AMENDED AND RESTATED TWO YEAR CHANGE OF CONTROL AGREEMENT by and among HUDSON CITY SAVING BANK, HUDSON CITY BANCORP, INC., and NAME Made and entered into as of December 31, 2008
Exhibit 10.3
AMENDED AND RESTATED
TWO YEAR CHANGE OF CONTROL AGREEMENT
TWO YEAR CHANGE OF CONTROL AGREEMENT
by and among
XXXXXX CITY SAVING BANK,
XXXXXX CITY BANCORP, INC.,
and
NAME
Made and entered into
as of December 31, 2008
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AMENDED AND RESTATED
TWO-YEAR CHANGE OF CONTROL AGREEMENT
TWO-YEAR CHANGE OF CONTROL AGREEMENT
This AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (the “Agreement”) is made and entered into as
of December 31, 2008 by and among XXXXXX CITY SAVINGS BANK, a savings bank organized and operating
under the federal laws of the United States and having an office at West 00 Xxxxxxx Xxxx, Xxxxxxx,
Xxx Xxxxxx 00000-0000 (the “Bank”), XXXXXX CITY BANCORP, INC., a business corporation organized and
existing under the laws of the State of Delaware and having an office at West 00 Xxxxxxx Xxxx,
Xxxxxxx, Xxx Xxxxxx 00000-0000 (the “Company”) and , an individual
residing at (the “Officer”).
INTRODUCTORY STATEMENT
The Officer currently serves as an officer of the Bank, a wholly-owned subsidiary of the
Company. The Officer, the Bank and the Company are currently parties to a Change of Control
Agreement, made and entered into as of (such date, the “Initial Effective Date”
and such agreement, the “Prior Agreement.”). The Board of Directors of the Bank and the Board of
Directors of the Company concluded that it is in the best interests of the Bank, the Company and
their shareholders to establish a working environment for the Officer which minimizes the personal
distractions that might result from possible business combinations in which the Company or the Bank
might be involved. The Bank and the Company decided to provide the Officer with assurance that his
compensation will be continued for a minimum period of two (2) years following termination of
employment (the “Assurance Period”) if his employment terminates under specified circumstances
related to a business combination. The Board of Directors of the Bank and the Board of Directors
of the Company decided to formalize this assurance by entering into the Prior Agreement with the
Officer. The Board of Directors of the Bank and the Board of Directors of the Company have
concluded that it is in the best interests of the Bank and the Company to amend and restate the
Prior Agreement pursuant to Section 18 thereof for the purpose, among others, of compliance with
the applicable requirements of section 409A of the Internal Revenue Code of 1986 (the “Code”).
The terms and conditions which the Bank, the Company and the Officer have agreed to are as
follows.
AGREEMENT
Section 1. Effective Date; Term; Change of Control and Pending Change of
Control Defined.
(a) This Agreement took effect on the Initial Effective Date and shall be in effect during the
period (the “Term”) beginning on the Initial Effective Date and ending on the first anniversary of
the date on which the Bank notifies the Officer of its intent to discontinue the Agreement (the
“Initial Expiration Date”) or, if later, the second anniversary of the latest Change of
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Control or Pending Change of Control, as defined below, that occurs after the Initial
Effective Date and before the Initial Expiration Date.
(b) For all purposes of this Agreement, a “Change of Control” shall be deemed to have occurred
upon the happening of any of the following events:
(i) the consummation of a reorganization, merger or consolidation of the
Company with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (“Exchange Act”)) in substantially the same relative proportions by
persons who, immediately prior to such transaction, beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) at
least 51% of the outstanding equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in the
election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of
the securities entitled to vote generally in the election of directors of
the Company;
(ii) the acquisition of all or substantially all of the assets of the Company
or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the outstanding securities of the Company entitled
to vote generally in the election of directors by any person or by any persons
acting in concert;
(iii) a complete liquidation or dissolution of the Company;
(iv) the occurrence of any event if, immediately following such event, at least
50% of the members of the Board of Directors of the Company do not belong to any of
the following groups:
(A) individuals who were members of the Board of Directors of the
Company on the Initial Effective Date; or
(B) individuals who first became members of the Board of Directors of
the Company after the Initial Effective Date either:
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(1) upon election to serve as a member of the Board of
Directors of the Company by affirmative vote of three-quarters of
the members of such board, or of a nominating committee thereof, in
office at the time of such first election; or
(2) upon election by the shareholders of the Board of Directors
of the Company to serve as a member of such board, but only if
nominated for election by affirmative vote of three-quarters of the
members of the Board of Directors of the Company, or of a nominating
committee thereof, in office at the time of such first nomination;
provided, however, that such individual’s election or nomination did not
result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning
of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other
than by or on behalf of the Board of Directors of the Company; or
(v) any event which would be described in section l (b)(i), (ii), (iii) or (iv)
if the term “Bank” were substituted for the term “Company” therein.
In no event, however, shall a Change of Control be deemed to have occurred as a result of any
acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by
the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 1(b), the term “person” shall have the
meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(c) For purposes of this Agreement, a “Pending Change of Control” shall mean: (i) the signing
of a definitive agreement for a transaction which, if consummated, would result in a Change of
Control; (ii) the commencement of a tender offer which, if successful, would result in a Change of
Control; or (iii) the circulation of a proxy statement seeking proxies in opposition to management
in an election contest which, if successful, would result in a Change of Control.
