EMPLOYMENT AGREEMENT
Exhibit 10.1
This sets forth the terms of the Employment Agreement made as of January 1, 2019 between (i) COMMUNITY BANK SYSTEM, INC., a Delaware corporation and registered bank holding company (“CBSI”), and COMMUNITY BANK, N.A., a national banking association (“CBNA”), both having offices located in Dewitt, New York (collectively, the “Employer”), and (ii) XXXXXX X. XXXXXX, an individual currently residing at Syracuse, New York (“Employee”). This Agreement is effective as of January 1, 2019 and supersedes the Employment Agreement between the parties dated January 1, 2016.
IN CONSIDERATION of the promises and mutual agreements and covenants contained herein, and other good and valuable consideration, the parties agree as follows:
1. | Employment. |
3. Termination. Employee’s employment by Employer shall be subject to termination as follows:
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(i) Employee’s willful breach of any material provision of this Agreement, which breach Employee shall have failed to cure within thirty (30) days following Employer’s written notice to Employee specifying the nature of the breach;
(ii) Any documented misconduct by Employee as an executive or director of Employer, or any subsidiary or affiliate of Employer for which Employee is performing services hereunder, which is material and adverse to the interests, monetary or otherwise, of Employer or any subsidiary or affiliate of Employer;
(iii) Unreasonable neglect or refusal to perform the duties assigned to Employee under or pursuant to this Agreement, unless cured within thirty (30) days following Employer’s written notice to Employee specifying the nature of the neglect or refusal;
(iv) Conviction of a crime involving any act of dishonesty, acts of moral turpitude, or the commission of a felony;
(v) Adjudication as a bankrupt, which adjudication has not been contested in good faith, unless bankruptcy is caused directly by Employer’s unexcused failure to perform its obligations under this Agreement;
(vi) Documented failure to follow the reasonable, written instructions of the Board of Directors of Employer, the Employer’s Executive Vice President and Chief Operating Officer, or the Employer’s Chief Executive Officer or authorized designee, provided that the instructions do not require Employee to engage in unlawful conduct; or
(vii) A willful violation of a material rule or regulation of the Office of the Comptroller of the Currency or of any other regulatory agency governing Employer or any subsidiary or affiliate of Employer.
Notwithstanding any other term or provision of this Agreement to the contrary, if Employee’s employment is terminated for cause, Employee shall forfeit all rights to payments and benefits otherwise provided pursuant to this Agreement; provided, however, that Base Salary shall be paid through the date of termination.
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In addition to the cash benefit described in the foregoing paragraph 3(e), Employer shall: (iii) waive all restrictions on all CBSI stock previously granted to Employee and permit Employee to dispose of any restricted stock; and (iv) treat as immediately exercisable all unexpired stock options held by Employee that are not exercisable or that have not been exercised, so as to permit Employee to purchase the balance of CBSI stock not yet purchased pursuant to said options until the end of the full exercise period provided in the original grant of the option right determined without regard to Employee’s termination of employment.
Notwithstanding the foregoing, amounts payable under clauses (i) or (ii) of this paragraph 3(e) shall be reduced by any payments made to Employee under paragraphs 6(a)(i) and (ii) of this Agreement and any payments made to Employee under any severance or similar plan, policy or program maintained by Employer.
(a) Benefit Plans. During the Period of Employment, Employee shall be eligible to participate in any employee pension benefit plans (as that term is defined under Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended), Employer-paid group life insurance plans, medical plans, dental plans, long-term disability plans, business travel insurance programs and other fringe benefit programs maintained by Employer for the benefit of (or which are applicable to) its executive employees. Participation in any of Employer’s benefit plans and programs shall be based on, and subject to satisfaction of, the eligibility requirements and other conditions of such plans and programs. Employer may require Employee to submit to an annual physical, to be performed by a physician of his own choosing. Employee shall be reimbursed for related expenses not covered by Employer’s health insurance plan, or any other plan in which Employee is enrolled. Employee shall not be eligible to participate in Employer’s Severance Pay Plan maintained for other employees not covered by employment agreements.
(i) Paid time off of twenty-one (21) days during each calendar year (with no carryover of unused vacation to a subsequent year) and any holidays that may be provided to all employees of Employer in accordance with Employer’s holiday policy;
(ii) Reasonable sick leave;
(iii) Reimbursement of membership fees and dues (but not personal expenses) for up to two club memberships and other appropriate professional associations, subject to the approval of Employer’s Executive Vice President and Chief Operating Officer, the primary purpose of which memberships shall be the promotion of Employer’s business interests. Reimbursements shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense was incurred;
(iv) The use of an Employer-owned mobile telephone and the payment or reimbursement of all Employer-related business charges incurred in connection with the use of such telephone; and
(v) The use of an Employer-owned or Employer-leased automobile, the selection and replacement of which shall be subject to the approval of Employer’s President and Chief Executive Officer (or the President and Chief Executive Officer’s designee), or at Employer’s option an automobile allowance to provide for a reasonably similar benefit consistent with similarly situated executive employees.
