Exhibit 10.9
Change-In-Control Agreements
with Five Executive Officers
Form of Change-in-Control Agreements made with the following five Executive
Officers of Cullen/Frost Bankers, Inc.

  1.   Robert A. Berman     2.   Paul H. Bracher     3.   Paul J. Olivier     4.
  William L. Perotti     5.   Emily A. Skillman

All of the above agreements are substantially identical in all material
respects, except as to the dates of the agreements and the parties thereto.

 

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Cullen/Frost Bankers, Inc.
Executive Severance Agreement
     THIS AGREEMENT is made and entered into as of the [DAY] day of [MONTH],
[YEAR], by and between Cullen/Frost Bankers, Inc. (hereinafter referred to
as the “Company”) and [NAME] (hereinafter referred to as the “Executive”).
     WHEREAS, the Board of Directors of the Company has approved the Company
entering into severance agreements with certain key executives of the Company;
     WHEREAS, the Executive is a key executive of the Company;
     WHEREAS, should the possibility of a Change in Control of the Company
arise, the Board believes it is imperative that the Company and the Board should
be able to rely upon the Executive to continue in his/her position, and that the
Company should be able to receive and rely upon the Executive’s advice, if
requested, as to the best interests of the Company and its shareholders without
concern that the Executive might be distracted by the personal uncertainties and
risks created by the possibility of a Change in Control;
     WHEREAS, should the possibility of a Change in Control arise, in addition
to his/her regular duties, the Executive may be called upon to assist in the
assessment of such possible Change in Control, advise management and the Board
as to whether such Change in Control would be in the best interests of the
Company and its shareholders, and to take such other actions as the Board might
determine to be appropriate; and
     WHEREAS, the Executive and the Company desire that the terms of this
Agreement shall completely replace and supersede the provisions set forth in the
Cullen/Frost Bankers, Inc. Executive Severance Plan and the Executive Severance
Agreement, entered into by and between the Company and the Executive on «Date»,
setting forth the terms and provisions with respect to the Executive’s
entitlement to payments and benefits following a Change in Control of the
Company.
     NOW THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of his/her advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control of
the Company, and to induce the Executive to remain in the employ of the Company,
and for other good and valuable consideration, the Company and the Executive
agree as follows:
Article 1. Establishment, Term, and Purpose
     This Agreement will commence on the Effective Date and shall continue in
effect for one (1) full year. However, at the end of such one (1) year period
and, if extended, at the end of each additional year thereafter, the term of
this Agreement shall be extended automatically for one (1) additional year,
unless the Committee delivers written notice thirty (30) days prior to the end
of such term, or extended term, to each Executive, that the Agreement will not
be extended. In such case, the Agreement will terminate at the end of the term,
or extended term, then in progress.

 

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     However, in the event a Change in Control occurs during the original or any
extended term, this Agreement will remain in effect for the longer of:
(i) twenty-four (24) months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company hereunder have been
fulfilled, and until all benefits required hereunder have been paid to the
Executive.
Article 2. Definitions
     Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized.
     2.1 “Base Salary” means the salary of record paid to an Executive as annual
salary, excluding amounts received under incentive or other bonus plans, whether
or not deferred.
     2.2 “Beneficial Owner” shall have the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
     2.3 “Beneficiary” means the persons or entities designated or deemed
designated by the Executive pursuant to Section 11.2 herein.
     2.4 “Board” means the Board of Directors of the Company.
     2.5 “Cause” means:

  (a)   The Executive’s willful and continued failure to substantially perform
his/her duties with the Company (other than any such failure resulting from
Disability or occurring after issuance by the Executive of a Notice of
Termination for Good Reason), after a written demand for substantial performance
is delivered to the Executive that specifically identifies the manner in which
the Company believes that the Executive has willfully failed to substantially
perform his/her duties, and after the Executive has failed to resume substantial
performance of his/her duties on a continuous basis within thirty (30) calendar
days of receiving such demand;     (b)   The Executive’s willfully engaging in
conduct (other than conduct covered under (a) above) which is demonstrably and
materially injurious to the Company, monetarily or otherwise; or     (c)   The
Executive’s having been convicted of a felony.         For purposes of this
subparagraph, no act, or failure to act, on the Executive’s part shall be deemed
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the action or omission was in the best
interests of the Company.