Section 2. Discharge Prior to a Pending Change of Control.
The Bank may discharge the Officer at any time prior to the occurrence of a Pending Change of
Control for any reason or for no reason. In such event:
(a) The Bank shall pay to the Officer (or, in the event of his death before
payment, his estate) his earned but unpaid compensation (including, without
limitation, salary and all other items which constitute wages under applicable law)
as of the date of his termination of employment. This payment shall be made at the
time and in the manner prescribed by law applicable to the payment of wages but in
no event later than 30 days after the date of the Officer’s termination of
employment.
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(b) The Bank shall provide the benefits, if any, due to the Officer, his
estate, surviving dependents or designated beneficiaries under the employee benefit
plans and programs and compensation plans and programs maintained for the benefit of
the officers and employees of the Bank, including the annual and long-term bonus
plans (if any) to which the Officer is entitled under any cash-based annual bonus or
performance compensation plan in effect for the year in which his or her termination
occurs, to be paid at the same time and on the terms and conditions (including but
not limited to achievement of performance goals) applicable under the relevant plan.
The time and manner of payment or other delivery of these benefits and the
recipients of such benefits shall be determined according to the terms and
conditions of the applicable plans and programs.
The payments and benefits described in sections 2(a) and (b) shall be referred to in this Agreement
as the “Standard Termination Entitlements.”
Section 3. Termination of Employment Due to Death.
The Officer’s employment with the Bank shall terminate, automatically and without any further
action on the part of any party to this Agreement, on the date of the Officer’s death. In such
event, the Bank shall pay and deliver to the Officer’s estate and surviving dependents and
beneficiaries, as applicable, the Standard Termination Entitlements.
Section 4. Termination Due to Disability after Change of Control or Pending
Change of Control.
The Bank may terminate the Officer’s employment during the Term and after the occurrence of a
Change of Control or a Pending Change of Control upon a determination, by a majority vote of the
members of the Board of Directors of the Bank, acting in reliance on the written advice of a
medical professional acceptable to it, that the Officer is suffering from a physical or mental
impairment which, at the date of the determination, has prevented the Officer from performing his
assigned duties on a substantially full-time basis for a period of at least one hundred and eighty
(180) days during the period of one (1) year ending with the date of the determination or is likely
to result in death or prevent the Officer from performing his assigned duties on a substantially
full-time basis for a period of at least one hundred and eighty (180) days during the period of one
(1) year beginning with the date of the determination. In such event:
(a) The Bank shall pay and deliver to the Officer (or in the event of his death
before payment, to his estate and surviving dependents and beneficiaries, as
applicable) the Standard Termination Entitlements.
(b) In addition to the Standard Termination Entitlements, the Bank shall
continue to pay the Officer his base salary, at the annual rate in effect for him
immediately prior to the termination of his employment, during a period ending on
the earliest of: (i) the expiration of one hundred and eighty (180) days after the
date of termination of his employment; (ii) the date on which long-term disability
insurance benefits are first payable to him under any long-term disability insurance
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plan
covering employees of the Bank (the “LTD Eligibility Date”); (iii) the date of his
death; and (iv) the expiration of the Assurance Period (the “Initial Continuation
Period”). If the end of the Initial Continuation Period is neither the LTD
Eligibility Date nor the date of his death, the Bank shall continue to pay the
Officer his base salary, at an annual rate equal to sixty percent (60%) of the
annual rate in effect for him immediately prior to the termination of his
employment, during an additional period ending on the earliest of the LTD
Eligibility Date, the date of his death and the expiration of the Assurance Period.
A termination of employment due to disability under this section 4 shall be effected by a notice of
termination given to the Officer by the Bank and shall take effect on the later of the effective
date of termination specified in such notice or the date on which the notice of termination is
deemed given to the Officer.
Section 5. Discharge with Cause after Change of Control or Pending Change of
Control.
(a) The Bank may terminate the Officer’s employment with “Cause” during the Term and after the
occurrence of a Change of Control or Pending Change of Control, but a termination shall be deemed
to have occurred with “Cause” only if
(i) the Board of Directors of the Bank, by majority vote of its entire
membership, determines that the Officer should be terminated because of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation of
any law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or any material breach of this Agreement; and
(ii) at least forty-five (45) days prior to the vote contemplated by section
1(b)(i), the Bank has provided the Officer with notice of its intent to discharge
the Officer for Cause, detailing with particularity the facts and circumstances
which are alleged to constitute Cause (the “Notice of Intent to Discharge”); and
(iii) after the giving of the Notice of Intent to Discharge and before the
taking of the vote contemplated by section 5(a)(i), the Officer (together with his
legal counsel, if he so desires) is afforded a reasonable opportunity to make both
written and oral presentations before the Board of Directors of the Bank for the
purpose of refuting the alleged grounds for Cause for his discharge; and
(iv) after the vote contemplated by section 5(a)(i), the Bank has furnished to
the Officer a notice of termination which shall specify the effective date of his
termination of employment (which shall in no event be earlier than the date on which
such notice is deemed given) and include a copy of a resolution or resolutions
adopted by the Board of Directors of the Bank, certified by its corporate secretary
and signed by each member of the Board of Directors voting in favor of adoption
of the
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resolution(s), authorizing the termination of the Officer’s employment with
Cause and stating with particularity the facts and circumstances found to constitute
Cause for his discharge (the “Final Discharge Notice”).
For purposes of this section 5, no act or failure to act, on the part of the Officer, shall be
considered “willful” unless it is done, or omitted to be done, by the Officer in bad faith or
without reasonable belief that the Officer’s action or omission was in the best interests of the
Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board of Directors of the Bank or based upon the written advice of counsel for the Bank
shall be conclusively presumed to be done, or omitted to be done, by the Officer in good faith and
in the best interests of the Bank.
(b) If the Officer is discharged with Cause during the Term and after a Change of Control or
Pending Change of Control, the Bank shall pay and provide to him (or, in the event of his death, to
his estate, his surviving beneficiaries and his dependents) the Standard Termination Entitlements
only. Following the giving of a Notice of Intent to Discharge, the Bank may temporarily suspend
the Officer’s duties and authority and, in such event, may also suspend the payment of salary and
other cash compensation, but not the Officer’s participation in retirement, insurance and other
employee benefit plans. If the Officer is not discharged, or is discharged without Cause, within
forty-five (45) days after the giving of a Notice of Intent to Discharge, payments of salary and
cash compensation shall resume, and all payments withheld during the period of suspension shall be
promptly restored. If the Officer is discharged with Cause not later than forty-five (45) days
after the giving of the Notice of Intent to Discharge, all payments withheld during the period of
suspension shall be deemed forfeited and shall not be included in the Standard Termination
Entitlements. If a Final Discharge Notice is given later than forty-five (45) days, but sooner than
ninety (90) days, after the giving of the Notice of Intent to Discharge, all payments made to the
Officer during the period beginning with the giving of the Notice of Intent to Discharge and ending
with the Officer’s discharge with Cause shall be retained by the Officer and shall not be applied
to offset the Standard Termination Entitlements. If the Bank does not give a Final Discharge Notice
to the Officer within ninety (90) days after giving a Notice of Intent to Discharge, the Notice of
Intent to Discharge shall be deemed withdrawn and any future action to discharge the Officer with
Cause shall require the giving of a new Notice of Intent to Discharge.
Section 6. Discharge without Cause.
The Bank may discharge the Officer without Cause at any time after the occurrence of a Change
of Control or Pending Change of Control, and in such event:
(a) The Bank shall pay and deliver to the Officer (or in the event of his death
before payment, to his estate and surviving dependents and beneficiaries, as
applicable) the Standard Termination Entitlements.
(b) In addition to the Standard Termination Entitlements:
(i) During the Assurance Period, the Bank shall provide for the Officer
and his dependents continued group life, health (including
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hospitalization,
medical and major medical), dental, accident and long-term disability
insurance benefits on substantially the same terms and conditions (including
any required premium-sharing arrangements, co-payments and deductibles) in
effect for them immediately prior to the Officer’s termination. The coverage
provided under this section 6(b)(i) may, at the election of the Bank, be
secondary to the coverage provided as part of the Standard Termination
Entitlements and to any employer-paid coverage provided by a subsequent
employer or through Medicare, with the result that benefits under the other
coverages will offset the coverage required by this section 6(b)(i).
(ii) The Bank shall make a lump sum payment to the Officer (or, in the
event of his death before payment, to his estate), in an amount equal to the
estimated present value of the salary that the Officer would have earned if
he had continued working for the Bank during the Assurance Period at the
highest annual rate of salary achieved during the period of three (3) years
ending immediately prior to the date of termination (the “Salary Severance
Payment”). The Salary Severance Payment shall be computed using the
following formula:
where “SSP” is the amount of the Salary Severance Payment (before the
deduction of applicable federal, state and local withholding taxes); “BS” is
the highest annual rate of salary achieved by the Officer during the period
of three (3) years ending immediately prior to the date of termination; “PR”
is the number of payroll periods that occur during a year under the Bank’s
normal payroll practices; “I” equals the applicable federal short term rate
established under section 1274 of the Internal Revenue Code of 1986 (the
“Code”) for the month in which the Officer’s termination of employment
occurs (the “Short Term AFR”) and “n” equals the product of the Assurance
Period at the Officer’s termination of employment (expressed in years and
fractions of years) multiplied by the number of payroll periods that occur
during a year under the Bank’s normal payroll practices. The Salary
Severance Payment shall be made on the day sixty (60) days after the
Officer’s termination of employment and shall be in lieu of any claim to a
continuation of base salary which the Officer might otherwise have and in
lieu of cash severance benefits under any severance benefits program which
may be in effect for officers or employees of the Bank.
(iii) The Bank shall make a lump sum payment to the Officer (or, in the
event of his death before payment, to his estate), in an amount equal to the
estimated present value of the annual bonuses that the
Officer would have earned if he had continued working for the Bank
during the Assurance Period at the highest annual rate of salary achieved
during the
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period of three (3) years ending immediately prior to the date of
termination (the “Bonus Severance Payment”). The Bonus Severance Payment
shall be computed using the following formula:
BSP = SSP x (ABP / ASP)
where “BSP” is the amount of the Bonus Severance Payment (before the
deduction of applicable federal, state and local withholding taxes); “SSP”
is the amount of the Salary Severance Payment (before the deduction of
applicable federal, state and local withholding taxes); “ABP” is the
aggregate of the annual bonuses paid or declared (whether or not paid) for
the most recent period of three (3) calendar years to end on or before the
Officer’s termination of employment; and “ASP” is the aggregate base salary
actually paid to the Officer during such period of three (3) calendar years
(excluding any year for which no bonus was declared or paid). The Bonus
Severance Payment shall be made on the day sixty (60) days after the
Officer’s termination of employment and shall be in lieu of any claim to a
continuation of participation in annual bonus plans of the Bank which the
Officer might otherwise have.
(iv) The Bank shall make a lump sum payment to the Officer (or, in the
event of his death before payment, to his estate), in an amount equal to the
estimated present value of the long-term incentive bonuses that the Officer
would have earned if he had continued working for the Bank during the
Assurance Period (the “Incentive Severance Payment”). The Incentive
Severance Payment shall be computed using the following formula:
ISP = (SSP / RAP) x (ALTIP / ALTSP) x Y
where “ISP” is the amount of the Incentive Severance Payment (before the
deduction of applicable federal, state and local withholding taxes); “SSP”
is the amount of the Salary Severance Payment (before the deduction of
applicable federal, state and local withholding taxes); “ALTIP” is the
aggregate of the most recently paid or declared (whether or not paid)
long-term incentive compensation payments (but not more than three (3) such
payments) for performance periods that end on or before the Officer’s
termination of employment; and “ALTSP” is the aggregate base salary actually
paid to the Officer during the performance periods covered by the payments
included in “ALTIP” and excluding base salary paid for any period for which
no long-term incentive compensation payment was declared or paid; “RAP” is
the Assurance Period, expressed in years and fractions of years; and “Y” is
the aggregate (expressed in years and fractions of years) of the
Assurance Period plus the number of years and fraction of years that have
elapsed since the end of the last performance period for which a long-term
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incentive payment has been declared and paid. The Incentive Severance
Payment shall be made on the day sixty (60) days after the Officer’s
termination of employment and shall be in lieu of any claim to a
continuation of participation in long-term incentive compensation plans of
the Bank which the Officer might otherwise have. Notwithstanding the
foregoing, the Incentive Severance Payment shall be zero if the Officer’s
termination of employment occurs at a time when he is not covered by any
long-term incentive compensation plan.
(v) The Bank shall pay to the Officer (or in the event of his death, to
his estate), an amount equal to the excess (if any) of : (A) the present
value of the aggregate benefits to which he would be entitled under any and
all tax-qualified and non-tax-qualified defined benefit plans maintained by,
or covering employees of, the Bank (the “Pension Plans”) if he had continued
working for the Bank during the Assurance Period; over (B) the present value
of the benefits to which the Officer and his spouse and/or designated
beneficiaries are actually entitled under such plans (the “Pension Severance
Payment”). The Pension Severance Payment shall be computed according to the
following formula:
PSP =
PPB – APB
where “PSP” is the amount of the Pension Severance Payment (before
deductions for applicable federal, state and local withholding taxes); “APB”
is the aggregate lump sum present value of the actual vested pension
benefits payable under the Pension Plans in the form of a straight life
annuity beginning at the earliest date permitted under the Pension Plans,
computed on the basis of the Officer’s life expectancy at the earliest date
on which payments under the Pension Plans could begin, determined by
reference to Table VI of section 1.72-9 of the Income Tax Regulations (the
“Assumed Life Expectancy”), and on the basis of an interest rate assumption
equal to the average bond-equivalent yield on United States Treasury
Securities with a Constant Maturity of 30 Years for the month prior to the
month in which the Officer’s termination of employment occurs (the “30-Year
Treasury Rate”); and “PPB” is the lump sum present value of the pension
benefits (whether or not vested) that would be payable under the Pension
Plans in the form of a straight life annuity beginning at the earliest date
permitted under the Pension Plans, computed on the basis that the Officer’s
actual age at termination of employment is his attained age as of his last
birthday that would occur during the Assurance Period, that his service for
benefit accrual purposes under the Pension Plans is equal to the aggregate
of his actual service plus the Assurance Period, that his average
compensation figure used in determining his accrued benefit is equal to the
highest annual rate of salary achieved by the
Officer during the period of three (3) years ending immediately prior to the
date of termination, that the Officer’s life expectancy at the earliest date
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on which payments under the Pension Plans could begin is the Assumed Life
Expectancy and that the interest rate assumption used is equal to the
30-Year Treasury Rate. The Pension Severance Payment shall be converted into
the same form, and paid at the same time, and in the same manner, as
benefits under the corresponding non-qualified plan, or, if no such
non-qualified plan exists, shall be paid in a lump sum on the day sixty (60)
days after the Officer’s termination of employment and shall be in lieu of
any claim to any actual increase in his accrued benefit in the Pension Plans
in respect of the Assurance Period.
(vi) The Bank shall pay to the Officer (or in the event of his death,
to his estate) an amount equal to the present value of the additional
employer contributions that would have been credited directly to his
account(s) under any and all tax-qualified and non-tax qualified defined
contribution plans maintained by, or covering employees of, the Bank (the
“Non-ESOP DC Plans”), plus the fair market value of the additional shares of
employer securities or other property that would have been allocated to his
account as a result of employer contributions under any tax-qualified
leveraged employee stock ownership plan and any related non-tax-qualified
supplemental plan maintained by, or covering employees of, the Bank (the
“ESOP Plans”) if he had continued in employment during the Assurance Period
(the “Defined Contribution Severance Payment”). The Defined Contribution
Severance Payment shall be computed according to the following formula:
DCSP = [SSP x (EC / BS)] + [(STK + PROP) x Y]
where: “DCSP” is the amount of the Defined Contribution Severance Payment
(before deductions for applicable federal, state and local withholding
taxes); “SSP” is the amount of the Salary Severance Payment (before
deductions for applicable federal, state and local withholding taxes); “EC”
is the amount of employer contributions actually credited to the Officer’s
accounts under the Non-ESOP Plans for the last plan year to end before his
termination of employment; “BS” is the Officer’s compensation taken into
account in computing EC; “Y” is the aggregate (expressed in years and
fractions of years) of the Assurance Period and the number of years and
fractions of years that have elapsed between the end of plan year for which
EC was computed and the date of the Officer’s termination of employment;
“STK” is the fair market value (determined by the final reported sales price
for stock of the same class on the last trading day before the Officer’s
termination of employment) of the employer securities actually allocated to
the Officer’s accounts under the ESOP Plans in respect of employer
contributions and dividends applied to loan amortization payments for the
last plan year to end
before his termination of employment; and “PROP” is the fair market value
(determined as of the day before the Officer’s
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termination of employment
using the same valuation methodology used to value the assets of the ESOP
Plans) of the property other than employer securities actually allocated to
the Officer’s accounts under the ESOP Plans in respect of employer
contributions and dividends applied to loan amortization payments for the
last plan year to end before his termination of employment. The Defined
Contribution Severance Payment shall be converted into the same form, and
paid at the same time, and in the same manner, as benefits under the
corresponding non-qualified plan, or, if no such non-qualified plan exists,
shall be paid in a lump sum on the day sixty (60) days after the Officer’s
termination of employment and shall be in lieu of any claim to a
continuation of participation in any defined contribution plans of the Bank
which the Officer might otherwise have.
(vii) Thirty days following the Officer’s termination of employment
with the Bank, at the election of the Bank, upon the surrender of options or
appreciation rights issued to the Officer under any stock option and
appreciation rights plan or program maintained by, or covering employees of,
the Bank, a lump sum payment in an amount equal to the product of:
(A) the excess of (I) the fair market value of a share of stock
of the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment, over
(II) the exercise price per share for such option or appreciation
right, as specified in or under the relevant plan or program;
multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For the purpose of computing this payment, the Officer shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of,
the Bank, even if he is not vested under such plan or program.
(viii) Thirty days following the Officer’s termination of employment
with the Bank, at the election of the Bank, upon the surrender of any shares
awarded to the Officer under any restricted stock plan maintained by, or
covering employees of, the Bank, the Bank shall make a lump sum payment in
an amount equal to the product of:
(A) the fair market value of a share of stock of the same class
of stock granted under such plan, determined as of the date of the
Officer’s termination of employment; multiplied by
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(B) the number of shares which are being surrendered.
For purposes of computing this payment, the Officer shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Bank, even if he is not vested under such
plan; provided, however, that any shares of restricted stock for which
vesting is conditioned on the attainment of one or more performance goals,
with the intent that the award of such shares should satisfy the
requirements of qualified performance-based compensation (within the meaning
of Treasury Regulation section 1.162-27(e)), shall vest only in accordance
with the terms of the associated plan and award, and the Bank’s right to
elect to purchase such shares pursuant to this Section 6(b)(vii) shall not
expire until thirty (30) days after such time as the vesting of such shares
is no longer conditioned on the attainment of any such performance goal.
The payments and benefits described in section 6(b) are referred to in this Agreement as the
“Additional Change of Control Entitlements”.
Section 7. Resignation.
(a) The Officer may resign from his employment with the Bank at any time. A resignation under
this section 7 shall be effected by notice of resignation given by the Officer to the Bank and
shall take effect on the later of the effective date of termination specified in such notice or the
date on which the notice of termination is deemed given to the Officer. The Officer’s resignation
of any of the positions within the Bank or the Company to which he has been assigned shall be
deemed a resignation from all such positions.
