EXHIBIT 10.7
NON-QUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
FOR XXXXXXX X. XXXXXXXXXX
NON-QUALIFIED SUPPLEMENTAL EXECUTIVE
RETIREMENT AGREEMENT
SOUND FEDERAL SAVINGS
WHITE PLAINS, NEW YORK
NON-QUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This Non-qualified Supplemental Executive Retirement Agreement (the
"Agreement"), effective as of the 1st day of January, 2004, formalizes the
agreements by and between SOUND FEDERAL SAVINGS (the "Bank"), a federally
chartered stock bank, and certain key employees, hereinafter referred to as
"Executive(s)", who shall be selected and approved by the Bank to participate in
this Agreement by execution of a Non-qualified Supplemental Executive Retirement
Joinder Agreement ("Joinder Agreement") in a form provided by the Bank. SOUND
FEDERAL BANCORP, INC. (the "Holding Company") is a party to this Agreement for
the sole purpose of guaranteeing the Bank's performance hereunder.
W I T N E S S E T H:
WHEREAS, the Executives are employed by the Bank; and
WHEREAS, the Bank recognizes the valuable services heretofore performed
for it by such Executives and wishes to encourage their continued employment and
to provide them with additional incentive to achieve corporate objectives; and
WHEREAS, the Bank wishes to provide the terms and conditions upon which
the Bank shall pay additional retirement benefits to the Executives; and
WHEREAS, the Bank intends this Agreement to be considered an unfunded
arrangement, maintained primarily to provide supplemental retirement income for
its Executives, members of a select group of management or highly compensated
employees of the Bank, for tax purposes and for purposes of the Employee
Retirement Income Security Act of 1974, as amended; and
WHEREAS, the Bank has adopted this Non-qualified Supplemental Executive
Retirement Agreement which controls all issues relating to Supplemental
Retirement Benefits as described herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Executive agree as follows:
SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the meanings
below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit" means that portion of the Supplemental Retirement
Benefit which is required to be expensed and accrued under generally
accepted accounting principles (GAAP).
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Administrator" means the Bank and/or its Board.
1.4 "Bank" means Sound Federal Savings and any successor thereto or the Board.
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1.5 "Beneficiary" means the person or persons (and their heirs) designated as
Beneficiary by the Executive to whom the deceased Executive's benefits are
payable. If no Beneficiary is so designated, then the Executive's Spouse,
if living, will be deemed the Beneficiary. If the Executive's Spouse is
not living, then the Children of the Executive will be deemed the
Beneficiaries and will take on a per stirpes basis. If there are no living
Children, then the Estate of the Executive will be deemed the Beneficiary.
1.7 "Benefit Eligibility Date" shall be the later of (1) the 1st day of the
month following the month in which the Executive attains the Normal
Retirement Age, or (ii) the 1st day of the month following the month in
which the Executive actually retires.
1.8 "Board" shall mean the Board of Directors of the Bank, unless specifically
noted otherwise.
1.9 "Cause" shall include termination because of the Executive's 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
material breach of any provision of this Agreement.
1.10 "Change in Control" shall mean a change in control of a nature that: (i)
would be required to be reported in response to Item 1(a) of the current
report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx");
or (ii) results in a Change in Control of the Association or the Company
within the meaning of the Home Owners' Loan Act, as amended ("HOLA"), and
applicable rules and regulations promulgated thereunder, as in effect at
the time of the Change in Control; or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of Company's
outstanding securities except for any securities purchased by the
Association's employee stock ownership plan or trust; or (b) individuals
who constitute the Board on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he were a member of the Incumbent Board;
or (c) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Association or the Company or similar
transaction in which the Association or Company is not the surviving
corporation occurs; or (d) a proxy statement soliciting proxies from
stockholders of the Company, by someone other than the current Board of
Directors of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the
outstanding shares of the common stock of the Company are exchanged for or
converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of
the Company and the shareholders owning beneficially or of record 25% or
more of the outstanding securities of the Company have tendered or offered
to sell their shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror.
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1.11 "Children" means the Executive's children, or the issue of any deceased
Children, then living at the time payments are due the Children under this
Agreement. The term "Children" shall include both natural and adopted
Children.
1.12 "Code" means the Internal Revenue Code of 1986, as amended.
1.13 "Disability Benefit" means the monthly benefit payable to the Executive
following a determination, in accordance with Subsection 3.6, that he is
no longer able, properly and satisfactorily, to perform his duties at the
Bank. The Disability Benefit shall be equal to the Accrued Benefit,
annuitized using the Interest Factor and paid over the Payout Period.
1.14 "Effective Date" of this Agreement shall be January 1, 2004.
1.15 "Estate" means the estate of the Executive.
1.16 "Executive" means the executive officer who is designated by the Board to
participate in the Plan.
1.17 "Holding Company" means Sound Federal Bancorp, Inc.
1.18 "Interest Factor" unless specifically designated otherwise in this
Subsection or in another place in this Agreement, means annual compounding
or discounting, as applicable, at six percent (6%). For purposes of
determining the present value of the amount necessary to contribute to a
rabbi trust to fund the Executive's benefit in the event of a Change in
Control, the Interest Factor shall mean 120% of the semiannual applicable
federal rate (AFR) as determined under Code section 1274(d).
1.19 "Normal Retirement Age" shall be the birthday on which the Executive
attains the age set forth in such Executive's NON-QUALIFIED SUPPLEMENTAL
EXECUTIVE RETIREMENT JOINDER AGREEMENT.
1.20 "Payout Period" means the time frame during which benefits payable
hereunder shall be distributed. Payments generally shall be made in
monthly installments commencing within thirty (30) days following the
occurrence of the event which triggers distribution and shall continue for
the longer of One Hundred Eighty (180) months or the Executive's lifetime.
In certain cases set forth herein, an Executive's (or Beneficiary's)
benefit shall be paid in a single lump payment.
1.20 "Plan Year" shall mean the calendar year.
1.21 "Spouse" means the individual to whom the Executive is legally married at
the time of the Executive's death, provided, however, that the term
"Spouse" shall not refer to an individual to whom the Executive is legally
married at the time of death if the Executive and such individual have
entered into a formal separation agreement (provided that such separation
agreement does not provide otherwise or state that such individual is
entitled to a portion of the benefit hereunder) or initiated divorce
proceedings.
1.22 "Supplemental Retirement Benefit" means an annual amount (before taking
into account federal and state income taxes), payable to the Executive in
monthly installments throughout the Payout Period, equal to the amount
designated in the Joinder Agreement. The Supplemental Retirement Benefit
shall be calculated annually, based on certain actuarial assumptions, as
the difference between (i) the benefit the Executive would be entitled to
receive upon retirement at his Normal Retirement Age under the Bank's
tax-qualified defined benefit pension plan and employee stock
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ownership plan without giving consideration to the limitations imposed
under Code Sections 401(a)(17) and 415 (the "Applicable Limitations") on
such benefits and contributions and (ii) the amount that the Executive is
actually entitled to receive at such time as the result of the Applicable
Limitations.
1.23 "Survivor's Benefit" means an annual amount payable to the Beneficiary in
monthly installments throughout the Payout Period, equal to the amount
designated in the Executive's Joinder Agreement.
SECTION II
ESTABLISHMENT OF RABBI TRUST
The Bank may establish a rabbi trust into which the Bank may contribute
assets which shall be held, subject to the claims of the Bank's creditors in the
event of the Bank's "Insolvency" as defined in the agreement which establishes
such rabbi trust, until the contributed assets are paid to the Executives and
their Beneficiaries in such manner and at such times as specified in this
Agreement. The Bank may make contributions to the rabbi trust to provide the
Bank with a source of funds to assist it in meeting the liabilities of this
Agreement. The rabbi trust and any assets held therein shall conform to the
terms of the rabbi trust agreement which may be established in conjunction with
this Agreement. To the extent the language in this Agreement is modified by the
language in the rabbi trust agreement, the rabbi trust agreement shall supersede
this Agreement. In the event of a Change in Control or imminent Change in
Control, the Bank shall establish a rabbi trust (if none has been previously
established hereunder) and shall transfer to the rabbi trust prior to such
Change in Control, the present value of an amount sufficient to fully fund the
Supplemental Retirement Benefit for each Executive covered by this Agreement.
SECTION III
BENEFITS
3.1 Retirement Benefit. If the Executive is in service with the Bank until
reaching his Normal Retirement Age, the Executive shall be entitled to the
Supplemental Retirement Benefit. Such benefit shall commence on the
Executive's Benefit Eligibility Date and shall be payable in monthly
installments throughout the Payout Period. In the event the Executive dies
at any time after attaining his Normal Retirement Age, but prior to
completion of all such payments due and owing hereunder, the Bank shall
pay to the Executive's Beneficiary a continuation of the monthly
installments for the remainder of the Payout Period.
