proxy Statement | | 33 |
| | | | | 2019 6-Month Corporate Goal Levels
(% payout opportunities) | | 2019 Actual
Performance as of
6/30/2019 | | Weighted | | | | Assigned
Weight | | Threshold
(50%) | | Target
(100%) | | Maximum
(150%) | | Performance | | % of
Target | | Average
Achievement(1) | | Adjusted Core Net Income(1) | | 80% | | $132.5M | | $141.0M | | $146.2M | | $146.6 | | 146.6% | | 117.3% | | Adjusted Efficiency Ratio(2) | | 20% | | 55% | | 52% | | 49% | | 51.5% | | 108.8% | | 21.8% | | TOTAL | | 100% | | | | | | | | | | | | 139.1% |
| (1) | Adjusted Core Net Income under our annual incentive plan is our reported net income, excluding (a) the benefit of lower than anticipatedcertain merger-related expenses, related to our core operating system conversion and the change in timing of realizing executive officer incentive expense related to our Executive Chairman and Chief Executive Officer, (b) the change in fair value of loan servicing rights, and (c) certain unanticipated benefits to our income tax expense provision. |
| gains from the sale of investment securities. | | (2) | Adjusted Efficiency Ratio under our annual incentive plan is our total operating expenses, excluding (a) the impairment of income tax credits, (b) amortization of intangibles, and (c) the excluded items described in footnote (1) above,merger-related expenses, divided by the sum of (i) net interest income, excluding the net interest income fully-tax equivalent adjustment, and (ii) noninterest income, excluding the change in fair value of loan servicing rights and gain on sales of investment securities. |
In addition, based on the factors described below under each NEO’s compensation summary (excluding Messrs. Dahl and Maass), the Compensation Committee determined that Messrs. Provost, Torgow, Shafer and Klaeser each executive achieved 150% of his individual performance metrics, at 100% of target. These performance outcomes resultedresulting in potentialtotal annual incentive payments equal to 127.5% of the target incentive payment,141.2% of his base salary, as set forth in
the table below. While adjusted core net income and the adjusted core efficiency ratio were the chosen corporate metrics used by the Committee in determining awards under the annual incentive plan, the Committee also determined, in its exercise of negative discretion, to consider our total shareholder return. Although our total shareholder return over the preceding 5-year period was higher than the KBW NASDAQ Regional Banking Index, the stock market decline in the fourth quarter of 2018 resulted in decline in our share value at year-end. Accordingly, the Committee exercised its discretion to decrease overall incentive payments as a result of its review of our total shareholder return for 2018. As a result, the Committee determined to fund Mr. Klaeser’s and Mr. Shafer’s incentive payments at 102% of target. In addition, with respect to Mr. Provost and Mr. Torgow, as noted above, the Committee re-evaluated their participation in the annual incentive plan and determined that to more closely align their interests with those of our shareholders and to increase the retention effect of their compensation packages, the Committee would exercise its discretion not to award Mr. Provost and Mr. Torgow any cash incentives under the annual incentive plan for 2018. Instead, the Committee determined to grant to each of Mr. Provost and Mr. Torgow a supplemental equity award in February 2019 with a grant date fair value equal to approximately $950,000, which approximates the target amount Mr. Provost and Mr. Torgow would have been eligible to receive under the annual incentive plan despite corporate and individual performance earned at 127.5% of target in 2018. This supplemental equity grant consists of time-vesting restricted stock units, or TRSUs, that vest in equal annual installments over a three-year period, in each case subject to continued service through the vesting date, subject to certain exceptions.
The following table reflects amounts earned and actually paid under theour annual incentive plan to those named executive officersNEOs who participated in, and received payments under, our annual incentive plan in 2019, as well as the amounts paid to Messrs. Dahl and Maass as determined by the Legacy TCF compensation committee and paid by us pursuant to the terms of the Merger. | | | | | | | | Performance Metrics | | | | | | | | | | | | | Target Incentive | | | Corporate | | Individual | | Potential Payout | | | | | | Named
Executive Officer | | % of
Salary | | Value(2) | | | Result | | Weight | | Result | | Weight | | % of
Target | | Value | | | Discretion | | Actual
Payout | | Craig R. Dahl(1) | | 100% | | $ | 1,019,615 | | | 200% | | 100% | | N/A | | N/A | | 200% | | $ | 2,039,230 | | | N/A | | $ | 2,039,230 | | David T. Provost | | 100% | | $ | 950,000 | | | 139.1% | | 80% | | 150% | | 20% | | 141.2% | | $ | 1,341,780 | | | N/A | | $ | 1,341,780 | | Dennis L. Klaeser | | 80% | | $ | 600,000 | | | 139.1% | | 80% | | 150% | | 20% | | 141.2% | | $ | 847,440 | | | N/A | | $ | 847,440 | | Gary Torgow | | 100% | | $ | 950,000 | | | 139.1% | | 80% | | 150% | | 20% | | 141.2% | | $ | 1,341,780 | | | N/A | | $ | 1,341,780 | | Thomas C. Shafer | | 100% | | $ | 950,000 | | | 139.1% | | 80% | | 150% | | 20% | | 141.2% | | $ | 1,341,780 | | | N/A | | $ | 1,341,780 | | Brian W. Maass(1) | | 75% | | $ | 362,164 | | | 200% | | 100% | | N/A | | N/A | | 200% | | $ | 724,328 | | | N/A | | $ | 724,328 |
| (1) | Awards made pursuant to Legacy TCF’s 2019 MIP based on W-2 wages and assumed by TCF in connection with the Merger. | | (2) | Represents base salary for Messrs. Provost, Klaeser, Torgow and Shafer in accordance with our annual incentive plan, and wages reported on Form W-2 for Messrs. Dahl and Maass, representing salary paid by both us and Legacy TCF. |
The Compensation Committee had the power to reduce or eliminate the payments under the annual incentive plan for each NEO in 2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Metrics | | | | | | | | | | | | Target Incentive | | Corporate | | Individual | | Potential Payout | | | | | | Named Executive Officer | | % of Salary | | Value | | Result | | Weight | | Result | | Weight | | % of Target | | Value | | Negative Discretion | | Actual Payout | | Dennis L. Klaeser | | 80% | | $600,000 | | 134.3% | | 80% | | 100% | | 20% | | 127.5% | | $764,736 | | $(152,736) | | $612,000 | | Thomas C. Shafer | | 100% | | $950,000 | | 134.3% | | 80% | | 100% | | 20% | | 127.5% | | $1,210,832 | | $(241,832) | | $969,000 |
Other 2018 Cash Bonus Payment
Under Mr. Ryan’s employment agreement, he received a guaranteed incentive paymentits discretion, which could include its subjective evaluation of $520,000 in 2018.
performance as well as evaluation of each NEO’s individual performance and risk management considerations.2019 Long-Term Equity Compensation
We deliver a significant portion of our executive officer compensation through long-term equity grants made under shareholder-approved plans that are specifically designed to: | • | ensure that executives have material “skin in the game,” thereby aligning executive and shareholder interests; | | • | reward executives for building long-term, sustainable shareholder value; and | | • | complement our annual cash incentive plan to appropriately balance executive focus on both short- and long-term objectives. |
| 2020 Proxy Statement | | 34 |
ensure that executives have material “skin in the game,” thereby aligning executive and shareholder interests;
reward executives for building long-term, sustainable shareholder value; and
complement our annual cash incentive plan to appropriately balance executive focus on both short- and long-term objectives.
In 2018, awards were provided under the 2017 Stock Plan, which our shareholders approved at the 2017 annual meeting.
Annual Long-Term Incentive Awards - February 2018
In February 2018,2019, we continued our long-standing practice of awarding ourgranting annual long-term equity grantsawards to our named executive officers.NEOs (except for Messrs. Dahl and Maass, whose employment began on the Merger Date). In setting the amount of equity awards in 2018,2019, the Compensation Committee considered a variety of factors, including the terms of each executive officer’s employment agreement, peer group data and the Compensation Committee’s assessment of individual retention risk. In 2018,2019, the Compensation Committee established annual long-term incentive awards with grant date fair values equal to between 80% and 105%200% of each executive’s base salary in effect at the time of the award, as indicated in the table below.below, which consisted of 60% PRSUs and 40% TRSUs, as described below under “Components of Annual Long-term and Strategic Awards.” The actual value that the named executive officersNEOs realize from these 20182019 long-term equity awards may differ from the grant date fair value of such awards due to share price appreciation or depreciation and the level at which the PRSU componentdepreciation. | Name | | Base Salary
on Grant Date | | Long-Term Incentive Award
as a Percent of Base Salary | | Approximate Grant
Date Fair Value of Award | | Craig R. Dahl(1) | | — | | — | | — | | David T. Provost | | $950,000 | | 200% | | $ | 1,900,000 | | Dennis L. Klaeser | | $750,000 | | 80% | | $ | 600,000 | | Gary Torgow | | $950,000 | | 200% | | $ | 1,900,000 | | Thomas C. Shafer | | $950,000 | | 100% | | $ | 950,000 | | Brian W. Maass(1) | | — | | — | | | — |
| (1) | Messrs. Dahl and Maass joined the Company pursuant to the Merger on August 1, 2019, and therefore did not receive long-term incentive awards from the Company in February 2019. |
Components of the long-term equity awards is earned. Annual Long-Term Incentive Awards The 2018 annual2019 long-term equity incentive awards granted to our named executive officersNEOs in February consisted of 60% PRSUs and 40% TRSUs, as described below under “Components of Annual Long-term and Strategic Awards.”
| | | | | | | | | Name | | Base Salary on Grant Date | | Long-Term Incentive Award as a Percent of Base Salary | | Approximate Grant Date Fair Value of Award | David T. Provost(1) | | $950,000 | | 105% | | $1,000,000 | | Dennis L. Klaeser | | $550,000 | | 80% | | $440,000 | Gary Torgow(1) | | $950,000 | | 105% | | $1,000,000 | | Thomas C. Shafer | | $750,000 | | 100% | | $750,000 | J. Brennan Ryan(2) | | — | | — | | — |
| | (1) | At the time of the grant, the award for each of Mr. Provost and Mr. Torgow was based on his $950,000 base salary that was approved in February 2018 to become effective in July 2018. |
| | (2) | Mr. Ryan was not hired until July 2018. |
Strategic Awards - February 2018
In addition to the annual long-term incentive awards, the Committee granted a special strategic award in 2018. In granting the strategic award, the Committee looked at a number of factors, including each executive’s (a) evolving roles and additional responsibilities, (b) unique ability to drive business to our bank, (c) ability to build strategic partnerships that advance our key business objectives, and their involvement and visibility within our communities that elevates both our visibility and standing. In light of these factors, the Committee considered the unvested equity position of each executive in Chemical and the potential for disruption to our business as well as the impact on shareholder value should any of our named executive officers leave, particularly Mr. Provost and Mr. Torgow, and determined that it was in the best interests of Chemical and our shareholders to grant additional equity awards. The strategic awards are not intended to be an ongoing component of our named executive officer annual compensation and the 2019 target long-term annual incentive awards approved by the Committee in February 2019 (to be disclosed in next year’s proxy statement) were, on average (excluding Mr. Ryan), 33% less than the total target long-term annual incentive awards granted in 2018. The 2018 strategic awards granted to our named executive officers in February consisted of 60% PRSUs and 40% TRSUs, as described below under “Components of Annual Long-term and Strategic Awards.”
Components of Annual Long-Term and Strategic Awards
Both the 2018 annual long-term equity incentive awards and the strategic awards granted to our named executive officers in February 2018 consisted of 60% PRSUs and 40% TRSUs. The TRSUs vest in equal 20% increments on each of the first five anniversaries of the February 27, 201825, 2019 grant date. TheBefore the Merger, the PRSUs arewere subject to conditional vesting based on the attainment of pre-established corporate performance metrics and continued service through the date our audit opinion is issued at the end of the three-year performance period of January 1, 2018 throughending December 31, 2020.2021. The corporate performance metrics for the PRSUs awarded in February 2018 are cumulativewere aggregate earnings per share weighted at 75%, and relative total shareholder return, weighted at 25%. The Compensation Committee established threshold, target and maximum performance levels for each selected goal. Paymentsperformance metric with payments for achievement of the threshold, target and maximum goals areperformance metrics of 50%, 100% and 150% of the target payment, respectively. Actual performance between threshold, target and maximum performance levels will be interpolated to determine the amountSee “Compensation of payment based on relative achievement of the corporate performance metrics. See “Overview of Key Events and Named Executive OfficerOfficers – 2019 Long-term Equity Compensation for 2018”– Annual Long-Term Incentive Awards” above for a table that describes the grant date fair value of both theour annual long-term and strategic awards.
Long-Term Incentive Grant - July 2018
Under| | | | | Performance Goals | | Actual Achievement | | Measure(1) | | Weighting | | Threshold | | Target | | Maximum | | Result | | Funding | | Weighted | | 2019 Aggregate EPS | | 75% | | $1.86 | | $1.98 | | $2.06 | | $2.03 | | 131.25% | | 98.44% | | 2019 Relative Total Shareholder Return(2) | | 25% | | 25th | | 50th | | 75th | | 20th | | 0% | | 0% |
| (1) | Performance metrics set forth in this table for the six months ended, and results set forth in this table were measured as of June 30, 2019. | | (2) | Represents TCF’s total shareholder return as a percentile relative to the KBW Nasdaq Regional Banking Index. |
Because the Merger resulted in a change in control of the Company, under the terms of his employment agreement,the PRSUs, all PRSU performance metrics were measured as of the latest practicable date before the Merger Date (which the Compensation Committee determined was the most recently completed calendar quarter before the Merger), and the number of PRSUs was fixed at the greater of the target (100%) performance level or actual performance, which we refer to as the “earned PRSUs,” and such earned PRSUs are now subject only to time-based vesting requirements based on July 9, 2018, upon joining the Corporation, Mr. Ryan received an initial equity award valued at $520,000 in the form of TRSUs that will vest in full on December 15, 2019, subject toNEO’s continued service through the vesting date.
January 4, 2017 PRSU Payouts
Theapplicable performance periodperiod. As shown in the above table, our actual performance for the January 4, 2017 PRSUs granted to Mr. Klaeser and Mr. Shafer concluded in 2018. The performance metrics to which these PRSUs were subject were adjusted dilutedaggregate earnings per share weighted 75%as of June 30, 2019 exceeded target, while our relative total shareholder return was below target, resulting in achievement being fixed at target, with vesting subject to continued employment through the original performance periods subject to the terms of the awards.| 2020 Proxy Statement | | 35 |
Merger-Related Equity Retention Awards As noted above, Mr. Shafer received a retention award of TRSUs in the amount of $4,184,583 which will vest in equal amounts on the first and second anniversary of the Merger Date. Mr. Maass also received a retention award of TRSUs with a grant date fair value of $2,500,011, which will vest in equal amounts on December 1, 2020 and the second anniversary of the Merger Date. For a detailed description of these retention awards, see the discussion herein under “Compensation Highlights – Equity Retention Awards.” Other Forms of Compensation Retirement and Other Benefits The Compensation Committee believes that benefits are an important aspect of our ability to attract and retain quality employees, and believes that our benefit programs are consistent with market practices based on its supervision of management’s analysis of industry peers and other employers with whom we compete for employees. Each NEO generally has access to the benefits provided to all full-time employees, including the Chemical Financial Corporation 401(k) Savings Plan (the “Chemical 401(k) Plan”) and, following the Merger, we assumed the TCF 401K Plan (the “TCF 401K Plan” and together with the Chemical 401(k) Plan, the “401(k) Plans”) which provided benefits to Legacy TCF employees, including Messrs. Dahl and Maass, through 2019. Standard benefits received by each NEO as a full-time employee have no impact on the amount of other elements of compensation awarded to the NEO. As of December 31, 2019, the Chemical 401(k) Plan was merged into the TCF 401K Plan, with the TCF 401K Plan surviving the merger, and as a result, as of January 1, 2020, all of our NEOs are eligible to participate in the TCF 401K Plan. 401(k) Plans and Deferred Compensation Plan Under the TCF 401K Plan, we offer matching contributions after six months of service (in the case of Legacy TCF employees, service with Legacy TCF is counted towards this requirement). The TCF 401K Plan qualifies as an employee stock ownership plan and a qualified tax or deferred compensation plan, or 401(k) Plan, under the Code. In combination with the Deferred Compensation Plans (as defined below), each NEO may receive the same match percentage as any employee. Before its merger with the TCF 401K Plan on December 31, 2019, the Chemical 401(k) Plan also qualified as a deferred compensation plan under the Code. The Code limits the amount of employee contributions and Company matching contributions under the 401(k) Plans for certain individuals, including each NEO. We created the TCF Financial Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), a nonqualified supplemental plan, to address these limitations. For the 166 participants as of January 31, 2020, eligible participants, including each of our NEOs, are eligible to contribute a portion of their salary to the Deferred Compensation Plan. Amounts contributed to the Deferred Compensation Plan are matched at 5% of the amount contributed to the Deferred Compensation Plan. The Compensation Committee believes the Deferred Compensation Plan is an important tool to attract and retain executive talent. In addition, upon completion of the Merger, we assumed the obligations of Legacy TCF under its TCF 401K Supplemental Plan (the “Legacy TCF Supplemental Plan” and together with the Deferred Compensation Plan, the “Deferred Compensation Plans”), which provided benefits similar to those provided under the Deferred Compensation Plan to Legacy TCF employees (including Messrs. Dahl and Maass). As of January 1, 2020, the TCF 401K Supplemental Plan is no longer eligible to receive employee contributions, and each of our NEOs is eligible for the Deferred Compensation Plan. Pension Benefits in 2019 We have a noncontributory Chemical Pension Plan that is considered a tax-qualified retirement plan. Under the Chemical Pension Plan, we have the authority to change or terminate the plan at any time. Effective June 30, 2006, we stopped accepting new participants in the Chemical Pension Plan. Since all of our NEOs joined TCF after 2006, none of our NEOs are participants in the Chemical Pension Plan. In addition, in July 2017, the Compensation Committee determined to freeze the Chemical Pension Plan such that no additional benefits would be accrued under the Chemical Pension Plan, and we approved the termination of the Chemical Pension Plan effective August 31, 2019. We believe that because the benefits to participants had been frozen, and because the Chemical Pension Plan was overfunded that it was in the best interests of both TCF and the participants to terminate the Chemical Pension Plan. We assumed the obligations of the Legacy TCF Cash Balance Pension Plan in connection with the Merger, which was frozen in 2004 and had further compensation credits discontinued in 2006. The termination of the Legacy TCF Cash Balance Pension Plan was approved by Legacy TCF, effective November 1, 2019. Mr. Dahl is the only NEO participating in the Legacy TCF Pension Plan. His pension benefits are disclosed below in the “Pension Benefits in 2019” table and described in the narrative following that table. Insurance Benefits NEOs are eligible for the same group medical, dental, disability, life insurance and other similar benefits that are generally available to our full-time employees. Perquisites Perquisites received by NEOs include use of Company-owned or leased automobiles or car allowances, use of a driver, club memberships, executive physicals, life insurance, incentive trips, and tax return preparation. Messrs. Torgow, Dahl and Provost may receive personal use of our corporate aircraft. The purpose of these perquisites is to provide competitive benefits, reduce security risks, and enhance scheduling and efficient use of the NEOs’ time. The Compensation Committee reviews the perquisites of the NEOs and other officers annually. | 2020 Proxy Statement | | 36 |
Looking Forward: 2020 Annual Cash Incentive For 2020, the Compensation Committee determined, with input from Pay Governance, that adjusted earnings per share and adjusted efficiency ratio weighted 25%. Similarare the best corporate performance metrics to the 2018 PRSU grant,measure our financial performance for our annual cash incentive, and that 80% of each participating NEO’s annual cash incentive award will be tied to those metrics. Consistent with 2019, the remaining 20% of these goals was measured on an interpolated scale ranging from 0% of target for below thresholdthe cash incentive awards will be tied to individual performance to 50% of target for threshold performance, to 100% of target for target performance to 150% of target for maximum performance.objectives. The Compensation Committee also determined levels for threshold, target, and maximum payouts for corporate performance metrics for use in 2020 for all NEOs. The 2020 annual incentive plan will be discussed in greater detail in next year’s proxy statement. Looking Forward: 2020 Long-Term Incentives For 2020, the Compensation Committee determined, with input from Pay Governance, that total shareholder return relative to our peer group is the best metric to measure our financial performance for our long-term incentive awards. Long-term incentive awards will consist of 60% PRSUs vesting at the end of a three-year performance period, and 40% TRSUs vesting in 25% annual increments over a period of four years. The Compensation Committee also determined levels for threshold, target, and maximum payouts for use in 2020 for all NEOs. The 2020 long-term incentives will be discussed in greater detail in next year’s proxy statement. TCF and Legacy TCF Combined 2019 Total Compensation The following sections describe the primary roles of our NEOs following our Merger and their total compensation received in 2019, including payments and equity awards granted by Legacy TCF prior to our Merger. Craig R. Dahl Mr. Dahl is our President and Chief Executive Officer, as well as a Director, roles to which he was appointed upon completion of the Merger. Prior to that, he had served as President and Chief Executive Officer of Legacy TCF since 2016 and Chairman since 2017. Mr. Dahl’s wealth of experience spans all aspects of a diversified commercial bank. He joined Legacy TCF as President and Chief Executive Officer of Legacy TCF’s Equipment Finance business when this business was launched in 1999, and has also played a pivotal role in leading the development and growth of Legacy TCF’s inventory finance and national residential mortgage lending businesses. In addition, Mr. Dahl had a key leadership role in overseeing Legacy TCF’s full Commercial Banking business. As Chief Executive Officer, he also supervised all of Retail Banking, and transformed the bank’s business strategy to deliver profitable growth for shareholders. Mr. Dahl’s insight and experience in both the banking industry and at Legacy TCF were critical to developing our organizational structure and assuring that taking “the best of both banks” was more than just words on a page. In developing our business structure and retaining key executives from both organizations, he and our Chairman collaborated closely to ensure that individuals were included in roles where they could continue to deliver on the successes of each organization, while positioning TCF to compete and win in the future. As a result of this careful planning and measured execution, we believe that we have created an organization that leverages the strengths of each organization, which we believe will translate to superior execution and business growth. His compensation for 2019 is provided below: | 2019 Compensation | | Salary(1) | | $ | 1,019,615 | | | Annual Cash Incentive(2) | | $ | 2,039,230 | | | Restricted Stock(3) | | $ | 1,839,840 | | | Total Compensation | | $ | 4,898,685 | | | % Performance-Based(4) | | | 60% | |
| (1) | Represents Mr. Dahl’s Form W-2 wages paid by Legacy TCF prior to the Merger Date and then by TCF following the Merger. | | (2) | Represents Mr. Dahl’s annual cash incentive awarded for 2019 through Legacy TCF’s 2019 MIP, the obligations of which we assumed in the Merger. | | (3) | Represents PRSUs and time-based restricted stock awards granted to Mr. Dahl by Legacy TCF in January 2019. These awards were subsequently converted to TRSUs or earned PRSUs, respectively, of TCF in connection with the Merger. Dollar amount is the grant date fair value as of the Merger Date. | | (4) | Performance-based compensation includes Mr. Dahl’s annual cash incentives and the grant date fair value of Mr. Dahl’s PRSUs as of the Merger Date. |
For information regarding Mr. Dahl’s employment agreement, see “Executive Compensation – Employment, Retention and Equity Award Agreements.” | 2020 Proxy Statement | | 37 |
David T. Provost Mr. Provost is Executive Vice Chairman of the Board and Chairman of TCF Bank, roles to which he was appointed upon completion of the Merger. Prior to that, he served as Chief Executive Officer and President. Mr. Provost is an expert in bank acquisitions, completing nine since acquiring First Michigan Bank in 2009. Previously, Mr. Provost was the Chairman and Chief Executive Officer of Talmer Bank and Trust, which merged with Chemical Bank. Under his leadership, Talmer Bank and Trust and its predecessor, First Michigan Bank, was the fastest growing bank in the country from 2010 to 2015, completing nine bank acquisitions. Previously, Mr. Provost established two banks, The Bank of Bloomfield Hills and The Bank of Rochester, which he combined and sold to PrivateBancorp in 2005. Mr. Provost is also active in community and civic organizations. Mr. Provost’s banking expertise, connections with the Detroit and greater Michigan business community, experience in acquisitions and community engagement are essential to TCF’s continued integration and maintaining key relationships in several of TCF’s primary markets. His compensation for 2019 is provided below: | 2019 Compensation | | Salary(1) | | $ | 931,731 | | | Annual Cash Incentive | | $ | 1,341,780 | | | Restricted Stock(2) | | $ | 1,905,172 | | | Total Compensation | | $ | 4,178,683 | | | % Performance-Based(3) | | | 60% | |
| (1) | Represents Mr. Provost’s Form W-2 wages paid in 2019. | | (2) | In February 2019, the Compensation Committee determined that to more closely align the interests of Mr. Provost with those of our shareholders, it would exercise its discretion under the annual incentive plan not to award a cash incentive payment for 2018 to Mr. Provost. At that time, the Compensation Committee awarded Mr. Provost TRSUs under the 2017 Stock Plan with a grant date fair value equal to approximately $950,000, which approximated the target amount he would have been eligible to receive in 2018 under the annual incentive plan. This award of TRSUs is not included in this table. | | (3) | Performance-based compensation includes Mr. Provost’s annual cash incentives and the grant date fair value of Mr. Provost’s PRSUs. |
For information regarding Mr. Provost’s employment agreement, see “Executive Compensation – Employment, Retention and Equity Award Agreements.” For information regarding Mr. Provost’s 2019 long-term incentive awards, see “Compensation of Named Executive Officers – 2019 Long-term Equity Compensation” in this CD&A. Dennis L. Klaeser Mr. Klaeser has been Chief Financial Officer of TCF and TCF Bank (formerly Chemical Bank) since August 2016, upon completion of our merger with Talmer Bancorp, Inc. Mr. Klaeser is a member of the TCF Executive Leadership Team and is a member of the board of directors of TCF Bank. Mr. Klaeser has extensive experience serving as Chief Financial Officer. Prior to that, Mr. Klaeser served as Chief Financial Officer and an Executive Managing Director of Talmer Bancorp, Inc. from May 2010 until Talmer Bancorp’s merger with the Chemical Financial Corporation in August 2016. Mr. Klaeser also served as Chief Financial Officer and a director of First Place Bank following its acquisition by Talmer Bancorp, Inc. from January 2013 until it was merged into Talmer Bank and Trust in February 2014. Mr. Klaeser’s experience and expertise will be instrumental in guiding TCF’s integration and the transition to Mr. Maass, who will serve as Chief Financial Officer when Mr. Klaeser ceases his employment with TCF in October 2020 His compensation for 2019 is provided below: | 2019 Compensation | | Salary(1) | | $ | 735,577 | | | Annual Cash Incentive | | $ | 847,440 | | | Restricted Stock | | $ | 601,629 | | | Total Compensation | | $ | 2,184,646 | | | % Performance-Based(2) | | | 55% | |
| (1) | Represents Mr. Klaeser’s Form W-2 wages paid in 2019. | | (2) | Performance-based compensation includes Mr. Klaeser’s annual cash incentives and the grant date fair value of Mr. Klaeser’s PRSUs. |
For information regarding Mr. Klaeser’s letter agreement and employment agreement, see “Executive Compensation – Employment, Retention and Equity Award Agreements.” For information regarding Mr. Klaeser’s 2019 long-term incentive awards, see “Compensation of Named Executive Officers – 2019 Long-term Equity Compensation” in this CD&A. | 2020 Proxy Statement | | 38 |
Gary Torgow Mr. Torgow serves as Executive Chairman of the Board, a position he has held since his appointment in August 2016, upon the completion of our merger with Talmer Bancorp, Inc. As Executive Chairman, Mr. Torgow has responsibility for leading the Board in its agenda and consideration of strategic issues as well as monitoring corporate governance and shareholder issues. As Executive Chairman, Mr. Torgow may serve as an advisor and confidant to the Chief Executive Officer, and advises on strategic plan development. In addition, given Mr. Torgow’s background as an attorney, his extensive community involvement and his government and corporate relations expertise, he serves a key role in corporate and community relations and in providing insight and strategic advice in an industry where a deep understanding of legislative and regulatory trends is especially important. Mr. Torgow was instrumental in the founding and board oversight of Talmer Bancorp and here, and he brings strong experience with publicly-held bank holding companies. Additionally, Mr. Torgow brings deep expertise and familiarity within the business community within the Michigan and Detroit markets, which are key to TCF’s strategy. Mr. Torgow plays a significant role in supporting and advocating for TCF across its business and customer relationships. His compensation for 2019 is provided below: | 2019 Compensation | | Salary(1) | | $ | 931,731 | | | Annual Cash Incentive | | $ | 1,341,780 | | | Restricted Stock(2) | | $ | 1,905,172 | | | Total Compensation | | $ | 4,178,683 | | | % Performance-Based(3) | | | 60% | |
| (1) | Represents Mr. Torgow’s Form W-2 wages paid in 2019. | | (2) | In February 2019, the Compensation Committee determined that to more closely align the interests of Mr. Torgow with those of our shareholders, it would exercise its discretion under the annual incentive plan not to award a cash incentive payment for 2018 to Mr. Torgow. At that time, the Compensation Committee awarded Mr. Torgow TRSUs under the 2017 Stock Plan with a grant date fair value equal to approximately $950,000, which approximated the target amount he would have been eligible to receive in 2018 under the annual incentive plan. This award of TRSUs is not included in this table. | | (3) | Performance-based compensation includes Mr. Torgow’s annual cash incentives and the grant date fair value of Mr. Torgow’s PRSUs. |
For information regarding Mr. Torgow’s employment agreement, see “Executive Compensation – Employment, Retention and Equity Award Agreements.” For information regarding Mr. Torgow’s 2019 long-term incentive awards, see “Compensation of Named Executive Officers – 2019 Long-Term Equity Compensation” in this CD&A. Thomas C. Shafer Mr. Shafer is our Chief Operating Officer of TCF and President and Chief Operating Officer of TCF Bank, roles to which he was appointed on the Merger Date. Before that, he served as Vice Chairman, President and Chief Executive Officer of Chemical Bank (which merged into TCF Bank on the Merger Date), from June 2017. Mr. Shafer has responsibility for National Banking, Regional Banking, IT and Operations, and has extensive experience in banking and executive leadership. Mr. Shafer joined Chemical Bank through the acquisition of Talmer Bancorp Inc. and served as Executive Vice President, Director of Regional and Community Banking of Chemical Bank from August 2016 to June 2017. Mr. Shafer joined Talmer Bank in 2010 and upon the organization’s 2013 acquisition of First Place Bank was appointed to serve as President, Chief Executive Officer and director of First Place Bank. Prior to joining Talmer Bank, Mr. Shafer spent 16 years with Citizens Republic Bancorp, where he held various executive level positions within Commercial and Retail Banking and also served as Chief Credit Officer. As he did with Chemical Bank’s and Talmer Bank’s previous mergers, Mr. Shafer plays a key leadership role in integrating both the retail and commercial businesses of Legacy TCF and Chemical Bank. His 2019 compensation is provided below: | 2019 Compensation | | Salary(1) | | $ | 931,731 | | | Annual Cash Incentive | | $ | 1,341,780 | | | Restricted Stock(2) | | $ | 5,137,196 | | | Total Compensation | | $ | 7,410,707 | | | % Performance-Based(3) | | | 26% | |
| (1) | Represents Mr. Shafer’s W-2 wages paid in 2019. | | (2) | Includes Mr. Shafer’s retention award, which had an approximate value of $4,184,583, and represents TRSUs and PRSUs granted during 2019 and valued at the grant date fair value. | | (3) | Performance-based compensation includes Mr. Shafer’s annual cash incentives and the grant date fair value of Mr. Shafer’s PRSUs. |
For information regarding Mr. Shafer’s employment agreement, see “Executive Compensation – Employment, Retention and Equity Award Agreements.” For information regarding Mr. Shafer’s 2019 long-term incentive awards, see “Compensation of Named Executive Officers – 2019 Long-term Equity Compensation” in this CD&A. | 2020 Proxy Statement | | 39 |
Brian W. Maass Mr. Maass currently serves as TCF’s Executive Vice President, Deputy Chief Financial Officer and Treasurer, roles to which he was appointed on the Merger Date. Mr. Maass currently has responsibility for Treasury, Financial Planning & Analysis and Investor Relations, and we were pleased to announce in December 2019 that effective October 1, 2020, Mr. Maass will assume the role of Chief Financial Officer. Prior to the Merger, Mr. Maass served as Executive Vice President and Chief Financial Officer of Legacy TCF. Mr. Maass has already been instrumental in leading significant integration projects including balance sheet repositioning, investor messaging and materials, capital management (including subordinated debt issuance and stock buyback approval), enhanced management reporting for new business segments, reduced deposit costs and maintained strong liquidity. We believe that the talents and experience that he brings to TCF, together with his deep knowledge of Legacy TCF and its business, will be instrumental in realizing the planned merger synergies and cost savings, as well as integrating the Finance teams of both organizations. Due to his change in role following the Merger, Mr. Maass would have had Good Reason under his Change in Control Severance Agreement with Legacy TCF, which would have permitted him to voluntarily terminate his employment and receive severance compensation. In order to incentivize him to remain with TCF and focus on working towards a successful integration and implementation of our key strategic initiatives, following the Merger, we granted him a retention equity award and entered into a new Executive Employment Agreement that eliminated his ability to terminate his employment and receive a change in control severance payment with respect to the performance goals were earned at 90.0% of targetMerger. His compensation for the performance period, as indicated in the table below.