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5. Stock Options. Employer shall cause the Compensation Committee of the Board to review whether Employee should be granted options to purchase shares of common stock of CBSI. Such review may be conducted pursuant to the terms of the Community Bank System, Inc. 2014 Long-Term Incentive Plan, a successor plan, or independently, as the Compensation Committee shall determine. Reviews shall be conducted no less frequently than annually.
(a) If Employee’s employment with Employer (as an employee) shall cease for any reason, including Employee’s voluntary termination for “good reason” (as defined in paragraph 6(d) below), but not including Employee’s termination for “cause”(as defined in paragraph 3 (d)) or Employee’s voluntary termination without “good reason”, within two (2) years following a “Change of Control” (as defined in paragraph 6(c)) that occurs during the Period of Employment, then:
(i) Employer shall pay to the Employee the greater of (A) 300 percent of the sum of the annual Base Salary in effect at the time of Employee’s termination and the aggregate sum of all payments made to Employee during the 12 months preceding Employee’s termination pursuant to the Management Incentive Plan (or equivalent successor plan), or (B) amounts of Base Salary and expected payments under the Management Incentive Plan (or equivalent successor plan) that otherwise would have been payable through the balance of the unexpired term of this Agreement. Unless Employee is a “specified employee “(as determined in accordance with Internal Revenue Code Section 409A), the amount determined pursuant to this paragraph 6(a)(i) shall be payable in equal bi-weekly installments over the 12-month period that begins on the first day of the month following Employee’s termination. If Employee is a “specified employee” (as determined in accordance with Internal Revenue Code Section 409A), then installment payments during the first six months of the 12-month installment period shall be limited to the extent required by Internal Revenue Code Section 409A, any unpaid installment amounts shall be paid immediately after such six-month period and installment payments due during the remaining six months shall be paid as scheduled.
(ii) Subject to the applicable limitations of Internal Revenue Code Section 409A that apply if Employee is a “specified employee “(as determined in accordance with Internal Revenue Code Section 409A), Employer shall provide Employee with fringe benefits, or the cash equivalents of such benefits, identical to those described in paragraph 4(a) for a period of thirty (30) months immediately following Employee’s qualifying termination.
(iii) Employer shall treat as immediately exercisable all unexpired stock options issued by Employer and held by Employee that are not otherwise exercisable or that have not been exercised so as to permit Employee to purchase the balance of CBSI stock not yet purchased pursuant to said options until the end of the full exercise period provided in the original grant of the option right, determined without regard to Employee’s termination of employment.
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(iv) Employer shall waive all restrictions on any shares of CBSI stock granted to Employee and permit Employee to dispose of such stock.
(b) Notwithstanding any provision of this Agreement to the contrary, in the event that any payment or benefit received or to be received by the Employee in connection with a Change of Control (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement)(all such payments and benefits being hereinafter called “Total Benefits”) would be subject (in whole or in part) to the excise tax imposed pursuant to Internal Revenue Code Section 4999, then the cash severance payments provided in this Agreement shall first be reduced, and the other payments and benefits hereunder shall thereafter be reduced, to the extent necessary so that no portion of the Total Benefits will be subject to such excise tax, but only if (i) is greater than or equal to (ii), where (i) equals the reduced amount of such Total Benefits minus the aggregate amount of federal, state and local income taxes on such reduced Total Benefits, and (ii) equals the unreduced amount of such Total Benefits minus the sum of (A) the aggregate amount of federal, state and local income taxes on such Total Benefits, and (B) the amount of excise tax to which the Employee would be subject in respect of such unreduced Total Benefits.
(c) For purposes of this paragraph 6, a “Change of Control” shall be deemed to have occurred if:
(i) any “person,” including a “group” as determined in accordance with the Section 13(d)(3) of the Securities Exchange Act of 1934 (“Exchange Act”), is or becomes the beneficial owner, directly or indirectly, of securities of Employer representing 30% or more of the combined voting power of Employer’s then outstanding securities;
(ii) as a result of, or in connection with, any tender offer or exchange offer, merger or other business combination (a “Transaction”), the persons who were directors of Employer before the Transaction shall cease to constitute a majority of the Board of Directors of Employer or any successor to Employer;
(iii) Employer is merged or consolidated with another corporation and as a result of the merger or consolidation less than 70% of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of Employer, other than (A) affiliates within the meaning of the Exchange Act, or (B) any party to the merger or consolidation;
(iv) a tender offer or exchange offer is made and consummated for the ownership of securities of Employer representing 30% or more of the combined voting power of Employer’s then outstanding voting securities; or
(v) Employer transfers substantially all of its assets to another corporation, which is not controlled by Employer.
