Exhibit 10(c)
XXXXX SPRING NATIONAL BANK OF MARYLAND
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made this 14th day of May, 1997 by and between Xxxxx
Spring National Bank of Maryland (the "Bank"), and Hunter X. Xxxxxx (the
"Executive").
INTRODUCTION
To encourage the Executive to remain a senior officer of the Bank, the
Bank is willing to provide salary continuation benefits to the Executive. The
Bank will pay the benefits from its general assets.
AGREEMENT
The Executive and the Bank agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Accrued Benefit" means the amount of liability for benefits
to be paid under this Agreement recorded on the books of the Bank in
accordance with Generally Accepted Accounting Principles and without
reduction for any income tax benefit related thereto.
1.1.2 "Benefit Percentage" means 70%.
1.1.3 "Change in Control" means the earliest of:
a. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Xxxxx Spring Bancorp, Inc.
("Bancorp") or the Bank) of beneficial ownership, as
that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 25% of
the outstanding capital stock of Bancorp or the Bank
entitled to vote for the election of directors
("Voting Stock");
b. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank, or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of
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a tender offer or an exchange offer for more than 20%
of the outstanding Voting Stock of Bancorp or the
Bank;
c. The effective time of (i) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (ii) a
transfer of substantially all of the property of
Bancorp or the Bank other than to an entity of which
Bancorp or the Bank owns at least 80% of the Voting
Stock;
d. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors;
e. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
1.1.4 "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provisions.
1.1.5 "Disability" means a physical or mental infirmity that
impairs the Executive's ability to substantially perform his duties
under this Agreement and that results in the Executive's becoming
eligible for long-term disability benefits under a long-term disability
plan maintained for Bank employees (or, if the Bank has no such plan in
effect, that impairs the Executive's ability to substantially perform
his duties for a period of one-hundred and eighty consecutive days).
The board of directors of the Bank shall determine whether or not the
Executive is and continues to be permanently disabled for purposes of
this Agreement in good faith, based upon competent medical advice and
other factors that it reasonably believes to be relevant. As a
condition to any benefits, the Bank may require the Executive to submit
to such physical or mental evaluations and tests as the Bank's Board of
Directors deems appropriate.
1.1.6 "Early Retirement Date" means the date on which the
Executive has both (a) attained age sixty and (b) completed ten Years
of Service.
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1.1.7 "Final Average Pay" means the Executive's three-year
average cash compensation, determined by adding (a) the total base
salary paid to the Executive for the thirty-six months preceding the
date of termination (or other date specified in this Agreement) divided
by three, and (b) one-third of the total cash bonuses (including,
without limitation, bonuses awarded under the Bank's Stakeholder
Program and similar programs) awarded to the Executive during the three
calendar years preceding the date of termination (or other date
specified in this Agreement). Final Average Pay shall not be reduced
for any pay reduction contributions (x) to cash or deferred
arrangements under Section 401(k) of the Code, (y) to a cafeteria plan
under Section 125 of the Code, or (z) to a nonqualified deferred
compensation plan. Final Average Pay shall not be increased by any
reimbursed expenses, credits, or benefits under any plan of deferred
compensation to which the Bank contributes, or any additional cash
compensation or compensation payable in a form other than cash.
1.1.8 "Good Reason" means the occurrence of any of the
following without Executive's express written consent:
a. A material breach by Bancorp or the Bank
of their obligation under a binding
employment agreement with the Executive;
b. A material reduction in the Executives's
responsibilities or authority, or a
requirement that the Executive report to any
person or group other than the board of
directors of Bancorp and the Bank (or any
other effective reduction in reporting
responsibilities) in connection with his
employment with Bancorp or the Bank;
c. Assignment to the Executive of duties of
a nonexecutive nature or duties for which he
is not reasonably equipped by his skills and
experience;
d. Failure of the Executive to be elected or
reelected to the Board of Bancorp or the
Bank;
e. Any reduction in salary or material
reduction in benefits below the amounts to
which he was entitled prior to a Change in
Control;
f. Termination of incentive and benefit plans,
programs or arrangements, or reduction of
the Executive's participation to such an
extent as to materially reduce their
aggregate value below their aggregate value
immediately prior to a Change in Control.
g. A requirement that the Executive relocate
his principal business office or his
principal place of residence outside
Xxxxxxxxxx County, Maryland, or the
assignment to the Executive of duties that
would reasonably require such a relocation;
h. A requirement that the Executive spend
more than thirty normal working days away
from Xxxxxxxxxx County, Maryland during any
consecutive twelve-month period; or
i. Failure to provide office facilities,
secretarial services, and other
administrative services to Executive that
are substantially equivalent
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to the facilities and services provided to
the Executive immediately prior to the
Change in Control (excluding brief periods
during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
Notwithstanding the foregoing a reduction or elimination of
the Executive's benefits under one or more benefit plans maintained by
Bancorp or the Bank as part of a good faith, overall reduction or
elimination of such plan or plans or benefits thereunder applicable to
all participants in a manner that does not discriminate against the
Executive (except as such discrimination may be necessary to comply
with law) shall not constitute an event of Good Reason or a material
breach of this Agreement, provided that benefits of the type or to the
general extent as those offered under such plans prior to such
reduction or elimination are not available to other officers of Bancorp
or the Bank or any company that controls either of them under a plan or
plans in or under which the Executive is not entitled to participate,
and receive benefits, on a fair and nondiscriminatory basis. This
provision shall not affect the rights of the Executive to enforce this
Agreement.
A termination with Good Reason means a Termination of
Employment by the Executive by written notice to the Bank, which notice
may be immediately effective, given within ninety days of the event of
Good Reason.
1.1.9 "Insurance Policy" means a single premium life insurance
policy which may be acquired by the Bank, in its sole discretion, as
sole owner, on the life of the Executive in connection with this
Agreement.
1.1.10 "Just Cause" means, as determined in good faith by the
Bank's board of directors, the Executive's:
a. Personal dishonesty;
b. Incompetence;
c. Willful misconduct;
d. Breach of fiduciary duty involving personal
profit;
e. Intentional failure to perform duties under
this Agreement;
f. Other, continuing material failure to
perform his duties after reasonable
notification (which shall be stated in writing
and given at least fifteen days prior to
termination) by the board of directors of the
Bank of such failure;
g. Willful violation of any law, rule or
regulation (other than traffic violations or
similar offenses) or final cease-and-desist
order; or
h. Material breach by the Executive of any
provision of this Agreement or an Employment
Agreement to which he and the Bank are parties.
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1.1.11 "Normal Retirement Date" means the date on which the
Executive has both (a) attained age sixty-five and (b) completed ten
Years of Service.
1.1.12 "Termination of Employment" means the Executive's
ceasing to be employed by the Bank for any reason whatsoever, voluntary
or involuntary, other than by reason of an approved leave of absence.
1.1.13 "Years of Service" means the total number of
twelve-month periods during which the Executive is employed on a
full-time basis by the Bank prior to and after the date of this
Agreement, inclusive of any approved leaves of absence.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. If the Executive terminates
employment on or after the Normal Retirement Date for reasons other than
death, the Bank shall pay the Executive the benefit described in this
Section 2.1.
2.1.1. Amount of Benefit. The benefit under this
Section 2.1 is one-twelfth of the Executive's Final Average Pay
multiplied by the Benefit Percentage, which product is reduced by:
2.1.1.1 Social Security Benefits. One-half of the
amount of monthly unreduced primary (not family) retirement
benefits under the United States Social Security Act that the
Executive would be eligible for if application were made as of
the Executive's sixty-fifth birthday, assuming that the
Executive had earnings at or above the maximum contribution
and benefit base under Section 230 of the United States Social
Security Act for his working career; and
2.1.1.2 Bank's Qualified Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive under the Bank's qualified
pension plan as of the Executive's Termination of Employment.
2.1.1.3 Prior Employer's Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive as of the Executive's Termination
of Employment because of employment by any and all other banks
or companies prior to the Executive's full time employment by
the Bank under any and all qualified, defined benefit pension
plans maintained by any and all such other banks or companies.
2.1.1.4 Bank's Qualified 401(k) and Profit Sharing
Plan. The straight life, maximum monthly payment, fifteen-year
annuity that may be
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purchased at the date of Termination from an issuer rated
superior by A.M. Best (or, in the Bank's discretion, with an
equivalent rating from another rating organization of similar
reputation) for cash equal to the value of the Executive's
account at the date of Termination under the Bank's Cash and
Deferred Profit Sharing Plan and Trust (or any successor plan)
attributable to Bank contributions, including the earnings
thereon.
2.1.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Termination of Employment and continuing until the later
of the Executive's death or the payment of one-hundred and seventy-nine
additional monthly payments.
2.2. Early Retirement Benefit. If the Executive terminates
employment on or after the Early Retirement Date but before the Normal
Retirement Date, and for reasons other than death or Disability, the Bank
shall pay to the Executive the benefit described in this Section 2.2.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.2.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional monthly payments.
2.3 Disability Benefit. If the Executive's employment is
terminated for Disability prior to the Normal Retirement Date, the Bank
shall pay to the Executive the benefit described in this Section 2.3.
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.3.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional months.
2.4 Change in Control Benefits. If within the period beginning six
months prior to and ending two years after a Change in Control, (a) the
Bank shall terminate the Executive's employment without Just Cause, or (b)
the Executive shall terminate his employment with Good Reason, the Bank
shall pay to the Executive the benefit described in this Section 2.4 in
lieu of any other benefit under this Agreement.
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2.4.1 Amount of Benefit. The benefit under this Section 2.4
is the Normal Retirement Benefit described in Section 2.1 calculated as
if the date of Termination of Employment were the Executive's Normal
Retirement Date, or, if elected by the Executive pursuant to Section
2.4.2.1, the Early Retirement Benefit described in Section 2.4.1
calculated as if the date of Termination of Employment were the
Executive's Early Retirement Date.
2.4.2 Payment of Benefits.
2.4.2.1 Approved Change in Control. If the Change in
Control was approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the day on which: (i) the Executive attains
age sixty-five, or, if the Executive so elects in writing
within ten days of Termination of Employment, (ii) the
Executive attains age sixty, and, in either case, continuing
until the later of the Executive's death or the payment of
one-hundred and seventy-nine additional monthly payments.
2.4.2.2 Unapproved Change in Control. If the Change
in Control was not approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the Termination of Employment and continuing
until the later of the Executive's death or one-hundred and
seventy-nine (179) additional monthly payments.
2.5. Vested Benefits following Other Terminations. Subject to
Section 2.4, if (i) the Executive voluntarily terminates employment before
the Early Retirement Date for reasons other than Death or Disability, or
(ii) the Bank terminates the Executive's Employment without Just Cause, the
Bank shall pay to the Executive the benefits described in this section.
2.5.1 Amount of Benefit. The benefit under this Section 2.5
is the straight life, maximum monthly payment, fifteen-year annuity
beginning on the first day of the month following the date on which (i)
the Executive attains age sixty-five, or, if the Executive so elects in
writing within ten days of Termination of Employment, (ii) the
Executive attains age sixty, that may be purchased in the two months
following the date of Termination from an issuer rated superior by A.M.
Best (or, in the Bank's discretion, with an equivalent rating from
another rating organization of similar reputation) for cash equal to
the amount of the vested Accrued Benefit at the date of such
termination.