The calculation of 2018 financial achievement includes certain non-GAAP adjustments that the Corporation has in prior years regularly and customarily made to its incentive plan financial results, including the exclusion of the fair value change in loan servicing rights and non-core extraordinary operating expenses, which in 2018 related exclusively to our core banking system conversion. The performance results also exclude the benefit of tax reform to prevent the enlargement of these awards due to what was an unforeseen change in the tax code when the performance goals were established.
| | | | | | | | | | | | | | | | | Measure | | Weighting | | Performance Goals | | Actual Achievement | | | Threshold | | Target | | Maximum | | Result | | Funding | | Weighted | 2018 Adjusted Diluted EPS (1) | | 75% | | $3.34 | | $3.49 | | $3.56 | | $3.4 | | 70% | | 52.5% | 2018 Adjusted Efficiency Ratio (2) | | 25% | | 57% | | 53% | | 51% | | 50.7% | | 150% | | 37.5% | | Payout Funding | | -- | | 50% | | 100% | | 150% | | -- | | -- | | 90% |
| 2019 Compensation | | Salary(1) | | $ | 482,885 | | | Annual Cash Incentive(2) | | $ | 724,328 | | | Restricted Stock(3) | | $ | 3,046,223 | | | Total Compensation | | $ | 4,253,436 | | | % Performance-Based(4) | | | 23% | |
| (1) | Represents Mr. Maass’ Form W-2 wages paid by Legacy TCF prior to the Merger Date and then by TCF following the Merger. | (1)(2) | AdjustedRepresents Mr. Maass’ annual cash incentive awarded for 2019 through Legacy TCF’s 2019 MIP, the obligations of which we assumed in the Merger. | | (3) | Represents PRSUs and time-based restricted stock awards granted to exclude (a)Mr. Maass by Legacy TCF in January 2019. These awards were subsequently converted to TRSUs of TCF in connection with the Merger. Dollar amount is the grant date fair value change in loan servicing rights and non-core extraordinary operating expenses,as of the Merger Date. Also includes Mr. Maass’ retention award, which in 2018 related exclusively to our core banking system conversion, and (b)had a value of $2,500,011 valued at the benefit of tax reform adopted in December 2017. |
| grant date fair value. | (2)(4) | Adjusted Efficiency Ratio is defined as (a) total operating expenses, excluding impairment of income tax credits, amortization of intangiblesPerformance-based compensation includes Mr. Maass’ annual cash incentives and the excluded items described in footnote (1) above, divided by (b) the sum of (i) net interest income, excluding the net interest income FTE adjustment, plus (ii) noninterest income, excluding the change ingrant date fair value of loan servicing rights and gain on salesMr. Maass’ PRSUs as of investment securities.the Merger Date. |
AdditionalFor information regarding Mr. Maass’ employment agreement, see “Executive Compensation Policies– Employment, Retention and Practices
Clawback PolicyEquity Award Agreements.”| Compensation & Governance Best Practices | | |
Recovery (“Recoupment”Clawback”)
In of Performance-Based CompensationThe Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) requires recovery of certain compensation from the interest of further aligningPrincipal Executive Officer and the interests of our named executive officers with those of our shareholders, the Compensation Committee adopted a “clawback” policy for incentive-based compensation awards made in 2014 and thereafter. The clawback policy provides that all long-term and annual incentive-based compensation, including time-vesting equity compensation and discretionary awards, that is earned after January 1, 2014 will be subject to repayment if it is paid to an executive officerPrincipal Financial Officer in the three-year period preceding any date on which we are required to discloseevent of a restatement of our financial statementsresults due to misconduct. The Audit Committee is responsible for determining whether annual cash incentive or long-term incentive compensation paid to the Principal Executive Officer or the Principal Financial Officer should be recovered in the event of a restatement. Mr. Dahl’s employment agreement sets forth his obligations to comply with these provisions of Sarbanes-Oxley, if applicable. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) required the SEC to issue rules that require all public companies to adopt additional mandatory clawback policies to recover any incentive-based compensation paid to current and former executive officers based on financial information that was subsequently required to be restated due to material noncompliance with any financial reporting requirements underrequirements. In 2015 the federal securities laws or asSEC issued proposed rules. There are a number of areas addressed by the proposed rules, however, that require clarification and will likely result in material changes to the proposed rules. As a result, the Compensation Committee believes it is appropriate to await comprehensive final rules and subsequent changes to Nasdaq Listing Rules before it adopts a clawback policy. Mr. Dahl’s employment agreement sets forth his obligations to comply with these provisions of misconductDodd-Frank, when applicable. Compensation Policies and Practices as They Relate to Risk Management On an annual basis, the Compensation Committee performs a review of our incentive compensation policies and practices for senior executive officers and others, individually or fraud. Repayment underin the clawback provision is limitedaggregate, who may have the potential to the amountexpose TCF to material levels of incentive-based compensation that exceeds the amountrisk. The Compensation Committee bases this review in part on an analysis of such compensation thatarrangements by our incentive compensation risk officer. The analysis and the Corporation would have paidCompensation Committee’s review considers, among other things, the balance between short- and long-term components of incentive compensation for the senior executive officers, the factors used to such executive officer if the financial statements had been originally filed in their restated form. Any employee who has reasonable cause to believe that a violation under the clawback provision has occurred must promptly report such mattersdetermine eligibility for annual cash incentive awards, terms of vesting for long-term incentive awards to the Compensation Committee. The Compensation Committee will exercise its business judgment insenior executive officers, risk management considerations, and how these elements relate to TCF’s most significant risks. In the fair applicationcase of the clawback policy and consider all relevant factors in determining whethersenior executive officers, the Compensation Committee will seekplaces significant reliance on its ability to recoverreduce or withhold an award if it determines that the executive incurred excessive risk. We believe that our incentive compensation from the executive officerarrangements, and the amount, timingcompensation policies and form of any incentive compensation recovery.practices in general, are not reasonably likely to have a material adverse effect on TCF. | 2020 Proxy Statement | | 40 |
Stock Ownership Guidelines
for Executive OfficersOur stock ownership guidelines are designed to encourage share ownership so that our executives have a direct stake in ChemicalTCF and to align their interests with the long-term interests of our shareholders. The ownership guidelines cover all named executive officersNEOs and are as follows: | | | Required Salary | | Position | Required Salary | Multiple | | President and Chief Executive Officer | | 5x base salary | | All other executive officers | | 3x base salary |
In general, stock ownership is determined in the same manner as beneficial ownership for SEC reporting purposes. The following share types are included under these guidelines: shares directly owned, family-owned shares, retirement plan shares and unvested TRSUs.time-based restricted stock. Stock options that are unexercised, regardless of their vesting status and in-the-money value, are not counted toward satisfaction of these guidelines. Unvested PRSUs areperformance-based restricted stock is also not counted toward stock ownership.
Executives are required to comply with these guidelines within five years of becoming subject to this policy. Individuals who acquire shares of common stock under our equity-based incentive plans must hold at least 50% of all net after-tax acquired shares until the earlier of the date at which they satisfy our stock ownership guidelines, or 36 months following acquisition of such shares. Currently, all named executive officers are either in compliance with the guidelines or within the five-year compliance window.
Anti-Hedging Policy
Our anti-hedging policy alignsThe Board adopted the Stock Ownership Guidelines because it believes that it is in our and our shareholders’ best interests to further align the long-term financial interests of executive management with those of our directorsshareholders by encouraging stock ownership among our executives. The Board believes that executive stock ownership demonstrates a long-term commitment to our growth and executive officers withprofitability. Anti-Hedging and Anti-Pledging Prohibitions under our shareholders. The policyInsider Trading Policy Our Insider Trading Policy prohibits our directors, and executive officers and employees from engaging in any transaction thatwhich could hedge or offset decreases in the market value of our common stock. In addition, all of directors and executives, including our NEOs, are prohibited from pledging stock including short-selling, put or call options, forward sale or purchase contracts, equity swaps, and exchange funds.
under our Insider Trading Policy.Deductibility of Executive Compensation
Internal Revenue Code Section 162(m) generally prohibits a federal income tax deduction to public companies for compensation over $1,000,000 paid to a "covered“covered employee."” A "covered employee"“covered employee” includes (i) the Chief Executive Officer, (ii) the Chief Financial Officer, (iii) the three other most highly compensated executive officers, and (iv) any individual who was a covered employee for any taxable year beginning after December 31, 2016. Before 2018, we were permitted to receive a federal income tax deduction for qualifying “performance-based” compensation as defined under Code Section 162(m) without regard to this $1,000,000 limitation. However, recent U.S. tax legislation eliminated the performance-based exception. These new rules became effective starting in 2018 for us, except that certain equity awards that were granted on or before November 2, 2017 may still qualify as performance-based compensation. To the extent that in 2018 or any later year, the aggregate amount of any covered employee'semployee’s salary, bonus, and amount realized from option exercises and vesting of restricted stock units or other equity awards, and certain other compensation amounts that are recognized as income for federal income tax purposes by the covered employee exceeds $1,000,000 in any year, we will not be entitled to a federal income tax deduction for the amount over $1,000,000 in that year.  | Compensation Committee Report |
The Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our executive officers,reviewed and may determine it is appropriate to provide compensationdiscussed the preceding Compensation Discussion and Analysis with management. Based on that may exceed deductibility limits in order to recognize performance, meet market demands, retain key executives,review and take into account other appropriate considerations.
Employment Agreements
In 2018, we entered into new or amended employment agreements with each of our named executive officers. The terms have been negotiated and determined with considerationdiscussion, the Compensation Committee recommended to the best interests of the Corporation and our shareholders. In attracting and securing a talented executive team, we believe we have positioned Chemical to successfully execute our growth strategy and vision.
We describe the material terms of our employment agreements with Mr. Provost, Mr. Torgow, Mr. Klaeser, Mr. Shafer and Mr. Ryan below under “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table.”
Severance and Change in Control Arrangements
We provide severance benefits and in certain circumstances, change in control benefits, which are designed to retain our key executives, including our named executive officers, during a potential change in control and also to provide income continuation in the event of certain involuntary terminations.
Each of our employment agreements with Mr. Provost, Mr. Torgow, Mr. Klaeser, Mr. Shafer and Mr. Ryan include certain severance payments upon termination of employment, and our employment agreements with Mr. Klaeser, Mr. Shafer and Mr. Ryan include severance benefits in connection with a change in control of the Corporation. With respect to a change in control, each employment agreement that includes change in control provisions provides “double trigger” benefits to the executive, meaningBoard that the severance benefits are paid only if we terminate the officer’s employment generally without cause or the executive either terminates his employment for good reason or experiences a good reason event (as applicable) following a changeCompensation Discussion and Analysis be included in control. For a detailed description of the severance and change in control benefits applicable to our named executive officers, see the discussion below under “Potential Payments Upon Termination or Change in Control.”TCF’s Proxy Statement.Arthur A. Weiss,Chair
Karen L. Grandstrand
Barbara J. Mahone
Vance K. Opperman
Roger J. Sit
Jeffrey L. Tate | 2020 Proxy Statement | | 41 |
Summary Compensation Table and Grants of Plan-Based Awards Table
| Executive Compensation |
| Summary Compensation Table | | |
The following summary compensation table shows(the “Summary Compensation Table”) identifies the cash and non-cash compensation we paidawarded to our named executive officers foror earned by the years ended December 31,NEOs in 2019, 2018, 2017 and 2016.2017. The positions listed in the table are those in which the named executive officerNEO served at December 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary(1) | Bonus | | Stock Awards(3) | | Option Awards(5) | Non-Equity Incentive Plan Compensation(6) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation(8) | Total | David T. Provost(9) | 2018 | $ | 456,731 |
| $ | — |
| | $ | 2,980,668 |
| (4) | $ | — |
| $ | — |
| (7) | $ | — |
| $ | 96,181 |
| $ | 3,533,580 |
| | President and Chief Executive Officer of Chemical | 2017 | 823,390 |
| — |
| | 1,047,880 |
| | — |
| — |
| | — |
| 61,194 |
| 1,932,464 |
| | Dennis L. Klaeser | 2018 | $ | 703,846 |
| $ | — |
| | $ | 993,556 |
| (4) | $ | — |
| $ | 612,000 |
| | $ | — |
| $ | 47,383 |
| $ | 2,356,785 |
| | Executive Vice President and Chief Financial Officer of Chemical and Chemical Bank | 2017 | 550,000 |
| 157,581 |
| | 944,839 |
| | — |
| 342,419 |
| | — |
| 36,654 |
| 2,031,493 |
| | | 2016 | 183,483 |
| — |
| | 75,000 |
| | — |
| — |
| | — |
| 11,607 |
| 270,090 |
| Gary Torgow(9) | 2018 | $ | 456,731 |
| $ | — |
| | $ | 2,980,668 |
| (4) | $ | — |
| $ | — |
| (7) | $ | — |
| $ | 69,170 |
| $ | 3,506,569 |
| | Executive Chairman of the Board of Directors of Chemical | 2017 | 823,390 |
| — |
| | 1,047,880 |
| | — |
| — |
| | — |
| 32,303 |
| 1,903,573 |
| Thomas C. Shafer(9) | 2018 | $ | 903,846 |
| $ | — |
| | $ | 993,556 |
| (4) | $ | — |
| $ | 969,000 |
| | $ | — |
| $ | 59,252 |
| $ | 2,925,654 |
| | Vice Chairman of Chemical and President and Chief Executive Officer of Chemical Bank | 2017 | 562,500 |
| 111,229 |
| | 647,341 |
| | 132,005 |
| 538,771 |
| | — |
| 52,975 |
| 2,044,821 |
| J. Brennan Ryan(10) | 2018 | $ | 300,000 |
| $ | 520,000 |
| (2) | $ | 520,000 |
| (4) | $ | — |
| $ | — |
| | $ | — |
| $ | 15,162 |
| $ | 1,355,162 |
| | Chief Operating Officer and Executive Vice President of Chemical and Chemical Bank | | | | | | | | | | | |
|
|
Name and
Principal Position | | Year | | Salary
($)(1) | | | Bonus
($) | | | Stock
Awards
($)(2) | | | Option
Awards
($)(3) | | | Non-Equity
Incentive Plan
Compensation
($)(4) | | | Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)(5) | | | All Other
Compensation
($)(6) | | | Total
($)(7) | | Craig R. Dahl(8)
Director, President, and Chief Executive Officer | | 2019 | | $ | 423,077 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,039,230 | | | $ | 3,890 | | | $ | 35,515 | | | $ | 2,501,712 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | David T. Provost
Executive Vice-Chairman, Former President and ChiefExecutive Officer | | 2019 | | | 931,731 | | | | — | | | | 2,855,154 | | | | — | | | | 1,341,780 | | | | — | | | | 117,204 | | | | 5,245,869 | | | | 2018 | | | 456,731 | | | | — | | | | 2,980,668 | | | | — | | | | — | | | | — | | | | 96,181 | | | | 3,533,580 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 823,390 | | | | — | | | | 1,047,880 | | | | — | | | | — | | | | — | | | | 61,194 | | | | 1,932,464 | | Dennis L. Klaeser
Executive Vice President and Chief Financial Officer | | 2019 | | | 735,577 | | | | — | | | | 601,629 | | | | — | | | | 847,440 | | | | — | | | | 75,784 | | | | 2,260,430 | | | | 2018 | | | 703,846 | | | | — | | | | 993,556 | | | | — | | | | 612,000 | | | | — | | | | 47,383 | | | | 2,356,785 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 550,000 | | | | 157,581 | | | | 944,839 | | | | — | | | | 342,419 | | | | — | | | | 36,654 | | | | 2,031,493 | | GaryTorgow
Executive Chairman | | 2019 | | | 931,731 | | | | — | | | | 2,855,154 | | | | — | | | | 1,341,780 | | | | — | | | | 117,733 | | | | 5,246,398 | | | | 2018 | | | 456,731 | | | | — | | | | 2,980,668 | | | | — | | | | — | | | | — | | | | 69,170 | | | | 3,506,569 | | | | 2017 | | | 823,390 | | | | — | | | | 1,047,880 | | | | — | | | | — | | | | — | | | | 32,303 | | | | 1,903,573 | | Thomas C. Shafer
Chief Operating Officer and President of TCF Bank | | 2019 | | | 931,731 | | | | — | | | | 5,137,196 | | | | — | | | | 1,341,780 | | | | — | | | | 152,931 | | | | 7,563,638 | | | | 2018 | | | 903,846 | | | | — | | | | 993,556 | | | | — | | | | 969,000 | | | | — | | | | 59,252 | | | | 2,925,654 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 562,500 | | | | 111,229 | | | | 647,341 | | | | 132,005 | | | | 538,771 | | | | — | | | | 52,975 | | | | 2,044,821 | | Brian W. Maass(8)
Executive Vice President and Deputy Chief Financial Officer | | 2019 | | | 208,846 | | | | — | | | | 2,500,011 | | | | — | | | | 724,328 | | | | — | | | | 25,665 | | | | 3,458,850 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes wages paid by TCF to Messrs. Dahl and Maass from the start of their employment with TCF on the Merger Date. Total wages paid by TCF and by Legacy TCF for 2019 are $1,019,615 to Mr. Dahl and $482,885 to Mr. Maass. | (1) | Includes salary deferred under the Chemical Financial Corporation 401(k) Savings Plan and the Chemical Financial Corporation Nonqualified Deferred Compensation Plan. For a description of changes related to base salary in 2018, see the discussion entitled "Elements of Compensation–Base Salary" in the CD&A section of this Proxy Statement. |
| | | (2) | This amount reflects his guaranteed incentive payment under terms of his Employment Agreement, as further explained under "Elements of Compensation–Other 2018 Cash Bonus Payments" in the CD&A section of this Proxy Statement. |
| | (3) | The values of all stock awards reported in this column were computed in accordance with Financial Accounting Standards Board Accounting Standards Codification, ASC Topic 718 Compensation-Stock Compensation (ASC 718). For a discussion718. Represents the following amounts: Mr. Provost – $1,145,151 of PRSUs and $1,710,003 of TRSUs; Mr. Klaeser – $361,615 of PRSUs and $240,014 of TRSUs; Mr. Torgow – $1,145,151 of PRSUs and $1,710,003 of TRSUs; Mr. Shafer – $572,597 of PRSUs and $4,564,599 of TRSUs; and Mr. Maass – $2,500,011 of TRSUs. Amounts reported for Messrs. Provost and Torgow include the value of the valuationTRSUs granted in 2019 pursuant to the 2017 Stock Plan in lieu of a cash incentive under our annual incentive plan, which had a grant date fair value of $949,981; excluding this award, total stock compensation based on performance at target to each of Messrs. Provost and Torgow would have been $1,905,173. The PRSUs were determined to have a value at the grant date based on management’s assessment that it was probable that the PRSUs would vest in 2021 at the target payout, or 1.0x the number of units granted. Because of the Merger, performance under PRSUs granted in 2019 was fixed at the target performance level before the Merger Date (the “earned PRSUs”), and the earned PRSUs are now only subject to time-based vesting requirements. None of the restricted stock unit awards are entitled to accrued dividends unless and until the awards vest. Amounts reported for Messrs. Dahl and Maass do not include the value of equity awards granted by Legacy TCF in January 2019 that were converted into TCF TRSUs or earned PRSUs in connection with the Merger; such grants were in the following amounts: Mr. Dahl - $1,839,840 split evenly between time-based restricted stock awards and PRSUs, and Mr. Maass - $546,212 split evenly between time-based restricted stock awards and PRSUs, valued at a grant date fair value as of the Merger Date. Including these awards, Mr. Dahl’s total stock awards would be $1,839,840 and Mr. Maass’ would be $3,046,223. TCF’s accounting policy and assumptions see Note 18for stock-based compensation are described in Notes 3 and 20 of the Notes to our 2018 consolidated financial statementsConsolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. |
| 2019. | (4) | Represents the following amounts: Mr. Provost – $1,780,673 of PRSUs and $1,199,995 of TRSUs; Mr. Klaeser – $593,558 of PRSUs and $399,998 of TRSUs; Mr. Torgow – $1,780,673 of PRSUs and $1,199,995 of TRSUs; Mr Shafer – $593,558 of PRSUs and $399,998 of TRSUs; and Mr. Ryan – $520,000 of TRSUs. The PRSUs were determined to have a value at the grant date based on management's assessment that it was probable that the PRSUs would vest in 2021 at 1.0x the number of units granted. However, if the highest level of performance conditions with respect to the PRSUs granted in 2018 are satisfied, then the value of the PRSUs, determined as of the grant date would be as follows: Mr. Provost – $2,671,010; Mr. Klaeser – $890,337; Mr. Torgow – $2,671,010; Mr. Shafer – $890,337. |
| | (5)(3) | This amount represents the grant date fair value, computed in accordance with ASC 718, of the stock options granted for each named executive officer.NEO. For a discussion of our valuation assumptions, see Note 1820 to our 2018 consolidated financial statements2019 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. The per share exercise price of each option award was equal to the market value of our common stock on the date each option was granted. |
| | (6) | | | (4) | For a further description of how the Compensation Committee determined incentive payments awarded in 2018,2019, see the discussion entitled "Elements“Compensation of Compensation–Named Executive Officers – NEO Pay Determinations – 2019 Annual Cash Incentive Plan" underPlan” in the Compensation Discussion and Analysis sectionCD&A of this Proxy Statement. | | | | (5) | Amounts shown reflect the change in pension value measured against Legacy TCF’s pension value as of December 31, 2018. There were no above-market or preferential earnings on our nonqualified deferred compensation plans. We assumed the obligations of the Legacy TCF Pension Cash Balance Pension Plan in connection with the Merger, which was terminated, effective November 1, 2019. Mr. Dahl is the only NEO participating in the Legacy TCF Pension Plan. |
| 2020 Proxy Statement | | 42 |
| (6) | Amounts shown in the “All Other Compensation” column for 2019 consist of the following: |
| (a) | Mr. Dahl: $21,154 of employer contributions to the Supplemental Plan; $3,546 consisting of the taxable portion of employer paid premiums for life insurance; $3,325 in car allowances; $3,500 in executive tax service; and $3,990 in personal use of the corporate aircraft. Amounts for Mr. Dahl’s personal use of the corporate aircraft are the aggregate incremental cost of non-business travel use, as determined based on the average weighted cost of fuel and maintenance, crew travel expense, on board catering expense, landing fees, trip-related hangar/parking costs, and smaller variable costs. In the event that a family member or guest accompanied Mr. Dahl on a flight, the above amount also includes any incremental costs, such as on-board catering costs that may be associated with such travel. | (7) | In February 2019, | | | (b) | Mr. Provost: $16,800 of employer contributions to the Committee determined that eachChemical 401(k) Plan; $6,858 consisting of the taxable portion of employer paid premiums for life insurance; $75,776 in dividend equivalents earned on TRSUs; $10,800 in car allowances; $3,970 consisting of the taxable portion of employer paid premiums for disability insurance; and $3,000 in company-paid club dues. | | | | | (c) | Mr. Klaeser: $16,800 of employer contributions to the Chemical 401(k) Plan; $3,564 consisting of the taxable portion of employer paid premiums for life insurance; $25,173 in dividend equivalents earned on TRSUs; $6,222 consisting of the taxable portion of employer paid premiums for disability insurance; $12,000 in moving expenses; and $12,025 in company-paid club dues. | | | | | (d) | Mr. Torgow: $16,800 of employer contributions to the Chemical 401(k) Plan; $3,564 consisting of the taxable portion of employer paid premiums for life insurance; $75,776 in dividend equivalents earned on TRSUs; $10,800 in car allowances; $5,761 consisting of the taxable portion of employer paid premiums for disability insurance; and $5,032 in company-paid club dues. | | | | | (e) | Mr. Shafer: $16,800 of employer contributions to the Chemical 401(k) Plan; $3,564 consisting of the taxable portion of employer paid premiums for life insurance; $96,993 in dividend equivalents earned on TRSUs; $10,800 in car allowances; $6,139 consisting of the taxable portion of employer paid premiums for disability insurance; $1,000 in contractual consideration to make employment agreement binding, and $17,635 in company-paid club dues. | | | | | (f) | Mr. Maass: $10,442 of employer contributions to the Supplemental Plan; $324 consisting of the taxable portion of employer paid premiums for life insurance; $11,399 in car allowances; and $3,500 in executive tax service. |
| (7) | Amounts shown for Messrs. Provost and Mr. Torgow was eligible to receive a cash incentive payment of at least $950,000 under the 2018 annual incentive plan, based on our corporate performance and his individual performance relative to the goals established by the Committee. However, the Committee determined that to more closely align the interests of Mr. Provost and Mr. Torgow with those of our shareholders, it would exercise its discretion under the plan not to award a cash incentive payment to either Mr. Provost or Mr. Torgow for 2018. Instead,2019 include the value of the TRSUs granted in February 2019 the Committee awarded each of Mr. Provost and Mr. Torgow time-vesting restricted stock units, or TRSUs, underpursuant to the 2017 Stock Plan, with a grant date fair value equal to $950,000 (thewhich approximated the target amount each officerexecutive would have been eligible to receive in 2018 under the annual incentive plan). Theplan that the Compensation Committee determined not to award; excluding these TRSUs, vest ratably over a three-year-period, in each case subjecttotal compensation would have been $4,295,888 to continued service throughMr. Provost and $4,296,417 to Mr. Torgow. | | | | (8) | Messrs. Dahl and Maass joined TCF on the vesting date, subject to certain exceptions.Merger Date. |
Employment, Retention and Equity Award Agreements Provisions of the employment and retention agreements for Messrs. Dahl, Provost, Klaeser, Torgow, Shafer and Maass and certain provisions in their respective equity award agreements are described below under “Executive Compensation – Employment, Retention and Equity Award Agreements.” Amount of Salary and Bonus in Proportion to Total Compensation The relationship of salary to the NEOs’ total compensation will vary from year to year primarily depending on the amount of non-equity incentive compensation (annual cash incentive) and grant date fair value of long-term awards, as discussed in the CD&A. | 2020 Proxy Statement | | 43 |
| Grants of Plan-Based Awards in 2019 | | (8) | Amounts in this column include the following for 2018: |
Mr. Provost: $16,500 of employer contributions to the 401(k) Savings Plan; $990 consisting of the taxable portion of employer paid premiums for life insurance; $10,000 of additional stipend to cover other company deductions; $26,771 in dividend equivalents earned on TRSUs; $10,800 in car allowances; and $31,120 in company-paid club dues.
Mr. Klaeser: $16,500 of employer contributions to the 401(k) Savings Plan; $1,980 consisting of the taxable portion of employer paid premiums for life insurance; $17,968 in dividend equivalents earned on TRSUs; and $10,935 in company-paid club dues.
Mr. Torgow: $16,500 of employer contributions to the 401(k) Savings Plan; $990 consisting of the taxable portion of employer paid premiums for life insurance; $10,000 of additional stipend to cover other company deductions; $26,771 in dividend equivalents earned on TRSUs; $10,800 in car allowances; and $4,109 in company-paid club dues.
Mr. Shafer: $16,500 of employer contributions to the 401(k) Savings Plan; $1,980 consisting of the taxable portion of employer paid premiums for life insurance; $14,124 in dividend equivalents earned on TRSUs; $10,800 in car allowances; and $15,848 in company-paid club dues.
Mr. Ryan: $138 consisting of the taxable portion of employer paid premiums for life insurance; $6,125 in dividend equivalents earned on TRSUs; $4,985 in car allowances; and $3,914 in company-paid club dues.
| | (9) | Mr. Provost, Mr. Shafer and Mr. Torgow joined Chemical on August 31, 2016 upon completion of the Talmer merger and qualified as named executive officers for the first time in 2017. |
| | (10) | Mr. Ryan joined Chemical on July 9, 2018. |
Grants of Plan-Based Awards Table
The following table provides a summary regardingshows plan-based equity and non-equity incentive awards granted to our named executive officersthe NEOs in 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) (2) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(3) | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | David T. Provost | | $ | 475,000 |
| $ | 950,000 |
| $ | 1,425,000 |
| | | | | | | | 2/27/2018(4) | | | | 17,345 |
| 34,689 |
| 52,034 |
| — |
| $ | 1,780,673 |
| | | 2/27/2018(5) | | | | — |
| — |
| — |
| 21,417 |
| 1,199,995 |
| | Dennis L. Klaeser | | $ | 300,000 |
| $ | 600,000 |
| $ | 900,000 |
| | | | | | | | 2/27/2018(4) | | | | 5,782 |
| 11,563 |
| 17,345 |
| — |
| $ | 593,558 |
| | | 2/27/2018(5) | | | | — |
| — |
| — |
| 7,139 |
| 399,998 |
| | Gary Torgow | | $ | 475,000 |
| $ | 950,000 |
| $ | 1,425,000 |
| | | | | | | | 2/27/2018(4) | | | | 17,345 |
| 34,689 |
| 52,034 |
| — |
| $ | 1,780,673 |
| | | 2/27/2018(5) | | | | — |
| — |
| — |
| 21,417 |
| 1,199,995 |
| | Thomas C. Shafer | | $ | 475,000 |
| $ | 950,000 |
| $ | 1,425,000 |
| | | | | | | | 2/27/2018(4) | | | | 5,782 |
| 11,563 |
| 17,345 |
| — |
| 593,558 |
| | | 2/27/2018(5) | | | | — |
| — |
| — |
| 7,139 |
| 399,998 |
| | J. Brennan Ryan | | $ | — |
| $ | — |
| $ | — |
| | | | | | | | 7/9/2018(6) | | | | — |
| — |
| — |
| 8,981 |
| 520,000 |
|
| | | | | | | | | | | | | | | | | | | | | | | | All Other
Stock Awards: | | | Grant Date | | | | | | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under
Equity Incentive Plan Award | | | Number of
Shares of | | | Fair Value of
Stock | | | Name | | Grant
Date | | | Threshold
($) | | | Target
($) | | | Max
($) | | | Threshold
(#) | | | Target
(#) | | | Max
(#) | | | Stock
(#) | | | Awards
($)(7) | | | Dahl | | | | | $ | — | | | $ | — | | | $ | 2,039,230 | | | | — | | | | — | | | | — | | | | — | | | | — | | | Provost | | | | | $ | 475,000 | | | $ | 950,000 | | | $ | 1,425,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 02/25 | (2) | | | — | | | | — | | | | — | | | | 13,559 | | | | 27,117 | | | | 40,676 | | | | — | | | $ | 1,145,151 | | | | | 02/25 | (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,292 | | | $ | 760,022 | | | | | 02/25 | (4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,364 | | | $ | 949,981 | | | Klaeser | | | | | $ | 300,000 | | | $ | 600,000 | | | $ | 900,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 02/25 | (2) | | | — | | | | — | | | | — | | | | 4,282 | | | | 8,563 | | | | 12,845 | | | | — | | | $ | 361,615 | | | | | 02/25 | (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,145 | | | $ | 240,014 | | | Torgow | | | | | $ | 475,000 | | | $ | 950,000 | | | $ | 1,425,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 02/25 | (2) | | | — | | | | — | | | | — | | | | 13,559 | | | | 27,117 | | | | 40,676 | | | | — | | | $ | 1,145,151 | | | | | 02/25 | (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,292 | | | $ | 760,022 | | | | | 02/25 | (4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,364 | | | $ | 949,981 | | | Shafer | | | | | $ | 475,000 | | | $ | 950,000 | | | $ | 1,425,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 02/25 | (2) | | | — | | | | — | | | | — | | | | 6,780 | | | | 13,559 | | | | 20,339 | | | | — | | | $ | 572,597 | | | | | 02/25 | (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,146 | | | $ | 380,011 | | | | | 08/01 | (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 101,617 | | | $ | 4,184,588 | | | Maass | | | | | $ | — | | | $ | — | | | $ | 724,328 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 12/13 | (6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 54,657 | | | $ | 2,500,011 | |
| (1) | | (1) | For each named executive officer,NEO, except Messrs. Dahl and Maass, amounts reported represent the potential payout range pursuant to our 2018 Annual Incentive Plan, which we refer to as the annual incentive plan, with all payments subject to achievement of corporate and individual performance objectives and the discretion of the Compensation Committee. The annual incentive plan is further explained in "Elements“Compensation of Compensation-AnnualNamed Executive Officers – NEO Pay Determinations – 2019 Annual Cash Incentive Plan"Plan” in the CD&A of this Proxy Statement. Actual amounts earned under the annual incentive plan in 20182019 are included in the column entitled “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table above. |
| | (2) | Mr. Ryan was hired in July 2018 Messrs. Dahl and thereforeMaass began their employment on August 1, 2019 and did not participate in theour annual incentive plan. Under his employment agreement, heplan for 2019. Each of their cash incentive payments was entitledawarded by Legacy TCF pursuant to a guaranteed incentive payment of $520,000Legacy TCF’s 2019 MIP and assumed by us in 2018. |
| connection with the Merger. | (3) | The values shown are the aggregate grant date fair value for initial awards computed in accordance with FASB ASC Topic 718. |
| | (4)(2) | Represents the award of PRSUs granted in 20182019 under the 2017 Stock Plan, with a performance period that ends on December 31, 2020.2021. The vesting iswas subject to the achievement of pre-established performance targets and the officer’sNEO’s continued service through the vesting date. Because of the Merger, achievement of performance targets was fixed at the target performance level before the Merger Date, and the earned PRSUs are now only subject to time-based vesting requirements. See "Elements“Compensation of Compensation-Long-TermNamed Executive Officers – NEO Pay Determinations – 2019 Long-Term Equity Compensation-Annual Long-Term Incentive Awards- February 2018" and "Elements of Compensation-Long-Term Equity Compensation-Strategic Awards-February 2018"Compensation” in the CD&A of this Proxy Statement for a description of the terms of these awards. Any PRSUs that vestvested units will be convertedconvert to shares of our common stock on a one-for-one basis. Earned PRSUs that do not vest will be forfeited. |
| | (5) | | | (3) | Represents the award of TRSUs granted in 20182019 under the 2017 Stock Plan. The TRSUs vest in equal 20% increments on each of the first five anniversaries of the February 25, 2019 grant date. See "Elements“Compensation of Compensation-Long-TermNamed Executive Officers – NEO Pay Determinations – 2019 Long-Term Equity Compensation-Annual Long-Term Incentive Awards-February 2018" and "Elements of Compensation-Long-Term Equity Compensation-Strategic Awards-February 2018"Compensation��� in the CD&A of this Proxy Statement for a description of the terms of these awards. Any vested units will convert to shares of our common stock on a one-for-one basis. TRSUs that do not vest will be forfeited. |
| | (6) | Represents | | (4) | In February 2019, the Compensation Committee determined that to more closely align the interests of Messrs. Provost and Torgow with those of our shareholders, it would exercise its discretion under the annual incentive plan not to award a cash incentive payment for 2018 to either Messrs. Provost or Torgow. At that time, the Compensation Committee awarded each of Messrs. Provost and Torgow TRSUs grantedunder the 2017 Stock Plan with a grant date fair value equal to $949,981, which approximated the target amount each executive would have been eligible to receive in 2018 under the 2017 Stock Plan. See “Elementsannual incentive plan. The TRSUs will vest in equal annual installments on each of Compensation-Long-Termthe first three anniversaries of the February 25, 2019 grant date. | | | | (5) | Amounts represent an equity retention award of TRSUs which will vest in equal amounts the first and second anniversary of the Merger Date. The material terms of the award are described under the heading “Compensation Highlights – Equity Compensation-Long-Term Incentive Grant-July 2018”Retention Awards” in the CD&A of this Proxy Statement for a descriptionStatement. | | | | (6) | Amounts represent an equity retention award of TRSUs which will vest in equal amounts on December 1, 2020 and the second anniversary of the Merger Date. The material terms of the award are described under the heading “Executive – Compensation Highlights – Equity Retention Awards” in the CD&A of this award. Any vested units will convert to shares of our common stock on a one-for-one basis. TRSUs that do not vest will be forfeited.Proxy Statement. | | | | (7) | The values shown are the aggregate grant date fair value for initial awards computed in accordance with ASC 718. |
| 2020 Proxy Statement | | 44 |
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements with Mr. Provost and Mr. Torgow
On February 27, 2018, we entered into new executive employment agreements with each of Mr. Provost, our Chief Executive Officer and President, and Mr. Torgow, the Executive Chairman of our board of directors, each of whom continued to serve in
these roles under their new employment agreements. These new employment agreements supersede and replace each executive’s prior employment agreement dated August 9, 2017.
Each employment agreement has an initial term of two years that commenced on March 1, 2018, the effective date, that automatically renews for successive one-year periods, unless either party provides the other party with notice of intention to terminate at least 30 days before an anniversary of the effective date, in which case the agreement will terminate at the end of the then-current term. Under the new employment agreements, each executive’s annual base salary was increased from $1.00 to $950,000 effective July 1, 2018. Each executive’s base salary will be reviewed by the Compensation Committee at least annually and can be increased in the Committee’s sole discretion. In addition to base salary, each executive is:
eligible to participate in our annual bonus and equity programs for senior executives;
entitled to an annual taxable stipend to cover deduction for other benefits under our group health care plan or for any other purpose in the amount of $20,000, with such stipend terminating on June 30, 2018;
eligible to participate in such employee benefit programs as are generally made available to our senior executives;
entitled to a monthly automobile allowance of $900; and
eligible for reimbursement for membership in two country clubs of his selection.
Each of the employment agreements provides for certain payments upon termination, as described below under “Potential Payments upon Termination or Change in Control.” Each employment agreement also requires the executive to keep corporate information confidential. In addition, each executive is subject to provisions related to non-competition and non-solicitation of customers and employees for a period of 24 months following termination of his employment.
For a discussion of awards under our annual cash incentive plan and long-term equity incentive plan, see “Elements of Compensation-Annual Cash Incentive Plan” and “Elements of Compensation-Long-Term Equity Compensation” in the CD&A section of this Proxy Statement.
Employment Agreements with Mr. Klaeser and Mr. Shafer
On July 1, 2018, we entered into new executive employment agreements with each of Mr. Klaeser, the Executive Vice President, Chief Financial Officer and Treasurer of Chemical and Chemical Bank, and Mr. Shafer, the Chief Executive Officer of Chemical Bank and Vice Chair of Chemical, each of whom continued to serve in these roles under their new employment agreements. These new employment agreements supersede and replace Mr. Klaeser’s employment agreement dated August 31, 2016 and Mr. Shafer’s employment agreement dated October 16, 2017.
Each employment agreement has an initial term of two years that commenced on July 1, 2018, the effective date, that automatically renews for successive one-year periods, unless either party provides the other party with notice of intention to terminate at least 30 days before an anniversary of the effective date, in which case the agreement will terminate at the end of the then-current term. Under the employment agreement, Mr. Klaeser will receive an annual base salary of $750,000, and Mr. Shafer will receive an annual base salary of $950,000. Each officer’s base salary will be reviewed by the Compensation Committee at least annually beginning in 2019 and is subject to adjustment. In addition to base salary, each executive is:
eligible to participate in any equity-based compensation programs that we offer, with an initial annual target for equity plan awards of 80% of base salary (in the case of Mr. Klaeser), and 100% of base salary (in the case of Mr. Shafer);
eligible to participate in our annual bonus programs for senior executives, with an initial annual target bonus equal to 80% of base salary (in the case of Mr. Klaeser), and 100% of base salary (in the case of Mr. Shafer);
eligible to participate in health and dental, life insurance, short and long term disability insurance, retirement and other employee fringe benefit programs covering our salaried employees as a group, and in any programs applicable to our senior executives;
entitled to a monthly automobile allowance of $900; and
eligible for reimbursement of up to $12,000 per year for Mr. Klaeser and $25,000 per year for Mr. Shafer for country club membership dues.
Each of the employment agreements provides for certain payments upon termination, as described below under “Potential Payments upon Termination or Change in Control.” Each employment agreement also requires the executive to keep corporate information confidential. In addition, each executive is subject to provisions related to non-competition and non-solicitation of customers and employees for a period of 24 months following termination of his employment.
For a discussion of awards under our annual cash incentive plan and long-term equity incentive plan, see “Elements of Compensation-Annual Cash Incentive Plan” and “Elements of Compensation-Long-Term Equity Compensation” in the CD&A section of this Proxy Statement.
Employment Agreement with Mr. Ryan
On July 9, 2018, we entered into an executive employment agreement with Mr. Ryan to serve as the Chief Operating Officer and Executive Vice President of Chemical and Chemical Bank. His agreement has an initial term of two years that automatically renews for successive one-year periods, unless either party provides the other party with notice of intention to terminate at least 30 days before an anniversary of the effective date, in which case the agreement will terminate at the end of the then-current term.
Under the employment agreement, Mr. Ryan will receive an annual base salary of $650,000. Mr. Ryan’s base salary will be reviewed by the Compensation Committee at least annually beginning in 2019 and is subject to adjustment. In addition to base salary, he is:
eligible to participate in any equity-based compensation programs that we offer, with an initial annual target for equity plan awards of 80% of base salary beginning in 2019 and a one-time time-vesting grant of restricted stock units in 2018 in the amount of 80% of his base salary, vesting on December 15, 2019;
eligible to participate in our annual bonus programs for senior executives, with an annual payment of up to 80% of his base salary, with a guaranteed payment for 2018 of $520,000, which is equal to 100% of his target award under the annual incentive plan;
eligible to participate in health and dental, life insurance, short and long term disability insurance, retirement and other employee fringe benefit programs covering our salaried employees as a group, and in any programs applicable to our senior executives;
entitled to a monthly automobile allowance of $900; and
eligible for reimbursement of up to $10,000 per year for country club membership dues.
His employment agreements provides for certain payments upon termination, as described below under “Potential Payments upon Termination or Change in Control.” His employment agreement also requires him to keep corporate information confidential. In addition, he is subject to provisions related to non-competition and non-solicitation of customers and employees for a period of 24 months following termination of his employment.
Mr. Ryan was hired in July 2018 and therefore did not participate in the annual incentive plan. For a discussion of his awards under our long-term equity incentive plan, see “Elements of Compensation-Long-Term Equity Compensation” in the CD&A section of this Proxy Statement.
Outstanding Equity Awards at Fiscal Year-End
| Outstanding Equity Awards at December 31, 2019 | | |
The following table provides information concerning stock optionsshows all equity awards that were outstanding exercisable and unexercisable, PRSUs and TRSUs outstanding that have not vestedat December 31, 2019 for each named executive officer as of December 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | Name | Award Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($)(1) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | David T. Provost | — |
| — |
| — |
| — |
| $ | — |
| — |
| | 30,595(5) | $ | 1,120,083 |
| 34,689(6) |
| $ | 1,269,964 |
| | | | | | | | | | | | | | | Dennis L. Klaeser | — |
| — |
| — |
| — |
| $ | — |
| — |
| | 25,128(7) | $ | 919,932 |
| 16,844(8) |
| $ | 616,659 |
| | | | | | | | | | | | | | | Gary Torgow | — |
| — |
| — |
| — |
| $ | — |
| — |
| | 30,595(9) | $ | 1,120,083 |
| 34,689(10) |
| $ | 1,269,964 |
| | | | | | | | | | | | | | | Thomas C. Shafer | 2/21/2017 |
| 1,777 |
| 7,104(4) |
| — |
| $ | 53.72 |
| 2/22/2027 |
| | 19,731(11) | $ | 722,359 |
| 17,072(12) |
| $ | 625,006 |
| | | 8/9/2017 |
| 1,145 |
| 4,578(4) |
| — |
| 46.95 |
| 8/10/2027 |
| | | | | | | J. Brennan Ryan | — |
| — |
| — |
| — |
| $ | — |
| — |
| | 9,121(13) | $ | 333,920 |
| — |
| $ | — |
| | | | | | | | | | | | | |
| | | | Option Awards | | | Stock Awards | | | | | Year of | | | Number of Securities
Underlying Unexercised
Options
(#) | | | Option
Exercise
Price | | | Option
Expiration | | | Number of
Shares or
Units of Stock
That Have Not
Vested | | | Market Value
of Shares or
Units of Stock
That Have
Not Vested | | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested | | | Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units or
Other Rights
That Have Not
Vested | | | Name | | Award | | | Exercisable | | | Unexercisable | | | ($)(1) | | | Date | | | (#) | | | ($)(2) | | | (#) | | | ($) | | | Dahl | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 6,443 | (3) | | | 301,532 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 28,991 | (4)(5) | | | 1,356,779 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 11,998 | (6) | | | 561,506 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 26,996 | (4)(7) | | | 1,263,413 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 19,737 | (4) | | | 923,692 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 22,339 | (9) | | | 1,045,465 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 22,339 | (4)(10) | | | 1,045,465 | | | | — | | | | — | | | Provost | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 39,025 | (12)(14) | | | 1,826,370 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 18,172 | (13)(22) | | | 850,450 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 27,117 | (12)(16) | | | 1,269,076 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 16,853 | (13)(23) | | | 788,720 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 21,065 | (13)(21) | | | 985,842 | | | | — | | | | — | | | Klaeser | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 2,588 | (13)(15) | | | 121,118 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 3,549 | (13)(17) | | | 166,093 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 13,008 | (12)(14) | | | 608,774 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 6,093 | (13)(22) | | | 285,152 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 8,563 | (12)(16) | | | 400,748 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 5,322 | (13)(23) | | | 249,070 | | | | — | | | | — | | | Torgow | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 39,025 | (12)(14) | | | 1,826,370 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 18,172 | (13)(22) | | | 850,450 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 27,117 | (12)(16) | | | 1,269,076 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 16,853 | (13)(23) | | | 788,720 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 21,065 | (13)(21) | | | 985,842 | | | | — | | | | — | | | Shafer | | | 2017 | | | | 3,553 | | | | 5,328 | (24) | | | 53.72 | | | | 2/22/2027 | | | | — | | | | — | | | | — | | | | — | | | | | | 2017 | | | | 2,290 | | | | 3,433 | (25) | | | 46.95 | | | | 8/10/2027 | | | | — | | | | — | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 3,487 | (13)(15) | | | 163,192 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 600 | (13)(17) | | | 28,080 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 326 | (13)(18) | | | 15,257 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 13,008 | (12)(14) | | | 608,774 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 6,057 | (13)(22) | | | 283,468 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 13,559 | (12)(16) | | | 634,561 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 8,426 | (13)(23) | | | 394,337 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 103,416 | (13)(19) | | | 4,839,869 | | | | — | | | | — | | | Maass | | | 2015 | | | | — | | | | — | | | | — | | | | — | | | | 10,162 | (11) | | | 475,582 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 2,044 | (3) | | | 95,659 | | | | — | | | | — | | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | 9,196 | (4)(5) | | | 430,373 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 3,854 | (6) | | | 180,367 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 7,614 | (8) | | | 356,335 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 8,673 | (4)(7) | | | 405,896 | | | | — | | | | — | | | | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | 6,079 | (4) | | | 284,497 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 6,632 | (9) | | | 310,378 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 6,632 | (4)(10) | | | 310,378 | | | | — | | | | — | | | | | | 2019 | | | | — | | | | — | | | | — | | | | — | | | | 54,657 | (13)(20) | | | 2,557,948 | | | | — | | | | — | |
| (1) | | (1) | Represents the closing market price of our common stock on the date of the grant. |
| stock option award. | (2) | | Computed by multiplying(2) | Market value was determined using the number of shares reported in the preceding column by the2019 year-end closing stock price of our common stock$46.80 per share as reported on The NASDAQ Stock MarketNasdaq.® at December 31, 2018 of $36.61 per share. |
| | (3) | | | (3) | Represents service-based restricted stock awards granted by Legacy TCF that we assumed in the Merger (as adjusted for the Exchange Ratio) that vested on January 1, 2020. | | | | (4) | Represents PRSUs thator performance-based restricted stock awards granted by Legacy TCF and assumed by us in the Merger (as adjusted for the Exchange Ratio) and converted to earned PRSUs or restricted stock awards on the Merger Date, which are now only subject to the achievement of pre-established performance targetstime-based vesting requirements. PRSUs granted in 2017 and the officer’s continued service through the vesting date, which is on the date of the issuance of the audit opinion with respect to our consolidated financial statements that include the year ending on the last day of the performance period. Any PRSUs that vest will be2018 were converted to sharesearned PRSUs at the maximum level of our commonperformance (or at a single level of performance, as applicable for the restricted stock on a one-for-one basis.awards) and awards granted in 2019 were converted to earned PRSUs that do not vest will be forfeited. The number of unearned PRSUs reported assumes the units are earned and vested at 1.0x the number of units granted (representing satisfaction of corporate performance goals at the target level of performance level).based on Legacy TCF’s performance as measured at June 30, 2019, under the terms of the Merger Agreement. | | | | (5) | Vested on January 1, 2020. |
| 2020 Proxy Statement | | 45 |
| (6) | Represents service-based restricted stock awards granted by Legacy TCF that we assumed in the Merger (as adjusted for the Exchange Ratio) that vest(ed) pro rata on January 1, 2019, 2020, and 2021. | (4) | | | (7) | Vests on January 1, 2021. | | | | (8) | Amounts represent a one-time award of time-based restricted stock made to Mr. Maass under the Legacy TCF Omnibus Plan in connection with his performance in 2017 and to encourage his retention. The award vests pro rata on January 1, 2019, 2020, and 2021. | | | | (9) | Represents service-based restricted stock awards granted by Legacy TCF that we assumed in the Merger (as adjusted for the Exchange Ratio) that vest pro-rata on April 1, 2020, January 1, 2021 and 2022. | | | | (10) | Vests on January 1, 2022. | | | | (11) | Represents service-based restricted stock awards granted by Legacy TCF that we assumed in the Merger (as adjusted for the Exchange Ratio) that vest on April 1, 2020. | | | | (12) | Represents PRSUs granted by us that were converted to earned PRSUs in the Merger, which are now subject only to time-based vesting requirements, at rates equal to the target level of performance for awards granted in 2017 and 2019 and at 112.5% of the target level of performance for awards granted in 2018, based on our performance as measured at June 30, 2019, under the terms of the PRSU agreements. | | | | (13) | TRSU award that earns dividend equivalent units from grant date. | | | | (14) | Vests on December 31, 2020. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate on October 1, 2020, vests on October 1, 2020. | | | | (15) | Vests on August 31, 2021. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate October 1, 2020, vests on October 1, 2020. | | | | (16) | Vests on December 31, 2021. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate on October 1, 2020, vests on October 1, 2020. | | | | (17) | Vests on February 21, 2022, and October 1, 2020. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate on October 1, 2020, vests on October 1, 2020. | | | | (18) | Vests on August 9, 2022. | | | | (19) | Vests in equal 50% increments on August 1, 2020 and 2021. | | | | (20) | Vests in equal 50% increments on December 1, 2020 and August 1, 2021. | | | | (21) | Vests in equal one-third increments on February 25, 2020, 2021, and 2022. | | | | (22) | Vest(ed) in equal 20% increments on February 27, 2019, 2020, 2021, 2022, and 2023. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate on October 1, 2020, vested in 20% increments on February 27, 2019 and 2020, with the remainder to vest on October 1, 2020. | | | | (23) | Vests in equal 20% increments on February 25, 2020, 2021, 2022, 2023, and 2024. For Mr. Klaeser, whose employment as Chief Financial Officer will terminate on October 1, 2020, 20% vested on February 25, 2020, with the remainder to vest on October 1, 2020. | | | | (24) | Represents stock options that vest ratably on the anniversary date of the February 21, 2017 grant date over a period of five years. |
| | (5) | Represents the following unvested awards granted to Mr. Provost: |
8,635 shares of restricted stock granted by Talmer that were assumed by us in the merger that vested on February 22, 2019.
21,960 TRSUs, which includes 543 dividend equivalent units earned since the grant date, that vest in equal 20% increments on each of the first five anniversaries of the February 27, 2018 grant date, based on his continued employment.
| | (6)(25) | Represents 34,689 shares of PRSUs with a performance period ending December 31, 2020stock options that vest as describedratably on the anniversary date of the August 9, 2017 grant date over a period of five years. |
Option Exercises and Stock Vested in footnote 3, above. |
| 2019 | | (7) | Represents the following unvested awards granted to Mr. Klaeser: |
5,249 shares of restricted stock granted by Talmer that were assumed by us in the merger that vested on February 22, 2019.
3,988 TRSUs, which includes 181 dividend equivalent units earned since the grant date, that vest 40% on August 31, 2019 and 60% on August 31, 2021, based on his continued employment.
3,431 TRSUs, which includes 155 dividend equivalent units earned since the grant date, that cliff vest on the fifth anniversary of the February 21, 2017 grant date, based on his continued employment.
5,140 shares of PRSUs with a performance period ended December 31, 2018 for which the performance conditions have been met but will not vest until the service condition is met as described in footnote 3, above.
7,320 TRSUs, which includes 181 dividend equivalent units earned since the grant date, that vest in equal 20% increments on each of the first five anniversaries of the February 27, 2018 grant date, based on his continued employment.
| | (8) | Represents the following shares of unvested PRSUs granted to Mr. Klaeser: |
5,281 shares with a performance period ending December 31, 2019 that vest as described in footnote 3, above.
11,563 shares with a performance period ending December 31, 2020 that vest as described in footnote 3, above.
| | (9) | Represents the following unvested awards granted to Mr. Torgow: |
8,635 shares of restricted stock granted by Talmer that were assumed by us in the merger that vested on February 22, 2019.
21,960 TRSUs, which includes 543 dividend equivalent units earned since the grant date, that vest in equal 20% increments on each of the first five anniversaries of the February 27, 2018 grant date, based on his continued employment.
| | (10) | Represents 34,689 shares of PRSUs with a performance period ending December 31, 2020 that vest as described in footnote 3, above. |
| | (11) | Represents the following unvested awards granted to Mr. Shafer: |
5,249 shares of restricted stock granted by Talmer that were assumed by us in the merger that vested on February 22, 2019.
3,371 TRSUs, which includes 153 dividend equivalent units earned since the grant date, that cliff vest on August 31, 2021, based on his continued employment.
580 TRSUs, which includes 26 dividend equivalent units earned since the grant date, that cliff vest on February 21, 2022, based on his continued employment.
315 TRSUs, which includes 11 dividend equivalent units earned since the grant date, that cliff vest on August 9, 2022, based on his continued employment.
2,896 shares of PRSUs with a performance period ended December 31, 2018 for which the performance conditions have been met but will not vest until the service condition is met as described in footnote 3, above.
7,320 TRSUs, which includes 181 dividend equivalent units earned since the grant date, that vest in equal 20% increments on each of the first five anniversaries of the February 27, 2018 grant date, based on his continued employment.
| | (12) | Represents the following shares of unvested PRSUs granted to Mr. Shafer: |
5,509 shares with a performance period ending December 31, 2019 that vest as described in footnote 3, above.
11,563 shares with a performance period ending December 31, 2020 that vest as described in footnote 3, above.
| | (13) | Represents 9,121 TRSUs, which includes 140 dividend equivalent units earned since the grant date, that cliff vest on December 15, 2019, based on his continued employment. |
2018 Option Exercises and Stock Vested
The following table providesshows information concerning stock options exercisedfor option exercises and vesting of stock awards vested in 2018 for the named executive officers: | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | Name | Number of Shares Acquired on Exercise(1) | | Value Realized on Exercise(2) | | Number of Shares Acquired on Vesting(3) | | Value Realized on Vesting(4) | | | | | | | | | | | David T. Provost | — |
| | $ | — |
| | 8,634 |
| | $ | 484,212 |
| Dennis L. Klaeser(5) | 76,185 |
| | 3,260,718 |
| | 5,248 |
| | 294,325 |
| | Gary Torgow | — |
| | — |
| | 8,634 |
| | 484,212 |
| | Thomas C. Shafer | — |
| | — |
| | 5,248 |
| | 294,325 |
| | J. Brennan Ryan | — |
| | — |
| | — |
| | — |
|
| | | Option Awards | | Stock Awards | | Name | | Number of Shares
Acquired on
Exercise
(#) | | | Value Realized
on Exercise
($) | | | Number of Shares
Acquired on Vesting
(#)(2) | | | Value Realized
on Vesting
($)(3) | | | Dahl(1) | | | — | | | $ | — | | | | — | | | $ | — | | | Provost | | | — | | | | — | | | | 13,026 | | | | 611,422 | | | Klaeser | | | — | | | | — | | | | 18,755 | | | | 860,831 | | | Torgow | | | — | | | | — | | | | 13,026 | | | | 611,422 | | | Shafer | | | — | | | | — | | | | 15,117 | | | | 706,167 | | | Maass(1) | | | — | | | | — | | | | — | | | | — | |
| (1) | No awards vested for Messrs. Dahl or Maass following the commencement of their employment on the Merger Date. | (1) | | | (2) | The number of shares shown is the gross number of shares covered by stock options exercised. Our share-based compensation plans permit the withholding of shares in payment of the stock option exercise price and for tax withholding purposes, resulting in a smaller number of shares acquired. |
| | (2) | The value of exercised stock options is calculated by multiplying the number of stock options exercised by the difference between the closing price of our common stock on the date of the exercise and the stock option exercise price. |
| | (3) | The number of shares shown isreflects the gross number of shares covered by awards that vested in 2018.2019. Shares for the required tax withholding were deducted from the gross number of shares vested, resulting in a smaller number of shares acquired upon vesting. |
| | (4) | | The dollar values reported in this column(3) | Amounts were calculated using the closing stock price of our common stock as reported on The NASDAQ Stock Market®Nasdaq on the vesting datedates of the stock awards. |
| 2020 Proxy Statement | | 46 |
The following table shows information on the defined benefit pension plan benefits of the NEOs: | Name | Plan Name | Number of Years
Credited Service
(#)(2) | Present Value of
Accumulated
Benefit
($)(3) | Payments
During Last
Fiscal Year
($) | | Dahl(3) | Legacy TCF Cash Balance Pension Plan(1) | 5.75 | $ | 85,198 | $ | — | | Provost | — | — | | — | | — | | Klaeser | — | — | | — | | — | | Torgow | — | — | | — | | — | | Shafer | — | — | | — | | — | | Maass | — | — | | — | | — |
| (1) | We assumed the obligations under the Legacy TCF Cash Balance Pension Plan in connection with the Merger. | (5)(2) | Represents stock options that were granted by Talmer that we assumedThe number of years of credited service is less than actual years of service with Legacy TCF or its subsidiaries because the plan was frozen during the NEO’s tenure with Legacy TCF or its subsidiaries. Mr. Dahl was not given credit for service other than for his actual years of service with Legacy TCF or its subsidiaries through April 1, 2006, the date the plan was frozen. | | (3) | All values shown are determined using interest rate and mortality assumptions consistent with those used in the merger.Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. The accumulated benefit is measured against Legacy TCF’s December 31, 2018 value. |
Material Information Regarding Pension Benefits Legacy TCF Pension Plan As of the Merger Date, we assumed Legacy TCF’s obligations under the TCF Cash Balance Pension Plan (the “Legacy TCF Pension Plan”). The Legacy TCF Pension Plan was terminated effective November 1, 2019. Benefits for the Legacy TCF Pension Plan have been provided under a cash balance formula since September 1, 1990. Compensation credits equal to the Applicable Percentage (based on the sum of age and years of service) multiplied by Certified Earnings (as defined below) were credited to the retirement accounts periodically. Compensation credits were discontinued effective April 1, 2006. The following table reflects the compensation credits that were in effect for the periods indicated above each column: | | Applicable Percentage | | | Sept. 1, 1990 | Jan. 1, 2002 | Jan. 1, 2004 | Jan. 1, 2005 | Jan. 1, 2006 | Beginning on | | Sum of the Participant’s age plus years | prior to | prior to | prior to | prior to | prior to | or after | | of service on the last day of the month | Jan. 1, 2002 | Jan. 1, 2004 | Jan. 1, 2005 | Jan. 1, 2006 | April 1, 2006 | April 1, 2006 | | Under 30 | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% | — | | Under 34 | 2.5% | 2.5% | — | 2.5% | 2.5% | — | | Under 36 | 2.5% | 2.5% | — | — | 2.5% | 0.0% | | Under 38 | 2.5% | 2.5% | — | — | — | — | | Under 40 | 2.5% | — | — | — | — | — | | 30 but less than 32 | — | — | 2.6% | — | — | — | | 32 but less than 34 | — | — | 2.7% | — | — | — | | 34 but less than 36 | — | — | 2.8% | 2.6% | — | — | | 36 but less than 38 | — | — | 2.9% | 2.7% | 2.6% | 0.0% | | 38 but less than 40 | — | 2.6% | 3.0% | 2.8% | 2.7% | 0.0% | | 40 but less than 50 | 3.5% | 3.5% | 3.5% | 3.5% | 3.5% | 0.0% | | 50 but less than 60 | 4.5% | 4.5% | 4.5% | 4.5% | 4.5% | 0.0% | | 60 but less than 70 | 5.5% | 5.5% | 5.5% | 5.5% | 5.5% | 0.0% | | 70 but less than 80 | 6.5% | 6.5% | 6.5% | 6.5% | 6.5% | 0.0% | | 80 or more | 7.5% | 7.5% | 7.5% | 7.5% | 7.5% | 0.0% |
Interest credits are credited to the retirement accounts using the one-year average of the 5-year Treasury Constant Maturity Rate plus 0.25%, rounded to the nearest quarter point, capped at 12% and determined at the beginning of each calendar year. Certified Earnings generally include earned income, wages, salaries, and fees (or other amounts) for services rendered in the course of employment. Also included are annual cash incentives, commissions paid to salespersons, compensation for services on the basis of profits, commissions on insurance premiums, tips and bonuses (but not including payments for referrals), and any pre-tax contributions to the TCF 401K Plan. Restricted stock awards are not included in Certified Earnings. | 2020 Proxy Statement | | 47 |
Before freezing the plan on April 1, 2006, cash balance benefits became vested after five years of vesting service, being 0% vested beforehand. The normal retirement date is age 65. A participant is eligible for early retirement if termination occurs after attainment of age 55 with at least five years of vesting service. A participant is eligible for vested terminated benefits if termination occurs after attainment of at least five years of vesting service. In either case, distribution of the cash balance account balance can occur immediately upon termination. The amount of the distribution depends upon the payment form elected and is actuarially equivalent to the account balance earned as of the date of distribution. The normal payment form is the life-only annuity. A variety of other payment forms are available (including the lump sum option), all equivalent in 2018
We have a noncontributory Pension Plan thatvalue if paid over an average lifetime. Mr. Dahl is considered a tax-qualifiedcurrently eligible for early retirement under the Legacy TCF pension plan. UnderAdditionally, an active employee is eligible for distributions beginning at age 62.The present value of the Pension Plan, we have the authority to change or terminate the Pension Plan at any time. Effective June 30, 2006, we stopped accepting new participantaccumulated benefit displayed in the Pension Plan. Since allBenefits table is the discounted value of the projected account balance at age 65 (projected with interest credits only). The value of the accumulated benefit was determined using assumptions consistent with those used for 2019 financial reporting purposes under FASB ASC Topic 715, “Compensation – Retirement Benefits” (“Topic 715”) unless otherwise directed by Regulation S-K. Some of those assumptions are as follows: | • | Benefits were assumed to commence at age 65; | | • | The assumed form of payment at distribution was the lump sum option; | | • | All benefits and present values are determined as of December 31, 2019, the Topic 715 measurement date; | | • | The discount rate used to determine present values was 1.95% at December 31, 2019; | | • | The rate of future interest credits used to determine present values as of December 31, 2019 is 2.05% per annum, and the rate of future interest credits used at December 31, 2018 was a select and ultimate assumption starting at 3.00% per annum for 2019 through 2021 and phasing to 3.25% for 2022 and beyond; and | | • | No pre-retirement mortality, termination, retirement, or disability was assumed. |
See Note 21 of the Notes to Consolidated Financial Statements included in our NEOs joined Chemical after 2006, none ofAnnual Report on Form 10-K for the year ended December 31, 2019 for additional information regarding our NEOs are participantsaccounting policy and assumptions for employee benefit plans. | Nonqualified Deferred Compensation in 2019 | |
The following table shows certain information for TCF’s nonqualified account-type plans for the Pension Plan. In addition, in July 2017, the Compensation Committee determined to freeze the Pension Plan such that no additional benefits would be accrued under the Pension Plan. Deferred Compensation
NEOs. In September 2006, the Legacy TCF board of directors approved the ChemicalTCF Financial Corporation Deferred Compensation Plan (the “DC Plan” ), formerly the Chemical Financial Corporation Deferred Compensation Plan), a voluntary nonqualified supplemental retirement program for a select group of management personnel. The DCTCF 401K Supplemental Plan (the “Supplemental Plan”) shown below is a Legacy TCF nonqualified supplemental program for the TCF 401K Plan, a qualified tax or deferred plan under Section 401(k) of the Code which we assumed in connection with the Merger. The TCF contributions shown in the table for the Supplemental Plan are matching contributions which are made at the same rate as under the TCF 401K Plan. For further information about this plan, refer to the CD&A under “Compensation of Named Executive Officers – Other Forms of Compensation.” The Deferred Stock Plan is unfunded for tax purposes and for purposesalso a Legacy TCF plan that we assumed in connection with the Merger which consists solely of ERISA.previously-deferred vested TCF common stock. The named executive officers in this proxy statement are eligible to participate
in the DC Plan. The DCSupplemental Plan was amended onOctober 23, 2019 to discontinue future deferrals by participants effective as of January 1, 2017 to allow an employer discretionary contribution to make up for lost employer contributions in the 401k Plan.
Participants may elect to defer up to 85% of their compensation to the DC Plan. The election to defer compensation under the DC Plan is irrevocable for each plan year as of the beginning of the plan year. Participant contributions are made into a grantor trust for the purpose of providing for payment of the deferred compensation under this plan. The investment of employee contributions are self-directed by participants within an established array of money market, equity and fixed income mutual funds. The aggregate earnings on these investments, by each named executive officer who is a participant in the DC Plan, are included in the table below, and are attributable to the specific investments selected by each participant. Participants may change the designation of their investments at such times as mutually agreed by the parties. As of December 31, 2018, participants could change their investment designation on a daily basis.
Participants elect, in advance of the deferral of their compensation, when the funds will be distributable. The aggregate balances of the participants are distributable, as designated by each participant, during January of the calendar year following the calendar year in which any of the following occur: the participant’s termination of employment; a change in control; the participant’s death or disability; an unforeseeable emergency; or at a specified time, as determined by the participant. The DC plan allows distributions to be made in a lump sum or up to 15 annual installments. Participants may change their current distribution election as long as the change is made at least 12 months prior to their first payment and is delayed by at least 5 years.