3.2 Death Prior to Normal Retirement Age. If the Executive dies prior to
attaining his Normal Retirement Age but while employed at the Bank, the
Executive's Beneficiary shall be entitled to the Survivor's Benefit. The
Survivor's Benefit shall commence within thirty (30) days of the
Executive's death and shall be payable in monthly installments throughout
the Payout Period.
3.3 Involuntary Termination (Other Than for Cause) or Voluntary Termination of
Employment. If the Executive's employment with the Bank is involuntarily
terminated prior to the attainment of his Normal Retirement Age, for any
reason other than for Cause, the Executive's death, disability, or
following a Change in Control (as defined), or the Executive voluntarily
terminates his employment, the Executive (or his Beneficiary) shall be
entitled to the Accrued Benefit relating to Executive at the time of the
Executive's termination of employment. Such benefit shall commence at the
Executive's Normal Retirement Age, shall be annuitized (using the Interest
Factor) and be payable in monthly installments throughout the Payout
Period. In the event the Executive dies prior to commencement or
completion of all such payments due and owing hereunder, the Bank shall
pay to the Executive's Beneficiary a continuation of the monthly
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installments for the remainder of the Payout Period. Notwithstanding
anything to the contrary herein, the Administrator may determine to pay
the Executive's Accrued Benefit to the Executive in a lump sum within
sixty (60) days of his termination.
3.4 Termination of Service Related to a Change in Control. If a Change in
Control occurs, and thereafter the Executive's employment is terminated
(either voluntarily or involuntarily), the Executive shall be entitled to
the Supplemental Retirement Benefit as if the Executive had remained
employed by the Bank (or its successor) until attainment of his Normal
Retirement Age. Such benefit shall commence within thirty (30) days of
such termination and shall be payable in monthly installments throughout
the Payout Period. In the event that the Executive dies at any time after
termination of employment, but prior to commencement or completion of all
such payments due and owing hereunder, the Bank, or its successor, shall
pay to the Executive's Beneficiary a continuation of the monthly
installments for the remainder of the Payout Period.
3.5 Termination for Cause. If the Executive is terminated for Cause, all
benefits under this Agreement shall be forfeited and this Agreement shall
become null and void as to such Executive.
3.6 Disability Benefit. Notwithstanding any other provision hereof, if
requested by the Executive and approved by the Board (which approval shall
not be unreasonably withheld), the Executive shall be entitled to receive
the Disability Benefit hereunder, in any case in which it is determined by
a duly licensed physician selected by the Bank, that the Executive is no
longer able, properly and satisfactorily, to perform his regular duties as
an Executive, because of ill health, accident, disability or general
inability due to age. If the Executive's service is terminated pursuant to
this paragraph and Board approval is obtained, the Executive may elect to
receive the Disability Benefit in lieu of any other benefit available
under Section III, which is not available prior to the Executive's Benefit
Eligibility Date. The Disability Benefit shall be paid within thirty (30)
days following the above-mentioned disability determination. At the
Executive's request, and upon Board approval, the Disability Benefit may
be paid in a lump sum. In the event the Executive dies at any time after
termination of employment due to disability but prior to payment of the
Disability Benefits, the Bank shall pay the Survivor's Benefit to the
Executive's Beneficiary. The determination regarding payment of a
Disability Benefit or payment of the Disability Benefit in a lump sum is
within the sole discretion of the Board.
SECTION IV
BENEFICIARY DESIGNATION
The Executive shall make an initial designation of primary and secondary
Beneficiaries upon execution of his Joinder Agreement and shall have the right
to change such designation, at any subsequent time, by submitting to the
Administrator in substantially the form attached as Exhibit A to the Joinder
Agreement, a written designation of primary and secondary Beneficiaries. Any
Beneficiary designation made subsequent to execution of the Joinder Agreement
shall become effective only when receipt thereof is acknowledged in writing by
the Administrator.