(b) The Officer’s resignation shall be deemed to be for “Good Reason” if the effective date of
resignation occurs during the Term, but on or after the effective date of a Change of Control, and
is on account of:
(i) the failure of the Bank (whether by act or omission of the Board of
Directors, or otherwise) to appoint or re-appoint or elect or re-elect the Officer
to the position with Bank that he held immediately prior to the Change of Control
(the “Assigned Office”) or to a more senior office;
(ii) if the Officer is or becomes a member of the Board of Directors of the
Bank, the failure of the shareholders of the Bank (whether in an election in which
the Officer stands as a nominee or in an election where the Officer is not a
nominee) to elect or re-elect the Officer to membership at the expiration of his
term of membership, unless such failure is a result of the Officer’s refusal to
stand for election;
(iii) a material failure by the Bank, whether by amendment of the certificate
of incorporation or organization, by-laws, action of the Board of Directors
Page 13 of 21
of the
Bank or otherwise, to vest in the Officer the functions, duties, or
responsibilities customarily associated with the Assigned Office; provided that
the Officer shall have given notice of such failure to the Bank, and the Bank has
not fully cured such failure within thirty (30) days after such notice is deemed
given;
(iv) any reduction of the Officer’s rate of base salary in effect from time to
time, whether or not material, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion of the
Officer’s compensation as and when due;
(v) any change in the terms and conditions of any compensation or benefit
program in which the Officer participates which, either individually or together
with other changes, has a material adverse effect on the aggregate value of his
total compensation package; provided that the Officer shall have given notice of
such material adverse effect to the Bank, and the Bank has not fully cured such
failure within thirty (30) days after such notice is deemed given;
(vi) any material breach by the Company or the Bank of any material term,
condition or covenant contained in this Agreement; provided that the Officer shall
have given notice of such material adverse effect to the Company and the Bank, and
the Company or the Bank have not fully cured such failure within thirty (30) days
after such notice is deemed given; or
(vii) a change in the Officer’s principal place of employment to a place that
is not the principal executive office of the Bank, or a relocation of the Bank’s
principal executive office to a location that is both more than twenty-five (25)
miles away from the Officer’s principal residence and more than twenty-five (25)
miles away from the location of the Bank’s principal executive office on the day
before the occurrence of the Change of Control.
In all other cases, a resignation by the Officer shall be deemed to be without Good Reason. In the
event of resignation, the Officer shall state in his notice of resignation whether he considers his
resignation to be a resignation with Good Reason, and if he does, he shall state in such notice the
grounds which constitute Good Reason. The Officer’s determination of the existence of Good Reason
shall be conclusive in the absence of fraud, bad faith or manifest error.
(c) In the event of the Officer’s resignation for any reason, the Bank shall pay and deliver
the Standard Termination Entitlements. In the event of the Officer’s resignation with Good Reason,
the Bank shall also pay and deliver the Additional Termination Entitlements.
Section 8. Terms and Conditions of the Additional Termination Entitlements.
The Bank and the Officer hereby stipulate that the damages which may be incurred by the
Officer following any termination of employment are not capable of accurate measurement as of the
date first above written and that the Additional Termination Entitlements constitute reasonable
damages under the circumstances and shall be payable without any requirement of proof of actual
Page 14 of 21
damage and without regard to the Officer’s efforts, if any, to mitigate damages. The Bank and the
Officer further agree that the Bank may condition the payment and delivery of the Additional
Termination Entitlements on the receipt of: (a) the Officer’s resignation from any and all
positions which he holds as an officer, director or committee member with respect to the Bank or
any subsidiary or affiliate of either of them; and (b) a release of the Bank and its officers,
directors, shareholders, subsidiaries and affiliates, in form and substance satisfactory to the
Bank, of any liability to the Officer, whether for compensation or damages, in connection with his
employment with the Bank and the termination of such employment except for the Standard Termination
Entitlements and the Additional Termination Entitlements.
Section 9. No Effect on Employee Benefit Plans or Programs.
The termination of the Officer’s employment during the Assurance Period or thereafter, whether
by the Bank or by the Officer, shall have no effect on the rights and obligations of the parties
hereto under the Bank’s qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and
major medical), dental, accident and long term disability insurance plans or such other employee
benefit plans or programs, or compensation plans or programs, as may be maintained by, or cover
employees of, the Bank from time to time; provided, however, that nothing in this Agreement shall
be deemed to duplicate any compensation or benefits provided under any agreement, plan or program
covering the Officer to which the Bank or Company is a party and any duplicative amount payable
under any such agreement, plan or program shall be applied as an offset to reduce the amounts
otherwise payable hereunder.
Section 10. Successors and Assigns.
This Agreement will inure to the benefit of and be binding upon the Officer, his legal
representatives and testate or intestate distributees, and the Company and the Bank and their
respective successors and assigns, including any successor by merger or consolidation or a
statutory receiver or any other person or firm or corporation to which all or substantially all of
the assets and business of the Company or the Bank may be sold or otherwise transferred. Failure of
the Company to obtain from any successor its express written assumption of the Company’s or Bank’s
obligations hereunder at least 60 days in advance of the scheduled effective date of any such
succession shall, if such succession constitutes a Change of Control, constitute Good Reason for
the Officer’s resignation on or at any time during the Term following the occurrence of such
succession.
Section 11. Notices.