2018 Nonqualified Deferred Compensation
The following table provides information concerning nonqualified deferred compensation for the named executive officers as of and for the year ended December 31, 2018:
| | | | | | | | | | | | | | | | | | Name | Executive Contributions in Last FY(1) | Company Contributions in Last FY | Aggregate Earnings in Last FY(2) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE(3) | | David T. Provost | $ | — |
| $ | — |
| $ | (36,483 | ) | $ | — |
| $ | 426,264 |
| | Dennis L. Klaeser | — |
| — |
| (197,188 | ) | — |
| 3,712,725 |
| | Gary Torgow | — |
| — |
| 17,448 |
| — |
| 1,269,173 |
| | Thomas C. Shafer | 429,000 |
| — |
| (39,097 | ) | — |
| 789,313 |
| | J. Brennan Ryan | — |
| — |
| — |
| — |
| — |
|
| | | Executive | Registrant | Aggregate | | Aggregate | | | | Contributions | Contributions | Earnings | Aggregate | Balance at | | | | in Last Fiscal | in Last Fiscal | in Last Fiscal | Withdrawals/ | December 31, | | | | Year | Year | Year | Distributions | 2019 | | Name | Plan | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | | Dahl | Supplemental Plan | 257,564 | 116,666 | 449,852 | (70,133) | 2,695,014 | | | Deferred Stock Plan | — | — | 556,284 | (73,762) | 2,675,147 | | Provost | DC Plan | — | — | 89,881 | — | 516,145 | | Klaeser | DC Plan | — | — | 954,412 | — | 4,667,137 | | Torgow | DC Plan | — | — | 26,222 | — | 1,295,395 | | Shafer | DC Plan | 587,600 | — | 187,606 | — | 1,564,519 | | Maass | Supplemental Plan | 207,702 | 37,932 | 44,859 | (8,917) | 400,013 |
| (1) | | (1) | Amounts included in this column are included in the “Salary” column in the Summary Compensation Table. |
| Amounts included in the Summary Compensation Table for Messrs. Dahl and Maass reflect contributions from the Merger Date. | | (2) | The amounts shown in this column are reported as compensation in the Summary Compensation Table. Amounts included in the Summary Compensation Table for Messrs. Dahl and Maass reflect contributions from the Merger Date. | | (3) | Amounts consist of dividend equivalents and unrealized appreciation or depreciation on the deemed account investments, primarily TCF common stock. There were no above-market or preferential earnings or appreciation in 2019 or previous years. Amounts included in this column are not included in the Summary Compensation Table. |
| | (3)(4) | Amounts consist of dividend equivalents on deemed investments in TCF common stock and distributions of vested shares from the Deferred Stock Plan which were included for each participant in the Summary Compensation Table in the years granted. The dividend equivalents are also included in the Aggregate Earnings in Last Fiscal Year column of this table. | | (5) | The aggregate balance at last fiscal year-end shown in this column includes contributions in prior years which were reported as “Salary” and “All Other Compensation” on the Summary Compensation Table for the applicable year. |
| 2020 Proxy Statement | | 48 |
Material Information Regarding the DC Plan | • | The NEOs in this Proxy Statement are eligible to participate in the DC Plan. Participants may elect to defer up to 85% of their compensation to the DC Plan. The election to defer compensation under the DC Plan is irrevocable for each plan year as of the beginning of the plan year. Participant contributions are made into a grantor trust for the purpose of providing for payment of the deferred compensation under this plan. The investment of employee contributions are self-directed by participants within an established array of money market, equity and fixed income mutual funds. The aggregate earnings on these investments, by each NEO who is a participant in the DC Plan, are included in the table above, and are attributable to the specific investments selected by each participant. Participants may change the designation of their investments at such times as mutually agreed by the parties. As of December 31, 2019, participants could change their investment designation on a daily basis. | | • | Participants elect, in advance of the deferral of their compensation, when the funds will be distributable. The aggregate balances of the participants are distributable, as designated by each participant, during January of the calendar year following the calendar year in which any of the following occur: the participant’s termination of employment; a change in control; the participant’s death or disability; an unforeseeable emergency; or at a specified time, as determined by the participant. In addition, distributions may be made from the DC Plan in the event of an unforeseeable emergency. The DC Plan allows distributions to be made in a lump sum or up to 15 annual installments. Participants may change their current distribution election as long as the change is made at least 12 months prior to their first payment and is delayed by at least 5 years. The DC Plan is unfunded for tax purposes and for purposes of ERISA. |
Material Information Regarding the Supplemental Plan | • | Covered compensation and contributions under a 401(k) plan are subject to certain limits imposed by the IRS. Legacy TCF maintained the Supplemental Plan to allow Legacy TCF NEOs to make pre-tax contributions from their salary and annual cash incentives at the same rate as under the TCF 401K Plan up to a total of 50% of covered pay and to receive an employer matching contribution at the same rate as under the TCF 401K Plan on their contributions up to 5% of pay. | | • | Employee contributions to the Supplemental Plan were invested, at the employee’s election, in the same investment choices that were available in the TCF 401K Plan. Employer matching contributions to the Supplemental Plan were invested 100% in TCF common stock. | | • | The amounts allocated to the accounts of each of the NEOs that participated primarily consisted of deemed TCF common stock. Earnings on deemed TCF common stock investments in the plan during the period of January 1, 2019 through July 31, 2019 consisted of $.30 per share in dividend equivalents and appreciation of $1.89 per share. Earnings on deemed TCF common stock investments in the plan during the period of the Merger Date through December 31, 2019 consisted of $.70 per share in dividend equivalents and appreciation of $4.15 per share. Dividend-equivalent distributions are made from the Supplemental Plan at the same time and at the same rate as to holders of TCF common stock generally. | | • | Distributions from the Supplemental Plan occur in a lump sum in the event of death, disability. Participants may also elect to receive a lump sum distribution either six months after termination, on a date certain or in the event of a change in control, or may receive a series of no more than ten annual payments following termination. | | • | Deemed investments in TCF common stock selected by the NEOs generally cannot be changed during employment (except in certain change in control situations) and such investments are distributed in-kind upon termination of employment, either in a lump sum six months thereafter or in annual installments, as elected by the participant. |
Material Information Regarding the Deferred Stock Plan | • | There were no contributions to the Deferred Stock Plan in 2019. | | • | The accounts of the NEOs are deemed to be invested in shares of TCF common stock. Distributions are made in-kind in the form of TCF common stock. | | • | Distributions are made in accordance with the terms of the restricted stock agreements applicable to the shares that have been deferred into the Deferred Stock Plan. | | • | TCF’s cost of the Deferred Stock Plan in 2019 was $15,696 for recordkeeper and trustee expenses. | | • | Shares of restricted stock contributed to the Deferred Stock Plan are not entitled to dividends until they vest. | | • | TCF has established a trust fund to hold assets for the payment of benefits as they come due. | | • | At December 31, 2019, the total investment in TCF common stock under the Deferred Stock Plan was 289,510 shares valued at $13,549,062. |
| 2020 Proxy Statement | | 49 |
The following pay ratio and supporting information compares the annual total compensation of our employees other than our CEO (including full-time, part-time, seasonal and temporary employees) and the annual total compensation of Craig Dahl, our CEO as of December 31, 2019, as required by regulations promulgated pursuant to Section 953(b) of the Dodd-Frank Act. The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. Due to the substantial change in our employee population resulting from the Merger, we calculated a new median employee as of December 31, 2019 (as discussed in more detail below) and calculated the pay ratio of our CEO against our 2019 median employee. For 2019, our last completed fiscal year: | • | The median of the annual total compensation of all employees of our company (other than our CEO) was $45,637; and | | • | The annual total compensation of Mr. Dahl, our CEO was $5,078,116 as determined by annualizing his compensation using the method discussed below. |
Based on this information, the ratio of the total compensation of our CEO to the median of the annual total compensation of all other employees was 111 to 1. Because Mr. Dahl became our CEO on the Merger Date, his total compensation as reported in the Summary Compensation Table included in this Proxy Statement is calculated based on payments from TCF from the Merger Date through December 31, 2019. Therefore, we annualized his compensation to provide a more complete approximation of his total compensation for the full year. To determine the pay ratio, we took the following steps: We determined that as of December 31, 2019, the determination date, our employee population consisted of approximately 8,022 individuals, primarily located in the United States, but including our Canadian employees. This population consists of full-time, part-time, temporary and seasonal employees of TCF and each of its direct and indirect subsidiaries. However, it does not include independent contractors who were employed by and had their compensation determined by unaffiliated third parties. To identify the “median employee” from our employee population, we compared the wages of our employees as reflected in our payroll records and reported in Box 5, Medicare Wages, to the Internal Revenue Service on Form W-2 for 2019. Because we offer a variety of compensation arrangements to our employees, including base salary, bonus, commissions and other incentive arrangements, we believe this was the most appropriate and comprehensive methodology for capturing the many different compensation arrangements we offer. We identified our median employee using this compensation measure, which was consistently applied to all of our employees included in the calculation. We annualized the compensation of employees that we hired in 2019, who were not employed for the full year (including the employees we assumed in connection with our Merger), by dividing their 2019 W-2 Box 5, Medicare Wages, by (a) the number of regular hours they worked in 2019, plus (b) the number of overtime hours they worked in 2019 times 1.5, and then multiplied the result by their full-time or part-time standard annual hours. We annualized compensation for part-time employees without making a full-time equivalent adjustment for part-time employees. Amounts paid in Canadian dollars were converted to U.S. dollars using the 2019 12-month average exchange rate. We used first quarter wages to annualize the compensation for three Legacy TCF employees that were on leave after the Merger Date. Once we identified our median employee, we calculated such employee’s annual total compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $45,637. To annualize Mr. Dahl’s compensation due to his partial year tenure as our CEO, we calculated the sum of Mr. Dahl’s: (i) base salary, (ii) full annual cash incentive for 2019, (iii) long-term equity awards granted by Legacy TCF in January 2019 which were converted to TRSUs of TCF at the Merger Date, (iv) any actual change in pension value for all of 2019, and (v) all other compensation reportable pursuant to Item 402(c)(2) (ix) paid by us and Legacy TCF for the full year. We believe that annualizing Mr. Dahl’s post-Merger base salary, and adding his equity compensation granted by Legacy TCF (since he did not receive any additional equity in connection with the Merger) reflects the truest depiction of both his total compensation and the ratio of that compensation to that of our median employee. | Employment, Retention and Equity Award Agreements | |
Below is a summary of employment and other arrangements with our NEOs. Cause, Good Reason, and Change in Control for each individual are defined below. Other capitalized terms not defined below have the meaning assigned to them in such individual’s agreement. For more information on termination and other severance payment rights of each NEO, see “Potential Payments uponUpon Termination or Change in ControlControl” herein. | 2020 Proxy Statement | | 50 |
EachCraig Dahl Employment and Equity Award Agreements On November 6, 2019, we entered into an amended and restated employment agreement with Mr. Dahl, effective November 6, 2019, which will continue through November 6, 2022, pursuant to which he is entitled to receive: | • | An annual salary of at least $1,050,000, subject to annual review and increase; | | • | Annual target bonus opportunity that is no less than 100% of base salary; | | • | Annual equity-based award with a target value equal to 200% of base salary; and | | • | Perquisites including but not limited to an auto allowance and payment of certain membership fees. |
In addition, if Mr. Dahl’s employment is terminated by TCF without Cause or by Mr. Dahl for Good Reason, subject to Mr. Dahl’s execution and non-revocation of oura release of claims, Mr. Dahl will be eligible to receive: | • | A lump sum equal to 2.5 times the sum of (i) his Annual Base Salary and (ii) the average of his annual bonus for the three most recently completed fiscal years; | | • | Any earned but unpaid annual bonus; | | • | The acceleration and vesting of all outstanding equity awards; and | | • | Payment of monthly COBRA insurance premiums for up to twenty-four months. |
In addition, the definition of Change in Control was changed by increasing the percentage of securities of TCF that any person would have to become the beneficial owner of in order to qualify as a Change in Control from 30% to 40% and the definition was expanded to include an “Active Change in Control Proposal Period” as defined in the Employment Agreement consistent with employment agreements executed by our other executives in connection with the Merger. For more details on termination payments paid to each NEO, see “Potential Payments Upon Termination or Change in Control” herein. Equity Award Agreements Restricted Stock Award Agreements dated January 25, 2017, January 24, 2018, March 6, 2018, and February 8, 2019 As described above, Mr. Dahl’s employment agreement will govern the treatment of restricted stock awards (which were converted into TRSUs as of the Merger Date) granted under the Restricted Stock Award Agreements dated January 25, 2017, January 24, 2018, March 6, 2018, and February 8, 2019 in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) Retires with one year’s advance notice. Performance-Based Restricted Stock Unit Agreements dated January 25, 2017, January 24, 2018, and February 8, 2019 As described above, Mr. Dahl’s employment agreement will govern the treatment of performance-based restricted stock units (which were converted into TRSUs as of the Merger Date) granted under the Performance-Based Restricted Stock Unit Agreements dated January 25, 2017, January 24, 2018, and February 8, 2019 in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) Retires with one year’s advance notice. David Provost Mr.and Gary Torgow Mr. Klaeser, Mr. ShaferRetention and Mr. RyanEquity Award Agreements Retention Agreements On January 27, 2019, TCF entered into retention agreements with Messrs. Provost and Torgow, effective August 1, 2019 and amended and restated on March 10, 2020, which will continue through August 1, 2022 (except in the event of a Change in Control, in which case the agreement will expire on the later of August 1, 2022 or two years following the date on which such Change in Control occurred) and provide for certain severance payments uponthe following: | • | An annual salary of $950,000, subject to annual review and increase; | | • | Annual target bonus opportunity that is equal to 100% of base salary; | | • | Annual equity-based award with a target value equal to 200% of base salary; | | • | Perquisites including but not limited to an auto allowance and payment of certain membership fees; and | | • | Participation in the same benefit plans as apply to TCF Senior Executives generally, and on the same terms and conditions. |
Upon any termination of executive’s employment during or following expiration of the term of the retention agreement, TCF will continue to provide each executive with the Office of the Chair Benefits while the executive continues to serve on the Board, including an office suite, use of a driver, certain technological equipment, and access to the company aircraft, in each case with respect to Mr. Klaeser, Mr. Shafer and Mr. Ryan, upon a qualifying termination following a change in controlbusiness activities on behalf of TCF. If Messrs. Provost or Torgow’s employment is terminated by TCF without Cause or by the Corporation, eachexecutive for Good Reason, subject to the executive’s execution and non-revocation of a general release and waiver of claims, against ushe is eligible to receive: | • | Two times the sum of (a) the executive’s then current Base Salary and (b) the average of the executive’s annual bonus for the three most recently completed calendar years (with each bonus calculated as the higher of the actual bonus, including amounts deferred or paid in the form of equity, or $1.5 million per year (such highest bonus, the “Recent Bonus”)), payable in equal installments over 104 weeks; and | | • | A lump sum payment equal to 24 times the executive’s monthly contribution towards coverage under COBRA. |
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As of December 31, 2019, if either Messrs. Provost or our affiliates.
Each executive’s employmentTorgow retired on or after 18 months following the Merger Date, upon 30 days’ notice and subject to a release of claims and 24-month non-competition and non-solicitation agreement, provides that his employment may be terminated:
by either executive or us at anyhe was eligible to receive base salary and bonus payments for the remainder of the time or for any reason or for no reasonfrom such retirement until the end of the term.Following the entry into amended and restated retention agreements with Messrs. Provost and Torgow on March 10, 2020 which eliminated the provisions of the retention agreements related to cash severance payments and accelerated equity benefits upon not less than 30 days prior written notice; by us for “cause” (as defined inretirement after 18 months following the employment agreement) without prior notice;
Merger Date, all equity-based awards granted to Messrs. Provost and Torgow are governed by the executive for “good reason” (as defined interms of the employment agreement) with prior written notice; and upon executive’s death or if executive is “disabled” (as defined in the employment agreement).
In addition to the employment agreements, certain equity award agreements with each executive provide for the acceleration of vesting of equityspecific awards on the occurrence of certain events, as described below.
Equity Award Agreements with Mr. Provost and Mr. Torgow
EmploymentTRSU Agreements dated February 27, 2018
Mr.As described above, Messrs. Provost’s and Mr. Torgow’s employment agreements each provide that if the executive is terminated by us without “cause” or the executive terminates his employment for “good reason,” each as defined in the employment agreement, then the executive is entitled to receive severance pay in the amount of two times executive’s then base salary (disregarding any reduction in base salary due to a good reason termination and with base salary calculated as the higher of actual base salary or $950,000), plus two times the average of executive’s bonuses under our annual cash incentive plan for each of the three most recently completed calendar years, including complete calendar years with Talmer Bank and Trust (with each bonus calculated as the higher of the actual bonus or $1.5 million). We will also pay each executive a lump sum amount equal to 24 times the executive’s monthly contribution towards COBRA for employee dependent health, prescription drug and dental coverage elections under our employee benefit plans providing such benefits, minus the COBRA administrative cost (whether or not executive elects COBRA). Our decision not to renew the term of the employmentretention agreements will also constitute our terminationgovern the treatment of TRSUs granted under the agreement without cause.
In addition, all equity-based awards granted to the executive on or afterTRSU agreements dated February 27, 2018 that remain outstanding onin the dateevent the executive (a) is terminated by us without “cause,”Cause, (b) terminates his employment for “good reason,” orGood Reason, (c) dies, or (d) is terminated due to a Disability.If the awards will be treated as follows:
allexecutive retires on one year’s advance notice after reaching age 55 following at least ten years of service, under the TRSU agreements, unvested stock options will immediately vest, and together with other vested stock options, will remain exercisable for a period of up to three years from termination;
all outstanding TRSUs will automatically vest and be convertible into our common stock; and
all PRSUs will automatically vest at the 100% of the applicable target level.
Restricted Stock Awards Assumed from Talmer Bancorp, Inc. (granted before the February 27, 2018 Employment Agreements)
Mr. Provost and Mr. Torgow each entered into restricted stock award agreements with Talmer Bancorp, Inc., which we assumed in our merger with Talmer Bancorp, Inc. Under these restricted stock agreements, any unvested shares of restricted stock will immediately vest upon the executive’s termination without cause (as defined in the agreement). All remaining restricted stock awards granted under these agreements vested in February 2019.
TRSU and PRSU Agreements dated February 27, 2018
We entered into TRSU and PRSU agreements with each of Mr. Provost and Mr. Torgow on February 27, 2018 that provide that, in the event of the executive’s termination due to disability, or if the executive provides one year written notice before his intended retirement (as defined in the 2017 Stock Plan), then executive will be issued (a) with respect to TRSUs, a pro rata number of TRSUsbasis based on the number of months that have passed since the last annual vesting date, or if no vesting date has occurred, the grant date, and (b) with respect to PRSUs, a pro rata number of PRSUs granted at the target (100%) level based on the number of months that have elapsed between the first day of the “performance period” (as defined in the agreement) and the effective date of the executive’shis termination. As described above, each executive’s Employment Agreement will govern the treatment of TRSUs and PRSUs granted under the TRSU and PRSU Agreements dated February 27, 2018 in the event the executive (a) is terminated by us without “cause,” (b) terminates his employment for “good reason,” or (c) dies. See “-Agreements with Mr. Provost and Mr. Torgow-Employment Agreements dated February 27, 2018.”
TRSU and PRSU Agreements dated February 25, 2019
We entered into TRSU and PRSU agreements with each of Mr.Messrs. Provost and Mr. Torgow on February 25, 2019. Under such TRSU agreements, if the executive is terminated without “cause”Cause by us or the executive terminates his employment for “good reason,”Good Reason, in either case following a “changeChange in control” (each as defined inControl, or if the agreement),executive retires on one year’s advance notice after reaching age 55 following at least ten years of service or on or following 18 months following the Merger without one year’s notice, all TRSUs granted to the executive, including TRSUs issued under prior agreements and plans, will 100% vest. Under the terms of such PRSU agreements,PRSUs, because the Merger resulted in a Change in Control, the eventperformance metrics of a “change in control” (as defined in the agreement), all PRSUs, granted to the executive, including PRSUs issued under prior agreements and plans, for which performance results have not been measured will bewere measured as of the latest practicable date prior tobefore the consummation of the change in controlMerger Date, and the number of PRSUs will bewas fixed at the greater of the target (100%) performance level or actual performance, (the “Earned Awards”),the “earned PRSUs,” and such Earned Awards will vest and beearned PRSUs are now subject only to forfeituretime-based vesting requirements based on the executive’s continued service through the applicable performance period. If, however,following the executiveMerger, the executive’s employment is terminated without cause by usCause or the executivehe terminates his employment for good reason, in either case following a change in control, such Earned AwardsGood Reason, the earned PRSUs will 100% vest. vest as of his employment termination date. Following the Merger, each executive’s earned PRSUs will fully vest on his Retirement (on one year’s advance notice), on his death, or his Disability, whether granted hereunder or granted before February 25, 2019. In the event of any conflict between the terms of the TRSU or PRSU agreement (as applicable), and any employment,his retention or change in control agreement with the executive (an “individual agreement”) and/or the terms of the 2017 Stock Plan, the provisions of the TRSU or PRSU agreement (as applicable), or, to the extent more favorable, the individual agreement will
control; provided, however, that any provisions of the TRSU or PRSU agreement (as applicable) relating to the timing of settlement or payment in respect of the TRSUs or PRSUs (as applicable) will control in the event of any conflict between the TRSU or PRSU agreement (as applicable), the 2017 Stock Plan, any prior plan and the award agreements thereunder, and any individual agreement.
Agreements with Mr. Klaeser and Mr. Shafer
Employment Agreements dated July 1, 2018 (and Stock Options and PRSU Agreements granted before November 2, 2017)
The following is a description of the severance benefits under our employment agreements with each of Mr. Klaeser and Mr. Shafer dated July 1, 2018, and our stock option and PRSU agreements with Mr. Klaeser and Mr. Shafer granted before November 2, 2017.
Termination Without Cause by Chemical or for Good Reason by the Executive. Under the employment agreements, if Mr. Klaeser’s or Mr. Shafer’s employment is terminated without “cause” by us or for “good reason” by the executive (each as defined in the agreement), and such termination is not within six months before or two years after a “change in control” (as defined in the agreement), each is entitled to receive severance in the amount of two times the executive’s then current base salary (disregarding any reduction in base salary due to a good reason termination) plus the average of the executive’s cash bonuses under our annual cash incentive plan for each of the three most recently completed calendar years (or such lesser number of completed calendar years that executive has been employed by us), payable in equal installments over 104 weeks. We will also pay each executive a lump sum health care stipend in the amount of $10,000, and will provide each executive with executive-level outplacement services for a period not to exceed 12 months.
Under the employment agreements, at the time of such termination, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and convert into shares of our common stock, and all PRSUs will be settled at 100% of target; provided, that, any stock options or PRSUs granted before November 2, 2017, will continue to be subject to their terms on such date. The PRSU award agreements granted on February 21, 2017 (to Mr. Klaeser and Mr. Shafer) and on August 9, 2017 (to Mr. Shafer) provide that (a) if the executive is terminated without cause, then the restrictions on such PRSUs will lapse on a pro rata basis based on the number of full months that have elapsed since the grant date divided by the number of full months in the restricted period; provided, that, the restrictions will not lapse until the end of the applicable performance period and then only if we satisfied the applicable performance conditions, and (b) if the executive terminates his employment for good reason, the unvested PRSUs will be forfeited. The PRSU award agreements granted on January 4, 2017 (to Mr. Klaeser and Mr. Shafer) and the outstanding stock option award agreements (to Mr. Shafer) provide that such unvested equity awards will automatically be forfeited if the executive is terminated without cause or if he terminates his employment for good reason.
Termination Six Months Before or Within Two Years Following a Change in Control. Under the employment agreements, if Mr. Klaeser’s employment is terminated without cause by us or if he terminates his employment for good reason, or if Mr. Shafer’s employment is terminated without cause by us, within two years following a change in control within six months before the date of a change in control, we will pay each executive a lump sum cash payment in the amount of two times the executive’s then current base salary (disregarding any reduction in base salary due to a good reason termination) plus the average of the executive’s cash bonuses under our annual cash incentive plan for each of the most recent three complete calendar years (or such lesser number of completed calendar years that executive has been employed by us), which we refer to as the “change in control payment.” We will also pay each executive a lump sum health care stipend in the amount of $10,000, and will provide each executive with executive-level outplacement services for a period not to exceed 12 months. In addition, with respect to Mr. Shafer, if during the term of his agreement, a good reason event occurs within two years following a change in control, he will receive a lump sum retention bonus in the amount of the change in control payment. If Mr. Shafer received such a retention bonus, he will no longer be entitled to a change in control or other cash severance payment if he is later terminated by us without cause.
Under the employment agreements, unless specified otherwise in the purchase agreement or other controlling agreement, unvested stock options outstanding at the time of a change in control will continue to vest under the vesting schedule, and if we are not the surviving entity, all unvested stock options will be converted into shares of the surviving entity’s common stock at the applicable exchange ratio; provided, that, any stock options granted before November 2, 2017, will continue to be subject to their terms on such date.
All of Mr. Shafer’s outstanding stock options were awarded before November 2, 2017, and under these award agreements, if he is terminated by us without cause or he terminates his employment for “good reason” following a “change in control” (each as defined in the award agreement), then any stock options assumed by the surviving corporation will become fully exercisable, or will be paid out in cash if such stock options have not been assumed. Generally, the treatment of TRSUs and PRSUs following a change in control is set forth below under “TRSU and PRSU Agreements dated February 25, 2019,” unless the treatment of such equity awards under the executive’s employment agreement is deemed more favorable.
Death or Disability. Under the employment agreements, neither Mr. Klaeser nor Mr. Shafer is entitled to any additional severance payments in the event of termination of his employment due to death or disability. However, under the employment agreements, in the event of either executive’s death or disability, all equity-based awards will be treated as follows: all unvested stock options will immediately vest, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and be convertible into shares of our common stock, and all PRSUs will be settled at 100% of target; provided, that, any stock options or PRSUs granted before November 2, 2017, will continue to be subject to their terms on such date.
All of Mr. Shafer’s outstanding stock options were awarded before November 2, 2017, and under these award agreements, upon his death or disability, all unvested stock options will be forfeited and vested stock options will remain exercisable until the earlier of the date such options expire or one year after his death or disability. The PRSU award agreements granted on February 21, 2017 (to Mr. Klaeser and Mr. Shafer) and on August 9, 2017 (to Mr. Shafer) provide that if the executive is terminated because of his death or disability, then the restrictions on such PRSUs will lapse on a pro rata basis based on the number of full months that have elapsed since the grant date divided by the number of full months in the restricted period; provided, that, the restrictions will not lapse until the end of the applicable performance period and then only if we satisfied the applicable performance conditions. The PRSU award agreements granted on January 4, 2017 (to Mr. Klaeser and Mr. Shafer) provide that such unvested equity awards will automatically be forfeited if the executive is terminated because of death or disability.
Retirement. Under the employment agreements, if Mr. Klaeser’s or Mr. Shafer’s employment is terminated due to “retirement” with one year’s advance notice, as defined in each agreement, then all equity-based awards will be treated as follows: all unvested stock options will immediately vest, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and be convertible into shares of our common stock, and all PRSUs will be settled at 100% of target; provided, that, any stock options or PRSUs granted before November 2, 2017, will continue to be subject to their terms on such date.
All of Mr. Shafer’s outstanding stock options were awarded before November 2, 2017, and under these award agreements, upon his retirement, all unvested stock options will terminate and vested stock options will remain exercisable until the earlier of the date such options expire or three years after his retirement. The PRSU award agreements granted on February 21, 2017 (to Mr. Klaeser and Mr. Shafer) and on August 9, 2017 (to Mr. Shafer) provide that, in the event the executive provides one year advance notice of his “retirement,” as defined in the applicable equity plan, then the restrictions on such PRSUs will lapse on a pro rata basis based on the number of full months that have elapsed since the grant date divided by the number of full months in the restricted period; provided, that, the restrictions will not lapse until the end of the applicable performance period and then only if we satisfied the applicable performance conditions. If, however, the executive retires without providing one year advanced notice, any such unvested PRSUs will be forfeited. The PRSU award agreements granted on January 4, 2017 (to Mr. Klaeser and Mr. Shafer) provide that if the executive retires (as defined in the Stock Incentive Plan of 2015), with or without notice, then the restrictions on such PRSUs will lapse on a pro rata basis based on the number of full months that have elapsed since the grant date divided by the number of full months in the restricted period; provided, that, the restrictions will not lapse until the end of the applicable performance period and then only if we satisfied the applicable performance conditions.
TRSU and PRSU Agreements dated February 25, 2019
We entered into TRSU and PRSU agreements with each of Mr. Klaeser and Mr. Shafer on February 25, 2019. Under such TRSU agreements, if the executive is terminated without “cause” by us or the executive terminates his employment for “good reason,” in either case following a “change in control” (each as defined in the agreement), all TRSUs granted to the executive, including TRSUs issued under prior agreements and plans, will 100% vest. Under such PRSU agreements, in the event of a “change in control” (as defined in the agreement), all PRSUs granted to the executive, including PRSUs issued under prior agreements and plans, for which performance results have not been measured will be measured as of the latest practicable date prior to the consummation of the change in control and the number of PRSUs will be fixed at the greater of the target (100%) performance level or actual performance (the “Earned Awards”), and such Earned Awards will vest and be subject to forfeiture based on the executive’s continued service through the performance period. If, however, the executive is terminated without cause by us or the executive terminates his employment for good reason, in either case following a change in control, such Earned Awards will 100% vest. In the event of any conflict between the terms of the TRSU or PRSU agreement (as applicable), and any employment, retention or change in control agreement with the executive (each an “individual agreement”) and/or the terms of the 2017 Stock Plan, the provisions of the TRSU or PRSU agreement (as applicable), or, to the extent more favorable, the individual agreement will control; provided, however, that any provisions of the TRSU or PRSU agreement (as applicable) relating to the timing of settlement or payment in respect of the TRSUs or PRSUs (as applicable) will control in the event of any conflict between the TRSU or PRSU agreement (as applicable), the 2017 Stock Plan, any prior plan and the award agreements thereunder, and any individualhis retention agreement.
Dennis Klaeser Employment and Equity Award Agreements Employment and Letter Agreement On July 1, 2018, TCF entered into an employment agreement with Mr. Ryan
Employment AgreementKlaeser, effective July 1, 2018, which was supplemented by his letter agreement dated July 9, 2018
Termination Without CauseDecember 13, 2019. The employment agreement, as supplemented by the Corporation or for Good Reason byletter agreement, will continue through October 1, 2020, when he will incur a Termination without Cause and he will be entitled to receive the Executive. Change in Control Severance Pay as defined in his employment agreement. Under Mr. Klaeser’s employment agreement, as supplemented, he is entitled to receive:| • | An annual salary of $750,000, subject to annual review and adjustment; | | • | Annual target bonus opportunity that is no less than 80% of base salary; | | • | Annual equity-based award with a target value equal to 80% of base salary; | | • | Perquisites including but not limited to an auto allowance and payment of certain membership fees; and | | • | Participation in the same benefit plans as apply to TCF Senior Executives generally, and on the same terms and conditions. |
When Mr. Klaeser’s employment terminates on October 1, 2020, he will be eligible to receive the following Change in Control Severance Pay: | • | A lump sum payment equal to two times the sum of (a) his then current Base Salary and (b) the average of his annual bonus for the three most recently completed calendar years; | | • | His pro rata bonus for 2020; | | • | The acceleration and vesting of all outstanding equity awards; | | • | 12 months of outplacement services through an external firm following termination; and | | • | A lump sum health care stipend of $10,000. |
Under his employment agreement, if Mr. Ryan’s employment is terminated without “cause” by usKlaeser experiences a qualifying termination within two years following a Change in Control, or for “good reason” by him (each as defined in the agreement), and such termination is not within six months before or two years afterthe date of a “changeChange in control” (as defined inControl, we will pay him the agreement), he is entitled to receive aabove-described severance payment in the amount of two times his then current base salary (disregarding any reduction in base salary due to a good reason termination) plus the average of his cash bonuses under our annual cash incentive plan for each of the three most recently completed calendar years (or such lesser number of completed calendar years that executive has been employed by us), payable in one lump sum (the “severance payment”). We will also pay Mr. Ryan a lump sum health care stipend in the amount of $10,000,cash payment and will provide him with executive-level outplacement services for a period not to exceed 12 months. At the time of his termination, all outstanding equity awardshe will be treated in accordance withentitled to the terms of the applicable equity plan or award agreement. above-referenced benefits.| 2020 Proxy Statement | | 52 |
Death or Disability. Under theMr. Kleaser’s employment agreement, Mr. Ryanhe is not entitled to any additional severance payments in the event of termination of his employment due to death or disability. At the time of termination due to death, Disability or disability,Retirement with one year’s advance notice. In addition, under his employment agreement, in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) Retires on one year’s advance notice after December 31, 2019, all outstanding equityequity-based awards will be treated as follows: all unvested stock options will immediately vest, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and be convertible into shares of our common stock, and all PRSUs will be settled at 100% of target; provided, that, any PRSUs granted before November 2, 2017, will continue to be subject to their terms on such date. Equity Award Agreements TRSU Agreements dated February 27, 2018 As described above, Mr. Klaeser’s employment agreement will govern the treatment of TRSUs granted under the TRSU Agreements dated February 27, 2018 in accordancethe event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is Disabled, or (e) his Retirement after December 31, 2019 (on one year’s advance notice). TRSU and PRSU Agreements dated February 25, 2019 We entered into TRSU and PRSU agreements with Mr. Klaeser on February 25, 2019. Under such TRSU agreements, if he is terminated without Cause by us or he terminates his employment for Good Reason, in either case following a Change in Control, all TRSUs granted to him, including TRSUs issued under prior agreements and plans, will 100% vest. Under the terms of such PRSUs, because the Merger resulted in a Change in Control, the performance metrics of all PRSUs, including PRSUs issued under prior agreements and plans (including PRSUs granted before November 2, 2017), were measured as of the latest practicable date before the Merger Date, and the number of PRSUs was fixed at the greater of the target (100%) performance level or actual performance, which we refer to as the “earned PRSUs,” and such earned PRSUs are now subject only to time-based vesting requirements based on the executive’s continued service through the applicable performance period. If, following the Merger, Mr. Klaeser’s employment is terminated without Cause or he terminates his employment for Good Reason, the earned PRSUs will vest as of his employment termination date. Following the Merger, his earned PRSUs will fully vest on his Retirement (on one year’s advance notice), death or Disability, whether granted hereunder or granted before February 25, 2019. In the event of any conflict between the terms of the applicable equityTRSU or PRSU agreement (as applicable), and his employment agreement and/or the terms of the 2017 Stock Plan, the provisions of the TRSU or PRSU agreement (as applicable), or, to the extent more favorable, the employment agreement will control; provided, however, that any provisions of the TRSU or PRSU agreement (as applicable) relating to the timing of settlement or payment in respect of the TRSUs or PRSUs (as applicable) will control in the event of any conflict between the TRSU or PRSU agreement (as applicable), the 2017 Stock Plan, any prior plan and the award agreements thereunder, and the employment agreement. Thomas Shafer Employment and Equity Award Agreements Employment Agreement On July 31, 2019, TCF entered into an amended employment agreement with Mr. Shafer which will continue through August 1, 2021 and automatically renews for successive periods unless either party provides the other party with notice of intention to terminate at least 30 days before an anniversary of the effective date, in which case the agreement will terminate at the end of the then-current two-year term. Under Mr. Shafer’s employment agreement, he is entitled to receive: | • | An annual salary of $950,000, subject to annual review and adjustment; | | • | Annual target bonus opportunity that is no less than 100% of base salary; | | • | Annual equity-based award with a target value equal to 100% of base salary; | | • | Perquisites including but not limited to an auto allowance and payment of certain membership fees; and | | • | Participation in the same benefit plans as apply to TCF Senior Executives generally, and on the same terms and conditions. |
If Mr. Shafer’s employment is terminated by TCF without Cause or award agreement.
Termination Six Months Beforeby him for Good Reason, each a qualifying termination, not within six months before or Within Two Years Followingtwo years after a Change in Control,. subject to his execution and non-revocation of a release of claims, Mr. Shafer will be eligible to receive:| • | two times the sum of (a) his then current Base Salary and (b) the average of his annual bonus for the three most recently completed fiscal years, payable in equal installments over 104 weeks; provided, that, Mr. Shafer will not be entitled to such severance payment if he experiences a qualifying termination within two years of the Merger Date; | | • | 12 months of outplacement services through an external firm following termination; and | | • | A lump sum health care stipend of $10,000. |
Under his employment agreement, if Mr. Ryan’s employment is terminated without cause by us or for good reason by himShafer experiences a qualifying termination within two years following a changeChange in controlControl, or within six months before the date of a changeChange in control, he is entitled to receiveControl, we will pay him the above-referencedabove-described severance payment. We will also pay Mr. Ryanpayment in a lump sum health care stipendcash payment and he will be entitled to the above-referenced benefits; provided, that, the Merger will not constitute a Change in Control. In addition, if he experiences a qualifying termination after the amount of $10,000, and will provide him with executive-level outplacement services for a period not to exceed 12 months. At the time ofChange in Control, his termination, all outstanding equity awards will be treatedvest as described below, except that PRSUs will vest at the greater of target or actual performance. | 2020 Proxy Statement | | 53 |
Under Mr. Shafer’s employment agreement, he is not entitled to any additional severance payments in accordancethe event of his termination due to death, Disability or Retirement with the terms of the applicable equity plan or award agreement.
