WALDEN FEDERAL SAVINGS AND LOAN ASSOCIATION CHANGE IN CONTROL AGREEMENT
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FEDERAL SAVINGS AND LOAN ASSOCIATION
This
AGREEMENT
(“Agreement”) is hereby entered into as of June 28, 2007, by
and
between XXXXXX
FEDERAL SAVINGS AND LOAN ASSOCIATION (the
“Bank”), L. Xxxxx Xxxx (“Executive”), and HOMETOWN
BANCORP, INC.
(the
“Company”), the holding company of the Bank, as guarantor.
WHEREAS,
the
Company and the Bank recognize the importance of Executive to their operations
and wish to protect Executive’s position in the event of a change in control for
the period provided for in this Agreement; and
WHEREAS,
Executive and the Boards of Directors of the Company and the Bank desire to
enter into an agreement setting forth the terms and conditions of payments
due
to Executive in the event of a change in control and the related rights and
obligations of each of the parties.
NOW,
THEREFORE,
in
consideration of the promises and mutual covenants herein contained, it is
hereby agreed as follows:
1.
Term
of Agreement.
a. The
term
of this Agreement shall be (i) the initial term, consisting of the period
commencing on the date of this Agreement (the “Effective Date”) and ending on
the date that is three (3) years after the Effective Date, plus (ii) any and
all
extensions of the initial term made pursuant to this Section 1. Notwithstanding
anything in this Section 1 to the contrary, the term of the Agreement shall
be fixed at one year as of the effective date of a Change in
Control.
b. Commencing
on the first anniversary of the Effective Date and continuing each anniversary
date thereafter, the Board of Directors of the Bank (the “Board of Directors”)
may extend the term of this Agreement for an additional one (1) year period
beyond the then effective expiration date, provided that Executive shall not
have given at least sixty (60) days’ written notice of Executive’s desire that
the term not be extended.
c. Notwithstanding
anything in this Section 1 to the contrary, this Agreement shall terminate
(i) if Executive or the Bank terminates Executive’s employment prior to a
Change in Control and (ii) on the first anniversary of the effective date
of a Change in Control.
2.
Change
in Control.
a. Upon
the
occurrence of a Change in Control (as defined in Section 2c.) followed at any
time during the remaining term of the Agreement by the termination of
Executive’s employment in accordance with the terms of the Agreement, other than
for Cause (as defined in Section 2d.), the provisions of Section 3 of the
Agreement shall apply.
b. Upon
the
occurrence of a Change in Control, Executive shall have the right to elect
to
voluntarily terminate his employment at any time during the remaining term
of
the Agreement following the occurrence of an event constituting “Good Reason.”
“Good
Reason” means, unless Executive has consented in writing thereto, the occurrence
following a Change in Control of any of the following:
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i.
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A
material reduction in Executive’s responsibilities or authority in
connection with his employment with the Company or the
Bank;
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ii.
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Assignment
to Executive of duties of a non-executive nature or duties for which
he is
not reasonably equipped by his skills and
experience;
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iii.
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A
reduction in salary or benefits contrary to the terms of this Agreement,
or, following a Change in Control as defined in Section 2c. of this
Agreement, any reduction in salary or material reduction in benefits
below
the amounts to which Executive was entitled prior to the Change in
Control;
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iv.
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Termination
of incentive and benefit plans (other than the Bank’s tax-qualified
plans), programs or arrangements, or reduction of Executive’s
participation to such an extent as to materially reduce their aggregate
value below their aggregate value as of the Effective Date;
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v.
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A
relocation of Executive’s principal business office by more than
thirty-five (35) miles from its current location;
or
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vi.
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Liquidation
or dissolution of the Company or the
Bank.
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Notwithstanding
the foregoing, if the Company or the Bank reduces or eliminates the Executive’s
benefits under one or more plans as part of a good faith, overall reduction
or
elimination of such benefits or plans, in a manner that does not discriminate
against Executive (except as such discrimination may be necessary to comply
with
law), the Company’s or the Bank’s action shall not constitute Good Reason for
termination or a material breach of this Agreement, provided that benefits
of
the same type or to the same general extent are not subsequently made available
to other officers of the Company and the Bank, or any company that controls
either of them, under a plan or program in which Executive is not entitled
to
participate.
c. For
purposes of this Agreement, a “Change in Control” shall be deemed to occur on
the earliest of any of the following events:
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i.
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Merger:
The Company or the Bank merges into or consolidates with another
corporation, or merges another corporation into the Company or the
Bank,
and as a result, less than a majority of the combined voting power
of the
resulting corporation immediately after the merger or consolidation
is
held by persons who were stockholders of the Company or the Bank
immediately before the merger or
consolidation.
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ii.
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Acquisition
of Significant Share Ownership: There is filed, or required to be
filed, a report on Schedule 13D or another form or schedule (other
than
Schedule 13G) required under Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, if the schedule discloses that the filing person
or
persons acting in concert has or have become the beneficial owner
of 25%
or more of a class of the Company’s voting securities, but this clause (b)
shall not apply to beneficial ownership of Company voting shares
held in a
fiduciary capacity by an entity of which the Company directly or
indirectly beneficially owns 50% or more of its outstanding voting
securities.
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iii.
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Change
in Board Composition: During any period of two consecutive years,
individuals who constitute the Company’s or the Bank’s Board of Directors
at the beginning of the two-year period cease for any reason to constitute
at least a majority of the Company’s or the Bank’s Board of Directors;
provided, however, that for purposes of this clause (iii), each director
who is first elected by the board (or first nominated by the board
for
election by the stockholders) by a vote of at least two-thirds (2/3)
of
the directors who were directors at the beginning of the two-year
period
shall be deemed to have also been a director at the beginning of
such
period; or
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iv.
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Sale
of Assets: The Company or the Bank sells to a third party all or
substantially all of its assets.
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Notwithstanding
anything in this Agreement to the contrary, in no event shall the reorganization
of the Bank from the mutual holding company form of organization to the full
stock holding company form of organization (including the elimination of the
mutual holding company) constitute a “Change in Control” for purposes of this
Agreement.
d. Executive
shall not have the right to receive termination benefits pursuant to Section
3
of this Agreement upon termination for Cause. Termination
for Cause shall mean termination of Executive’s employment because of
Executive’s personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, regulation (other than traffic
violations or similar offenses), final cease and desist order, or any material
breach of any provision of this Agreement. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and
until
there shall have been delivered to him a copy of a resolution duly adopted
by
the affirmative vote of a majority of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for the purpose
of finding (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board of Directors), that
Executive engaged in conduct justifying termination for Cause and specifying
the
particulars of such conduct in detail. Executive shall not have the right to
receive compensation or other benefits for any period after termination for
Cause. During the period beginning on the date of the Notice of Termination
for
Cause pursuant to Section 4 of this Agreement through the Date of Termination,
stock options granted to Executive under any stock option plan shall not be
exercisable, nor shall any unvested stock awards granted to Executive under
any
stock benefit plan of the Bank, the Company or any subsidiary or affiliate
thereof, vest. At the Date of Termination, such stock options and unvested
stock
awards shall become null and void and shall not be exercisable by or delivered
to Executive at any time following his termination for Cause.
3. Termination
Benefits.
a. If,
on or
after the effective date of a Change in Control, Executive’s employment is
voluntarily (in accordance with Section 2b.) or involuntarily terminated (other
than for Cause) during the remaining term of the Agreement, Executive shall
receive:
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i.
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a
lump sum cash payment equal to three (3) times the Executive’s base salary
as of the termination date. Such payment shall be made not later
than ten
(10) calendar days following Executive’s termination of employment under
this Section 3.
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ii.