SECTION V
EXECUTIVE'S RIGHT TO ASSETS:
ALIENABILITY AND ASSIGNMENT PROHIBITION
At no time shall the Executive be deemed to have any lien, right, title or
interest in or to any specific investment or asset of the Bank. The rights of
the Executive, any Beneficiary, or any other person claiming through the
Executive under this Agreement, shall be solely those of an unsecured general
creditor of the Bank. The Executive, the Beneficiary, or any other person
claiming through the Executive,
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shall only have the right to receive from the Bank those payments so specified
under this Agreement. Neither the Executive nor any Beneficiary under this
Agreement shall have any power or right to transfer, assign, anticipate,
hypothecate, mortgage, commute, modify or otherwise encumber in advance any of
the benefits payable hereunder, nor shall any of said benefits be subject to
seizure for the payment of any debts, judgments, alimony or separate maintenance
owed by the Executive or his Beneficiary, nor be transferable by operation of
law in the event of bankruptcy, insolvency or otherwise.
SECTION VI
ACT PROVISIONS
6.1 Named Fiduciary and Administrator. The Bank shall be the Named Fiduciary
and Administrator (the "Administrator") of this Agreement. As
Administrator, the Bank shall be responsible for the management, control
and administration of the Agreement as established herein. The
Administrator may delegate to others certain aspects of the management and
operational responsibilities of the Agreement, including the employment of
advisors and the delegation of ministerial duties to qualified
individuals.
6.2 Claims Procedure and Arbitration. In the event that benefits under this
Agreement are not paid to the Executive (or to his Beneficiary in the case
of the Executive's death) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the
Administrator within sixty (60) days from the date payments are refused.
The Administrator shall review the written claim and, if the claim is
denied, in whole or in part, they shall provide in writing, within thirty
(30) days of receipt of such claim, their specific reasons for such
denial, reference to the provisions of this Agreement or the Joinder
Agreement upon which the denial is based, and any additional material or
information necessary to perfect the claim. Such writing by the Bank and
its Board of Directors shall further indicate the additional steps which
must be undertaken by claimants if an additional review of the claim
denial is desired.
If claimants desire a second review, they shall notify the Administrator
in writing within thirty (30) days of the first claim denial. Claimants
may review this Agreement, the Joinder Agreement or any documents relating
thereto and submit any issues and comments, in writing, they may feel
appropriate. In its sole discretion, the Administrator shall then review
the second claim and provide a written decision within thirty (30) days of
receipt of such claim. This decision shall state the specific reasons for
the decision and shall include reference to specific provisions of this
Agreement or the Joinder Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement and the Joinder Agreement or the meaning and
effect of the terms and conditions thereof, it shall be settled by
arbitration administered by the AAA under its Commercial Arbitration
Rules, and judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
SECTION VII
MISCELLANEOUS
7.1 No Effect on Employment Rights. Nothing contained herein will confer upon
the Executive the right to be retained in the service of the Bank nor
limit the right of the Bank to discharge or otherwise deal with the
Executive without regard to the existence of the Agreement.
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7.2 State Law. The Agreement is established under, and will be construed
according to, the laws of the State of New York, to the extent such laws
are not preempted by the Act and valid regulations published thereunder.
7.3 Severability and Interpretation of Provisions. In the event that any of
the provisions of this Plan or portion hereof, are held to be inoperative
or invalid by any court of competent jurisdiction, or in the event that
any legislation adopted by any governmental body having jurisdiction over
the Bank would be retroactively applied to invalidate this plan or any
provision hereof or cause the benefits hereunder to be taxable, then: (1)
insofar as is reasonable, effect will be given to the intent manifested in
the provisions held invalid or inoperative, and (2) the validity and
enforceability of the remaining provisions will not be affected thereby.
In the event that the intent of any provision shall need to be construed
in a manner to avoid taxability, such construction shall be made by the
plan administrator in a manner that would manifest to the maximum extent
possible the original meaning of such provisions.
7.4 Incapacity of Recipient. In the event the Executive is declared
incompetent and a conservator or other person legally charged with the
care of his person or Estate is appointed, any benefits under the
Agreement to which such Executive is entitled shall be paid to such
conservator or other person legally charged with the care of his person or
Estate.
7.5 Unclaimed Benefit. The Executive shall keep the Bank informed of his
current address and the current address of his Beneficiaries. If the
location of the Executive is not made known to the Bank within three years
after the date upon which any payment of any benefits may first be made,
the Bank shall delay payment of the Executive's benefit payment(s) until
the location of the Executive is made known to the Bank; however, the Bank
shall only be obligated to hold such benefit payment(s) for the Executive
until the expiration of three (3) years. Upon expiration of the three (3)
year period, the Bank may discharge its obligation by payment to the
Executive's Beneficiary. If the location of the Executive's Beneficiary is
not made known to the Bank by the end of an additional two (2) month
period following expiration of the three (3) year period, the Bank may
discharge its obligation by payment to the Executive's Estate. If there is
no Estate in existence at such time or if such fact cannot be determined
by the Bank, the Executive and his Beneficiary(ies) shall thereupon
forfeit any rights to the balance, if any, of any benefits provided for
such Executive and/or Beneficiary under this Agreement.