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(d) For purposes of this paragraph 6, “good reason” shall mean action taken by Employer that results in:
(i) | An involuntary and material adverse change in Employee’s authority, duties, responsibilities, or base compensation; |
(ii) | An involuntary and material relocation of the office from which Employee is expected to perform his duties; or |
(iii) | A material breach of this Agreement. |
In all cases, Employee must provide notice to Employer of the existence of a condition described in (i), (ii) or (iii) above within 30 days of the initial existence of the condition, upon the notice of which Employer shall have 30 days thereafter (the “remedy period”) in which to remedy the condition (and not be required to pay or provide the severance benefit described in this Section 6). If the “good reason” condition is not remedied within the 30-day remedy period, Employee shall receive the severance benefit described in this Section 6 only if Employee terminates employment within ten business days following the expiration of the 30-day remedy period.
(b) No Competition. Employee’s employment is subject to the condition that during the term of his employment hereunder and for the period specified in paragraph 8(c) below, Employee shall not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director, individual proprietor, lender, consultant or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business (a “Competitive Operation”) which competes in the banking industry or with any other business conducted by Employer or by any group, affiliate, division or subsidiary of Employer, in the same counties of New York, Pennsylvania or any other state in which the Employer or any such group, affiliate, division or subsidiary conducts business. Employee shall keep Employer fully advised as to any activity, interest, or investment Employee may have in any way related to the banking industry. It is understood and agreed that, for the purposes of the foregoing provisions of this paragraph, (i) no business shall be deemed to be a business conducted by Employer or any group, division, affiliate or subsidiary of Employer unless 5% or more of Employer’s consolidated gross sales or operating revenues is derived from, or 5% or more of Employer’s consolidated assets are devoted to, such business; (ii) no business conducted by any entity by which Employee is employed or in which he is interested or with which he is connected or associated shall be deemed competitive with any business conducted by Employer or any group, division, affiliate or subsidiary of Employer unless it is one from which 2% or more of its consolidated gross sales or operating revenues is derived, or to which 2% or more of its consolidated assets are devoted; and (iii) no business which is conducted by Employer on the date of Employee’s termination and which subsequently is sold by Employer shall, after such sale, be deemed to be a Competitive Operation within the meaning of this paragraph. Ownership of not more than 5% of the voting stock of any publicly held corporation shall not constitute a violation of this paragraph.
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(c) Non-Competition Period. The “non-competition period” shall begin on January 1, 2019 and shall end 12 months after the Employee’s termination of employment; provided, however, that the non-competition period shall end on the date Employee’s employment ends in the event of Employee’s termination for “good reason” (as defined in paragraph 6(d)), or Employee’s termination without cause (as defined in paragraph 3(d)).
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14. Governing Law. This Agreement was executed and delivered in New York and shall be construed and governed in accordance with the laws of the State of New York.
16. Miscellaneous. This Agreement constitutes the entire understanding and agreement between the parties with respect to the subject matter hereof and shall supersede all prior understandings and agreements, including the Employment Agreement between the parties that is scheduled to expire effective December 31, 2018. This Agreement cannot be amended, modified, or supplemented in any respect, except by a subsequent written agreement entered into by the parties hereto. The services to be performed by Employee are special and unique; it is agreed that any breach of this Agreement by Employee shall entitle Employer (or any successor or assigns of Employer), in addition to any other legal remedies available to it, to apply to any court of competent jurisdiction to enjoin such breach. The provisions of paragraphs 3(e), 6 and 8 hereof shall survive the termination of this Agreement.
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18. Jurisdiction, Venue and Fees. The jurisdiction of any proceeding between the parties arising out of, or with respect to, this Agreement shall be in a court of competent jurisdiction in New York State, and venue shall be in Onondaga County. Each party shall be subject to the personal jurisdiction of the courts of New York State. If Employee is the prevailing party in a proceeding to collect payments due pursuant to this Agreement, Employer shall reimburse Employee for reasonable attorneys’ fees incurred by Employee in connection with such proceeding. Reimbursement shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense was incurred. The foregoing right of reimbursement shall expire on the fifth anniversary of Employee’s separation of employment with Employer.
[Signature page follows.]
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The foregoing is established by the following signatures of the parties on January 4, 2019.
COMMUNITY BANK SYSTEM, INC. | ||
By: | /s/ Xxxx X. Xxxxxxxx | |
Its: | President and Chief Executive Officer | |
COMMUNITY BANK, N.A. | ||
By: | /s/ Xxxxxxxxxx X. Xxxxxx | |
Its: | SVP & Chief Human Resources Officer | |
/s/ Xxxxxx X. Xxxxxx | ||
XXXXXX X. XXXXXX |
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