AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit
10.7
AMENDMENT
AGREEMENT
made the 26th day of
December, 2007, by and between STERLING BANK, a New Jersey-chartered commercial
bank (the “Bank”), and XXXXXX X. XXXX, an individual (the
“Executive”).
WITNESSETH:
WHEREAS,
the parties entered into an agreement dated January 25, 2006, relating, among
other things, to the Executive’s employment by the Bank (the “Employment
Agreement”); and
WHEREAS,
the parties desire, to amend the Employment Agreement to comply with section
409A of the Internal Revenue Code of 1986, as amended (the “Code”), by executing
this document (the “Amendment”), effective as of January 25, 2006.
NOW,
THEREFORE, the parties, intending to be legally bound hereby, further agree as
follows, effective as of January 25, 2006:
1. Section
2(f) of the Employment Agreement is amended and restated to read as
follows;
(f) Voluntary Termination by the
Executive With Good Reason. The Executive may resign his
employment under this Agreement for a Good Reason at any time during the
Employment Period upon thirty (30) days notice as herein set
forth. As used in this Agreement, “Good Reason” means any of the
following, unless such circumstances are fully cured within thirty (30) days
after the Executive notifies the Bank in writing that he intends to terminate
his employment for Good Reason::
(i) any
reduction in title, a material change in reporting structure or a material
reduction in the Executive’s responsibilities or authority (including such
responsibilities and authority as the same may be increased at any time during
the Employment Period) over the operations of the Bank, which reduction or
change shall be deemed to have occurred if the Bank becomes a subsidiary of (or
integrated into) an entity that is initially controlled (determined by reference
to the voting power of its securities) by persons other than the Bank’s
shareholders immediately prior to the relevant transaction;
(ii) the
assignment to the Executive of duties inconsistent with the Executive’s title as
the President and Chief Executive Officer of the Bank, resulting in a material
negative change to the Executive in the employment relationship;
(iii) any
reassignment of the Executive that reasonably requires the Executive to move his
present principal residence referred to in Section 13, or to provide his
employment services under this Agreement at a principal office location of the
Bank that is more than 25 miles from where the Bank’s principal office is
located on the date of this Agreement;
1
(iv) any
removal of the Executive from office or any material adverse change in the terms
and conditions of the Executive’s employment, except for any termination of the
Executive’s employment under the provisions of Subsections (a), (c) or
(d);
(v) any
material reduction in the Executive’s base compensation provided in Section 3(a)
or in the Executive’s incentive compensation provided in Section 3(d), unless,
in the latter case, such reduction is in accordance with the terms of any
written incentive plan approved by the Board of Directors, in each case, as in
effect on the date hereof or as the same may be increased from time to time;
provided however, that no reduction shall be deemed to occur if it occurs by
reason of any permitted action by the Bank set forth in Section 3;
(vi) any
failure of the Bank to provide the Executive with benefits at least as favorable
(in the aggregate) as those enjoyed by him under any of the pension and welfare
(including insured welfare) benefit plans in which the Executive then currently
participates, or the taking of any action that would materially reduce any of
such benefits, unless such reduction is part of a reduction applicable to all or
substantially all of the officers of the Bank covered by such
plans;
(vii) the
failure of any successor of the Bank to assume and agree to perform (or cause to
be assumed and agreed to be performed by one of its affiliated companies) the
Bank’s obligations under this Agreement, as provided in and to the extent
required by Section 14(a); or
(viii) a
material breach of this Agreement on the part of the Bank at any relevant time,
coupled with the failure to cure the same within 30 days after receipt of a
written notice of such breach from the Executive.
At the
Option of the Executive, exercisable by him within 90 days after the occurrence
of an event constituting an event of Good Reason and after the Bank has failed
to cure or otherwise fully remedy such event within 30 days following written
notice of such event by the Executive, the Executive may resign from employment
under this Agreement by a notice in writing (the “Notice of Termination”)
delivered to the Bank, whereupon the provisions of Section 4 shall
apply. Notwithstanding the foregoing, any amounts payable upon
termination by the Executive upon the occurrence of any of the foregoing Good
Reason events shall be paid only if the Executive actually terminates employment
within two (2) years following the initial existence of such event.
2
2. Section
4(a)(ii) of the Employment Agreement is amended and restated to read as
follows;
(ii) The
Executive shall also be entitled, at the Bank’s sole cost, to
continuation of welfare benefits in which he was participating as of the date of
his termination of employment, for a period of three-years following such
termination; provided, however, that this provision shall not result in
duplication of any of such benefits as otherwise provided for
herein. To the extent it is determined that any benefits under the
preceding sentence are taxable to the Executive, they are intended to constitute
payments made upon an involuntary termination from service and payable pursuant
to Treas. Reg. §1.409A-1(b)(9)(iii), to the maximum extent permitted by said
provision and to the extent the payment of such taxable benefits would exceed
the specified time period under Treas. Reg. §1.409A-1(b)(9)(iii), Executive
shall be paid, within thirty (30) days of the date of termination, a lump sum
amount in cash equal to the present value (determined based upon the interest
rate provided in Section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as
amended (the “Code”)) of the Bank’s cost, as of the date of termination, of
otherwise providing such benefit beyond the specified time period under Treas.