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2.5.2 Vested Accrued Benefit. For purposes of this
section 2.5, only, the Accrued Benefit shall vest in accordance with the
following schedule:
Years of Percentage of Accrued
Service Benefit That Is Vested
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less than 4 0%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 60%
12 70%
13 80%
14 90%
15 100%
2.5.3 Payment of Benefit. The Bank shall pay the monthly
benefit (or cause such benefit to be paid) to the Executive, or his
beneficiary after the Executive's death, on the first day of each month
commencing with the month following the month in which the Executive
attains (i) age sixty-five, or if elected by the Executive pursuant to
section 2.5.2. (ii) age sixty. The Bank may, in its sole discretion,
purchase such an annuity for or transfer its ownership rights to the
Executive in settlement of this obligation, in which case all of the
Bank's obligations under this Agreement shall immediately terminate.
Article 3
Death Benefits
3.1 Death During Active Service. If the Executive dies while
in the active service of the Bank, the Bank shall pay to the Executive's
beneficiary the benefit described in this Section 3.1.
3.1.1 Insurance Policy in Effect. If the Executive dies
while the Insurance Policy is validly in effect, the benefit under
Section 3.1 is the greater of (i) the lifetime benefit that would have
been paid to the Executive under Section 2.1 calculated as if the date
of the Executive's death were the Normal Retirement Date, or (ii) the
straight life, maximum monthly payment, fifteen-year annuity, for
payments beginning the month following the Executive's death, that
could be purchased from an issuer rated superior by A.M. Best (or, in
the Bank's discretion, with an equivalent rating from another rating
organization of similar reputation) for cash equal to three times the
Executive's Final Average Pay.
3.1.2 Insurance Policy Not in Effect. If the Executive dies
while the Insurance Policy is not validly in effect, the benefit under
Section 3.1 is the Accrued Benefit at the date of the Executive's death
divided by one-hundred and eighty.
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3.1.3 Payment of Benefit. The Bank shall pay the benefit to
the Beneficiary on the first day of each month commencing with the
month following the Executive's death and continuing for one-hundred
and seventy-nine additional months.
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Bank. The Executive
may revoke or modify the designation at any time by filing a new
designation. However, designations will only be effective if signed by the
Executive and accepted by the Bank during the Executive's lifetime. The
Executive's beneficiary designation shall be deemed automatically revoked
if the beneficiary predeceases the Executive, or if the Executive names a
spouse as beneficiary and the marriage is subsequently dissolved. If the
Executive dies without a valid beneficiary designation, all payments shall
be made to the Executive's surviving spouse, if any, and if none, to the
Executive's surviving children and to the descendants of any deceased child
by right of representation, and if no children or descendants survive, to
the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative, or person having the care or custody of
such minor, incompetent person, or incapable person. The Bank may require
proof of incompetency, minority, or guardianship as it may deem appropriate
prior to the distribution of the benefit. Such distribution shall
completely discharge the Bank from all liability with respect to such
benefit.
Article 5
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Bank shall not pay any amount of any benefit under this Agreement:
5.1 Excess Parachute Payment. To the extent the amount of benefit
would be an excess parachute payment under Section 280G of the Code, with
consideration for any right of the Executive, under an employment agreement
with the Bank or otherwise, to waive benefits hereunder or other payments
in order to prevent an excess parachute payment.
5.2 Termination for Cause. If the Bank terminates the Executive's
employment for Just Cause.
5.3 Suicide. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, or if the
Executive has made any material misstatement of fact on any application for
the Insurance Policy.
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Article 6
Claims and Review Procedures
6.1 Claims Procedures. The Bank shall notify the Executive's
beneficiary in writing, within ninety days of his or her written
application for benefits, of his or her eligibility or noneligibility for
benefits under the Agreement. If the Bank determines that the beneficiary
is not eligible for benefits or full benefits, the notice shall set forth
(a) the specific reasons for such denial, (b) a specific reference to the
provisions of the Agreement on which the denial is based, (c) a description
of any additional information or material necessary for the claimant to
perfect his or her claim, and a description of why it is needed, and (d) an
explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the beneficiary
wishes to have the claim reviewed. If the Bank determines that there are
special circumstances requiring additional time to make a decision
regarding eligibility for benefits, the Bank shall notify the beneficiary
of the special circumstances and the date by which a decision is expected
to be made, and may extend the time by which notice may be given of such
decision for up to an additional ninety-day period.