TRSU Agreement dated July 9, 2018
We entered into a TRSU agreement with Mr. Ryan on July 9, 2018. Under theone year’s advance notice.In addition, under his employment agreement, in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) his Retirement on one year’s advance notice, all equity-based awards will be treated as follows: all unvested stock options will immediately vest, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and be convertible into shares of our common stock, and all PRSUs will be settled at 100% of target; provided, that, any PRSUs granted before November 2, 2017, will continue to be subject to their terms on such date. Equity Award Agreements TRSU Agreements dated February 27, 2018 As described above, Mr. Ryan’sShafer’s employment agreement will govern the treatment of TRSUs granted under the TRSU agreements dated February 27, 2018 in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is Disabled, or (e) his Retirement (on one year’s advance notice). TRSU and PRSU Agreements dated February 25, 2019 Mr. Shafer entered into the same form of TRSU and PRSU Agreements dated February 25, 2019 that are described above for Mr. Klaeser under the heading “Dennis Klaeser Employment and Equity Award Agreements—Equity Award Agreements—TRSU and PRSU Agreements date February 25, 2019.” 2019 Equity Retention Award As described under the heading “Compensation Highlights—Equity Retention Awards” in the CD&A of this proxy statement, in connection with the Merger, we granted equity retention awards consisting of TRSUs to induce Mr. Shafer to remain employed with us following the Merger Date. The retention award agreement provides that, in the event of his termination without “cause”Cause by us, or if he terminates his employment for “good reason” (each as defined in the agreement),a Modified Good Reason, or if he dies, is terminated due to Disability, or is disabled, or if he providesterminate due to his Retirement (on one year written notice before his intended retirement after reaching age 55 with ten years of service,year’s advance notice), then all remaining restrictions on the TRSUs will lapse, and such award will 100% vest. A Modified Good Reason means (a) any material reduction in his Base Salary, as it may be adjusted from time to time, without a corresponding reduction in the base salaries of the other executives of TCF, or (b) any requirement by TCF (without the his consent) that he be principally based at any office or location more than 60 miles from his principal work location as of the grant date. In addition, under his TRSUthe retention award agreement, if Mr. Ryanhe is terminated without causeCause by us or if he terminates his employment for good reason,Good Reason, in either case following a Change in Control (other than the Merger), all TRSUs granted to him under the agreement will 100% vest. Brian Maass Employment and Equity Award Agreements Employment Agreement On December 13, 2019, TCF entered into an amended employment agreement with Mr. Maass, effective December 13, 2019, which will continue through December 13, 2021, and automatically renews for successive one-year periods unless either party provides the other party with notice of intention to terminate at least 30 days before an anniversary of the effective date. Under Mr. Maass’ employment agreement, he is entitled to receive: | • | An annual salary of at least $575,000, subject to annual review and adjustment; | | • | Annual cash incentive opportunity and long-term incentive awards, at levels commensurate with his position; and | | • | Participation in the same benefit plans as apply to TCF salaried employees generally, and on the same terms and conditions |
If Mr. Maass’ employment is terminated by TCF without Cause or by him for Good Reason, each a qualifying termination, not within six months before or two years after a Change in Control, subject to his execution and non-revocation of a release of claims, Mr. Maass will be eligible to receive: | • | 1.5 times the sum of (i) his then current Base Salary and (ii) the average of his annual bonus for the three most recently completed calendar years, payable in equal installments over 78 weeks; provided, that, Mr. Maass will not be entitled to such severance payment if he experiences a qualifying termination within two years of the Merger Date; | | • | 12 months of outplacement services through an external firm following termination; and | | • | A lump sum health care stipend of $10,000. |
Under his employment agreement, if Mr. Maass experiences a qualifying termination within two years following a “changeChange in control” (as definedControl, or within six months before the date of a Change in Control, we will pay him the above-described severance payment in a lump sum cash payment; provided, that, the Merger will not constitute a Change in Control. In addition, if he experiences a qualifying termination after the Change in Control, his outstanding equity awards will vest as described below, except that PRSUs will vest at the greater of target or actual performance. Under Mr. Maass’ employment agreement, he is not entitled to any additional severance payments in the agreement),event of his termination due to death, Disability or Retirement with one year’s advance notice. In addition, under his employment agreement, in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) his Retirement on one year’s advance notice, all equity-based awards will be treated as follows: all unvested stock options will immediately vest, the restrictions on all time-vesting restricted stock will lapse, all TRSUs will immediately vest and be convertible into shares of our common stock, and all PRSUs will be settled at 100% vest.of target. | 2020 Proxy Statement | | 54 |
Equity Award Agreements Restricted Stock Award Agreements dated April 22, 2015, January 25, 2017, January 24, 2018, March 6, 2018, and February 8, 2019 As described above, Mr. Maass’s employment agreement will govern the treatment of restricted stock awards granted under the Restricted Stock Award Agreements dated January 25, 2017, January 24, 2018, and February 8, 2019 in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) Retires with one year’s advance notice. Performance-Based Restricted Stock Unit Agreements dated January 25, 2017, January 24, 2018, and February 8, 2019 As described above, Mr. Maass’s employment agreement will govern the treatment of performance-based restricted stock granted under the Performance-Based Restricted Stock Unit Agreements dated January 25, 2017, January 24, 2018, and February 8, 2019 in the event he (a) is terminated by us without Cause, (b) terminates his employment for Good Reason, (c) dies, (d) is terminated due to a Disability, or (e) Retires with one year’s advance notice. 2019 Equity Retention Award As described under the heading “Compensation Highlights—Equity Retention Awards” in the CD&A of this proxy statement, in connection with the Merger, we granted equity retention awards consisting of TRSUs to induce Mr. Maass to remain employed with us following the Merger Date. The form of award agreement is described above under the heading “Thomas Shafer Employment and Equity Award Agreements—Equity Award Agreements—2019 Equity Retention Award.” Definitions under Employment, Retention and Equity Award Agreements Definitions of “Change in Control” For purposes of all employment agreement with our NEOs and all TRSU and PRSU agreements entered into with any NEO in 2019, a Change in Control is deemed to occur upon: (a) the acquisition by a party of 40% or more of the voting stock of TCF’s then-outstanding securities; (b) a change in a majority of TCF’s Board of Directors over a two-year period (other than if such Directors were nominated by at least two-thirds of the Directors who were Directors at the beginning of the period, or whose nomination was so approved); or (c) holders of TCF common stock approving a merger or acquisition that results in TCF’s voting stock representing less than 60% of the shares outstanding immediately prior to such merger or acquisition, (but, a change of control will not be deemed to have occurred if the merger, consolidation, sale or disposition of assets is not subsequently consummated). For purposes of Mr. Dahl’s employment agreement only, a Change in Control is also deemed to occur upon holders of TCF common stock approving (a) a plan of complete liquidation of TCF, or (b) an agreement for the sale of all or substantially all of TCF’s assets. The employment agreements of Messrs. Shafer, Klaeser, and Maass also define a Change in Control to include the acquisition, by a party or parties acting as a group, of TCF’s assets that have a total gross fair market value equal to or exceeding forty percent (40%) of the total gross fair market value of TCF’s assets in a single transaction or within a 12-month period ending with the most recent acquisition. For purposes of any TRSU or PRSU agreements entered into with any NEO in 2019, a Change in Control also includes the acquisition, by a party or parties acting as a group, of TCF’s assets that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of TCF’s assets in a single transaction or within a 12-month period ending with the most recent acquisition. Definitions of “Cause” and “Good Reason” For purposes of Mr. Dahl’s employment agreement and equity awards, “Cause” generally includes: (a) the deliberate and continued failure to devote substantially all business time and best efforts to the performance of duties after 30 days’ written notice from the Board; (b) a deliberate and material violation of reasonable and lawful instructions of the Board; (c) gross misconduct; (d) conviction of a felony or any criminal charge involving moral turpitude and all appeals from such conviction have been exhausted; or (e) failure or refusal to comply with a reasonable and lawful policy, standard or regulation of Company in any material respect, relating to sexual harassment, other unlawful harassment or workplace discrimination. For purposes of Messrs. Provost’s and Torgow’s retention agreements and equity awards, “Cause” generally means: (a) executive’s material breach of any provision in the employment agreement, which continues uncured after 20 days’ written notice from the Board; (b) executive’s failure or refusal to materially perform all lawful services required of executive by his employment position, which continues after 20 days’ notice from the Board; (c) executive’s commission of fraud, embezzlement, theft, or a crime constituting moral turpitude, which, in the reasonable good-faith judgment of the Board, renders continued employment harmful to TCF; (d) executive’s misappropriation of TCF’s assets or property; (e) executive’s conviction with respect to any felony or other crime which, in the reasonable good-faith judgment of the Board, adversely affects TCF or its reputation. For purposes of Messrs. Klaeser’s, Shafer’s, and Maass’ employment agreements and TCF equity awards, “Cause” generally means: (a) removal by order of a regulatory agency having jurisdiction over TCF; (b) executive’s material breach of any provision in the employment agreement, which continues uncured after 20 days’ written notice from TCF; (c) executive’s failure or refusal to materially perform all lawful services required | 2020 Proxy Statement | | 55 |
of executive by his employment position, which failure continues after 20 days’ written notice from TCF; (d) executive’s commission of fraud, embezzlement, theft, or a crime constituting moral turpitude, which, in the reasonable good-faith judgment of the Board, renders continued employment harmful to TCF; (e) executive’s misappropriation of TCF assets or property; or (f) executive’s conviction with respect to any felony or other crime which, in the reasonable good faith judgment of TCF’s Board, adversely affects TCF and its reputation. For purposes of Mr. Dahl’s employment agreement, “Good Reason” generally means: (a) any material diminution in the scope of his authority and responsibility; (b) a material diminution in his base compensation, including bonus opportunity, benefits or perquisites; (c) a material change in geographic location at which he must perform the services; (d) requiring Mr. Dahl to report to a supervisor other than TCF’s Board; or (e) any other action or inaction that constitutes a material breach by TCF of the agreement. Additionally, under Mr. Dahl’s employment agreement, “Good Reason” also includes the failure of any acquirer of or successor to TCF to assume the obligations of TCF under Mr. Dahl’s employment agreement in connection with a change in control. For purposes of Messrs. Provost’s and Torgow’s retention agreements and equity awards, “Good Reason” generally means: (a) any material reduction in his base salary, as it may be adjusted; (b) any material reduction in executive’s status, position or responsibilities; (c) any requirement (without executive’s consent) that he be principally based at any office or location more than 50 miles from executive’s principal work location immediately before the effective date of the agreement or (d) any material breach of the agreement by TCF. For purposes of Messrs. Klaeser’s, Shafer’s, and Maass’ employment agreements and TCF equity awards (other than the retention equity awards), “Good Reason” generally means: (a) any material reduction in executive’s Base Salary, as it may be adjusted, without a corresponding reduction to the base salaries of other TCF executives; (b) any material reduction in executive’s status, position or responsibilities, including service on the Board; (c) any requirement (without executive’s consent) that he be principally based at any office or location more than 60 miles from executive’s principal work location as of the effective date of the agreement or (d) any material breach of the agreement by TCF. Additionally, under Mr. Maass’ employment agreement, “Good Reason” also includes the failure of TCF to promote Mr. Maass to the position of Chief Financial Officer by October 1, 2020. | Potential Payments Upon Termination or Change in Control | |
Each of our employment agreements with Messrs. Dahl, Provost, Klaeser, Torgow, Shafer and Maass provide for certain severance payments upon termination of employment, including with respect to Messrs. Dahl, Shafer and Maass, upon a qualifying termination following a change in control of TCF, but not including our Merger, each subject to the executive’s execution of a general release and waiver of claims against us or our affiliates. | 2020 Proxy Statement | | 56 |
Potential Post-Employment Payments Due to Our Named Executive Officers
The following table shows potential post-employment payments due to Mr. Provost, Mr. Klaeser, Mr. Torgow, Mr. Shafer and Mr. Ryaneach NEO upon termination from the Corporation forTCF under various reasons,circumstances, including a change in control of the Corporation,Company, assuming that those events occurred on December 31, 2018. If we terminate such named executive officer’s2019. For purposes of the table, a “Qualifying Termination upon a Change in Control” means the executive’s termination without Cause by us or executive’s termination of his employment for “cause”Good Reason, each within six months before or the executive resigns, then we have no further obligation to such named executive officer except for payment of any amounts earned and unpaid as of the effective date of the termination. Accordingly, those events are omitted from the table. In addition, at December 31, 2018, none of our named executive officers were eligible for retirement and, therefore, we have omitted retirement (with or without notice) from the table as well.two years after a Change in Control. We report amounts in the table without any reduction for possible delay in the commencement or timing of payments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acceleration of Vesting | | | | Termination Scenario | | Cash Payments(1) | | Benefits(2) | | Stock Options(3) | | TRSUs(4) | | PRSUs(5) | | Restricted Stock Awards(6) | | Total | | David T. Provost | | | | | | |
| | |
| | |
| | | | | | Death | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 784,076 |
| (8) | $ | 1,269,964 |
| (8 | ) | $ | — |
| | $ | 2,054,040 |
| | Disability | | — |
| | — |
| | | | 130,679 |
| (9) | 352,768 |
| (9 | ) | — |
| | 483,447 |
| | Without Cause | | 4,900,000 |
| | 26,184 |
| | — |
| | 784,076 |
| (8) | 1,269,964 |
| (8 | ) | 316,127 |
| | 7,296,351 |
| | Good Reason | | 4,900,000 |
| | 26,184 |
| | — |
| | 784,076 |
| (8) | 1,269,964 |
| (8 | ) | — |
| | 6,980,224 |
| | Change in Control with Qualifying Termination | | 4,900,000 |
| (7) | 26,184 |
| (7) | — |
| | 784,076 |
| (10) | 1,269,964 |
| (10 | ) | — |
| | 6,980,224 |
| | Dennis L. Klaeser | | | | |
| | |
| | |
| | |
| | | | | | Death | | — |
| | — |
| | — |
| | 520,667 |
| (11) | 552,213 |
| (12 | ) | 192,166 |
| | 1,265,046 |
| | Disability | | — |
| | — |
| | — |
| | 520,667 |
| (11) | 552,213 |
| (12 | ) | 192,166 |
| | 1,265,046 |
| | Without Cause | | 2,674,677 |
| | 35,000 |
| | — |
| | 520,667 |
| (11) | 552,213 |
| (12 | ) | 192,166 |
| | 3,974,723 |
| | Good Reason | | 2,674,677 |
| | 35,000 |
| | — |
| | 520,667 |
| (11) | 423,321 |
| (13 | ) | 192,166 |
| | 3,845,831 |
| | Qualifying Termination on a Change in Control | | 2,674,677 |
| | 35,000 |
| | — |
| | 520,667 |
| (10) | 804,831 |
| (10 | ) | 192,166 |
| | 4,227,341 |
| | Gary Torgow | | | | |
| | |
| | |
| | |
| | | | | | Death | | — |
| | — |
| | — |
| | 784,076 |
| (8) | 1,269,964 |
| (8 | ) | — |
| | 2,054,040 |
| | Disability | | — |
| | — |
| | | | 130,679 |
| (9) | 352,768 |
| (9 | ) | — |
| | 483,447 |
| | Without Cause | | 4,900,000 |
| | 26,184 |
| | — |
| | 784,076 |
| (8) | 1,269,964 |
| (8 | ) | 316,127 |
| | 7,296,351 |
| | Good Reason | | 4,900,000 |
| | 26,184 |
| | — |
| | 784,076 |
| (8) | 1,269,964 |
| (8 | ) | — |
| | 6,980,224 |
| | Change in Control with Qualifying Termination | | 4,900,000 |
| (7) | 26,184 |
| (7) | — |
| | 784,076 |
| (10) | 1,269,964 |
| (10 | ) | — |
| | 6,980,224 |
| | Thomas C. Shafer | | | | |
| | |
| | |
| | |
| | | | | | Death | | — |
| | — |
| | — |
| | 390,299 |
| (11) | 545,953 |
| (12 | ) | 192,166 |
| | 1,128,418 |
| | Disability | | — |
| | — |
| | | | 390,299 |
| (11) | 545,953 |
| (12 | ) | 192,166 |
| | 1,128,418 |
| | Without Cause | | 3,347,667 |
| | 35,000 |
| | — |
| | 390,299 |
| (11) | 545,953 |
| (12 | ) | 192,166 |
| | 4,511,085 |
| | Good Reason | | 3,347,667 |
| | 35,000 |
| | — |
| | 390,299 |
| (11) | 423,321 |
| (13 | ) | 192,166 |
| | 4,388,453 |
| | Change in Control with Qualifying Termination or Good Reason Event | | 3,347,667 |
| (14) | 35,000 |
| | — |
| | 390,299 |
| (10) | 651,983 |
| (10 | ) | 192,166 |
| | 4,617,115 |
| | J. Brennan Ryan | | | | |
| | |
| | |
| | |
| | | | | | Death | | — |
| | — |
| | — |
| | 328,794 |
| (15) | — |
| | — |
| | 328,794 |
| | Disability | | — |
| | — |
| | | | 328,794 |
| (15) | — |
| | — |
| | 328,794 |
| | Without Cause | | 2,340,000 |
| | 35,000 |
| | — |
| | 328,794 |
| (15) | — |
| | — |
| | 2,703,794 |
| | Good Reason | | 2,340,000 |
| | 35,000 |
| | — |
| | 328,794 |
| (15) | — |
| | — |
| | 2,703,794 |
| | Change in Control with Qualifying Termination | | 2,340,000 |
| | 35,000 |
| | — |
| | 328,794 |
| (15) | — |
| | — |
| | 2,703,794 |
|
| | | | | | | | | | | | Acceleration of Vesting | | | | | | | | | Termination Scenario | | Cash
Payments(1)
($) | | | Benefits(2)
($) | | | Stock
Options(3)
($) | | | TRSUs(4)
($) | | | PRSUs(5)
($) | | | Legacy TCF
Restricted
Stock
Awards(6)
($) | | | Total
($) | | | Craig Dahl | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice | | — | | | — | | | — | | | — | | | 3,665,657 | | | 2,832,196 | | | $ | 6,497,853 | | | Death or Disability | | — | | | — | | | — | | | — | | | 3,665,657 | | | 2,832,196 | | | $ | 6,497,853 | | | Without Cause | | 6,131,562 | | | 26,809 | | | — | | | — | | | 3,665,657 | | | 2,832,196 | | | | 12,656,225 | | | Good Reason | | 6,131,562 | | | 26,809 | | | — | | | — | | | 3,665,657 | | | 2,832,196 | | | | 12,656,225 | | | Qualifying Termination Upon a Change in Control | | — | (7) | | — | (7) | | — | | | — | | | 3,665,657 | | | 2,832,196 | | | $ | 6,497,853 | | | David Provost | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice(8) | | — | | | — | | | — | | | 1,951,739 | (9) | | 3,095,446 | (10) | | — | | | | 5,047,185 | | | Death or Disability | | — | | | — | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 5,720,458 | | | Without Cause | | 4,900,000 | | | 26,809 | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 10,647,266 | | | Good Reason | | 4,900,000 | | | 26,809 | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 10,647,266 | | | Qualifying Termination Upon a Change in Control | | — | (7) | | — | (7) | | — | | | 2,625,012 | (12) | | 3,095,446 | (10) | | — | | | | 5,720,458 | | | Dennis Klaeser | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice | | — | | | — | | | — | | | — | (13) | | — | (13) | | — | | | | — | | | Death or Disability | | — | | | — | | | — | | | 821,434 | (11) | | 1,009,523 | (10) | | — | | | | 1,830,957 | | | Without Cause | | 2,650,016 | | | 35,000 | | | — | | | 821,434 | (11) | | 1,009,523 | (10) | | — | | | | 4,515,973 | | | Good Reason | | 2,650,016 | | | 35,000 | | | — | | | 821,434 | (11) | | 1,009,523 | (10) | | — | | | | 4,515,973 | | | Qualifying Termination Upon a Change in Control | | 2,650,016 | | | 35,000 | | | — | | | 821,434 | (11) | | 1,009,523 | (10) | | — | | | | 4,515,973 | | | Gary Torgow | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice(8) | | — | | | — | | | — | | | — | (14) | | — | (14) | | — | | | | | | | Death or Disability | | — | | | — | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 5,720,458 | | | Without Cause | | 4,900,000 | | | 26,809 | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 10,674,076 | | | Good Reason | | 4,900,000 | | | 26,809 | | | — | | | 2,625,012 | (11) | | 3,095,446 | (10) | | — | | | | 10,674,076 | | | Qualifying Termination Upon a Change in Control | | — | (7) | | — | (7) | | — | | | 2,625,012 | (12) | | 3,095,446 | (10) | | — | | | | 5,720,458 | | | Thomas Shafer | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice | | — | | | — | | | — | | | — | (16) | | — | (16) | | — | | | | — | | | Death or Disability | | — | | | — | | | — | | | 5,724,202 | (11) | | 1,243,336 | (10) | | — | | | | 6,967,538 | | | Without Cause | | — | (15) | | 35,000 | | | — | | | 5,724,202 | (11) | | 1,243,336 | (10) | | — | | | | 7,002,538 | | | Good Reason | | — | (15) | | 35,000 | | | — | | | 884,333 | (17) | | 1,243,336 | (10) | | — | | | | 2,162,669 | | | Modified Good Reason | | — | (15) | | 35,000 | | | — | | | 5,724,202 | (18) | | 1,243,336 | (18) | | — | | | | 7,002,538 | | | Qualifying Termination Upon a Change in Control | | 3,102,500 | | | 35,000 | | | — | | | 5,724,202 | (11) | | 1,243,336 | (10) | | — | | | | 10,105,038 | |
| 2020 Proxy Statement | | 57 |
| | | | | | | | | | | | Acceleration of Vesting | | | | | | | | | | Termination Scenario | | Cash
Payments(1)
($) | | | Benefits(2)
($) | | | Stock
Options(3)
($) | | | TRSUs(4)
($) | | | PRSUs(5)
($) | | | Legacy TCF
Restricted
Stock
Awards(6)
($) | | | | Total
($) | | | Brian Maass | | | | | | | | | | | | | | | | | | | | | | | | Termination For Cause or Retirement without Notice | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | Retirement with Notice | | — | | | — | | | — | | | — | (19) | | — | (19) | | — | (19) | | | — | | | Death or Disability | | — | | | — | | | — | | | 2,557,948 | (11) | | 1,146,647 | (20) | | 1,702,818 | | | | 5,407,413 | | | Without Cause | | — | (15) | | 35,000 | | | — | | | 2,557,948 | (11) | | 1,146,647 | (20) | | 1,702,818 | | | | 5,442,413 | | | Good Reason | | — | (15) | | 35,000 | | | — | | | — | (17) | | 1,146,647 | (20) | | 1,702,818 | | | | 2,884,465 | | | Modified Good Reason | | — | (15) | | 35,000 | | | — | | | 2,557,948 | (18) | | 1,146,647 | (20) | | 1,702,818 | | | | 5,442,413 | | | Qualifying Termination Upon a Change in Control | | 1,517,764 | | | 35,000 | | | — | | | 2,557,948 | (11) | | 1,146,647 | (20) | | 1,702,818 | | | | 6,960,177 | |
| (1) | Represents cash payments pursuant to the executive employment agreements or retention agreements, as applicable, described above, as follows: |
Mr. Provost and Mr. Torgow: two times the executive’s base salary, plus two times his average bonus of $1.5 million.
Mr. Klaeser, Mr. Shafer and Mr. Ryan: two times the executive’s base salary plus the average of the executive’s cash bonuses under our annual cash incentive plan for each of the most recent three complete calendar years (or such lesser number of completed calendar years that executive has been employed by us). For purposes of this calculation, we have included annual cash incentive payments earned in the year-ended 2018, even if not paid until 2019.
| • | Mr. Dahl: 2.5 times the executive’s base salary, plus 2.5 times his average bonus of $1.4 million. Mr. Dahl’s average bonus includes his cash bonuses received in 2016 and 2018 pursuant to the Legacy TCF MIP applicable for each year, and the cash value of the equity award he received in 2017 in lieu of the cash bonus he earned pursuant to the Legacy TCF 2017 MIP. For purposes of this calculation, we have not included annual cash incentive payments for the year-ended 2019. | (2) | • | Messrs. Provost and Torgow: two times the executive’s base salary, plus two times his average bonus of $1.5 million. For purposes of this calculation, we have not included annual cash incentive payments for the year-ended 2019. | | • | Messrs. Klaeser and Shafer: two times the executive’s base salary plus the average of the executive’s cash bonuses under our annual cash incentive plan for each of the most recent three complete calendar years (or such lesser number of completed calendar years that executive has been employed by us). For purposes of this calculation, we have not included annual cash incentive payments for the year-ended 2019. | | • | Mr. Maass: one and a half times the executive’s base salary plus the average of the executive’s cash bonuses under our annual cash incentive plan for each of the most recent three complete calendar years (or such lesser number of completed calendar years that executive has been employed by us). For purposes of this calculation, we have not included annual cash incentive payments for the year-ended 2019. |
| (2) | Pursuant to executive employment or retention agreements, amounts reported for each executive are as follows: |
Mr. Provost and Mr. Torgow: a lump sum amount equal to 24 times the executive’s monthly contribution towards COBRA for employee dependent health, prescription drug and dental coverage elections under our employee benefit plans providing such benefits, minus the COBRA administrative cost.
Mr. Klaeser, Mr. Shafer and Mr. Ryan: a lump sum health care stipend in the amount of $10,000 and the value of executive-level outplacement services for a period not to exceed 12 months, estimated at $25,000.
| • | Messrs. Dahl, Provost and Torgow: a lump sum amount equal to 24 times the executive’s monthly contribution towards COBRA for employee dependent health, prescription drug and dental coverage elections under our employee benefit plans providing such benefits, minus the COBRA administrative cost. | (3) | • | Messrs. Klaeser, Shafer and Maass: a lump sum health care stipend in the amount of $10,000 and the value of executive-level outplacement services for a period not to exceed 12 months, estimated at $25,000. |
| (3) | Mr. Shafer is the only named executive officer with unvested stock options; however, none were in-the-money at December 31, 2018. |
| 2019. | | (4) | Amount represents the market value, excludingincluding dividend equivalents, of unvested TRSUs that would vest in connection with a termination event on December 31, 2018.TRSUs. The valuation of these awards is based on the closing price of our common stock as reported on The NASDAQ Stock Market® atNasdaq of $46.80 per share on December 31, 2018 of $36.61 per share. |
| 2019. | | (5) | Amount represents the market value, excluding dividend equivalents, of unvested PRSUs that would vest in connection with a termination event on December 31, 2018.were converted into earned PRSUs as of the Merger Date. The valuationmarket value of these awards is based on the closing price of our common stock as reported on The NASDAQ Stock Market atNasdaq of $46.80 per share on December 31, 2018 of $36.61 per share. With respect to the January 4, 20172019. The PRSUs granted to Mr.Messrs. Provost, Klaeser, Torgow and Mr. Shafer for whichin 2017, 2018 and 2019, as applicable, were converted into earned PRSUs at rates equal to 100%, 112.5% and 100%, respectively, of the performance conditions were met at 90% of target at December 31, 2018, but which remained unvested at year-end, the number of shares that vested,on the Merger Date. The Legacy TCF PRSUs granted to Messrs. Dahl and thusMaass in 2017, 2018 and 2019 were converted into earned PRSUs at rates equal to 150%, 150% and 100%, respectively, of the value reflected in the table, is based on our actual performance. With respect to all other PRSUs, thetarget number of shares that vest for each NEO, and thuson the value reflected in the table, is based on an assumption that PRSUs are achieved at the “target” performance level. |
| Merger Date. | | (6) | Amount represents the market value of unvested Legacy TCF restricted stock awards that would vest in connection with a termination event on December 31, 2018.were converted as of the Merger Date. The valuationawards did not include dividend rights for unvested shares. The market value of these awards is based on the closing price of our common stock as reported on The NASDAQ Stock Market atNasdaq of $46.80 per share on December 31, 20182019. Represents full vesting of $36.61 per share. For Mr. Provost and Mr. Torgow, vesting is determined under the applicableLegacy TCF restricted stock agreement, as described above. For Mr. Klaeser and Mr. Shafer, vesting is determinedawards under eachthe executive’s employment agreement or award agreement, as described above. |
| applicable. | | (7) | UnderWith respect to Messrs. Dahl, Provost and Torgow, neither their employment agreements nor retention agreements, as applicable, contain any severance provisions that are based on or otherwise relate to a Change in Control; however, each of Mr. Provost and Mr. Torgow willexecutive would receive a cash severance payment of $6,131,562 (with respect to Mr. Dahl) and the associated COBRA benefits described in footnote 2, above,$4,900,000 (with respect to Messrs. Provost and Torgow) if the executive is terminated by us without “cause”Cause or if he terminates his employment for “good reason,”Good Reason, whether or not such termination follows a changeChange in control. |
| Control, assuming such qualifying termination occurred on December 31, 2019. Messrs. Provost and Torgow are also entitled to the benefits disclosed in footnote two on a termination without Cause or if he terminates his employment for Good Reason, whether or not such termination follows a Change in Control. | | (8) | Represents full vestingUnder the retention agreements, Messrs. Provost and Torgow were only entitled to cash severance and benefits if they retired 18 months after the Merger Date, which date had not passed as of December 31, 2019. On March 10, 2020, Messrs. Provost and Torgow entered into amended and restated retention agreements with us eliminating the provisions of the TRSU or PRSU awards (as applicable) under his employment agreement, as described above. |
| retention agreements related to cash severance payments and accelerated equity benefits upon retirement after 18 months. | | (9) | Represents pro rata vesting under the executive’s February 27, 2018 TRSU or PRSU agreement (as applicable) as described above. |
| and full vesting under the executive’s February 25, 2019 TRSU agreement. | | (10) | For purposesRepresents full vesting of this table, we have determined vesting on a qualifying termination following a change in controlearned PRSUs under the February 25, 2019 TRSU or PRSU agreement (as applicable), which also governs the treatment of prior awards. |
| agreement. | | (11) | Represents full vesting of TRSUs under the TRSU awards under hisexecutive’s retention agreement or employment agreement, as described above. |
| applicable. | | (12) | Represents (a) full vesting of PRSUs granted toTRSUs under the 2018 and 2019 TRSU agreements. | | (13) | Under Mr. Klaeser and Mr. Shafer on February 27, 2018 under each executive’sKlaeser’s employment agreement, (b) pro rata vesting of PRSUs grantedhe is not eligible for Retirement with one year’s advance notice until after December 31, 2019. Similarly, under the February 21, 2017his applicable TRSU and PRSU agreements, (to Mr. Klaeser and Mr. Shafer) andhe does not meet the August 9, 2017 PRSU agreement (to Mr. Shafer), and (c) forfeituredefinition of PRSUs granted under the January 4, 2017 PRSU agreement (to Mr. Klaeser and Mr. Shafer). |
| Retirement because he has not attained ten years of service. | (13)(14) | Represents (a) full vestingUnder Mr. Torgow’s equity agreements, he is not eligible for Retirement with one year’s advance notice because he has not attained ten years of PRSUs granted to Mr. Klaeser and Mr. Shafer on February 27, 2018 under each executive’s employment agreement, and (b) forfeiture of the PRSUs awarded under the February 21, 2017 PRSU agreements (to Mr. Klaeser and Mr. Shafer), the August 9, 2017 PRSU agreement (to Mr. Shafer) and the January 4, 2017 PRSU agreement (to Mr. Klaeser and Mr. Shafer). |
| service. | (14)(15) | RepresentsUnder Messrs. Shafer’s and Maass’ employment agreements, for the amount duefirst two years after the Merger Date, he will not be entitled to Mr. Shafer under his employment agreementreceive the cash severance payment described in footnote one, above, if he is terminated without cause“Cause” by us or if experiences a good reason event, each withinhe terminates his employment for “Good Reason,” but he will be entitled to the benefits described in footnote two, years following a change in control. |
| above. | (15)(16) | Under Mr. Shafer’s employment agreement and equity agreements, he is not eligible for Retirement with one year’s advance notice because he has not attained ten years of service. | | (17) | Represents full vesting of TRSUs (except for the 2019 retention equity awards granted to Messrs. Shafer and Maass) under the executive’s employment agreement. | | (18) | Represents full vesting of TRSUs under his July 9, 2018 TRSUthe executive’s employment agreement as described above.and the 2019 retention equity awards. | | (19) | Under Mr. Maass’ employment agreement and equity agreements, he is not eligible for Retirement with one year’s advance notice because he has not reached age 55 or attained ten years of service. | | (20) | Represents full vesting of PRSUs under the executive’s employment agreement. |
| 2020 Proxy Statement | | 58 |
Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer and President, David Provost.
For 2018, our last completed fiscal year:
The median of the total annual compensation for all employees of our company (other than our Chief Executive Officer) was $40,686; and
the total annual compensation of our Chief Executive Officer was $3,533,580, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement.
Based on this information, for 2018 the ratio of the annual total compensation of Mr. Provost, our Chief Executive Officer and President, to the median of the total annual compensation was approximately 87 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our Chief Executive Officer, we took the following steps:
 | | 1. | We determined that as of December 31, 2018, our employee population consisted of 3,224 individuals with all of these individuals located in the United States. This population included our full-time, part-time, seasonal and temporaryEquity Compensation Plans Approved by Shareholders |
employees. However, it did not include independent contractors who were employed by and had their compensation determined by unaffiliated third parties.
| | 2. | To identify the “median employee” from our employee population, we compared the wages of our employees as reflected in our payroll records and reported in Box 5, Medicare Wages, to the Internal Revenue Service on Form W-2 for 2018. Because we offer a variety of compensation arrangements to our employees, including base salary, bonus, commissions and other incentive arrangements, we believe this was the most appropriate and comprehensive methodology for capturing the many different compensation arrangements we offer. We identified our median employee using this compensation measure, which was consistently applied to all of our employees included in the calculation. |
| | 3. | We annualized the compensation of employees that we hired in 2018, who were not employed for the full year, by dividing their 2017 W-2 Box 5, Medicare Wages, by (a) the number of regular hours they worked in 2018, plus (b) the number of overtime hours they worked in 2018 times 1.5, and then multiplied the result by their full-time or part-time standard annual hours. We annualized compensation for part-time employees without making a full-time equivalent adjustment for part-time employees. |
| | 4. | Since all of our employees are located in the United States, as is our Chief Executive Officer, we did not make any cost-of-living adjustments in identifying our “median employee.” |
| | 5. | Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $40,686. |
| | 6. | With respect to the annual total compensation of our Chief Executive Officer, we used the amount reported in the “Total” column of our Summary Compensation Table included in this Proxy Statement. |
Director Compensation
Effective May 1, 2018, the board of directors implemented changes to our director compensation program in light of the completion of the Talmer merger and integration and our ongoing growth, which has significantly increased our size and complexity and subjected us to enhanced regulatory requirements and scrutiny. We engaged Aon to perform a market analysis of director compensation for a financial institution of our size, compared to our 2018 peer group. After reviewing this market analysis, the Committee determined that to enable it to continue to retain and recruit qualified directors, it was in our best interest to revise the board of director compensation program, as follows.