Reg. §1.409A-1(b)(9)(iii). To the extent any such benefit may not be
provided to the Executive because he is no longer an employee of the Bank, the
Bank shall pay Executive, within thirty (30) days of the date of termination, a
lump sum payment in an amount equal to the present value (using the interest
rate provided in Code Section 1274(b)(2)(B)) of 100% of the cost to the Bank,
under the applicable welfare benefit plans of the Bank, for providing such
benefits to the Executive, his spouse and eligible dependents, if any, for the
period commencing as of the first day of the first month next following the date
of termination and continuing for thirty-six months thereafter, at the cost in
effect as of the date of termination (less the Executive’s portion of the cost
for the active plans) and assuming an annual 10% increase in the amount of such
costs over the period described in this Section.
3. Section
4(a)(iii) of the Employment Agreement is amended and restated to read as
follows;
(iii) In
the event that the amounts and benefits payable under this section, when added
to other amounts and benefits which may become payable to the Executive by the
Bank (the “Payments”), are such that he becomes subject to the excise tax
provisions of Code Section 4999, the
3
Bank
shall pay him such additional amount or amounts (the “Gross-Up Payments”) as
will result in his retention (after the payment of all federal, state and local
excise, employment, and income taxes with respect to the Payments) of a net
amount equal to the net amount he would have retained had the initially
calculated Payments been subject only to income and employment
taxation. For purposes of determining the amount of Gross-Up
Payments, the Executive shall be deemed to be subject to the highest marginal
federal, state, local and (if relevant) foreign tax rates. All
calculations required to be made under this paragraph shall be made by the
Bank’s independent public accountants, subject to the right of the Executive’s
representative to review the same. All such amounts required to be
paid shall be paid at the time any withholding may be required under applicable
law, and any additional amounts to which the Executive may be entitled shall be
paid or reimbursed no later than 15 days following confirmation of such amount
by the Bank’s independent accountants, but in no event later than the end of the
Executive’s taxable year next following the Executive’s taxable year in which
the Executive or the Bank (as the case may be) remits the related
taxes. In the event any amounts paid hereunder by the Bank are
subsequently determined to be in excess of the amounts owed because estimates
were required or otherwise, the Executive will reimburse the Bank to correct the
error upon written notice from the Bank, together with written confirmation of
the same by the Bank’s independent accountants, as appropriate, and to pay
interest thereon at the applicable federal rate (as determined under Code
Section 1274 for the period of time such erroneous amount remained outstanding
and unreimbursed). In the event any amounts paid hereunder by the
Bank are subsequently determined to be less than the amounts owed (or paid later
than when due) for any reason, the Bank will pay to the Executive the deficient
amount, together with (i) interest at the greater of the above-referenced rate
or the interest he may be required to pay taxing authorities, plus (ii) any
penalties assessed against him by such authorities. Prior to its
payment to the Executive, the Bank shall be entitled to request the delivery of
proof (by calculations made by the Executive’s accountant or, in the case of tax
assessments, the Executive’s delivery of copies of such assessments) of the
underpaid amounts and any interest or penalties assessed by taxing
authorities. The parties recognize that the actual implementation of
the provisions of this subsection are complex and agree to deal with each other
in good faith to resolve any questions or disagreements arising
hereunder.
4. A new
Section 4(a)(v) is added to the Employment Agreement, reading as
follows;
(v) Any
payments made pursuant to this Section 4(a), to the extent of payments made from
the date of termination of Executive’s employment through March 15th of the
calendar year following such termination, are intended to constitute separate
payments for purposes of Treas. Reg. §1.409A-2(b)(2) and thus payable pursuant
to the “short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to
the extent such payments are
4
made
following said March 15th, they are intended to constitute separate payments for
purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination
from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the
maximum extent permitted by said provision. Notwithstanding the
foregoing, if the Bank determines that any other payments hereunder fail to
satisfy the distribution requirement of Code Section 409A(a)(2)(A), the payment
of such benefit shall be delayed to the minimum extent necessary so that such
payments are not subject to the provisions of Code Section
409A(a)(1).
5. A new
Section 4(e) is added to the Employment Agreement, reading as
follows;
(e) Separation from
Service. Notwithstanding anything in this Agreement to the
contrary, the receipt of any benefits under this Section 4 as a result of
Executive’s termination of employment shall be subject to satisfaction of the
condition precedent that the Executive undergo a “separation from service”
within the meaning of Treas. Reg. § 1.409A-1(h) or any successor
thereto.
6. Section
17 of the Employment Agreement is deleted in its entirety and Section 18 is
renumbered accordingly.
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused it
to be executed, as of the date first above written.
STERLING
BANK
By: /s/ R. Xxxxx
Xxxxxx
Date: December
26, 2007
[CORPORATE
SEAL] Attest: /s/ Xxxx X.
Xxxxx
Date: December
26, 2007
/s/ Xxxxxx X.
Xxxx
Xxxxxx X.
Xxxx
Date: December
26, 2007
5