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Continued
benefit coverage under all group medical, dental and life insurance
plans
in which Executive participated as of the date of the Change in
Control
(collectively, the “Employee Benefit Plans”) for a period of thirty-six
months following Executive’s termination of employment. Said coverage
shall be provided under the same terms and conditions in effect
on the
date of Executive’s termination of employment. Solely for purposes of
benefit continuation under the Employee Benefit Plans, Executive
shall be
deemed to be an active employee. To the extent that the Bank cannot
provide any benefits required under this Section 3a. under the
terms of
the Employee Benefit Plans, the Bank shall enter into alternative
arrangements that will provide Executive with coverage that is
substantially similar to the coverage provided to Executive by
the Bank
prior to his termination of employment, subject to any applicable
limitations of Section 409A of the Internal Revenue Code of 1986,
as
amended (the “Code”).
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b. Notwithstanding
any contrary provisions of this Section 3, in no event shall the aggregate
payments or benefits to be made or afforded to Executive (the “Termination
Benefits”) constitute an “excess parachute payment” under Section 280G of the
Code, and to avoid such a result, the Termination Benefits will be reduced,
if
necessary, to an amount that is one dollar ($1.00) less than three (3) times
Executive’s “base amount,” as determined in accordance with said Section 280G of
the Code. The Executive shall determine the allocation of the reduction among
the Termination Benefits.
4. Notice
of Termination.
a. The
Bank
or Executive shall communicate any purported termination by means of a Notice
of
Termination to the other party(ies). For purposes of this Agreement, a “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
detail the facts and circumstances claimed to provide a basis for termination
of
Executive’s employment.
b. “Date
of
Termination” shall mean the date specified in the Notice of Termination (which,
in the case of a termination for Cause, shall not be less than thirty (30)
days
from the date such Notice of Termination is given).
5.
Source
of Payments.
The
Bank
shall make in a timely manner all payments provided for under this Agreement
in
cash or check from its general funds. The Company, however, unconditionally
guarantees payment and the provision of all amounts and benefits due to
Executive under this Agreement. If the Bank does not timely pay or provide
such
amounts and benefits, the Company shall pay or provide such amounts and
benefits.
6.
Effect
on Prior Agreements and Existing Benefit Plans.
This
Agreement contains the entire understanding between the parties and supersedes
any prior agreement between the Bank or the Company and Executive, except that
this Agreement shall not effectively reduce any benefit or compensation
otherwise inuring to Executive. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement. Nothing in this
Agreement shall confer upon Executive the right to continue in the employ of
the
Bank or the Company or shall impose on the Bank or the Company any obligation
to
retain Executive as an employee for any period.
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7. No
Attachment.
a. Except
as
required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation or to execution, attachment, levy or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to do so shall be null, void and of no effect.
b. This
Agreement shall be binding upon, and inure to the benefit of, Executive, the
Bank, the Company and their respective successors and assigns.
8.
Modification
and Waiver.
a. This
Agreement may be modified or amended only by means of a written instrument
signed by the parties.
b. No
term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver
or
estoppel. No written waiver shall be deemed a continuing waiver unless
specifically stated as such, and each such waiver shall operate only as to
the
specific term or condition waived and shall not constitute a waiver of such
term
or condition for the future or as to any act other than that specifically
waived.
9. Severability.
If
all or
part of any provision of this Agreement is held invalid for any reason, such
invalidity shall not affect the validity of any other provision or part of
this
Agreement, and all other provisions and parts of this Agreement shall continue
in full force and effect.
10.
Headings
for Reference Only.
The
headings of sections and paragraphs in this Agreement are included solely for
convenience of reference and shall not control the meaning or interpretation
of
any of the provisions of this Agreement. In addition, any references to the
masculine shall apply to both the masculine and the feminine.
11.
Governing
Law.
Except
to
the extent preempted by federal law, the validity, interpretation, performance,
and enforcement of this Agreement shall be governed by the laws of New York,
without regard to conflicts of law principles.
12.
Arbitration.
Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by Executive within fifty (50) miles
from the location of the Bank’s home office in Walden, New York, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator’s award in any court having jurisdiction;
provided, however, that Executive shall be entitled to seek specific performance
of his right to be paid until the Date of Termination during the pendency of
any
dispute or controversy arising under or in connection with this
Agreement.