The annual cash retainer was increased from $45,000 to $50,000.
The annual equity retainer value was increased from a grant date fair value of $45,000 to a grant date fair value of $80,813.
Certain Committee service stipends were amended to bring more consistency to the Committee service component of our director pay program.
The following terms represent the structuretable provides information as of our directorDecember 31, 2019 regarding TCF’s equity compensation program. | | | | | | | Effective prior to May 1, 2018 | | Effective May 1, 2018 | | Annual Cash Retainer | $45,000 | | $50,000 | | Annual Equity Retainer | $45,000 | | $80,813 | | Lead Independent Director Retainer | $25,000 | | $30,000 | | Annual Cash Retainers for Audit Committee Service | Chair – $20,000
Member – $10,000
| | Chair – $25,000
Member – $12,500
| | Annual Cash Retainers for ALCO and Risk Management Committee | Chair – $10,000
Member – $5,000
| | Chair – $20,000
Member – $7,500
| | Annual Cash Retainers for Compensation and Pension Committee Service | Chair – $15,000
Member – $7,500
| | Chair – $20,000
Member – $10,000
| | Per Meeting Cash Retainer for BSA Committee Service | Not Applicable | | $750 per meeting | | Annual Cash Retainers for Service on All Other Board Committees | Chair – $10,000
Member – $5,000
| | Chair – $15,000
Member – $7,500
|
For 2018, non-employee directors were required to elect the formplans, which consist of delivery of their cash retainers from three alternatives: (1) Directors’ Deferred Stock Plan (DDSP) units, (2) cash, or (3) a combination of DDPS units and cash. Mr. Klein, Ms. Mahone and Mr. Wheatlake elected to receive all cash retainers in the form of cash. Mr. Pelizzari elected to receive his committee service retainers in the form of DDSP units, but other retainers in cash. The other non-employee directors elected to receive their both their annual cash retainers and committee service retainers in the form of DDSP units.
Our directors who are employees are not entitled to any additional compensation related to their service as a director. For 2018, this included Mr. Provost, Mr. Shafer and Mr. Torgow.
On April 21, 2008, the shareholders approved the Chemical Financial Corporation Directors’ Deferred Stock Incentive Plan (DDSP)of 2019 (the “2019 Stock Plan”), authorizingChemical Financial Corporation Stock Incentive Plan of 2017 (the “2017 Stock Plan”), the issuanceChemical Financial Corporation Stock Incentive Plan of up to 400,000 shares2015 (the “2015 Stock Plan”), the Chemical Financial Corporation Stock Incentive Plan of our common stock. The DDSP provides benefits to our non-employee directors2012 (the “2012 Stock Plan”), and the Chemical Financial Corporation Stock Incentive Plan of 2006 (the “2006 Stock Plan”), each of which was approved by TCF’s shareholders, as well as the Amended and Restated Legacy TCF Financial 2015 Omnibus Incentive Plan (the “Legacy TCF Omnibus Plan”), which was approved by Legacy TCF’s shareholders and assumed by us in the formMerger:| Plan Category | | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a) | | Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) | | Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
(c) | | | Equity compensation plans approved by security holders(1) | | 556,613 | | $34.05 | | 1,808,804 | (2) | | Equity compensation plans not approved by security holders(3) | | — | | — | | 2,271,524 | (4) | | TOTAL | | 556,613 | | $34.05 | | 4,080,328 | |
| (1) | Plans approved by security holders include the 2019 Stock Plan, 2017 Stock Plan, the 2015 Stock Plan, the 2012 Stock Plan, and the 2006 Stock Plan. | | (2) | Represents shares available for issuance under the 2019 Stock Plan. | | (3) | Represents shares reserved for issuance under the Legacy TCF Omnibus Plan, which share reserve we assumed in the Merger. The Legacy TCF Omnibus Plan was approved by Legacy TCF shareholders before the Merger. | | (4) | Represents shares available for issuance under the Legacy TCF Omnibus Plan to employees who (a) were employees of Legacy TCF before the closing of the Merger or (b) are hired by TCF or any of its subsidiaries after the closing of the Merger. The Legacy TCF Omnibus Plan authorizes the grant of awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, performance-based restricted stock, and performance-based restricted stock units. |
In addition, at December 31, 2019, we also had 59,360 shares issuable upon exercise of an equity retainer that is required tooutstanding options, warrants and rights under plans assumed by us in various other merger transactions, with a weighted average exercise price of outstanding options, warrants and rights of $13.88 per share. No further grants will be deferred annually and invested in stock units representing shares of our common stock. The DDSP allows each non-employee director to voluntarily defer their annual cash retainer and/or all director and/or community advisory director fees and investmade under these retainers in stock units representing shares of our common stock. The amountassumed plans. These assumed plans consisted of the annual cashTalmer Bancorp, Inc. 2009 Equity Incentive Plan (“TLMR Equity Incentive Plan”), the Lake Michigan Financial Corporation Stock Incentive Plan of 2003 and equity retainers in additionthe Lake Michigan Financial Corporation Stock Incentive Plan of 2012 (collectively referred to as the director committee service fees contributed to“LMFC Stock Incentive Plans”). The TLMR Equity Incentive Plan granted non-statutory stock options that were awarded at the DDSP are vested immediately. The deferral election must be made before the beginning of a plan year. The DDSP is an unfunded supplemental nonqualified deferred compensation plan that complies with Internal Revenue Code Section 409A. The equity retainer and any cash retainer voluntarily contributed to the DDSP are converted to stock units on the date paid. Any director fees that are voluntarily contributed to the DDSP are converted to stock units on the date we pay our next quarterly cash dividend. The number of stock units credited to each participating director’s account is determined by dividing the dollar amount of the equity retainer and any deferred cash retainer by the marketfair value of a single share of ourTalmer Bancorp, Inc. common stock on the date of grant. Effective as of our merger with Talmer Bancorp, Inc. on August 31, 2016, each option outstanding under the annual retainer is paid,TLMR Equity Incentive Plan ceased to represent a stock option for TLMR common stock and by dividingwas converted into a stock option for common stock of TCF. The LMFC Stock Incentive Plans granted non-statutory stock options that were awarded at the dollar amount of any deferred director fees by the marketfair value of a single share of ourLake Michigan Financial Corporation common stock on the next quarterly cash dividend payment date. Each participating director’s account is also credited with dividend equivalentsdate of grant. Effective as of our acquisition of Lake Michigan Financial Corporation on May 31, 2015, each date we pay cash dividends. Dividend equivalents areoption outstanding under the LMFC Stock Incentive Plans ceased to represent a numberstock option for LMFC common stock and was converted into a stock option for common stock of stock units equal toTCF. Payment for the numberexercise of an option at the time of exercise may be made in the form of shares of TCF’s common stock that havehaving a market value equal to the amount of any cash dividends that would have been paid to a shareholder owning the number of shares of common stock represented by stock units in a participating director’s account on each cash dividend payment date.
Distributions will be made in our common stock equal to the number of stock units in the participating director’s account. Any fractional shares will be paid in cash. Distributions will not be made until a director retires or terminates service as a director or upon the deathexercise price of the director or a change in control of the Corporation. For common stock issued upon a director’s retirement from or termination of service, the director has a choice to receive the shares in a lump-sum or in five annual installments. A director must make an irrevocable election between the lump-sum and five annual installmentsoption at the time of exercise, or in cash. There are no further stock options or other awards available for grant under the director begins participating inTLMR Equity Incentive Plan or the DDSP. The election is irrevocableLMFC Stock Incentive Plans. As of December 31, 2019, there were 43,132 options to purchase TCF’s common stock under the TLMR Equity Incentive Plan with a weighted average exercise price of $13.42 per share and applies16,228 options to all future deferral elections. Uponpurchase TCF’s common stock outstanding under the LMFC Stock Incentive Plans with a change in control (as defined in the DDPS) or deathweighted average exercise price of the director, shares will be issued in a lump-sum. We may also permit a distribution to a participating director due to an unforeseeable emergency.$15.10 per share.| 2020 Proxy Statement | | 59 |
Mr. Fitterling, Mr. Lievense, Ms. McQuade, Mr. Pelizzari, Mr. Stauffer, Mr. Tate and Mr. Weiss made voluntary contributions to the DDSP during 2018.
2018 Director Compensation
The following table sets forth the compensation paid to our non-employee directors for services rendered during 2018:
| | | | | | | | | | | | | | | | | | | | | | | | | Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation(3) | | Total | | | | | | | | | | | | James R. Fitterling | $ | 105,000 |
| $ | 80,813 |
| $ | — |
| $ | — |
| $ | — |
| $ | 6,930 |
| | $ | 192,743 |
| | Ronald A. Klein | 86,250 |
| 80,813 |
| — |
| — |
| — |
| 2,712 |
| | 169,775 |
| | Richard M. Lievense | 105,000 |
| 80,813 |
| — |
| — |
| — |
| 4,853 |
| (4) | 190,666 |
| | Barbara J. Mahone | 81,250 |
| 80,813 |
| — |
| — |
| — |
| 4,918 |
| | 166,981 |
| Barbara L. McQuade(5) | 77,500 |
| 80,813 |
| | | | 2,678 |
| | 160,991 |
| | John E. Pelizzari | 100,500 |
| 80,813 |
| — |
| — |
| — |
| 9,516 |
| | 190,829 |
| | Larry D. Stauffer | 88,000 |
| 80,813 |
| — |
| — |
| — |
| 7,760 |
| | 176,573 |
| | Jeffrey L. Tate | 82,500 |
| 80,813 |
| — |
| — |
| — |
| 5,854 |
| | 169,167 |
| | Arthur A. Weiss | 100,000 |
| 80,813 |
| — |
| — |
| — |
| 6,912 |
| | 187,725 |
| | Franklin C. Wheatlake | 95,000 |
| 80,813 |
| — |
| — |
| — |
| 2,552 |
| | 178,365 |
|
| Proposal 2 | | (1) | Represents the aggregate dollar amount of all fees earned or paid in cash for services as a director, including the cash retainer, committee and/or committee chair fees, lead independent director fee, and meeting fees, including any fees voluntarily deferred under the DDSP. Voluntary deferrals of the cash retainer and other fees into the DDSP in 2018 were as follows: $105,000 by Mr. Fitterling, $105,000 by Mr. Lievense, $77,500 by Ms. McQuade, $97,500 by Mr. Pelizzari, $85,000 by Mr. Stauffer, $82,500 by Mr. Tate and $100,000 by Mr. Weiss.Advisory (Non-Binding) Vote to Approve Executive Compensation (“Say on Pay”) |
| | (2) | Represents the grant date fair value computed inIn accordance with ASC 718. The amounts reported represent the annual equity retainers paid to each director in 2018 and deferred and invested in stock units representing shares of our common stock. The aggregate number of stock awards earned by each director for services, voluntary contributions made by the director to the DDSP and dividend equivalents credited to each director’s DDSP participant account since becoming a director and/or subsequent to the lump-sum distribution, if applicable, is represented by the number in the column titled “Stock Units” set forth in the table under the heading “Ownership of Chemical Financial Common Stock by Directors and Executive Officers” and such information is here incorporated by reference. |
| | (3) | Represents dividend equivalents paid in 2018 on stock units in the DDSP as well as community advisory fees paid in 2018. As permitted by SEC regulation, perquisites that in the aggregate total less than $10,000 are not included. |
| | (4) | Does not include $40,000 in independent contractor fees paid by Chemical Bank to Geld Capital, LLC, which is principally owned by Mr. Lievense, as described in “Transactions with Related Persons” below. |
| | (5) | Elected to the board of directors effective April 25, 2018. |
Other Matters
Transactions with Related Persons
Statement of Policy Regarding Transactions with Related Persons
Transactions by us with related parties are subject to review by our audit committee, as well as regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by us with our affiliates) and the Federal Reserve's Regulation O (which governs certain loans by us to our executive officers, directors and principal shareholders). We have also adopted policies to comply with these regulatory requirements and restrictions. In addition, our Audit Committee reviews and approves all transactions between Chemical and related persons which are required to be reported under SEC Regulation S-K, Item 404.
Geld Capital, LLC
Chemical Bank entered into an independent contractor agreement, effective July 1, 2018, with Geld Capital, LLC, which is principally owned by one of our directors, Richard Lievense. Under the agreement, Geld Capital, LLC will provide certain services to Insite Capital, LLC, a subsidiary of Chemical, for a fee of $40,000 per calendar quarter, during the term of the agreement. Unless earlier terminated, the agreement will terminate on September 30, 2019.
28 Associates LLC
Chemical Bank, currently headquartered in downtown Detroit, previously announced its planned expansion in the city, including approximately 500 jobs to be located there once it moves into a new headquarters building. On March 27, 2019, Chemical Bank and 28 Associates LLC, a Michigan limited liability company, entered into a letter agreement regarding the development and lease of a new headquarters building for Chemical Bank in Detroit. The parties have been in negotiations with respect to this property owned by 28 Associates since the third quarter of 2018. The development of this property on a high-profile lot located directly in the heart of Detroit’s entertainment and commercial district, will be one of the first commercial high-rise buildings to be constructed in Detroit in decades. This project is a fundamental component of Chemical’s commitment to participate in the revitalization of the City of Detroit and capitalize as a commercial bank on its strategic effort to be Detroit’s “Hometown Bank,” and build crucial deposit and loan relationships with key commercial and municipal customers in the market, including the City of Detroit. Chemical Bank remains fully committed to this effort. 28 Associates is 50% owned by the five adult children of Chemical’s Chairman, Gary Torgow, through their ownership of a member of 28 Associates, Park Elizabeth Associates LLC. The members of Park Elizabeth Associates are Elie Torgow, Yoni Torgow, Rachel H. Torgow Krakauer, Moshe Torgow, and Jacob Torgow. Mr. Torgow recused himself from all Board deliberations related to this agreement, and none of these adult children are directors, officers or employees of Chemical or Chemical Bank. The Audit Committee of the Board (of which Mr. Torgow is not a member) also approved this letter agreement. Elie Torgow is also the manager of 28 Associates and owns less than .01% of Chemical. The approximate aggregate value of the interest of Mr. Torgow’s children in the development and lease transaction is equal to approximately 50% of the amounts payable to 28 Associates thereunder. The letter agreement provides for the parties to enter into a development and lease transaction to include a triple net lease by Chemical of a proposed office building at the initial rate of $35 per rentable square foot for office space, or approximately $6,977,950 annually, and $50 per rentable square foot for retail space, or approximately $190,050 annually, with two percent annual increases during the initial term. The lease will have a term of 22.5 years and a rent commencement date of January 1, 2022. Chemical Bank has four renewal options of 84 months for each renewal option. The leased property will be approximately 421,481 square feet of gross area comprised of (a) a 203,171 square-foot building containing approximately (i) 199,370 square feet of rentable office space and (ii) 3,801 rentable square feet of 1st floor retail space, and (b) a parking garage and related parking facilities, including without limitation, 311 parking spaces. The four renewal terms will be at 95% fair market rental, with two percent annual increases, provided the base rent during each renewal term shall not be less than the immediately preceding lease year before commencement of each renewal term. 28 Associates, which owns the property, will remediate and improve the property and build the office building. Chemical Bank and 28 Associates have agreed to cooperate to seek critical tax incentives from governmental agencies, which will be for the benefit of the developer and Chemical Bank. Conditions to closing include receipt of tax incentives as well as guaranteed construction cost agreements on terms acceptable to the landlord and the tenant. ChemicalBank will lease the 311 parking spaces within the premises at an estimated monthly cost of $300 per spot, or $1,119,600 annually, provided that up to 60 parking spaces may be subleased back by 28 Associates for the same amount, reducing the net leased parking spaces to 251, or by $216,000 annually. Chemical Bank will also retain all parking rental income realized at the property from event parking rental services. If the parties do not enter into a final lease agreement with respect to the property, or if the parties do not receive the contemplated tax incentives by September 30, 2019, Chemical Bank has agreed to pay 28 Associates a break-up fee of $6 million, as 28 Associates has held the property off of the market since the third quarter of 2018, commenced the termination of tenants in an existing building on the site and incurred expenses associated with site preparation and negotiations as Chemical Bank has completed its due diligence.
Other relationships
Directors, officers, principal shareholders and their associates and family members were customers of, and had transactions (including loans and loan commitments) with, Chemical Bank in the ordinary course of business during 2018. All such loans and commitments were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to Chemical and did not involve more than a normal risk of collectability or present other unfavorable features. Similar transactions may be expected to take place in the ordinary course of business in the future. None of these loan relationships presently in effect were disclosed as nonaccrual, past due, restructured or potential problems as of the date of this proxy statement.
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a)14A of the Securities Exchange Act of 1934 (the “Exchange Act”), TCF is asking shareholders on an advisory (non-binding) basis to approve the executive compensation of TCF’s NEOs as described in the CD&A and tabular disclosure and accompanying narrative discussions of NEO compensation in this Proxy Statement and related material (“Say on Pay”). TCF conducts annual Say on Pay votes and expects to conduct the next Say on Pay vote at the 2021 Annual Meeting.We believe that our executive compensation programs and policies appropriately align named executive officers’ incentives with shareholder interests and are designed to attract and retain high quality executive talent. We believe that our executive compensation programs and policies are and have been competitive within the industry and in comparison with the compensation programs and policies of competitors in the markets that we serve. We also believe that both TCF and our shareholders benefit from responsive corporate governance policies and dialogue. We believe that shareholders have responded positively to the changes made over the last several years to our compensation program, with TCF receiving approximately 96% of votes cast “FOR” TCF’s compensation last year. The changes made by TCF in recent years include ensuring our equity awards have a “double trigger,” such that the award will not vest in connection with a change in control unless the executive’s employment is terminated without cause by us, or for good reason by the executive, within two years thereof, and that annual cash incentives are based on performance metrics that are widely used and tracked in the industry and demonstrate efficient use of capital. In March 2020, after further review by the Compensation Committee, consideration of shareholder input and to continue our philosophy of best practices in corporate governance, the Compensation Committee determined that it was in the best interests of TCF and our shareholders to eliminate Messrs. Provost and Torgow’s right to voluntarily resign without Good Reason after 18 months following the Merger Date and receive full compensation for the remaining contract term. As a result, on March 10, 2020, we amended and restated Messrs Provost’s and Torgow’s retention agreements to eliminate the provisions of the retention agreements related to cash severance payments and accelerated equity benefits upon retirement after 18 months following the Merger Date. Because the Compensation Committee believes that the program continues to appropriately reward executives for performance while not encouraging excessive risk taking, the Compensation Committee again approved our compensation program. See “Compensation of Named Executive Officers” in the CD&A for a more complete discussion of TCF’s executive compensation program. Shareholders are asked to approve the following resolution: “RESOLVED, that the compensation paid to our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.” Although this is an advisory vote, the Compensation Committee values the views of our shareholders and will consider the outcome of the vote when determining future executive compensation arrangements. | Recommendation of the Board | | |
The Board unanimously recommends that shareholders vote “FOR” this Proposal. | 2020 Proxy Statement | | 60 |
| Proposal 3 | Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants |
The Audit Committee has appointed the firm of KPMG LLP (“KPMG”), independent registered public accountants, to audit the financial statements of TCF Financial and its subsidiaries for the fiscal year ending December 31, 2020. TCF is providing shareholders at the Annual Meeting with the opportunity to vote on an advisory (non-binding) vote on the appointment of KPMG. Such a vote is not required but is being solicited by TCF in order to determine if the shareholders approve of TCF’s appointment of KPMG as our independent registered public accountants. The Audit Committee’s appointment of KPMG is not contingent upon obtaining shareholder approval. In the event of a negative vote by shareholders, the Audit Committee will take such vote into consideration in determining whether to continue to retain KPMG. Representatives of KPMG are expected to be present at the Annual Meeting and to be available to respond to appropriate questions. The representatives will also be provided an opportunity to make a statement, if they so desire. | Recommendation of the Board | | |
The Board unanimously recommends that shareholders vote “FOR” this Proposal. | Audit Committee Report |
The Audit Committee has reviewed and discussed the audited financial statements with management; received written disclosures and the letter from the independent registered public accountants, KPMG, required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence; and discussed the independence of KPMG with representatives of such accounting firm. The Audit Committee also discussed with KPMG the matters required by Statement on Auditing Standards No. 1301,Communications With Audit Committees. Based on the review and discussions above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the TCF Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2019, for filing with the SEC. By the Audit Committee: Julie H. Sullivan,Chair Karen L. Grandstrand Barbara J. Mahone Roger J. Sit Jeffrey L. Tate Franklin C. Wheatlake | 2020 Proxy Statement | | 61 |
| Independent Registered Public Accountants |
Fees paid to KPMG for the years ended December 31, 2018 and 2019 are as follows: | | 2018 | 2019 | | Audit Fees(1) | $ | 1,879,077 | $ | 5,461,093(2) | | Audit-Related Fees(3) | | 80,000 | | 504,600(4) | | Tax Fees(5) | | 751,465 | | 1,429,652(6) | | All Other Fees | | — | | — | | TOTAL | $ | 2,710,542 | $ | 7,395,345 |
| (1) | Amounts include fees for annual audit, quarterly reviews, separate opinions, consents and comfort letters. | | (2) | Amount includes fees paid by Legacy Chemical through the Merger Date, and then by TCF as a combined enterprise. For the period from January 1, 2019 through the Merger Date, Legacy TCF paid $1,152,678 in fees to KPMG for audit fees. | | (3) | Audit-Related Fees in 2018 and 2019 are related to employee benefit plan audits, servicing reports, agreed-upon procedures, and other audit-related work. | | (4) | Amount includes fees paid by Legacy Chemical through the Merger Date, and then by TCF as a combined enterprise. For the period from January 1, 2019 through the Merger Date, Legacy TCF paid $41,250 in fees to KPMG for audit-related fees. | | (5) | Tax Fees are primarily related to tax consulting and acquisition-related tax matters and also includes tax compliance services. | | (6) | Amount includes fees paid by Legacy Chemical through the Merger Date, and then by TCF as a combined enterprise. For the period from January 1, 2019 through the Merger Date, Legacy TCF paid $257,500 in fees to KPMG for tax fees. |
The Audit Committee has considered all fees for non-audit services to be compatible with maintaining the registered public accountants’ independence. The Audit Committee has a Pre-Approval Policy to pre-approve the audit and non-audit services performed by our independent registered public accounting firm. All services provided by the independent registered public accounting firm are either within general pre-approved limits or specifically approved by the Audit Committee. Subject to certain limitations, the authority to grant pre-approvals may be delegated to one or more members of the Audit Committee. In the event that approval is required prior to a regularly scheduled Audit Committee meeting, the Audit Committee Chair is authorized to pre-approve audit and non-audit services, provided the aggregate fees for the services approved by the Chair since the prior Committee approvals shall not exceed $500,000. Any services pre-approved by the Chair will be reported to and considered by the full Audit Committee at its next scheduled meeting. During 2019, all services provided by KPMG (including all of the services related to the fees described in the foregoing table) were pre-approved by the Audit Committee or by the Audit Committee Chair. Each member of the Audit Committee is independent, as independence is defined in Section 5605(a)(2) of the Nasdaq listing rules. | 2020 Proxy Statement | | 62 |
| Background of Executive Officers who are not Directors |
The following describes the business experience of executive officers of TCF Financial, or its principal wholly-owned subsidiary TCF Bank, who are not Directors of TCF Financial. Thomas J. Butterfield(age 55) became Executive Vice President, Chief Technology and Operations Officer of TCF on August 1, 2019 in connection with the Merger. Before the Merger, Mr. Butterfield was Chief Information Officer of Legacy TCF since March 2015. Before joining Legacy TCF, from January 2014 to August 2014, Mr. Butterfield was the Senior Vice President, Technology Strategy & Business Solutions at Target Corp., an upscale discount retail company. Beginning in January 2006, Mr. Butterfield served in various leadership positions at Target, including acting Chief Information Officer of Target Canada, from January 2011 to December 2013. James M. Costa(age 51) became Executive Vice President, Chief Risk Officer and Chief Credit Officer of TCF on August 1, 2019 in connection with the Merger. Before the Merger, Mr. Costa was the Chief Risk Officer since August 2013 and Chief Credit Officer since January 2017 for Legacy TCF and Legacy TCF Bank. He has over 30 years of financial services experience. Before joining Legacy TCF, from 2010 to 2013, Mr. Costa served as Executive Vice President of Risk and Head of Enterprise Portfolio Management at PNC Financial Services Group, Inc., a financial services institution, and before that, from 2004 to 2010, he led enterprise credit strategy for Wachovia Corporation, a financial services institution. Joseph T. Green(age 65) became Executive Vice President, General Counsel, and Assistant Secretary of TCF on August 1, 2019 in connection with the Merger. Before the Merger, Mr. Green was Secretary of Legacy TCF since 2011 and General Counsel of Legacy TCF since 2009. He was also a Senior Vice President of Legacy TCF since 2008. Mr. Green served as General Counsel of Legacy TCF Bank since 1993, as Secretary of Legacy TCF Bank since 2001, and was an Executive Vice President of Legacy TCF Bank since 2010. William S. Henak(age 61) became Executive Vice President, National Banking on August 1, 2019, in connection with the Merger. Before the Merger, Mr. Henak was Executive Vice President, Wholesale Banking of Legacy TCF since January 1, 2016 with oversight over the equipment finance and leasing, inventory finance and commercial banking business units. Mr. Henak had been President and Chief Executive Officer at TCF Equipment Finance, a division of Legacy TCF Bank, since December 2012, and had also served in various leadership roles with TCF Equipment Finance, Inc., a wholly owned subsidiary of Legacy TCF Bank, since 2000 when Legacy TCF acquired First Commercial Capital Corporation, a general equipment leasing company that Mr. Henak founded in 1995. Before that, Mr. Henak had been an Executive Vice President for Computer Leasing, Inc., a computer leasing company, since 1985. Before entering the equipment finance industry, Mr. Henak was a Certified Public Accountant with KPMG Peat Marwick. Andrew J. Jackson(age 61) became Chief Audit Executive Officer on August 1, 2019 in connection with the Merger. Before the Merger, Mr. Jackson was the Chief Audit Executive Officer of Legacy TCF since August 2012. Before joining Legacy TCF, from July 2006 to August 2012, Mr. Jackson was Executive Vice President and Corporate Auditor, in charge of the Internal Audit function, of First Tennessee Bank, a financial services institution. Michael S. Jones(age 51) became Executive Vice President, Regional Banking on August 1, 2019, in connection with the Merger. Before the Merger, Mr. Jones was Executive Vice President, Consumer Banking of Legacy TCF since January 1, 2016. Before that, Mr. Jones had been Executive Vice President and Chief Financial Officer of Legacy TCF since January 1, 2012. He also has served in various leadership positions with certain of Legacy TCF’s wholly-owned subsidiaries since 2008. Mr. Jones has nearly 20 years of financial experience in various functions including finance and operations. Before joining Legacy TCF, Mr. Jones held financial leadership positions with a subsidiary of PACCAR, Inc., a manufacturer of premium commercial vehicles, and various subsidiaries of General Electric Company, a large diversified technology and financial services company. Dennis L. Klaeser(age 62) is Executive Vice President and Chief Financial Officer of TCF, a position he has held since August 2016. Before the Merger, Mr. Klaeser was also our Treasurer since August `2016. Before that, Mr. Klaeser served as Chief Financial Officer and Executive Managing Director of Talmer Bancorp, Inc. from May 2010 until Talmer Bancorp’s merger with TCF on August 31, 2016. Mr. Klaeser also was Chief Financial Officer and a Director of First Place Bank following its acquisition by Talmer Bancorp, Inc. from January 2013 until it was merged into Talmer Bank in February 2014. Mr. Klaeser served on the Board of Managers of InSite Capital, LLC, a wholly owned subsidiary of the Company, since December 2016. Before joining Talmer, Mr. Klaeser was a Senior Midwest Bank Analyst with Raymond James from April 2009 to May 2010. From 2003 until 2009, Mr. Klaeser was Chief Financial Officer of PrivateBancorp, Inc., where he was responsible for financial and accounting functions as well as strategic planning, capital markets, SEC, regulatory and board reporting, Sarbanes-Oxley, and investor relations. He served as Managing Director and head of the financial institutions group for Anderson Corporate Finance from 2000 to 2002, a division of Arthur Andersen. Mr. Klaeser also spent seven years as an investment banker and was head of the Financial Institutions Group at EVEREN Securities, which was acquired by First Union Securities. Mr. Klaeser has served as Treasurer of the Chemical Bank Foundation’s Board of Trustees since May 2017. Mr. Klaeser also has served as a member of the Board of Trustees for Lawrence University of Wisconsin since November 2018. | 2020 Proxy Statement | | 63 |
Sandra D. Kuohn(age 55) became Executive Vice President and Chief Human Capital Management Officer of TCF on August 1, 2019 in connection with the Merger. Before that, Ms. Kuohn was our Chief Human Resource Officer since August 2016. Before that, she served as the Chief Human Resource Officer for Talmer Bank beginning in July 2011. Before joining Talmer Bank, Ms. Kuohn spent 11 years as the Global Vice President of Human Resources for Urban Science, Inc. headquartered in Detroit, Michigan where she was responsible for recruiting, compensation and benefits, career development, and performance management across ten different countries around the world. Before her role at Urban Science, Ms. Kuohn owned her own consulting business for five years and started her career with Anderson Consulting in Detroit. Ms. Kuohn is a member of the Executive Board of Trustees for the CATCH charity and chairs their annual Detroit News/CATCH Outstanding Graduates program. Brian W. Maass(age 46) became Deputy Chief Financial Officer and Treasurer of TCF on August 1, 2019 in connection with the Merger. Before the Merger, Mr. Maass was Executive Vice President and Chief Financial Officer of Legacy TCF and Legacy TCF Bank since January 1, 2016. Before that, Mr. Maass had been Chief Investment Officer and Treasurer of Legacy TCF since 2012. Before joining Legacy TCF, Mr. Maass was Senior Vice President, Corporate Treasury with Wells Fargo Bank, NA, a national banking association, since 2005. Mr. Maass held other senior leadership, treasury, finance and accounting positions at Wells Fargo since 2000. Before that, Mr. Maass was a Manager at Crowe Horwath LLP, a public accounting and consulting firm, within its Banking and Financial Services Group. Thomas C. Shafer(age 61) became Chief Operating Officer of TCF and President and Chief Operating Officer of TCF Bank on August 1, 2019 in connection with the Merger, with responsibility for National Banking, Regional Banking, IT and Operations. He previously served as Vice Chairman and Director of TCF and President and Chief Executive Officer of Legacy Chemical Bank since June 2017. Before that, Mr. Shafer was Executive Vice President and Director of Regional and Community Banking of Legacy Chemical Bank from November 2016 until June 2017. Mr. Shafer served as Vice Chairman of Talmer Bancorp, Inc. from 2011 until September 2014, and subsequently served as Chief Operating Officer of Talmer Bancorp, Inc. and President of Talmer Bank from September 2014 to November 2016. He also served as Chief Executive Officer and President and Director of First Place Bank, a wholly owned subsidiary of Talmer Bancorp, Inc., from January 2013 until it was merged into Talmer Bank in February 2014. Before joining Talmer, Mr. Shafer served Citizens Republic Bancorp for a 16-year period in various executive-level positions, including as Executive Vice President of Regional Banking, Executive Vice President of Commercial Banking, Chief Credit Officer and Executive Vice President of Specialty Banking. Kathleen S. Wendt(age 46) is Chief Accounting Officer of TCF, a position she has held since October 2017. She also became an Executive Vice President in connection with the Merger. Before that, Ms. Wendt served as our Deputy Chief Financial Officer since July 2018. Before joining TCF, Ms. Wendt served as Chief Accounting Officer and an Executive Managing Director of Talmer Bancorp, Inc. from June 2011 until its merger with TCF on August 31, 2016. She served as First Senior Vice President and Chief Accounting Officer of Legacy Chemical Bank following the merger with Talmer Bancorp, Inc. until March 2017. Ms. Wendt is a certified public accountant with experience in financial reporting, accounting policy and the management of controls over financial reporting. Ms. Wendt served in several positions with Comerica Incorporated from May 2003 until June 2011, including Senior Vice President, Director of External Reporting and Senior Vice President, Director of Accounting Policy and Financial Procedures and Controls. Before that, Ms. Wendt served as an Assurance Manager at PricewaterhouseCoopers located in Chicago, Illinois and Zurich, Switzerland. Donnell R. White(age 43) is currently our Chief Diversity Officer and Director of Strategic Partnerships of TCF Bank. He previously served in the same role at Chemical Bank since June 2018 until the Merger. Prior to joining Chemical Bank, Mr. White served as Executive Director of the Detroit Branch National Association for the Advancement of Colored People (NAACP) from 2001 until joining Chemical Bank in 2018. While there, he was responsible for the strategic, financial and operational oversight of the organization and also served as the spokesperson and community liaison for the organization. Mr. White is a founding member of New York University’s Brennan Center for Justice Law Enforcement Signatory Group. He also serves as a board member of ClearCorps Detroit, Arab American and Chaldean Council, and Crime Stoppers of Michigan. In addition, he serves on the Federal Bureau of Investigations Multicultural Advisory Committee, Wayne State University President’s Community Advisory Group, and Focus Hope Advisory Group. He is Board Trustee for Michigan Children’s Foundation, the Detroit Symphony Orchestra and Detroit Public Safety Foundation. | 2020 Proxy Statement | | 64 |
| Ownership of TCF Stock |
| TCF Stock Ownership of Directors and Executive Officers | | |
COMMON STOCK The following table shows ownership as of February 28, 2020, of TCF common stock by those indicated. | Name of Beneficial Owner | | Amount and Nature of
Beneficial Ownership(1)(2) | | Percent
of Class(3) | | Directors who are not NEOs: | | | | | | Peter Bell | | 30,137 | | * | | Karen L. Grandstrand | | 42,636 | | * | | Richard H. King | | 14,743 | | * | | Ronald A. Klein | | 43,084 | | * | | Barbara J. Mahone | | 22,633 | | * | | Barbara L. McQuade | | 7,556 | | * | | Vance K. Opperman | | 77,217 | | * | | Roger J. Sit | | 124,022 | | * | | Julie H. Sullivan | | 5,362 | | * | | Jeffrey L. Tate | | 10,066 | | * | | Arthur A. Weiss | | 32,857 | | * | | Franklin C. Wheatlake | | 93,461 | | * | | Theresa M. H. Wise | | 3,506 | | * | | NEOs: | | | | | | Craig R. Dahl | | 379,114 | | * | | David T. Provost | | 113,200 | | * | | Dennis A. Klaeser | | 65,398 | | * | | Gary H. Torgow | | 113,200 | | * | | Thomas C. Shafer | | 44,809 | | * | | Brian W. Maass | | 69,784 | | * | | All Directors and Executive Officers combined (28 persons) | | 1,815,659 | | 1.19% |
| * | Represents 1.0% or less of the outstanding TCF common stock. | | (1) | All shares are directly owned and the person indicated has sole voting and dispositive power, except as indicated in this footnote and footnote (2) below. Includes shares beneficially owned by affiliated trusts or family members who share the person’s household, with respect to which shares the indicated person disclaims any beneficial ownership, as follows: Mr. Bell, 16,925 shares; Mr. Klein, 14,205 shares; Mr. Sit, 45,505 shares; Mr. Wheatlake, 3,799 shares; Mr. Provost, 283 shares; Mr. Torgow, 1,339 shares; and all Directors and Executive Officers combined, 123,798 shares. Includes the following shares indirectly owned through related entities: Mr. Sit, 50,810 shares; Mr. Wheatlake, 78,495 shares; and all Directors and Executive Officers, 129,305 shares. Mr. Sit and Mr. Wheatlake disclaim any beneficial ownership in the shares owned by a related entity. Includes stock options exercisable within 60 days, as follows: Mr. Klein, 17,698 shares; Mr. Shafer, 7,619 shares; and all Directors and Executive Officers combined, 26,652 shares. | | (2) | Includes whole shares of TCF common stock allocated to accounts in the 401(k) Plan for which certain NEOs have shared voting power as follows: Mr. Dahl, 14,576 shares; Mr. Maass, 5,252 shares; and all Executive Officers combined, 90,957 shares. Also includes whole shares of TCF common stock in the trust for the Supplemental Plan for which certain NEOs do not have voting power, as follows: Mr. Dahl, 66,204 shares; Mr. Maass, 9,119 shares; and all Legacy TCF Executive Officers combined, 175,467 shares. Also includes whole shares of TCF common stock (all of which have vested) in the trust for the TCF Employees Omnibus Deferred Stock Compensation Plan for which the NEOs do not have voting power, as follows: Mr. Dahl, 25,405 shares; and all Legacy TCF Executive Officers combined, 30,486 shares. Also includes whole shares of TCF common stock (vested) in the trust for the Directors Deferred Compensation Plan for which the holder does not have voting power, as follows: Mr. Bell, 6,019 shares; Ms. Grandstrand, 42,636 shares; Mr. King, 14,535 shares; Mr. Opperman, 51,929 shares; Mr. Sit, 21,035 shares; Dr. Sullivan, 5,362 shares; Dr. Wise, 3,506 shares; and all Legacy TCF Directors combined, 145,022 shares. | | (3) | As of February 28, 2020, there were 152,698,770 shares of TCF common stock outstanding. The percentage for each Director and Executive Officer has been calculated by treating as outstanding the shares which could be purchased upon the exercise of outstanding options by such Director or Executive Officer within 60 days after February 28, 2020. |
| 2020 Proxy Statement | | 65 |
PREFERRED STOCK None of our directors or executive officers own any of our depositary shares, each representing a 1/1000thinterest in a share of our 5.70% Series C Non-Cumulative Perpetual Preferred Stock. | TCF Common Stock Ownership of Certain Beneficial Owners | | |
The following table shows ownership as of December 31, 2019 of each person known by us to beneficially own more than five percent of our common stock. | Name of Beneficial Owner | | Amount and Nature of
Beneficial Ownership of TCF
Common Stock | | Percent
of Class(3) | | The Vanguard Group(1) | | 14,596,858 | | 9.51% | | BlackRock, Inc.(2) | | 14,138,873 | | 9.20% |
| (1) | The information that follows is based upon the Schedule 13G/A filed with the SEC on behalf of The Vanguard Group on February 12, 2020. Information is as of December 31, 2019. Beneficial ownership of shares by The Vanguard Group is in the following manner: sole voting power, 78,520 shares; shared voting power, 22,118 shares; sole dispositive power, 14,515,735 shares; and shared dispositive power, 81,123 shares. The address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355. | | (2) | The information that follows is based upon the Schedule 13G/A filed with the SEC on behalf of BlackRock, Inc. on February 6, 2020. Information is as of December 31, 2019. Beneficial ownership of shares by BlackRock, Inc. is in the following manner: sole voting power, 13,504,765 shares; shared voting power, 0 shares; sole dispositive power, 14,138,873 shares; and shared dispositive power, 0 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. | | (3) | As of December 31, 2019, there were 152,965,571 shares of TCF common stock outstanding. |
| Delinquent Section 16(a) Reports |
Section 16(a) of the Exchange Act requires our directors and certain officers and persons who beneficially own more than 10% of our outstanding common stock to file reports of beneficial ownership and changes in beneficial ownership of shares of our common stock with the SEC. SEC regulations require such persons to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such reports furnished to us or written representations from certain reporting persons that no Forms 5 were required for those persons, we believe that all applicable Section 16(a) reporting and filing requirements were satisfied on a timely basis by such persons from January 1, 20182019 through December 31, 2018.2019, other than a Form 4 that was not timely filed for Mr. Jackson reporting the purchase of 12 shares executed on September 16, 2019 in an account which Mr. Jackson beneficially owns, but which is managed by an investment advisor. This omission occurred due to the failure of the investment advisor to continue the purchase restrictions requested by Mr. Jackson following the Merger. | 2020 Proxy Statement | | 66 |
| Additional Information |
| Who is Permitted to Vote at the Annual Meeting? | | |
You are entitled to vote at the Annual Meeting if you owned shares of TCF’s common stock at the close of business on March 9, 2020. Each share of TCF common stock you owned as of the Record Date entitles you to one vote on each proposal at the Annual Meeting. You may vote “FOR” or “WITHHOLD” with respect to each nominee for Proposal 1. With respect to all other proposals, you may vote “FOR,” “AGAINST,” or “ABSTAIN.” Shareholders of Record If your shares of TCF common stock are registered directly in your name, then you are considered the shareholder of record with respect to those shares and you may grant your proxy directly to the individuals listed on the proxy card or vote in person at the Annual Meeting. “Street Name” Holders If your shares are held in a stock brokerage account or by any other nominee, then you are considered the beneficial owner of those shares, which are said to be held in “street name.” As the beneficial owner, you may direct your broker or other nominee how to vote your shares using the voting instructions provided to you by that broker or other nominee. You may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from your broker or other nominee. | How is a Quorum Determined? | | |
A majority of the shares of TCF common stock outstanding as of the Record Date must be present in person or by proxy at the Annual Meeting in order to have a quorum. Broker non-votes (described below) are counted as present for purposes of establishing a quorum. If you vote by proxy before the Annual Meeting but decide to withhold authority or abstain on one or more proposals, you are counted as being present at the Annual Meeting and your shares count for purposes of establishing a quorum but will not be deemed to have been voted in favor of such proposal(s). Shareholders of Record In addition to voting your shares in person at the Annual Meeting, you can also vote your shares of TCF common stock in advance of the Annual Meeting by submitting a proxy to TCF using one of the following options: | • | online using the instructions for Internet voting shown on the Notice or proxy card(s); | | • | by telephone using the instructions for telephone voting shown on the proxy card(s); or | | • | by mail by marking the proxy card(s) with your instructions and then signing, dating and returning the proxy card(s) in the enclosed return addressed envelope. |
The individuals designated as proxies on a proxy submitted to TCF will vote your shares based on your instructions. If you submit your proxy card(s) to TCF, but do not give instructions as to any or all of the proposals, your proxies will vote in accordance with the Directors’ recommendations for each proposal for which you do not provide instructions. If any other business comes before the Annual Meeting, your proxies will vote your proxy according to their own judgment. | 2020 Proxy Statement | | 67 |
“Street Name” Holders You must follow the voting instructions provided by your broker or other nominee. Brokers who hold your shares in “street name” have the authority to vote shares for which they do not receive instructions on all routine matters submitted for approval at the Annual Meeting.In the absence of your specific instructions as to how to vote, your broker will not have authority to vote on the matters considered non-routine, which includes all actions other than Proposal 3, the Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as independent Registered Public Accountants for the Fiscal Year Ending December 31, 2020.Investors who hold their stock in “street name” are invited to attend the Annual Meeting; however, you must obtain a legal proxy from the shareholder of record (your broker or other nominee) in order to vote your shares in person at the Annual Meeting. Annual Meeting Webcast Only shareholders who attend in person may vote during the Annual Meeting. Shareholders listening to the Annual Meeting via webcast are not able to vote during the Annual Meeting. Regardless of whether you plan to attend the Annual Meeting in person or listen to the Annual Meeting via webcast, please vote in advance by proxy by following the instructions set forth on the Notice or proxy card(s). Notice You may not vote by filling out and returning the Notice. The Notice identifies the items to be voted on at the Annual Meeting and provides instructions on how to access TCF’s proxy materials and submit your vote, but you cannot vote by marking the Notice and returning it. | I Have Already Submitted my Proxy, May I Revoke it and Vote at the Annual Meeting? | | |
Yes, your proxy is revocable and is automatically revoked if you submit a valid proxy with a later date or vote at the meeting. You can vote your shares at the Annual Meeting by written ballots available at the Annual Meeting, even if you voted them in advance by proxy. However, if your shares are held in “street name” by a broker or other nominee, you must bring with you to the Annual Meeting a legal proxy from them showing you as the owner. Shareholders who listen to the Annual Meeting via the webcast will not be able to revoke proxies or vote at the Annual Meeting via the webcast. | What is the Vote Required for Approval? | | |
Assuming a quorum is present, for Proposal 1, the election of Directors, the 16 candidates who receive the most “FOR” votes (a “plurality”) will be elected; provided, however, that any Director nominee who receives a greater number of “WITHHOLD” votes from his or her election than votes “FOR” such election shall immediately offer his or her resignation to the Board, which will then decide whether to accept the resignation. Assuming a quorum is present, both Proposal 2 and Proposal 3 requires the affirmative vote of a majority of the votes cast at the Annual Meeting and entitled to vote. | What is a “Broker Non-Vote” and What is the Effect of Broker Non-Votes and Abstentions? | | |
A “broker non-vote” occurs when your broker or other institution holding title to your shares as your nominee (in “street name”) does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from you. Generally, if a broker returns a “non-vote” proxy with respect to a proposal, then the shares covered by such a “non-vote” proxy will be counted as present for purposes of determining a quorum, but will not be counted in determining the outcome of the vote on that matter at the Annual Meeting. In the absence of specific instructions from you, your broker or other institution holding title to your shares as nominee will not have discretion to vote on any matters at the Annual Meeting other than Proposal 3, the Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2020. A properly executed proxy marked “ABSTAIN” with respect to a proposal will be counted as present for purposes of determining a quorum. Shares voted “ABSTAIN” will not constitute a vote “for” or “against” any matter being voted on at the Annual Meeting and will not be counted as a “votes cast” on any matter. As a result, abstentions will have no effect on the outcome of such matters. | 2020 Proxy Statement | | 68 |
| Who Pays for the Expenses Related to Proxy Solicitation? | | |
TCF is paying all costs of solicitation. Proxies may be solicited on TCF’s behalf by Directors, officers or employees in person or by telephone, electronic transmission, mail, or facsimile. Directors, officers, and employees will not receive any additional compensation for such services. TCF will, upon request, reimburse brokerage firms and other nominees for their reasonable expenses incurred for forwarding solicitation materials to beneficial owners of TCF common stock. | Who will Count the Votes? | | |
A representative of Broadridge Financial Solutions, Inc., TCF’s tabulation agent, will tabulate the votes and act as the independent inspector of election. | How do I Attend the Annual Meeting?* | | |
Registered Shareholders: | • | Your Notice of Internet Availability of Proxy Materials; or | | • | The admission ticket attached to the top half of your proxy card if you received a paper copy of the proxy materials; or | | • | A printout of the email you received to vote your shares if you received your proxy materials via email. |
Street Name Shareholders: Brokerage statement or letter from your bank or broker showing your holdings of TCF common stock. | * | As part of our precautions regarding the coronavirus, or COVID-19, we are planning for the possibility that the Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be available at http://ir.tcfbank.com. Annual Meeting attendance is limited to TCF shareholders as of the Record Date. To attend the Annual Meeting, you will be required to present a valid form of photo identification as well as proof that you own TCF common stock, which can include the following: |
How can Shareholders Submit Proposals and Nominate Directors for this Annual Meeting| and Next Year’s Annual Meeting? | | |
A shareholder seeking to present a proposal at our annual meeting of shareholders must submit a notice to our Corporate Secretary in accordance with our bylaws not less than 120 calendar days prior to the date corresponding to the date of our proxy statement or notice of meeting released to shareholders in connection with the last preceding annual meeting of shareholders, in the case of an annual meeting (unless we did not hold an annual meeting within the last year, or if the date of the upcoming annual meeting changed by more than 30 days from the date of the last preceding meeting, then the notice must be delivered or mailed and received not more than 10 days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting), and not more than ten days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting, in the case of a special meeting. A shareholder seeking to include a proposal in our proxy statement and form of proxy relating to a meeting of shareholders must submit the proposal to us in accordance with SEC Rule 14a-8. With respect to our 2020 annual meeting of shareholders, the deadline to submit a notice of a proposal and to include a proposal in our proxy statement and form of proxy relating to the meeting iswas November 27, 2019. A shareholder seeking to nominate an individual for election as a director of ChemicalTCF must submit a notice to our Corporate Secretary in accordance with our Bylawsbylaws not less than 120 days prior to the date of the meeting, in the case of an annual meeting, and not more than seven days following the date of notice of the meeting, in the case of a special meeting.
SolicitationIf you are a shareholder and you wish to have a proposal included in TCF’s proxy statement for the 2021 Annual Meeting of Proxies Our directors, officers and employees and our affiliates will initially solicit proxiesShareholders (the “2021 Annual Meeting”), you must submit your request in writing to the Company’s Corporate Secretary no later than November 25, 2020. We suggest that you send any such proposals by mail and overcertified mail. Shareholders can nominate Directors at an Annual Meeting if the Internet. They also may solicit proxies in person,nomination: (i) is submitted to the Company’s Corporate Secretary by telephone or by other means, but they will not receive any additional compensation for these efforts. Nominees, trusteesthe deadline set forth above and: (ii) satisfies the informational and other fiduciaries who hold stockrequirements in the bylaws of TCF as determined by the Board. TCF reserves the right to vote all proxies as it determines in its discretion on behalfany shareholder proposals or nominations, pursuant to authority provided on the proxy card. Also, see TCF’s Director Nominations policy described above under “Corporate Governance.”| 2020 Proxy Statement | | 69 |
| What is TCF’s Policy on Shareholder Nominations? | | |
Please refer to “Corporate Governance – Director Nominations” above for a description of beneficial ownersTCF’s policy on shareholders nominations. | How can Shareholders get copies of TCF’s Annual Report? | | |
SHAREHOLDERS MAY RECEIVE A FREE COPY OF TCF FINANCIAL’S 2019 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS.If you wish to receive a copy, please send a written request to the Company’s Corporate Secretary at Suite 1800, 333 W. Fort Street, Detroit, Michigan, 48226. If you want copies of our common stockexhibits to the 2019 Annual Report on Form 10-K, a reasonable charge may communicate withbe required to cover the beneficial owners by mail or otherwise andexpense. You can also visit the Investor Relations section of TCF’s website,http://ir.tcfbank.com for free access to TCF’s SEC filings. TCF may forward proxy materialselect to and solicit proxies from the beneficial owners. We will pay all costs of solicitation of proxies. We will also solicit proxies by telephone and the Internet. See the enclosed proxy for instructions.
Important Notice Regarding Delivery of Shareholder Documents
The SEC has adopted rules that permit companiescombine mailings to satisfy the delivery requirements for proxy statements, annual reports or Notice of Internet Availability of Proxy Materials with respected to two or more shareholders sharingliving at the same address, by delivering a singleas permitted under the rules of the SEC. Consequently, only one copy of each of the annual report, proxy statement, annual report or the Notice of Internet Availability of Proxy Materials addressedmay be delivered to those shareholder,multiple shareholders sharing an address unless we haveTCF has received contrary instructions from one or more of the shareholders who share the same address. Wesuch shareholders. TCF will deliver on a one-time basis, promptly upon written or oral request froma separate copy of its 2019 Annual Report on Form 10-K, this proxy statement or Notice, as applicable, to a shareholder at a shared address to which a separatesingle copy of our 2019 Proxy Statement, 2018 Annual Reportthe documents was delivered. With regard to Shareholdershouseholding, you may direct any requests for separate copies to the Company’s Corporate Secretary at the TCF address provided above. If you reside at the same address as another shareholder and you prefer to receive your own copy of the annual report, proxy statement, or the Notice of Internet Availability of Proxy Materials. Requests shouldin the future, you may contact TCF’s transfer agent, Computershare, by calling its toll-free number, (800) 261-0598, or writing to them at Computershare, P.O. Box 505000, Louisville, KY 40233. Your request with regard to householding will be made to Chemical’s Investor Relations at Investor Relations, Chemical Financial Corporation, 333 W. Fort Street, Suite 1800, Detroit, Michigan 48226, telephone (800) 867-9757. Shareholders sharing an address whoeffective 30 days after receipt. If you are currently receiving multiple copies of the annual report, proxy statement, annual reportor the Notice and prefer to shareholders and Notice of Internet Availability of Proxy Materials may instruct us to deliverreceive a single copy of such documents on an ongoing basis. Such instructions must be in writing, must be signed by each shareholder who is currently receiving a separate copy of the documents, must be addressed to Chemical’s Investor Relations at Investor Relations, Chemical Financial Corporation, 333 W. Fort Street, Suite 1800, Detroit, Michigan 48226, and will continue in effect unless and until we receive contrary instructions as provided below. Any shareholder sharing an addressset for your household, you may request to receive and instruct us to send separate copies of the proxy statement, annual report to shareholders and Notice of Internet Availability of Proxy Materials on an ongoing basis by written or verbal request to Chemical’s Investor Relations at Investor Relations, Chemical Financial Corporation, 333 W. Fort Street, Suite 1800, Detroit, Michigan 48226, telephone (800) 867-9757. We will begin sending separate copies of such documents within thirty days of receipt of such instructions.
Availability of Information
Our combined 2018 Annual Report to Shareholders and Form 10-K Annual Report, including financial statements and financial statement schedules, but not the exhibits to the Form 10-K, and the 2019 Notice of Annual Meeting and Proxy Statement are available on the following website, www.proxydocs.com/CHFC or through the SEC's website at www.sec.gov. This information may be obtained without charge upon written request to Chemical Financial Corporation. Please direct your requests to Chemical’s Investor Relations at Investor Relations, Chemical Financial Corporation, 333 W. Fort Street, Suite 1800, Detroit, Michigan 48226. Copies of exhibits to the Form 10-K may be requestedalso contact Computershare at the cost of 30 cents per page from the Corporation.
phone number or address above.| 2020 Proxy Statement | | 70 |
APPENDIX A
CHEMICAL FINANCIAL CORPORATION
STOCK INCENTIVE PLAN OF 2019
SECTION 1
Establishment of Plan; Purpose of Plan
1.1Establishment of Plan.The Company hereby establishes the STOCK INCENTIVE PLAN OF 2019 for its corporate and Subsidiary Directors, officers and other key Employees. The Plan permits the grant and award of Stock Options, Restricted Stock, Restricted Stock Units, Stock Awards and other stock-based and stock-related awards to Employees and non-employee Directors of the Company or any of its Subsidiaries.
1.2Purpose of Plan.The purpose of the Plan is to provide Participants with an increased incentive to contribute to the performance and growth of the Company and its Subsidiaries, to join the interests of Participants with the interests of the Company’s shareholders through the opportunity for increased stock ownership and to attract and retain Participants. The Plan is further intended to provide flexibility to the Company in structuring long-term incentive compensation and performance-based compensation to best promote the foregoing objectives.
SECTION 2
Definitions
The following words have the following meanings set forth below unless a different meaning plainly is required by the context:
2.1 “Act” means the Securities Exchange Act of 1934, as amended.
2.2 “Affiliate” means any organization controlling, controlled by or under common control with the Company.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Cause” means, unless otherwise provided in an Equity-Based Award Agreement, (x) “Cause” as defined in an Individual Agreement to which the Participant is a party, or (y) if there is no such Individual Agreement or if it does not define Cause: (a) conviction of, or plea of guilty or nolo contendere by Participant for committing a felony under federal law or the law of the state in which such action occurred; (b) willful and deliberate failure on the part of Participant in the performance of his or her employment duties or director duties in any material respect; (c) dishonesty in the course of fulfilling Participant’s employment duties or director duties; (d) the Participant’s material violation of an ethics and compliance program, code of conduct or other material policy of the Company or its Subsidiaries; or (e) prior to a Change in Control, such other events as shall be determined by the Committee. Following a Change in Control, any determination by the Committee as to whether “Cause” exists shall be subject to de novo review.
2.5 “Change in Control,” unless otherwise defined in an Equity-Based Award Agreement, shall be limited to the Company and defined as the occurrence of any of the following events: (a) a Person or Persons acting as a group, acquires (or has acquired during the 12-month period ending on the last acquisition) stock of the Company that together with stock held by such Person or group constitutes more than 40% of the total voting power of the Company’s stock; (b) the consummation of a merger or consolidation of the Company with any other corporation, if such merger or consolidation results in the outstanding voting securities of the Company immediately prior thereto representing 60% or less of the total outstanding voting securities of the surviving entity immediately after such merger or consolidation; (c) a majority of the members of the Company’s Board are replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of such appointment or election; or (d) the acquisition, by a Person or Persons acting as a group, of the Company’s assets that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of the Company’s assets in a single transaction or within a 12-month period ending with the most recent acquisition. Gross fair market value means the value of the Company’s assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. No trust department or designated beneficiary or other trustee of such trust department
of the Company or a Subsidiary of the Corporation, or other similar fiduciary capacity of the Company with direct voting control of the stock shall be treated as a Person or group within the meaning of subparagraph (a) hereof. Further, no profit sharing, employee stock ownership, employee stock purchase and savings, employee pension or other employee benefit plan of the Company or any of its Subsidiaries, and no trustee of any such plans in its capacity as such trustee, shall be treated as a Person or group within the meaning of subparagraph (a) hereof. For the avoidance of doubt, and notwithstanding any provision in the definition of Change in Control to the contrary, in the event that any Equity Award constitutes deferred compensation, and the settlement of, or distribution of benefits under such Equity Award is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in control event” under Code Section 409A.
2.6 “Code” means the Internal Revenue Code of 1986, as amended. Each reference in this Plan to a section or sections of the Code, unless otherwise noted, shall be deemed to include a reference to the rules and regulations issued under such section or sections of the Code.
2.7 “Committee” means the Compensation and Pension Committee of the Board or such other committee as the Board may designate from time to time. The Committee shall consist of at least two members of the Board. The Board intends for all of the Committee members to be “non-employee directors” as defined in Rule 16b-3 issued under the Act and independent directors as set forth in the NASDAQ Marketplace Rules with respect to compensation committee members.
2.8 “Common Stock” means the Company’s common stock, par value $1.00 per share.
2.9 “Company” means Chemical Financial Corporation, a Michigan corporation, and its successors and assigns.
2.10 “Director” means a member of the Board.
2.11 “Disability” means an inability of a Participant to perform his or her employment or Director duties due to physical or mental disability for a continuous period of 180 days or longer and the Participant is eligible for benefits under the long-term disability policy of the Company or a Subsidiary.
2.12 “Employee” means an employee (including an officer who is an employee) of the Company or one of its Subsidiaries.
2.13 “Equity-Based Award” means the award or grant of a Stock Option, Restricted Stock, a Restricted Stock Unit, a Stock Award, or another stock-based or stock-related award, to a Participant pursuant to the Plan.
2.14 “Equity-Based Award Agreement” means the written agreement with the Company and/or certificate of award issued by the Company (including any amendment or supplement thereto) that evidences and contains the terms and conditions of an Equity-Based Award awarded or granted under the Plan. Such document shall be referred to as an Equity-Based Award Agreement regardless of whether a Participant’s signature is required.
2.15 “Good Reason” means the occurrence of any of the following events without the written consent of the Participant: (a) any material reduction in the Participant’s base salary, as it may be adjusted from time to time, without a corresponding reduction in the base salaries of other similarly situated Participants; (b) any material reduction in the Participant’s status, position or responsibilities; or (c) any requirement by the Company or any one of its Subsidiaries (without the Participant’s consent) that the Participant be principally based at any office or location more than sixty (60) miles from the Participant’s principal work location as of the effective date of the Equity-Based Award Agreement. Notwithstanding the foregoing, a Good Reason event shall not be deemed to have occurred if the Participant’s positions or responsibilities change in a manner that overall constitute an enhanced position or one or more different positions with the same or greater aggregate responsibilities. Further, if the Participant fails to give the Company, or its Subsidiary, as applicable, written notice of his or her intention to terminate employment with such entity for Good Reason within ninety (90) days following the Participant’s first knowledge of any Good Reason event and a period of sixty (60) days in which the Company, or its Subsidiary, as applicable, may remedy the event alleged to constitute Good Reason, and if the Participant has not terminated his or her employment within thirty (30) days following the expiration of the Company’s, or its Subsidiary’s, as applicable, foregoing cure period, the event shall not constitute Good Reason, and the Participant shall have no right to terminate employment for Good Reason as a result of such event.
2.16 “Individual Agreement” means (a) any employment, change in control or severance agreement between the Participant and the Company or one of its Subsidiaries (or any successor thereto) and (b) any retention agreement between the Participant and the Company or one of its Subsidiaries (or any successor thereto) that becomes effective on or following February 25, 2019.
2.17 “Market Value” shall equal the closing market price of shares of Common Stock reported on NASDAQ (or any successor exchange or system that is the primary stock exchange or system for trading of Common Stock) on the date of grant, exercise or vesting, as applicable, or if NASDAQ (or any such successor) is closed on that date, the next preceding date on which NASDAQ (or any such successor) was open for trading and on which shares of Common Stock were traded. If the Common Stock is not readily tradable on an established securities market, the Market Value shall be determined by any means deemed fair and reasonable by the Committee, taking into account such factors as it considers advisable in a manner consistent with the valuation principles of Section 409A of the Code, except when the Committee expressly determines not to use Section 409A valuation principles, which determination shall be final and binding on all parties.
2.18 “NASDAQ” means The NASDAQ Stock Market.
2.19 “Participant” means any corporate Employee or Director who is granted an Equity-Based Award under the Plan.
2.20 “Performance” means the level of achievement of the performance goals established by the Committee pursuant to Section 9.1.
2.21 “Performance Measures” means measures as described in Section 9 on which the performance goals are based.
2.22 “Performance Period” means the period of time during which the performance goals must be met to determine the degree of payout, the vesting, or both, with respect to an Equity-Based Award that is deemed by the Committee to be as Performance-Based Compensation under Section 9 of the Plan.
2.23 “Performance-Based Compensation” means compensation under an Equity-Based Award that is subject to performance-based vesting conditions as defined in Section 9 and granted under the Plan (a “Performance-Based Award”).
2.24 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
2.25 “Plan” means the Chemical Financial Corporation Stock Incentive Plan of 2019 as set forth herein, as it may be amended from time to time.
2.26 “Prior Plans” means the Chemical Financial Corporation Stock Incentive Plan of 2017, the Chemical Financial Corporation Stock Incentive Plan of 2015 and the Chemical Financial Corporation Stock Incentive Plan of 2012.
2.27 “Restricted Period” means the period of time during which Restricted Stock, Restricted Stock Units or other stock-based or stock-related awards that are awarded under the Plan are subject to the risk of forfeiture, restrictions on transfer and other restrictions or conditions pursuant to Sections 6, 7, or 8. The Restricted Period may differ among Participants and may have different expiration dates with respect to shares of Common Stock covered by the same Equity-Based Award.
2.28 “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 of the Plan while such Common Stock remains subject to the risk of forfeiture, restrictions on transfer and other restrictions or conditions pursuant to Section 6.
2.29 “Restricted Stock Unit” means an award to a Participant pursuant to Section 6 of the Plan and described as a “Restricted Stock Unit” in Section 6.
2.30 “Retirement” for an Employee means the voluntary Termination of all employment with the Company and its Subsidiaries after the Employee has attained 55 years of age and completed 10 years of service with the Company or one of its Subsidiaries or as otherwise may be set forth in the Equity-Based Award Agreement or other grant document with respect to a Participant and a particular Equity-Based Award. “Retirement” for a Director means the Cessation of the Director’s service at the end of the Director’s term when the Director is not nominated for reelection, or as otherwise may be set forth in the Equity-Based Award Agreement or other grant document with respect to a Participant and a particular Equity-Based Award.
2.31 “Stock Award” means an award of Common Stock awarded to a Participant pursuant to Section 7 of the Plan.
2.32 “Stock Option” means the right to purchase Common Stock at a stated price for a specified period of time. For purposes of the Plan, a Stock Option may only be a nonqualified stock option.
2.33 “Subsidiary” means any corporation or other entity of which 50% or more of the outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled by the Company or by one or more Subsidiaries of the Company. The term “Subsidiary” includes present and future Subsidiaries of the Company.
2.34 “Termination” or “Cessation”(and similar terms, regardless of whether expressed in this Plan using the capitalized terms Termination or Cessation) of an Employee’s employment, or of a Director’s service or status as a Director, as applicable, shall be considered to occur on the date on which an Employee is no longer obligated to perform services as an Employee for the Company or any of its Subsidiaries and the Employee’s right to re-employment is not guaranteed by statute, contract or written policy of the Company or a Subsidiary, or a Director ceases to be a Director, as applicable, regardless of whether the Employee or Director continues to receive compensation from the Company or any of its Subsidiaries for past services after such date. The following shall not be considered a Termination or Cessation: (i) a transfer of an Employee or Director among the Company and its Subsidiaries; (ii) a leave of absence, duly authorized in writing by the Company or any of its Subsidiaries, as applicable, for military service or for any other purpose approved by the Company or any of its Subsidiary, as applicable, if the period of such leave does not exceed ninety (90) days; (iii) a leave of absence in excess of ninety (90) days, duly authorized in writing by the Company, or any of its Subsidiaries, provided that, in the case of an Employee, the Employee’s right to re-employment is guaranteed by statute, contract or written policy of the Company or any of its Subsidiaries; or (iv) a termination of employment with the Company or any of its Subsidiaries with continued service as a Director or termination of service as a Director with continued services as an Employee. Notwithstanding the foregoing provisions of this definition, with respect to any Equity-Based Award that constitutes a “nonqualified deferred compensation plan” subject to Section 409A of the Code, a Participant shall not be considered to have experienced a “Termination” of employment or “Cessation” of service unless the Participant has experienced a “separation from service” within the meaning of Section 409A of the Code.
SECTION 3
Administration
3.1Power and Authority. The Committee shall administer the Plan. The Committee may delegate any, some or all of its record keeping, calculation, payment and other ministerial or administrative authority and responsibility from time to time to and among one or more individuals, who may be members of the Committee or Employees, but all actions taken pursuant to delegated authority and responsibility shall be subject to such review, change and approval by the Committee as the Committee considers appropriate. Except as limited in the Plan or as may be necessary to ensure, to the extent that the Committee so desires, that the Plan provides Performance-Based Compensation, the Committee shall have all of the express and implied powers and duties set forth in the bylaws of the Company and the Plan, shall have full power and authority to interpret the provisions of the Plan and Equity-Based Awards granted under the Plan and shall have full power and authority to supervise the administration of the Plan and Equity-Based Awards granted under the Plan and to make all other determinations and do all things considered necessary or advisable for the administration of the Plan. All determinations, interpretations and selections made by the Committee regarding the Plan shall be final and conclusive. The Committee shall hold its meetings at such times and places as it considers advisable. Action may be taken by a written instrument signed by all of the members of the Committee and any action so taken shall be fully as effective as if it had been taken at a meeting duly called and held. The Committee shall make such rules and regulations for the conduct of its business as it considers advisable.
3.2Grants or Awards to Participants. In accordance with and subject to the provisions of the Plan, the Committee shall have the authority to determine all provisions of Equity-Based Awards as the Committee may consider necessary or desirable and as are consistent with the terms of the Plan, including, without limitation, the following: (a) the persons who shall be selected as Participants; (b) the nature and, subject to the limitations set forth in Sections 4.1 and 4.3 of the Plan, extent of the Equity-Based Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Equity-Based Award, any exercise price, the manner in which an Equity-Based Award will vest or become exercisable and the form of payment for the Equity-Based Award); (c) the time or times when Equity-Based Awards will be granted; (d) the duration of each Equity-Based Award; and (e) the restrictions and other conditions to which payment or vesting of Equity-Based Awards may be subject; provided, however, that a vesting period of at least one year from the date an Equity-Based Award is granted must apply to at least 95% of the Equity-Based Awards granted under this Plan.