6.2 Review Procedure. If the beneficiary is determined by the Bank
not to be eligible for benefits, or if the beneficiary believes that he or
she is entitled to greater or different benefits, the beneficiary shall
have the opportunity to have such claim reviewed by the Bank by filing a
petition for review with the Bank within sixty days after receipt of the
notice issued by the Bank. Such petition shall state the specific reasons
that the beneficiary believes entitle him or her to benefits or to greater
or different benefits. Within sixty days after receipt by the Bank of the
petition, the Bank shall afford the beneficiary (and counsel, if any) an
opportunity to present his or her position to the Bank orally or in
writing, and the beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the beneficiary of its
decision in writing within the sixty-day period, stating specifically the
basis of its decision, written in a manner calculated to be understood by
the beneficiary, and the specific provisions of the Agreement on which the
decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, notice of such decision may be deferred for up to
another sixty-day period at the election of the Bank, but notice of this
deferral shall be given to the beneficiary.
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Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and
the Bank, and their beneficiaries, survivors, executors, administrators,
and transferees.
8.2 No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the Bank's right to
discharge the Executive. It also does not require the Executive to remain
an employee nor interfere with the Executive's right to terminate
employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached, or encumbered in any
manner.
8.4 Tax Withholding. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall
be governed by the laws of the State of Maryland, except to the extent
preempted by the laws of the United States of America.
8.6 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Bank for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Bank to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. The Insurance Policy and any other
insurance on the Executive's life in which the Bank has an interest is a
general asset of the Bank to which neither the Executive nor any
beneficiary has any preferred or secured claim of any kind, and does not
represent funding for the benefit under this Agreement. Any representation
or assertion contrary to this section 8.6 is a material breach of this
Agreement by the representing or asserting party, which, if such party is
the Executive or, following his death, a beneficiary, shall immediately
result in the cessation of any and all payments and the elimination of any
liability hereunder for any payment not made prior to such assertion or
representation, and, if such party is the Bank, shall subject it to
liability for actual damages for such breach.
8.7 Non-Competition Provisions. Regardless of anything herein to
the contrary, except in the case of a Termination of Employment by the Bank
without Just Cause, a Termination of
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Employment by the Executive with Good Reason, or with the permission of the
Bank, during the two years immediately following the Executive's
Termination of Employment, the Executive shall not serve as an officer or
director or employee of any bank holding company, bank, savings
association, savings and loan holding company, or mortgage company (any of
which, a "Financial Institution") which Financial Institution offers
products or services competing with those offered by the Bank from offices
in any county in the State of Maryland or of any other State in which the
Bank or any of its affiliates has a branch, and shall not interfere with
the relationship of the Bank and any of its employees, agents, or
representatives. In the event of any breach by the Executive of this
Covenant Not to Compete, the Board of Directors of the Bank shall direct
that any unpaid balance of any payments to the Executive under this
Agreement be suspended, and shall thereupon notify the Executive of such
suspension, in writing. Thereupon, if the Board of Directors of the Bank
shall determine that such breach by the executive exists at any time after
a period of one month following notification of the such suspension, all
rights of the Executive and his beneficiary under this agreement, including
rights to any and all further payments hereunder, shall thereupon
terminate.
8.8 Successors. This Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Bank which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Bank.
IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer
have signed this Agreement.
EXECUTIVE XXXXX SPRING NATIONAL BANK OF
MARYLAND
/s/ Hunter X. Xxxxxx By:/s/ W. Xxxx Xxxxxxx
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Title: Chairman of the Board
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