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13.
Payment
of Legal Fees.
All
reasonable legal fees and expenses paid or incurred by Executive pursuant to
any
dispute or question of interpretation handled pursuant to Section 12 of this
Agreement shall be paid or reimbursed by the Bank or the Company, but only
if
Executive is successful pursuant to the arbitration proceeding or a legal
judgment or settlement.
14.
Indemnification.
The
Company or the Bank shall provide Executive (and Executive’s heirs, executors
and administrators) with coverage under a standard directors’ and officers’
liability insurance policy and shall indemnify Executive (and Executive’s heirs,
executors and administrators) to the fullest extent permitted under applicable
law against all expenses and liabilities reasonably incurred in connection
with
or arising out of any action, suit or proceeding in which Executive may be
involved by reason of acting outside the scope of his authority as a director
or
officer of the Company or the Bank (whether or not Executive continues to serve
as a director or officer at the time of incurring such expenses or liabilities),
such expenses and liabilities to include, but not be limited to, judgments,
court costs, attorneys’ fees and the costs of reasonable
settlements.
15. Successors
to the Bank and the Company.
The
Bank
and the Company shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or assets of the Bank or the Company,
expressly and unconditionally to assume and agree to perform the Bank’s and the
Company’s obligations under this Agreement, in the same manner and to the same
extent that the Bank and the Company would be required to perform if no such
succession or assignment had taken place.
16. Required
Provisions.
In the
event any of the foregoing provisions of this Section 16 are in conflict with
the terms of this Agreement, this Section 16 shall prevail.
a. The
Bank’s board of directors may terminate Executive’s employment at any time, but
any termination by the Bank, other than termination for Cause, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after termination for Cause.
b. If
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
§1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion:
(i)
pay Executive all or part of the compensation withheld while its contract
obligations were suspended; and (ii) reinstate (in whole or in part) any of
the
obligations which were suspended.
c. If
Executive 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 Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1),
all obligations of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.
d. If
the
Bank is in default as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the contracting parties.
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e. All
obligations under this Agreement shall be terminated, except to the extent
determined that continuation of the contract is necessary for the continued
operation of the Bank: (i) by the Director of the OTS (or his or her designee),
at the time the Federal Deposit Insurance Corporation (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 Federal Deposit Insurance Act, 12 U.S.C.
§1823(c); or (ii) by the Director of the OTS (or his or her designee) at the
time the Director (or his designee) approves a supervisory merger to resolve
problems related to the operations of the Bank or when the Bank is determined
by
the Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such
action.
f. Any
payments made to Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC
regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.
17.
Effect
of Code Section 409A. Notwithstanding
anything in this agreement to the contrary, if the Bank in good faith
determines, as of the effective date of Executive’s termination of employment,
that an amount (or any portion of an amount) payable to Executive hereunder,
is
required to be suspended or delayed for six months in order to satisfy the
requirements of Section 409A of the Code, then the Bank will so advise
Executive, and any such payment (or the minimum amount thereof) shall be
suspended and accrued for six months, whereupon such amount or portion thereof
shall be paid to Executive in a lump sum (together with interest thereon at
the
then-prevailing prime rate) on the first day of the seventh month following
the
effective date of Executive’s termination of employment.
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SIGNATURES
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement effective as of the date first
set
forth above.
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ATTEST:
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XXXXXX
FEDERAL SAVINGS AND LOAN ASSOCIATION
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/s/Xxx
Xxxxxxx
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By:
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/s/
Xxxxxx X. Xxxxxxx
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For
the Entire Board of Directors
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ATTEST:
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HOMETOWN
BANCORP, INC
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(Guarantor)
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/s/Xxxxxx
X. Xxxxxx
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By
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/s/
Xxxxxx X. Xxxxxxx
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Corporate
Secretary
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For
the Entire Board of Directors
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[SEAL]
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WITNESS:
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EXECUTIVE
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/s/Xxx
Xxxxxxx
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/s/
L. Xxxxx Xxxx
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L.
Xxxxx Xxxx
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