Exhibit 10.1
SOUND FEDERAL BANCORP
SUPPLEMENTAL EXECUTIVE AGREEMENT
FOR XXXXXXX X. XXXXXXXXXX
WHEREAS, Xxxxxxx X. XxXxxxxxxx ("Executive") and Sound Federal Bancorp (the
"Company") desire to enter into this Supplemental Executive Agreement
("Supplemental Agreement") to supplement the Employment Agreement entered into
between the Executive and Sound Federal Savings and Loan Association (the
"Association"), the wholly owned subsidiary of the Company, on July 14, 1999
(hereinafter referred to as the "Employment Agreement"); and
WHEREAS, tax law provisions relating to "golden parachute payments" could
have the effect of reducing the benefits otherwise provided to Executive under
the Employment Agreement as a result of a change in control of the Company or
the Association; and
WHEREAS, the Board believes that the Supplemental Agreement is in the best
interests of the Company and its shareholders and will provide the benefits
intended to be provided under the Employment Agreement to Executive in the event
of a change in control of the Company or the Association, without any reduction
because of tax code "penalties" or excise taxes relating to a change in control;
and
WHEREAS, the Company and the Executive also desire to enter into the
Supplemental Agreement for the purpose of providing further incentive to the
Executive to achieve successful results in the management and operations of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereto
hereby agree as follows:
1. In the event of a Change in Control (as defined in the Employment
Agreement) of the Association or the Company, the Executive shall be entitled to
receive, pursuant to this Supplemental Agreement, an amount, payable by the
Company, in addition to any compensation or benefits payable by the Company
pursuant to Section 11 of the Employment Agreement, which amount shall equal the
difference between (i) the amount that would be paid under the Employment
Agreement pursuant to Section 11(j) of the Employment Agreement but for the
reductions in payments required by Section 11(j) of the Employment Agreement, if
any, and (ii) the amount that is actually paid under the terms of the Employment
Agreement after any such reduction.2. In each calendar year that Executive is
entitled to receive payments or benefits under the provisions of the Employment
Agreement and this Supplemental Agreement, the independent accountants of the
Company shall determine if an excess parachute payment (as defined in Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code")) exists. Such
determination shall be made after taking any reductions permitted pursuant to
Section 280G of the Code and the regulations thereunder. Any amount determined
to be an excess parachute payment after taking into account such reductions
shall be hereafter referred to as the
"Initial Excess Parachute Payment". As soon as practicable after a Change in
Control, the Initial Excess Parachute Payment shall be determined. Upon the Date
of Termination following a Change in Control, the Company shall pay Executive,
subject to applicable withholding requirements under applicable state or federal
law an amount equal to:
(i) twenty (20) percent of the Initial Excess Parachute Payment (or
such other amount equal to the tax imposed under Section 4999 of
the Code), and
(ii) such additional amount (tax allowance) as may be necessary to
compensate Executive for the payment by Executive of state and
federal income and excise taxes on the payment provided under
Clause (i) and on any payments under this Clause (ii). In
computing such tax allowance, the payment to be made under Clause
(i) shall be multiplied by the "gross up percentage" ("GUP"). The
GUP shall be determined as follows:
Tax Rate
GUP = ---------------
1- Tax Rate
The Tax Rate for purposes of computing the GUP shall be the
highest marginal federal and state income and employment-related
tax rate, including any applicable excise tax rate, applicable to
the Executive in the year in which the payment under Clause (i)
is made.
3. Notwithstanding the foregoing, if it shall subsequently be determined in
a final judicial determination or a final administrative settlement to which
Executive is a party that the excess parachute payment as defined in Section
4999 of the Code, reduced as described above, is different from the Initial
Excess Parachute Payment (such different amount being hereafter referred to as
the "Determinative Excess Parachute Payment") then the Company's independent
accountants shall determine the amount (the "Adjustment Amount") the Executive
must pay to the Company or the Company must pay to the Executive in order to put
the Executive (or the Company, as the case may be) in the same position as the
Executive (or the Company, as the case may be) would have been if the Initial
Excess Parachute Payment had been equal to the Determinative Excess Parachute
Payment. In determining the Adjustment Amount, the independent accountants shall
take into account any and all taxes (including any penalties and interest) paid
by or for Executive or refunded to Executive or for Executive's benefit. As soon
as practicable after the Adjustment Amount has been so determined, the Company
shall pay the Adjustment Amount to Executive or the Executive shall repay the
Adjustment Amount to the Company, as the case may be.
4. In each calendar year that Executive receives payments or benefits under
the Employment Agreement, Executive shall report on his state and federal income
tax returns such information as is consistent with the determination made by the
independent accountants of the Company as described above. The Company shall
indemnify and hold Executive harmless from any and all losses, costs and
expenses (including without limitation, reasonable attorney's fees, interest,
fines and penalties) which Executive incurs as a result of reporting such
information. Executive shall promptly notify the Company in writing whenever the
Executive receives notice of the institution of a judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under Section
4999 of the Code of any amount paid or payable under this
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Supplemental Agreement is being reviewed or is in dispute. The Company shall
assume control at its expense over all legal and accounting matters pertaining
to such federal tax treatment (except to the extent necessary or appropriate for
Executive to resolve any such proceeding with respect to any matter unrelated to
amounts paid or payable pursuant to this contract) and Executive shall cooperate
fully with the Company in any such proceeding. The Executive shall cooperate
fully with the Company in any such proceeding. The Executive shall not enter
into any compromise or settlement or otherwise prejudice any rights the Company
may have in connection therewith without prior consent to the Company.
IN WITNESS WHEREOF, Sound Federal Bancorp has caused this Supplemental
Agreement to be executed and its seal to be affixed hereunto by its duly
authorized officer, and Executive has signed this Supplemental Agreement as of
the 9th day of November, 2001.
ATTEST: [SEAL] SOUND FEDERAL BANCORP
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Secretary
[SEAL]
WITNESS: EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxxx X. XxXxxxxxxx
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Xxxxxxx X. XxXxxxxxxx
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