3.3Amendments or Modifications of Equity-Based Awards.Subject to Section 3.4 and Section 11, the Committee shall have the authority to amend or modify the terms of any outstanding Equity-Based Award in any manner, provided that the amended or modified terms are not prohibited by the Plan as then in effect and provided such actions do not cause an Equity-Based Award not already subject to Section 409A of the Code to become subject to Section 409A of the Code, including, without limitation, the authority to: (a) modify the number of shares or other terms and conditions of an Equity-Based Award; provided that any increase in the number of shares of an Equity-Based Award other than pursuant to Section 4.4 shall be considered to be
a new grant with respect to such additional shares for purposes of Section 409A of the Code and such new grant shall be made at Market Value on the date of grant; (b) extend the term of an Equity-Based Award to a date that is no later than the earlier of the latest date upon which the Equity-Based Award could have expired by its terms under any circumstances or the 10th anniversary of the date of grant; (c) accelerate the exercisability or vesting or otherwise terminate, waive or modify any restrictions relating to an Equity-Based Award; (d) accept the surrender of any outstanding Equity-Based Award; and (e) to the extent not previously exercised or vested, authorize the grant of new Equity-Based Awards in substitution for surrendered Equity-Based Awards; provided, however, that such grant of new Equity-Based Awards is in compliance with Code Section 409A.
3.4Repricing Prohibited. Except for adjustments as permitted by Section 4.4, without the approval of shareholders, the Committee may not amend, replace, substitute, or exchange previously granted Equity-Based Awards in a transaction that constitutes a “repricing,” which means any of the following: (a) changing the terms of an Equity-Based Awards to lower its exercise price; (b) any other action that is treated as a “repricing” under generally accepted accounting principles; (c) repurchasing for cash or canceling Equity-Based Awards at a time when its exercise price is greater than the Market Value of the underlying shares of Common Stock in exchange for another Equity-Based Award; or (d) as such term is used in NASDAQ FAQ Identification Number 220. In addition, the Committee may not cancel any outstanding Stock Option and replace it with a cash payment that is greater than the intrinsic value (if any) of the cancelled Stock Option without shareholder approval.
3.5Dividends Prohibited. Dividends, or dividend equivalents, may not be paid on any unvested Equity-Based Awards issued under the Plan; provided, that the Committee may provide that dividends, or dividend equivalents, on unvested Equity-Based Awards (other than Stock Options or performance-based Restricted Stock or Restricted Stock Units) may be accrued and paid upon vesting of the applicable Equity-Based Award. Any Equity-Based Awards that include such accrual rights shall comply with Section 409A of the Code.
3.6Indemnification of Committee Members. Neither any member or former member of the Committee, nor any individual or group to whom authority or responsibility is or has been delegated, shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the administration and implementation of the Plan. Each person who is or shall have been a member of the Committee, and any other individual or group exercising delegated authority or responsibility with respect to the Plan, shall be indemnified and held harmless by the Company from and against any cost, liability or expense imposed or incurred in connection with such person’s or the Committee’s taking or failing to take any action under the Plan or the exercise of discretion or judgment in the administration and implementation of the Plan. This Section 3.5 shall not be construed as limiting the Company’s or any Subsidiary’s ability to terminate or otherwise alter the terms and conditions of the employment of an individual or group exercising delegated authority or responsibility with respect to the Plan, or to discipline any such person. Each such person shall be justified in relying on information furnished in connection with the Plan’s administration by any appropriate person or persons.
SECTION 4
Shares Subject to the Plan
4.1Number of Shares. Subject to adjustment as provided in Section 4.4 of the Plan, the total number of shares available for Equity-Based Awards under the Plan shall be 2,400,000 shares of Common Stock. Such shares shall be authorized and unissued shares, including shares purchased on the open market or otherwise acquired by the Company. Upon shareholder approval of this Plan, no further awards shall be made under the Prior Plans.
4.2Share Recycling Prohibited. Shares subject to Equity-Based Awards that are canceled, surrendered, modified, exchanged for substitute Equity-Based Awards, or that forfeit, expire or terminate prior to the exercise or vesting of the Equity-Based Awards in full, and shares that are surrendered to the Company in connection with the exercise or vesting of Equity-Based Awards, whether previously owned or otherwise subject to such Equity-Based Awards, may not be reissued as new Equity-Based Awards under the Plan.
4.3 Limitation Upon Equity-Based Awards. No Participant shall be granted, during any calendar year, Equity-Based Awards with respect to more than 25% of the total number of shares of Common Stock available for Equity-Based Awards under the Plan set forth in Section 4.1 of the Plan, subject to adjustment as provided in Section 4.4 of the Plan.
(a)Stock Dividends and Distributions. If the number of shares of Common Stock outstanding changes by reason of a stock dividend, stock split, recapitalization or other general distribution of Common Stock or other securities
to holders of Common Stock, the number and kind of securities subject to outstanding Equity-Based Awards and available for issuance under the Plan, together with applicable exercise prices and the limitations provided in Section 4.3, shall be adjusted in such manner and at such time as shall be equitable under the circumstances, as determined by the Committee.
(b)Other Actions Affecting Common Stock. If there occurs, other than as described in Section 4.4(a), any merger, business combination, recapitalization, reclassification, subdivision or combination approved by the Board that would result in the persons who were shareholders of the Company immediately prior to the effective time of any such transaction owning or holding, in lieu of or in addition to shares of Common Stock, other securities, money and/or property (or the right to receive other securities, money and/or property) immediately after the effective time of such transaction, then the outstanding Equity-Based Awards (including exercise prices) and reserves for Equity-Based Awards under the Plan shall be adjusted in such manner and at such time as shall be equitable under the circumstances, as determined by the Committee. It is intended that in the event of any such transaction, Equity-Based Awards under the Plan shall entitle the holder of each Equity-Based Award to receive (upon exercise in the case of Stock Options), in lieu of or in addition to shares of Common Stock, any other securities, money and/or property receivable upon consummation of any such transaction by holders of Common Stock with respect to each share of Common Stock outstanding immediately prior to the effective time of such transaction; upon any such adjustment, holders of Equity-Based Awards under the Plan shall have only the right to receive in lieu of or in addition to shares of Common Stock such other securities, money and/or other property as provided by the adjustment.
(c)No Fractional Shares. No fractional shares shall be issued pursuant to the Plan. Any fractional shares resulting under the terms of the Plan, including but not limited to, due to adjustments under Section 4.4, partial vesting or tax withholding, shall be rounded up or down as determined in the Committee’s discretion and no cash payment shall be made in lieu of the fractional share.
SECTION 5
Stock Options
5.1Grant. A Participant may be granted one or more Stock Options under the Plan. No Participant shall have any rights as a shareholder with respect to any shares of stock subject to Stock Options granted hereunder until such shares have been issued. For purposes of determining the number of shares available under the Plan, each Stock Option shall count as the number of shares of Common Stock subject to the Stock Option. Stock Options shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. In addition, the Committee may vary, among Participants and among Stock Options granted to the same Participant, any and all of the terms and conditions of the Stock Options granted under the Plan. Subject to the limitation imposed by Section 4.3 of the Plan, the Committee shall have complete discretion in determining the number of Stock Options granted to each Participant. Stock Options issued under the Plan shall be nonqualified stock options and shall not be considered incentive stock options as defined in Section 422(b) of the Code. The date of grant of a Stock Option shall be the date the Stock Option is authorized by the Committee or a future date specified by the Committee as the date for issuing the Stock Option.
5.2Stock Option Agreements. Stock Options shall be evidenced by stock option agreements, certificates of award, or both, containing the terms and conditions applicable to such Stock Options. To the extent not covered by a stock option agreement or certificate of award, the terms and conditions of this Section 5 shall govern.
5.3Stock Option Exercise Price. The per share Stock Option exercise price shall be determined by the Committee, but shall be a price that is equal to or greater than 100% of the Market Value per share on the date of grant.
5.4Medium and Time of Payment. The exercise price for each share purchased pursuant to a Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or provides in the applicable stock option agreement or grant, in shares of Common Stock (for the avoidance for doubt, including by the Participant instructing the Company to withhold a number of shares of Common Stock having a Market Value on the date the applicable Stock Option is exercised equal to the product of (a) the exercise price multiplied by (b) the number of shares of Common Stock in respect of which the Stock Option is being exercised). Broker-assisted cashless exercise of Stock Options is permitted under the Plan, provided that it is effectuated in a manner that does not violate the Sarbanes-Oxley Act of 2002 or other laws, rules or regulations. The time and terms of payment may be amended with the consent of a Participant before or after exercise of a Stock Option, provided that such amendment would not cause a Stock Option to become subject to Section 409A of the Code. Except as limited by the Act, the Sarbanes-Oxley Act of 2002 or other laws, rules or regulations, the Committee may from time to time authorize payment of all or a portion of the Stock Option exercise price in the form of a promissory note or other deferred payment installments according to such terms as the
Committee may approve; provided, however,that such promissory note or other deferred payment installments shall be with full recourse and shall bear a market rate of interest. The Board may restrict or suspend the power of the Committee to permit such loans and may require that adequate security be provided.
5.5Limits on Exercisability. Stock Options shall be exercisable for such periods, not to exceed 10 years and one day from the date of grant, as may be fixed by the Committee. At the time of exercise of a Stock Option, the holder of the Stock Option, if requested by the Committee, must represent to the Company that the shares are being acquired for investment and not with a view to the distribution thereof. The Committee may in its discretion require a Participant to continue the Participant’s service with the Company or its Subsidiaries for a certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed vesting provisions.
5.6Termination of Employment or Cessation of Service. Unless otherwise specified in a Participant’s Equity-Based Award Agreement or Individual Agreement:
(a)General. If a Participant ceases to be a Director or ceases to be employed by the Company or one of its Subsidiary for any reason, the Participant’s outstanding Stock Options that have not vested by the date of Termination or Cessation shall be forfeited. If a Participant ceases to be a Director or is no longer employed by the Company or one of its Subsidiary for any reason other than the Participant’s Retirement, death, Disability or Termination for Cause, the Participant may exercise his or her Stock Options in accordance with their terms for a period not exceeding the earlier of the expiration of the Stock Options by their terms and three months after such Termination of employment or Cessation of service as a Director, but only to the extent the Participant was entitled to exercise the Stock Options on the date of Termination.
(b)Death. If a Participant dies either while an Employee or Director otherwise during a time when the Participant could have exercised a Stock Option, the Stock Options issued to such Participant shall be exercisable in accordance with their terms by the personal representative of such Participant or other successor to the interest of the Participant for a period of one year after such Participant’s death to the extent that the Participant was entitled to exercise the Stock Options on the date of death or Termination or Cessation, whichever first occurred, but not beyond the original term of the Stock Options.
(c)Disability. If a Participant ceases to be a Director or ceases to be employed by the Company or one of its Subsidiaries due to the Participant’s Disability, he or she may exercise his or her Stock Options in accordance with their terms for one year after he or she ceases to be a Director or employed unless such Stock Options earlier expire by their terms, but only to the extent that the Participant was entitled to exercise the Stock Options on the date of such event and not beyond the original terms of the Stock Options.
(d)Participant Retirement. If a Participant no longer serves as a Director or ceases to be employed by the Company or one of its Subsidiaries due to Retirement, the Participant may exercise his or her Stock Options in accordance with their terms for three years after such Termination of employment or Cessation of service unless such Stock Options earlier expire by their terms.
(e)Termination for Cause. If a Participant’s service as a Director or employment is terminated for Cause, the Participant shall have no further right to exercise any Stock Options previously granted to him or her.
SECTION 6
Restricted Stock and Restricted Stock Units
6.1Grant. Subject to the limitations set forth in Sections 4.1 and 4.3 of the Plan, Restricted Stock and Restricted Stock Units may be granted to Participants under the Plan. Shares of Restricted Stock are shares of Common Stock the retention, vesting and/or transferability of which is subject, during specified periods of time, to such conditions (including continued employment, service as a Director and/or achievement of performance goals established by the Committee) and terms as the Committee deems appropriate. Restricted Stock Units are Equity-Based Awards denominated in units of Common Stock under which the issuance of shares of Common Stock is subject to such conditions (including continued employment, service as a Director and/or achievement of performance goals established by the Committee) and terms as the Committee deems appropriate. For purposes of determining the number of shares available under the Plan, each Restricted Stock Unit shall count as the number of shares of Common Stock subject to the Restricted Stock Unit. Unless determined otherwise by the Committee, each Restricted Stock Unit shall be equal to one share of Common Stock and shall entitle a Participant to either shares of Common Stock or an
amount of cash determined with reference to the value of shares of Common Stock. To the extent determined by the Committee, Restricted Stock and Restricted Stock Units may be satisfied or settled in cash, in shares of Common Stock or in a combination thereof. Unless specified otherwise in an Equity-Based Award Agreement or other superseding agreement, Restricted Stock Units shall be settled within 30 days following satisfaction of the applicable vesting requirements, subject to any delay required by Section 409A of the Code. Restricted Stock Units that are Performance-Based Compensation shall be settled no later than the 15th day of the third month after the Restricted Stock Units vest. Restricted Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but shall be consistent with the terms of the Plan.
6.2Restricted Stock Agreements. Awards of Restricted Stock and Restricted Stock Units shall be evidenced by restricted stock or restricted stock unit agreements or certificates of award containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall from time to time determine. Unless the restricted stock or restricted stock unit agreement or certificate of award provides otherwise, awards of Restricted Stock and Restricted Stock Units shall be subject to the terms and conditions set forth in this Section 6.
6.3Vesting. The grant, issuance, retention, vesting and settlement of shares of Restricted Stock and Restricted Stock Units shall occur at such time and in such installments as determined by the Committee or under criteria established by the Committee. The Committee shall have the right to make the timing of the grant and/or issuance of, the ability to retain and the vesting and/or the settlement of Restricted Stock Units and shares of Restricted Stock subject to continued employment, passage of time and/or such performance criteria as deemed appropriate by the Committee.
6.4Termination of Employment or Cessation of Service. Unless otherwise specified in a Participant’s Equity-Based Award Agreement or Individual Agreement:
(a)Voluntary Termination Other Than Retirement. Other than as provided below upon Retirement, if a Participant voluntarily ceases to be an Employee, or if a Participant who is a Director voluntarily ceases to be a Director, for any reason during the Restricted Period, each share of Restricted Stock and Restricted Stock Unit still subject in full or in part to restrictions at the date of such Termination or Cessation shall automatically be forfeited and returned to the Company.
(b)Death, Disability or Termination Without Cause. In the event a Participant terminates his or her employment with the Company or one of its Subsidiaries, or a Director ceases to be a Director, because of death, Disability or Termination without Cause during the Restricted Period, the restrictions remaining on any or all shares of Restricted Stock and Restricted Stock Units shall lapse and such award shall vest on a prorated basis and be convertible into a number of shares of Common Stock equal to (i) the number of the Participant’s shares of unvested Restricted Stock or Restricted Stock Units as of the effective date of the Termination, multiplied by (ii) the quotient of (x) the number of full months that have elapsed since the later of the date of grant or the most recent annual vesting date and the effective date of Participant’s Termination and (y) the total number of full months remaining in the vesting period since the later of the date of grant or the most recent annual vesting date. For Restricted Stock or Restricted Stock Units that are subject to attainment of performance goals, the number of a Participant’s unvested Restricted Stock or Restricted Stock Units that are subject to proration as of the effective date of the Termination as set forth in the immediately preceding sentence shall be the target (100%) number of Restricted Stock or Restricted Stock Units set forth in the Equity-Based Award Agreement. All remaining shares of Restricted Stock shall be forfeited and returned to the Company and all remaining Restricted Stock Units shall be forfeited; provided, that the Committee may, in its sole discretion, waive the restrictions remaining on any or all of such remaining shares of Restricted Stock and Restricted Stock Units either before or after the death, Disability or Termination without Cause of the Participant.
(c)Retirement. If a Participant who is a Director ceases providing services as a Director due to Retirement during the Restricted Period, then the restrictions remaining on any or all shares of Restricted Stock shall terminate automatically in full upon Retirement. In the event a Participant who is an Employee terminates his or her employment with the Company or any one of its Subsidiaries because of Retirement during the Restricted Period and the Participant has given the Company or its Subsidiary, as applicable, written notice of his or her intended date of Retirement at least one year in advance of such intended date of Retirement, the restrictions remaining on any or all shares of Restricted Stock and Restricted Stock Units shall lapse and such award shall vest on a prorated basis and be convertible into a number of shares of Common Stock in the manner described in Section 6.4(b) of the Plan. If the Participant does not provide such advance notice, then all remaining shares of Restricted Stock shall be forfeited and returned to the Company and all remaining Restricted Stock Units shall be forfeited. The Committee may, in its sole discretion, waive the restrictions remaining on any or all such remaining shares of Restricted Stock and Restricted Stock Units either before or after the Retirement of the Participant.
(d)Termination for Cause. If a Participant’s employment or service as a Director is Terminated for Cause, the Participant shall have no further right to receive any Restricted Stock or Restricted Stock Units and all Restricted Stock still subject to restrictions at the date of such Termination shall automatically be forfeited and returned to the Company and all Restricted Stock Units still subject to restrictions at the date of such Termination shall automatically be forfeited.
6.5Legending of Restricted Stock. In addition to any other legend that may be set forth on a Participant’s share certificate, such certificates, if any, evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend:
The shares represented by this certificate were issued subject to certain restrictions under the Chemical Financial Corporation Stock Incentive Plan of 2019 (the “Plan”). This certificate is held subject to the terms and conditions in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented by this certificate except in compliance with that agreement, which provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company.
The Committee may require that certificates, if any, representing shares of Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been satisfied or lapsed.
6.6Rights as a Shareholder. A Participant shall have all liquidation and other rights with respect to Restricted Stock held of record by such Participant as if the Participant held unrestricted Common Stock, subject to the restrictions regarding payment of dividends as set forth in Section 3.5; provided, that the unvested portion of any award of Restricted Stock shall be subject to any restrictions on transferability or risks of forfeiture imposed pursuant to this Section 6 and the terms and conditions set forth in the Participant’s restricted stock agreement. Unless the Committee otherwise determines or unless the terms of the applicable restricted stock unit agreement or grant provide otherwise, a Participant shall have no dividend or liquidation rights with respect to shares of Common Stock subject to awards of Restricted Stock Units held by such Participant.
6.7Voting Rights. Unless otherwise determined by the Committee, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the Restricted Period. Participants shall have no voting rights with respect to shares of Common Stock underlying Restricted Stock Units unless and until such shares are reflected as issued and outstanding shares on the Company’s stock ledger.
SECTION 7
Stock-Based Awards
7.1Grant. Subject to the limitations set forth in Sections 4.1 and 4.3 of the Plan, in addition to any Stock Options, Restricted Stock, or Restricted Stock Units that a Participant may be granted under the Plan, a Participant may be granted one or more other types of awards based on or related to shares of Common Stock (including the grant of Stock Awards). Such awards shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined from time to time by the Committee in its sole discretion, and shall be evidenced by agreements or certificates of award containing such terms and conditions. Notwithstanding the previous sentence, the shares of stock subject to Stock Awards shall be issued no later than the 15th day of the third month after the end of the calendar year in which the award is vested. Such awards shall be expressed in terms of shares of Common Stock or denominated in units of Common Stock. For purposes of determining the number of shares available under the Plan, each such unit shall count as the number of shares of Common Stock to which it relates.
7.2Rights as a Shareholder.
(a)Stock Awards. A Participant shall have all voting, dividend, liquidation and other rights with respect to vested shares of Common Stock issued to the Participant as a Stock Award under this Section 7 upon the Participant becoming the holder of record of the Common Stock granted pursuant to such Stock Award; provided, that the Committee may impose such restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock Award as it considers appropriate. Any dividend payment with respect to a vested Stock Award shall be made no later than the 15th day of the third month following the date the dividends are paid to shareholders.
(b)General. With respect to shares of Common Stock subject to awards granted under the Plan other than Stock Options, Restricted Stock, Restricted Stock Units and Stock Awards, a Participant shall have such rights as
determined by the Committee and set forth in the respective award agreements; and the Committee may impose such restrictions on the assignment or transfer of Common Stock awarded pursuant to such awards as it considers appropriate.
SECTION 8
Change in Control
Unless otherwise specified in a Participant’s Equity-Based Award Agreement or Individual Agreement, upon and following a Change in Control the following terms shall apply to all Equity-Based Awards granted under the Plan.
8.1Continued Vesting of Equity-Based Awards. Following a Change in Control, all Equity-Based Awards granted under the Plan that are outstanding at the time of the Change in Control and have not previously vested shall continue to vest in accordance with the vesting provisions and Restricted Period in effect immediately prior to the Change in Control, except as otherwise contemplated by this Section 8. Following a Change in Control, and after giving effect to the provisions of this Section 8, a Participant’s rights in respect of Retirement, death and Disability as set forth in the Plan, including any prorated vesting of unvested Equity-Based Awards, shall continue to apply.
8.2Settlement of Performance-Based Equity-Based Awards. With respect to Restricted Stock and Restricted Stock Units granted under the Plan that remain subject to the attainment of Performance Measures for which performance results have not been measured in the ordinary course prior to such Change in Control, upon the effective date of a Change in Control, the number of shares subject to the applicable Equity-Based Award Agreement from and after the date of the consummation of the Change in Control be equal to the greater of (a) the target (100% payout) number of shares of Restricted Stock or Restricted Stock Units set forth in the applicable Equity-Based Award Agreement, and (b) the number of shares of Restricted Stock or Restricted Stock Units that would have been earned based on the actual performance of the Company measured through the latest practicable date prior to the effective date of the Change in Control (which, unless otherwise determined by the Committee, shall be the most recently completed calendar quarter) (such higher number, the “Earned Performance-Based Awards”). All remaining shares of Restricted Stock shall be forfeited and returned to the Company, and all remaining Restricted Stock Units shall be forfeited. Following the date of consummation of the Change in Control, the Earned Performance-Based Awards shall vest and be subject to forfeiture based on a Participant’s continued service through the last day of the Performance Period.
8.3Conversion of Equity-Based Awards if Not the Surviving Entity. If the Company is not the surviving entity following the effective date of a Change in Control, all outstanding and unvested shares of Restricted Stock and Restricted Stock Units shall (after giving effect to Section 8.2 of the Plan, to the extent applicable) be converted into Restricted Stock or Restricted Stock Units of the surviving entity’s common stock at the applicable exchange ratio on the date of the Change in Control (or shall be otherwise adjusted as contemplated by Section 4.4(b) of the Plan) in a manner approved by the Board. The value of all outstanding Stock Options shall be converted to a cash amount (which shall be received upon exercise, in lieu of shares of Common Stock or other securities or consideration) equal to the greater of the excess of (a) the highest sales price of the Company’s Common Stock on Nasdaq on the date immediately prior to the effective date of such Change in Control of the Company or (b) the highest price per share actually paid in by the acquirer in connection with any Change in Control of the Company, over the exercise price per share of such Stock Options. Such amount shall remain subject to the vesting schedule of the applicable Stock Option and shall be paid in cash (without interest) when the applicable Stock Option otherwise would have vested in accordance with the applicable Equity-Based Award Agreement.
8.4Termination Without Cause or for Good Reason. If, during the two-year period following the effective date of a Change in Control, a Participant’s employment with the Company and/or its Subsidiaries is involuntarily terminated without Cause or a Participant terminates such employment for Good Reason, all unvested Equity-Based Awards granted to the Participant under the Plan shall vest in full on the Termination date of the Participant, subject to the settlement determination and conversion provisions set forth in Sections 8.2 and 8.3 of the Plan. Restricted Stock and Restricted Stock Units that vest pursuant to this Section 8.4 shall be converted into shares of Common Stock (or the common stock of the surviving entity, as applicable) and shall be issued to the Participant within thirty (30) days following the Participant’s Termination date, subject to any required delay pursuant to Section 409A of the Code. Stock Options that vest pursuant to this Section 8.4 shall be exercisable for the full remaining term of the Stock Options as set forth in the applicable Equity-Based Award Agreements.
SECTION 9
Performance Measures
9.1Performance Measures. Subject to Committee discretion as set forth in a Participant’s Equity-Based Award Agreement or other controlling document, performance goals that are intended to be Performance-Based Compensation may include, but are not limited to, the following Performance Measures:
| Back to Contents | | (a) | Net income (before or after taxes, interest, depreciation, and/or amortization); |
| | (e) | Cash earnings per share (reflecting dilution of the Common Stock as the Committee deems appropriate and, if the Committee so determines, net of or including dividends); |
| | (f) | Cash earnings return on equity; |
| | (h) | Operating income per share; |
| | (i) | Operating income return on equity; |
| | (l) | Cash flow return on capital; |
| | (o) | Share price (including without limitation growth measures, total shareholder return or comparison to indices); |
| | (p) | Expense or cost levels; |
| | (t) | Customer satisfaction, satisfaction based on specified objective goals or a Company-sponsored customer survey; |
| | (u) | Economic value added measurements; |
| | (v) | Market share or market penetration with respect to specific designated products or services, product or service groups and/or specific geographic areas; |
| | (w) | Reduction of losses, loss ratios, expense ratios or fixed costs; |
| | (y) | Specified objective social goals; |
One or more Performance Measures may be used to measure the performance of one or more of the Company, its Subsidiaries, or any combination of the foregoing, compared to pre-determined levels, as the Committee may deem appropriate, or compared to the performance of a pre-established peer group, or published or special index that the Committee, in its sole discretion, deems appropriate. The Committee also has the authority to provide for accelerated vesting of any Equity-Based Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 9.
9.2Evaluation of Performance. With respect to any Equity-Based Award granted under the Plan, the Committee may determine in its sole discretion that any evaluation of Performance may include or exclude any of the following events or their effects that occur during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Financial Accounting Standards Board Accounting Standards Codification Topic 225-20 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable fiscal year; (f) acquisitions, mergers, or divestitures (including non-recurring transaction-related expenses); (g) securities offerings; (h) accounting changes; (i) amortization of goodwill or other intangible assets; (j) discontinued operations; and (k) other special charges or extraordinary items.
9.3Committee Discretion. In the event of changes to applicable tax laws, securities laws and accounting principles, in addition to its authority under Section 9.2, the Committee may alter the governing Performance Measures without obtaining shareholder approval of such changes.
9.4Adjustment of Performance-Based Compensation. Equity-Based Awards that are designed to be Performance-Based Compensation pursuant to Section 9 of the Plan may not be increased or adjusted upward. The Committee shall retain the discretion to decrease or adjust such Equity-Based Awards downward, and such Equity-Based Awards may be forfeited in whole or in part.
9.5Performance-Based CompensationConditioned on Performance. Payment of Performance-Based Compensation to a Participant for a Performance Period under this Plan shall be entirely contingent upon achievement of the performance goals established by the Committee pursuant to this Section 9, the satisfaction of which must be substantially uncertain when established by the Committee for the Performance Period.
9.6Time of Determination of Performance Goals by Committee. All performance goals to be made by the Committee for a Performance Period pursuant to this Section 9 shall be established in writing by the Committee during the first 90 days of such Performance Period and before 25% of the Performance Period has elapsed.
9.7Objective Standards. Performance-Based Compensation shall be based solely upon objective criteria, consistent with this Section 9, from which an independent third party with knowledge of the facts could determine whether the performance goal or range of goals is met and from that determination could calculate the Performance-Based Compensation to be paid. Although the Committee has authority to exercise reasonable discretion to interpret this Plan and the criteria it shall specify pursuant to this Section 9 of the Plan, it may not amend or waive such criteria after the 90th day of the respective Performance Period with respect to an Equity-Based Award intended to be Performance-Based Compensation. The Committee shall have no authority or discretion to increase any Performance-Based Compensation or to construct, modify or apply the measurement of a Participant’s Performance in a manner that will directly or indirectly increase the Performance-Based Compensation for the Participant for any Performance Period above the amount determined by the applicable objective standards established within the time period set forth in Section 9.6.
SECTION 10
General Provisions
10.1Restrictions on Transferability; Clawback and Recoupment.
(a)General. Unless the Committee otherwise consents or permits (before or after the Equity-Based Award is made) or unless the Equity-Based Award Agreement provides otherwise, Equity-Based Awards granted under the Plan may not be sold, exchanged, transferred, pledged, assigned or otherwise alienated or hypothecated except by will or the laws of descent and distribution, and, as a condition to any transfer permitted by the Committee or the terms of the award agreement, the transferee must execute a written agreement permitting the Company to satisfy any federal, state or local withholding or other taxes associated with or resulting from the exercise or vesting of any Equity-Based Award in any manner provided for in Section 10.3. All provisions of an Equity-Based Award that are determined with reference to the Participant, including without limitation those that refer to the Participant’s employment or service as a Director with the Company or any one of its Subsidiaries, shall continue to be determined with reference to the Participant after any transfer of an Equity-Based Award. All rights with respect to Equity-Based Awards granted to a Participant under the Plan shall be exercisable during the Participant’s lifetime only by such Participant or his or her guardian or legal representative.
(b)Other Restrictions. The Committee may impose other restrictions on any Equity-Based Award or shares of Common Stock acquired pursuant to the exercise or settlement of an Equity-Based Award under the Plan as the Committee deems advisable, including, without limitation, holding periods or further transfer restrictions, forfeiture provisions, and restrictions under applicable federal or state securities laws.
(c)Clawback and Recoupment. Equity-Based Awards under the Plan shall be subject to the Company’s “clawback” policy for the recovery and recoupment of incentive compensation, as it may be amended from time to time.
10.2No Rights to Equity-BasedAwards. No Participant or other person shall have any claim to be granted any Equity-Based Award under the Plan and there is no obligation of uniformity of treatment of Participants or holders or beneficiaries of Equity-Based Awards under the Plan. The terms and conditions of Equity-Based Awards of the same type and the determination
of the Committee to grant a waiver or modification of any Equity-Based Award and the terms and conditions thereof need not be the same with respect to each Participant or the same Participant.
10.3Withholding. The Company or a Subsidiary shall be entitled to: (a) withhold and deduct from future wages of a Participant (or from other amounts that may be due and owing to a Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state, local and foreign withholding and employment-related tax requirements attributable to an Equity-Based Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Equity-Based Award; or (b) require a Participant promptly to remit the amount of such withholding to the Company or the Subsidiary, as applicable, before taking any action with respect to an Equity-Based Award. Unless the Committee determines otherwise, withholding may be satisfied by withholding Common Stock to be received upon exercise or vesting of an Equity-Based Award or by delivery to the Company of previously owned Common Stock. The Company and any Subsidiary may establish such rules and procedures concerning timing of any withholding election as it deems appropriate.
10.4Compliance With Laws; Listing and Registration of Shares. All Equity-Based Awards granted under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be subject to all applicable laws, rules and regulations, and to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of such Equity-Based Award or the issuance or purchase of shares thereunder, such Equity-Based Award may not be exercised in whole or in part, or the restrictions on such Equity-Based Award shall not lapse, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
10.5No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, including the grant of Stock Options and other stock-based and stock-related awards, and such arrangements may be either generally applicable or applicable only in specific cases.
10.6No Right to Employment. The grant of an Equity-Based Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The Company or any Subsidiary may at any time dismiss a Participant from employment or service, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any written agreement with the Participant.
10.7No Liability of Company. Neither the Company, any Subsidiary, Affiliate, Employee nor Director shall be liable to a Participant or any other person as to: (a) the non-issuance or non-sale of Common Stock as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; (b) any tax consequence to any Participant or other person due to the receipt, exercise or settlement of any Equity-Based Award granted hereunder, including but not limited to any tax treatment under Section 409A of the Code; and (c) any provision of law or legal restriction that prohibits or restricts the transfer of shares of Common Stock issued pursuant to any Equity-Based Award. For the avoidance of doubt, this Section 10.7 shall apply to any Subsidiary or Affiliate in existence or hereafter comes into existence.
10.8Suspension of Rights under Equity-Based Awards. The Company, by written notice to a Participant, may suspend a Participant’s and any transferee’s rights under any Equity-Based Award for a period not to exceed 60 days while the Termination for Cause of that Participant’s employment or service with the Company and its Subsidiaries is under consideration.
10.9Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable federal law.
10.10Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included, unless such construction would cause the Plan to fail in its essential purposes.
10.11Compliance with 409A. The Plan and Equity Based Awards granted hereunder are intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom, and, with respect to any Equity Based Awards that constitute deferred compensation subject to Section 409A of the Code, the Plan, Equity Based Award Agreements and any Individual Agreement shall be interpreted and administered in all respects in accordance with Section 409A of the Code (including with respect to the application of any defined terms with respect to Equity Based Award Agreements that constitute nonqualified deferred compensation, which defined terms shall be interpreted to have the meaning required by Section 409A of
the Code to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code). Each payment (including the delivery of shares of Common Stock) under any Equity Based Award that constitutes nonqualified deferred compensation subject to Section 409A of the Code shall be treated as a separate payment for purposes of Section 409A of the Code and, to the extent to be made or delivered upon a termination of employment or cessation of service may only be made upon a “separation from service” under Section 409A of the Code to the extent necessary to avoid the imposition of penalty taxes on a Participant pursuant to Section 409A of the Code. In no event may a Participant, directly or indirectly, designate the calendar year of any payment to be made under this Plan that constitutes nonqualified deferred compensation subject to Section 409A of the Code. Notwithstanding any other provision of this Agreement to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the date of a Participant’s separation from service), Equity Based Awards that constitute nonqualified deferred compensation within the meaning of Section 409A of the Code that would otherwise be deliverable by reason of a Participant’s separation from service during the six-month period immediately following such separation from service shall instead be provided on the earlier to occur of: (a) the date that is six months and one day after such Participant’s separation from service; or (b) the date of such Participant’s death.
SECTION 11
Termination and Amendment
11.1Board and Committee Actions. The Board may terminate the Plan at any time or may from time to time amend or alter the Plan or any aspect of it as it considers proper and in the best interests of the Company; provided, that no such amendment may be made, without the approval of shareholders of the Company, that would (i) reduce the exercise price at which Stock Options may be granted below the price provided for in Section 5.3, (ii) reduce the exercise price of outstanding Stock Options, or (iii) otherwise amend the Plan in any manner requiring shareholder approval by law or under NASDAQ listing requirements or other applicable NASDAQ rules.
11.2No Impairment. Notwithstanding anything to the contrary in Section 11.1, no such amendment or alteration to the Plan or to any previously granted award agreement or Equity-Based Award shall be made which would impair the rights of the holder of the Equity-Based Award, without such holder’s consent; provided, that no such consent shall be required if the Committee determines in its sole discretion and prior to the date of any Change in Control that such amendment or alteration is required or advisable in order for the Company, the Plan or the Equity-Based Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any tax or accounting standard, law or regulation.
SECTION 12
Effective Date and Duration of the Plan
The Plan shall take effect May 7, 2019, subject to approval by the shareholders at the 2019 Annual Meeting of Shareholders or any adjournment thereof or at a Special Meeting of Shareholders. Unless earlier terminated by the Board, no Equity-Based Award shall be granted under the Plan after May 7, 2029.
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