7.6 Limitations on Liability. Notwithstanding any of the preceding provisions
of the Agreement, no individual acting as an employee or agent of the Bank
or the Holding Company, or as a member of the Board of the Bank or Holding
Company shall be personally liable to the Executive or any other person
for any claim, loss, liability or expense incurred in connection with the
Agreement.
7.7 Gender. Whenever in this Agreement words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
7.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this
Agreement shall affect the right of the Executive to participate in or be
covered by any qualified or non-qualified pension, profit sharing, group,
bonus or other supplemental compensation or fringe benefit agreement
constituting a part of the Bank's existing or future compensation
structure.
7.9 Suicide. Notwithstanding anything to the contrary in this Agreement, the
benefits otherwise provided herein shall not be payable and this Agreement
shall become null and void if the
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Executive's death results from suicide, whether sane or insane, within
twenty-six (26) months after the execution of his Joinder Agreement.
7.10 Inurement. This Agreement shall be binding upon and shall inure to the
benefit of the Bank, its successors and assigns, and the Executive, his
successors, heirs, executors, administrators, and Beneficiaries.
7.11 Tax Withholding. The Bank may withhold from any benefits payable under
this Agreement all federal, state, city, or other taxes as shall be
required pursuant to any law or governmental regulation then in effect.
7.12 Headings. Headings and sub-headings in this Agreement are inserted for
reference and convenience only and shall not be deemed a part of this
Agreement.
SECTION VIII
AMENDMENT/REVOCATION
This Agreement shall not be amended, modified or revoked at any time, in
whole or part, without the mutual written consent of the Executive and the Bank,
and such mutual consent shall be required even if the Executive is no longer
employed by the Bank.
SECTION IX
EXECUTION
9.1 This Agreement sets forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby, and any previous
agreements or understandings between the parties hereto regarding the
subject matter hereof are merged into and superseded by this Agreement.
9.2 This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies
shall together constitute one and the same instrument.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the Bank and the Holding Company have caused this
Agreement to be executed on this 1st day of April 2004.
ATTEST: SOUND FEDERAL SAVINGS
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
---------------------- --------------------
Secretary Title: Chairman
ATTEST: SOUND FEDERAL BANCORP, INC.
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
---------------------- --------------------
Secretary Title: Chairman
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NON-QUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT JOINDER AGREEMENT
I, Xxxxxxx X. XxXxxxxxxx, and SOUND FEDERAL SAVINGS hereby agree for good
and valuable consideration, the value of which is hereby acknowledged, that I
shall participate in the Non-qualified Supplemental Executive Retirement
Agreement ("Agreement") established as of January 1, 2004, by SOUND FEDERAL
SAVINGS, as such Agreement may now exist or hereafter be modified, and do
further agree to the terms and conditions thereof.
I understand that I must execute this Non-qualified Supplemental Executive
Retirement Joinder Agreement ("Joinder Agreement") as well as notify the
Administrator of such execution in order to participate in the Agreement.
I understand that if I retire on or after attainment of my Normal
Retirement Age of 65, I shall be entitled to the Supplemental Retirement
Benefit, calculated in accordance with Subsections 1.22 and 3.1, and subject to
all relevant provisions of the Agreement. My Supplemental Retirement Benefit
payable at my Normal Retirement Age is presently projected to be $76,400,
provided, however, my actual Supplemental Retirement Benefit at my Normal
Retirement Age may be a greater or smaller amount.
I understand that my annual Survivor's Benefit shall be equal to my
Supplemental Retirement Benefit, as calculated in accordance with Subsections
1.22 and 3.1 on the day immediately prior to my death, and subject to Subsection
3.2 and all relevant provisions of the Agreement.
I further understand that I am entitled to review or obtain a copy of the
Agreement, at any time, and may do so by contacting the Bank.
This Joinder Agreement shall become effective upon execution (below) by
both the Executive and a duly authorized officer of the Bank.
Dated this 1st day of April, 2004.
/s/ Xxxxxxx X. XxXxxxxxxx
--------------------------------
Xxxxxxx X. XxXxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------
(Bank's duly authorized Officer)
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