Any communication required or permitted to be given under this Agreement, including any
notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and
shall be deemed to have been given at such time as it is delivered personally, or five days after
mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below or at such other address as one such party may
by written notice specify to the other party:
Page 15 of 21
If to the Officer:
If to the Company or the Bank:
Xxxxxx City Bancorp, Inc.
West 00 Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Chairman, Human Resources Committee
West 00 Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Chairman, Human Resources Committee
with a copy to:
Xxxxxxx Xxxxxxxx & Wood llp
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxx, Esq.
Xxxxxxx Xxxxxxxx & Wood llp
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxx, Esq.
Section 12. Indemnification for Attorneys’ Fees.
(a) The Bank shall indemnify, hold harmless and defend the Officer against reasonable costs,
including legal fees and expenses, incurred by him in connection with or arising out of any action,
suit or proceeding (including any tax controversy) in which he may be involved, as a result of his
efforts, in good faith, to defend or enforce the terms of this Agreement. For purposes of this
Agreement, any settlement agreement which provides for payment of any amounts in settlement of the
Bank’s obligations hereunder shall be conclusive evidence of the Officer’s entitlement to
indemnification hereunder, and any such indemnification payments shall be in addition to amounts
payable pursuant to such settlement agreement, unless such settlement agreement expressly provides
otherwise.
(b) The Bank’s obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Bank may have against the Officer or others. In
no event shall the Officer be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Officer under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Officer obtains other employment. Unless it is
determined that the Officer has acted frivolously or in bad faith, the Bank shall pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the Officer may reasonably
incur as a result of or in connection with his consultation with legal counsel or arising out of
any action, suit, proceeding, tax controversy or contest (regardless of the outcome thereof) by the
Bank, the Officer or others regarding the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including as a
Page 16 of 21
result of any
contest by the Officer about the amount of any payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the applicable Federal rate provided for in section
7872(f)(2)(A) of the Code.
(c) Any payment or reimbursement to effect indemnification under this section 12 shall be made
no later than the last day of the calendar year following (i) the calendar year in which the
Officer incurs the expense, or (ii), if later, within sixty (60) days after the settlement or
resolution that gives rise to the Officer’s right to reimbursement; provided, however, that the
Officer shall have submitted to the Bank documentation supporting such expenses at such time and in
such manner as the Bank may reasonably require.
Section 13. Severability.
A determination that any provision of this Agreement is invalid or unenforceable shall not
affect the validity or enforceability of any other provision hereof.
Section 14. Waiver.
Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof
shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of
this Agreement must be made in writing, designated as a waiver, and signed by the party against
whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any
one or more times shall not be deemed a waiver or relinquishment of such right or power at any
other time or times.
Section 15. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same Agreement.
Section 16. Governing Law.
Except to the extent preempted by federal law, this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey applicable to
contracts entered into and to be performed entirely within the State of New Jersey.
Section 17. Headings and Construction.
The headings of sections in this Agreement are for convenience of reference only and are not
intended to qualify the meaning of any section. Any reference to a section number shall refer to a
section of this Agreement, unless otherwise stated.
Section 18. Entire Agreement; Modifications.
This instrument contains the entire agreement of the parties relating to the subject matter
hereof, and supersedes in its entirety any and all prior agreements, understandings or
Page 17 of 21
representations relating to the subject matter hereof. No modifications of this Agreement shall be
valid unless made in writing and signed by the parties hereto; provided, however, that this
Agreement shall be subject to amendment in the future in such manner as the Bank shall reasonably
deem necessary or appropriate to effect compliance with section 409A of the Code and the
regulations thereunder (“Section 409A”) and to avoid the imposition of penalties and additional
taxes under Section 409A, it being the express intent of the parties that any such amendment shall
not diminish the economic benefit of the Agreement to the Officer on a present value basis.
Section 19. Required Regulatory Provisions.
The following provisions are included for the purposes of complying with various laws, rules
and regulations applicable to the Company or the Bank:
(a) Notwithstanding anything herein contained to the contrary, in no event
shall the aggregate amount of compensation payable to the Officer pursuant to
Section 6(b) of this Agreement (exclusive of amounts described in Section 6(b)(vii)
or (viii)) exceed three times the Officer’s average annual total compensation for
the last five consecutive calendar years to end prior to the Officer’s termination
of employment with the Bank (or for the Officer’s entire period of employment with
the Bank if less than five calendar years).
(b) Notwithstanding anything herein contained to the contrary, any payments to
the Officer by the Company or the Bank, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section 18(k)
of the Federal Deposit Insurance Act (“FDI Act”), 12 U.S.C. Section 1828(k), and any
regulations promulgated thereunder.
(c) Notwithstanding anything herein contained to the contrary, if the Officer
is suspended from office and/or temporarily prohibited from participating in the
conduct of the affairs of the Bank pursuant to a notice served under Section 8(e)(3)
or 8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(3) or 1818(g)(1), the Bank’s
obligations under this Agreement shall be suspended as of the date of service of
such notice, unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Bank, in its discretion, may (i) pay to the Officer all or part
of the compensation withheld while the Bank’s obligations hereunder were suspended
and (ii) reinstate, in whole or in part, any of the obligations which were
suspended.
(d) Notwithstanding anything herein contained to the contrary, if the Officer
is removed and/or permanently prohibited from participating in the conduct of the
Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the FDI Act,
12 U.S.C. Section 1818(e)(4) or (g)(1), all prospective obligations of the Bank
under this Agreement shall terminate as of the effective date of the order, but
vested rights and obligations of the Bank and the Officer shall not be affected.
Page 18 of 21
(e) Notwithstanding anything herein contained to the contrary, if the Bank is
in default (within the meaning of Section 3(x)(1) of the FDI Act, 12
U.S.C. Section 1813(x)(1), all prospective obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and the Officer shall not be affected.
(f) Notwithstanding anything herein contained to the contrary, all prospective
obligations of the Bank hereunder shall be terminated, except to the extent that a
continuation of this Agreement is necessary for the continued operation of the Bank:
(i) by the Director of the Office of Thrift Supervision (“OTS”) or his
or her designee or the Federal Deposit Insurance Corporation (“FDIC”), at
the time the FDIC enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the FDI
Act, 12 U.S.C. Section 1823(c);
(ii) by the Director of the OTS or his or her designee at the time such
Director or designee approves a supervisory merger to resolve problems
related to the operation of the Bank or when the Bank is determined by such
Director to be in an unsafe or unsound condition.
The vested rights and obligations of the parties shall not be affected. If and to the extent that
any of the foregoing provisions shall cease to be required by applicable law, rule or regulation,
the same shall become inoperative as though eliminated by formal amendment of this Agreement.
Section 20. Guaranty.
The Company hereby irrevocably and unconditionally guarantees to the Officer the payment of
all amounts, and the performance of all other obligations, due from the Bank in accordance with the
terms of this Agreement as and when due without any requirement of presentment, demand of payment,
protest or notice of dishonor or nonpayment.
Section 21. Section 409A of the Internal Revenue Code.
The Officer and the Bank acknowledge that each of the payments and benefits promised to the
Officer under this Agreement must either comply with the requirements of Section 409A or qualify
for an exception from compliance. To that end, the Officer and the Bank agree that:
(a) the payment described in section 2(a) is intended to be excepted from
compliance with Section 409A pursuant to Treasury Regulation section 1.409A-1(b)(3)
as payment made pursuant to the Bank’s customary payment timing arrangement;
Page 19 of 21
(b) the benefits and payments described in section 2(b) are expected to comply
with or be excepted from compliance with Section 409A on their own terms;
(c) the benefits and payments on disability described in section 4 are intended
to be excepted from compliance with Section 409A as “disability pay” pursuant to
Treasury Regulation section 1.409A-1(a)(5); and
(d) the welfare benefits provided in kind under section 6(b)(i) are intended to
be excepted from compliance with Section 409A as welfare benefits pursuant to
Treasury Regulation section 1.409A-1(a)(5) and/or as benefits not includible in
gross income.
(e) the legal fee reimbursements described in section 12 are intended to
satisfy the requirements for “reimbursement or in-kind benefit plans” described in
Treasury Regulation section 1.409A-3(i)(1)(iv) and shall be administered to satisfy
such requirements;
In the case of a payment that is not excepted from compliance with Section 409A, and that is
not otherwise designated to be paid immediately upon a permissible payment event within the meaning
of Treasury Regulation section 1.409A-3(a), the payment shall not be made prior to, and shall, if
necessary, be deferred (with interest at the annual rate of 6%, compounded monthly from the date of
the Officer’s termination of employment to the date of actual payment) to and paid on the later of
the day five (5) days after the Officer’s earliest separation from service (within the meaning of
Treasury Regulation section 1.409A-1(h)) and, if the Officer is a specified employee (within the
meaning of Treasury Regulation section 1.409A-1(i)) on the date of his separation from service, the
first day of the seventh month following the Officer’s separation from service. Each amount
payable under this plan that is required to be deferred beyond the Officer’s separation from
service, shall be deposited on the date on which, but for such deferral, the Bank would have paid
such amount to the Officer, in a grantor trust which meets the requirements of Revenue Procedure
92-65 (as amended or superseded from time to time), the trustee of which shall be a financial
institution selected by the Bank with the approval of the Officer (which approval shall not be
unreasonably withheld or delayed), pursuant to a trust agreement the terms of which are approved by
the Officer (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and
payments made shall include earnings on the investments made with the assets of the Rabbi Trust,
which investments shall consist of short-term investment-grade fixed-income securities or units of
interest in mutual funds or other pooled investment vehicles designed to invest primarily in such
securities. Furthermore, this Agreement shall be construed and administered in such manner as
shall be necessary to effect compliance with Section 409A.
Page 20 of 21
IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed and the
Officer has hereunto set his hand, all as of the day and year first above written.
| Name: | ||||||||
| Xxxxxx City Savings Bank | ||||||||
Attest: |
||||||||
By
|
By | |||||||
| Name: | Name: | |||||||
| Title: | Title: | |||||||
[Seal] |
||||||||
| Attest: | Xxxxxx City Bancorp, Inc | |||||||
By
|
By | |||||||
| Title: | Title: | |||||||
[Seal] |
||||||||
Page 21 of 21