     2.6 “Change in Control” of the Company shall be deemed to have occurred as
of the first day that any one or more of the following conditions is satisfied
and regulatory approval has been granted if necessary:

  (a)   The “beneficial ownership” (as defined in Rule 13d-3 under the Exchange
Act) of securities representing more than 20 percent (20%) of the combined
voting power of the Company is

 

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      acquired by a Person (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or an
affiliate thereof, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company); or

  (b)   The stockholders of the Company approve a definitive agreement to merge
or consolidate the Company with or into another company (other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than sixty percent (60%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation);     (c)   During any period of
two (2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in paragraph (a) or (b) of this section) whose
election by the Board of Directors or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or     (d)   The stockholders of
the Company approve a definitive agreement to sell or otherwise dispose of all
or substantially all of its assets, or adopt a plan for liquidation.

     However, in no event shall a Change in Control be deemed to have occurred,
with respect to the Executive, if the Executive is part of a purchasing group
which consummates the Change-in-Control transaction. The Executive shall be
deemed “part of a purchasing group” for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent (3%) of the stock
of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control by a majority of the nonemployee continuing
Directors).
     2.7 “Code” means the United States Internal Revenue Code of 1986,
as amended, and any successors thereto.
     2.8 “Committee” means the Compensation and Benefits Committee of the Board
or any other committee appointed by the Board to perform the functions of the
Compensation and Benefits Committee.
     2.9 “Company” means Cullen/Frost Bankers, Inc., a Delaware corporation, or
any successor thereto as provided in Article 10 herein.
     2.10 “Disability” means complete and permanent inability by reason of
illness or accident to perform the duties of the occupation at which the
Executive was employed when such disability commenced.

 

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     2.11 “Effective Date” means the date of this Agreement set forth above.
     2.12 “Effective Date of Termination” means the date on which a Qualifying
Termination occurs which triggers the payment of Severance Benefits hereunder.
     2.13 “Exchange Act” means the United States Securities Exchange Act of
1934, as amended.
     2.14 “Good Reason” shall mean, without the Executive’s express written
consent, the occurrence of any one or more of the following:

  (a)   The assignment of the Executive to duties materially inconsistent with
the Executive’s authorities, duties, responsibilities, and status (including
offices and reporting requirements) as an employee of the Company, or a
reduction or alteration in the nature or status of the Executive’s authorities,
duties, or responsibilities than those in effect immediately preceding the
Change in Control;     (b)   The Company’s requiring the Executive to be based
at a location which is at least fifty (50) miles further from the current
primary residence than is such residence from the Company’s current
headquarters, except for required travel on the Company’s business to an extent
substantially consistent with the Executive’s business obligations as of the
Effective Date;     (c)   A material change in the Executive’s Base Salary or
bonus opportunity as in effect on the Effective Date or as the same shall be
increased from time to time;     (d)   A material reduction in the Executive’s
level of participation in any of the Company’s short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices, or arrangements in which the Executive participates immediately
preceding the Change in Control; provided, however, that reductions in the
levels of participation in any such plans shall not be deemed to be “Good
Reason” if the Executive’s reduced level of participation in each such program
remains substantially consistent with the average level of participation of
other executives who have positions commensurate with the Executive’s position.
        For purposes of this Agreement, long-term incentives shall mean the
Cullen Frost Bankers, Inc. 1992 Stock Plan and any other similar plans
instituted by the Company;     (e)   The failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Article 10 herein; or     (f)   Any
termination of Executive’s employment by the Company that is not effected
pursuant to a Notice of Termination.

     The existence of Good Reason shall not be affected by the Executive’s
temporary incapacity due to physical or mental illness not constituting a
Disability. The Executive’s Retirement shall constitute a waiver of the
Executive’s rights with respect to any circumstance constituting Good Reason.
The

 

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Executive’s continued employment shall not constitute a waiver of the
Executive’s rights with respect to any circumstance constituting Good Reason.
     2.15 “Notice of Termination” shall mean a written notice which shall
indicate the specific termination provision in this Agreement relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated.
     2.16 “Person” shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a “group” as provided in Section 13(d).
     2.17 “Qualifying Termination” means any of the events described in
Section 3.2 herein, the occurrence of which triggers the payment of Severance
Benefits hereunder.
     2.18 “Retirement” means the Executive’s voluntary termination of employment
in a manner which qualifies the Executive to receive immediately payable
retirement benefits under the Company’s tax-qualified retirement plan or under
the successor or replacement of such retirement plan if it is then no longer is
effect.
     2.19 “Severance Benefits” means the payment of severance compensation as
provided in Section 3.3 herein.
     2.20 “Target Bonus” shall mean the target bonus amount established under
the Company’s annual incentive plan.
     2.21 “Trust” means the Company grantor trust to be created pursuant to
Article 6 of this Agreement.
Article 3. Severance Benefits
     3.1 Right to Severance Benefits. The Executive shall be entitled to receive
from the Company Severance Benefits, as described in Section 3.3 herein, if
there has been a Change in Control of the Company and if, within twenty-four
(24) calendar months following the Change in Control, a Qualifying Termination
of the Executive has occurred.
     The Executive shall not be entitled to receive Severance Benefits if he/she
is terminated for Cause, or if his/her employment with the Company ends due to
death, Disability, or Retirement or due to a voluntary termination of employment
by the Executive without Good Reason.
     3.2 Qualifying Termination. The occurrence of any one or more of the
following events shall trigger the payment of Severance Benefits to the
Executive under this Agreement:

  (a)   An involuntary termination of the Executive’s employment by the Company
for reasons other than Cause within twenty-four (24) calendar months following a
Change in Control of the Company pursuant to a Notice of Termination delivered
to the Executive by the Company;

 

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  (b)   A voluntary termination by the Executive for Good Reason within
twenty-four (24) calendar months following a Change in Control of the Company
pursuant to a Notice of Termination delivered to the Company by the
Executive; or     (c)   The Company or any successor company breaches any of the
provisions of this Agreement.

     3.3 Description of Severance Benefits. In the event the Executive becomes
entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2
herein, the Company shall pay to the Executive and provide him with the
following:

  (a)   An amount equal to two (2) times the highest rate of the Executive’s
annualized Base Salary in effect immediately preceding the Change in Control.  
  (b)   An amount equal to two (2) times the Executive’s highest target bonus
established for the year immediately preceding the Change in Control.     (c)  
An amount equal to the Executive’s unpaid Base Salary, a pro rata amount of the
Executive’s Target Bonus for the year in which the termination occurs, accrued
vacation pay, and earned but not taken vacation pay through the Effective Date
of Termination.     (d)   A continuation of the welfare benefits of health care,
life and accidental death and dismemberment, and disability insurance coverage
for two (2) full years after the Effective Date of Termination. These benefits
shall be provided to the Executive at the same premium cost, and at the same
coverage level, as in effect as of the Executive’s Effective Date of
Termination. However, in the event the premium cost and/or level of coverage
shall change for all employees of the Company, or for management employees with
respect to supplemental benefits, the cost and/or coverage level, likewise,
shall change for the Executive in a corresponding manner.         The
continuation of these welfare benefits shall be discontinued prior to the end of
the two (2) year period in the event the Executive has available substantially
similar benefits at a comparable cost from a subsequent employer, as determined
by the Committee.     (e)   All long-term incentive awards immediately vest.

     The aggregate benefits accrued by the Executive as of the Effective Date of
Termination under all other savings and retirement plans sponsored by the
Company shall be distributed pursuant to the terms of the applicable plans.
     3.4 Termination for Disability. Following a Change in Control of the
Company, if an Executive’s employment is terminated due to Disability, the
Executive shall receive his/her Base Salary through the Effective Date of
Termination, at which point in time the Executive’s benefits shall be determined
in accordance with the Company’s disability, retirement, insurance, and other
applicable plans and programs then in effect. In the event the Executive’s
employment is terminated due to Disability, the Executive shall not be entitled
to the Severance Benefits described in Section 3.3.

 

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     3.5 Termination for Retirement or Death. Following a Change in Control of
the Company, if the Executive’s employment is terminated by reason of his/her
Retirement or death, the Executive’s benefits shall be determined in accordance
with the Company’s retirement, survivor’s benefits, insurance, and other
applicable programs of the Company then in effect. In the event the Executive’s
employment is terminated by reason of his/her Retirement or death, the Executive
shall not be entitled to the Severance Benefits described in Section 3.3.
     3.6 Termination for Cause, or Other Than for Good Reason or Retirement.
Following a Change in Control of the Company, if the Executive’s employment is
terminated either: (a) by the Company for Cause; or (b) by the Executive (other
than for Retirement, Good Reason, or under circumstances giving rise to a
Qualifying Termination described in Section 3.2(c) herein), the Company shall
pay the Executive his/her full Base Salary and accrued vacation through the
Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Executive is entitled under any compensation plans of the
Company, at the time such payments are due, and the Company shall have no
further obligations to the Executive under this Agreement.
     3.7 Notice of Termination. Any termination of employment by the Company or
by the Executive for Good Reason shall be communicated by a Notice of
Termination.
Article 4. Form and Timing of Severance Benefits
     4.1 Form and Timing of Severance Benefits. The Severance Benefits described
in Sections 3.3(a), 3.3(b), and 3.3(c) herein shall be paid in cash to the
Executive in a single lump sum as soon as practicable following the Effective
Date of Termination, but in no event beyond thirty (30) days from such date.
     4.2 Withholding of Taxes. The Company shall be entitled to withhold from
any amounts payable under this Agreement all taxes as legally shall be required
(including, without limitation, any United States federal taxes and any other
state, city, or local taxes).
Article 5. Excise Tax Equalization Payment
     5.1 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (in the
aggregate, the “Total Payments”), if all or any part of the Total Payments will
be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), the Company shall pay to the
Executive in cash an additional amount (the “Gross-Up Payment”) such that the
net amount retained by the Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state, and local income tax, penalties,
interest, and Excise Tax upon the Gross-Up Payment provided for by this
Section 5.1 (including FICA and FUTA), shall be equal to the Total Payments.
Such payment shall be made by the Company to the Executive as soon as practical
following the Effective Date of Termination, but in no event beyond thirty
(30) days from such date.
     5.2 Tax Computation. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:

  (a)   Any other payments or benefits received or to be received by the
Executive in connection with a Change in Control of the Company or the
Executive’s termination of employment

 

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      (whether pursuant to the terms of this Agreement or any other plan,
arrangement, or agreement with the Company, or with any Person whose actions
result in a Change in Control of the Company or any Person affiliated with the
Company or such Persons) shall be treated as “parachute payments” within the
meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments”
within the meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel as supported by the Company’s
independent auditors and acceptable to the Executive, such other payments or
benefits (in whole or in part) do not constitute parachute payments, or unless
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the meaning
of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax;

  (b)   The amount of the Total Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and     (c)  
The value of any noncash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.

     For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive’s residence on the
Effective Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
     5.3 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 5.2 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
Article 6. The Company’s Payment Obligation
     The Company’s obligation to make the payments and the arrangements provided
for herein shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand. Each and every payment made hereunder by the
Company shall be final, and the Company shall not seek to recover all or any
part of such payment from the Executive or from whomsoever may be entitled
thereto, for any reasons whatsoever.
     The Executive shall not be obligated to seek other employment in mitigation
of the amounts payable or arrangements made under any provision of this
Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company’s obligations to make the

 

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payments and arrangements required to be made under this Agreement, except to
the extent provided in Section 3.3(d) herein.
Article 7. Legal Remedies
     7.1 Payment of Legal Fees. To the extent permitted by law, the Company
shall pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Executive as a result of the Company’s
refusal to provide the Severance Benefits to which the Executive becomes
entitled under this Agreement, or as a result of the Company’s contesting the
validity, enforceability, or interpretation of this Agreement, or as a result of
any conflict (including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
     7.2 Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his/her employment with the Company, in
accordance with the rules of the American Arbitration Association then in
effect.
     Judgment may be entered on the award of the arbitrator in any court having
proper jurisdiction. All expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by the Company.
Article 8. Successors and Assignment
     8.1 Successors to the Company. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
of all or substantially all of the business and/or assets of the Company or of
any division or subsidiary thereof to expressly assume and agree to perform the
Company’s obligations under this Agreement in the same manner and to the same
extent that the Company would be required to perform them if no such succession
had taken place. The date on which any such succession becomes effective shall
be deemed to be the date of the Change in Control.
     8.2 Assignment by the Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive dies while any amount would still be payable to him
hereunder had he/she continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive’s Beneficiary. If the Executive has not named a Beneficiary, then
such amounts shall be paid to the Executive’s devisee, legatee, or other
designee, or if there is no such designee, to the Executive’s estate.
Article 9. Miscellaneous
     9.1 Employment Status. Except as may be provided under any other agreement
between the Executive and the Company, the employment of the Executive by the
Company is “at will,” and may be terminated by either the Executive or the
Company at any time, subject to applicable law.
     9.2 Beneficiaries. The Executive may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Executive under this Agreement. Such designation must be
in the form of a signed writing acceptable to the Committee. The Executive may
make or change such designations at any time.

 

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     9.3 Severability. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.
     9.4 Modification. No provision of this Agreement may be modified, waived,
or discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by the Executive and by an authorized member of the
Committee, or by the respective parties’ legal representatives and successors.
     9.5 Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the state of Texas shall be the controlling law in all
matters relating to this Agreement.
          IN WITNESS WHEREOF, the parties have executed this Agreement on this
[DAY] day of [MONTH], [YEAR].

                  Cullen/Frost Bankers, Inc.       Executive    
 
               
By:
               
 
 
 
     
 
   
 
               
Its:
  Chairman
 
           
 
               
 
  Attest: