AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
Exhibit
4
AMENDED
AND RESTATED
This
Agreement, effective as of this 22nd day of December, 2006
(the "Effective Date") by and between Smithtown Bancorp, Inc., a New York
corporation (the "Company"), Bank of Smithtown, a New York banking institution
(the "Bank"), and Xxxxxx X. Xxxxxxx (the "Executive"), Executive Vice President
and Chief Commercial Lending Officer of the Company and the Bank.
WHEREAS,
the Company and the Bank consider it essential to the best interests of the
Company's stockholders and the operations of the Bank to xxxxxx the continuing
employment of key management personnel by minimizing the uncertainty and
distraction among, and departures by, senior management personnel in the event
of a Change in Control (as defined herein).
NOW
THEREFORE, the Company, the Bank and the Executive, in consideration of the
premises and mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
agree as follows:
1.
Change
in Control.
A
"Change in Control" means any one of the following events:
(a)
Merger:
The
Company merges into or consolidates with another corporation, or merges another
corporation into the Company and, as a result, less than a majority of the
combined voting power of the resulting corporation immediately after the merger
or consolidation is held by persons who were stockholders of the Company
immediately before the merger or consolidation;
(b) Acquisition
of Significant Share Ownership: A
report
on Schedule 13D or another form or schedule (other than Schedule 13G) is filed
or is required to be filed under Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, if the schedule discloses that the filing person(s) has
or
have become the beneficial owner(s) of 25% or more of a class of the Company's
voting securities, but this clause (b) shall not apply to beneficial ownership
of Company voting shares held in a fiduciary capacity by an entity of which
the
Company directly or indirectly beneficially owns 50% or more of its outstanding
voting securities;
(c)
Change
in Board Composition: During
any period of two consecutive years, individuals who constitute the Company's
or
the Bank's Board of Directors at the beginning of the two-year period cease
for
any reason to constitute at least a majority of the Company's or the Bank's
Board of Directors; provided, however, that for purposes of this clause (c),
each director who is first elected by such board (or first nominated by such
board for election) by a vote of at least two-thirds (2/3) of the directors
who
were directors at the beginning of the period shall be deemed to have been
a
director at the beginning of the two-year period; or
(d) Sale
of
Assets: The Company or the Bank sell to a third party all or substantially
all
of their assets.
2. Terminating
Event.
A
"Terminating Event" shall mean any of the events provided in this Section 2
which occurs within twenty-four (24) months following the effective date of
a
Change in Control as defined in Section l:
(a) Termination
by the Bank or the Company of the employment of the Executive with the Bank
or
the Company for any reason other than Cause. "Cause" shall mean any act of
dishonesty by the Executive resulting in the substantial personal enrichment
of
the Executive at the expense of the Bank and/or the Company. The Executive
shall
not be deemed to have been terminated for Cause by the Bank or the Company
unless there has been delivered to the Executive a copy of a resolution duly
adopted by a majority of the entire membership of the Board of Directors at
a
meeting of the Board duly called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive to be heard before
the Board with counsel) finding that, in the good faith opinion of the Board,
the Executive was guilty of the conduct described above and specifying the
particulars of such conduct. If
the
Bank or the Company terminates the Executive's employment for Cause, the Bank
and the Company shall have no further obligations to make any payments to the
Executive under this Agreement.
(b) Termination
by the Executive of his employment with the Bank and the Company, upon the
provision of thirty (30) days' advance written notice, for Good Reason. "Good
Reason" shall mean termination upon the occurrence of or after any of the
following events:
(i)
A
significant adverse change, not consented to by the Executive, in the nature
or
scope of the Executive's responsibilities, authority, powers, functions or
duties from those exercised by the Executive immediately prior to a Change
in
Control;
(ii)
A
reduction in the Executive's base annual salary or cash incentive compensation
opportunity as measured by reference to the Executive's base salary and cash
incentive compensation opportunity prior to the date of the Change in
Control;
(iii)
A
relocation of the Executive's employment to any location that is more than
fifty
(50) miles from the Executive's primary employment location at the time of
the
Change in Control, or a requirement that the Executive travel more than 30
working days in any calendar year or more than 10 consecutive calendar days
at
any one time.
(iv)
A
failure to continue in effect or a reduction in any benefit programs or
perquisites in which the Executive participated or which were provided to the
Executive prior to the Change in Control, including stock compensation benefits,
unless the Company or the Bank provides the Executive with a plan or plans
that
provide substantially similar benefits, or unless such changes or reductions
are
required by law or are made on a non-discriminatory basis and are generally
applicable to all employees;
(v)
Failure by the Company or the Bank to require a successor to assume and agree
to
perform their respective obligations under this Agreement; or
(vi)
A
material breach by the Company or the Bank of any of their respective
obligations under this Agreement.
3.
Severance
Payments. Upon
the
occurrence of a Terminating Event, the Company or the Bank shall pay to the
Executive as severance the following:
(a) An
amount
equal to three (3) times the sum of (x) the Executive's highest annual rate
of
base salary during the three (3) most recently completed calendar years
preceding the effective date of the Change in Control and (y) the highest annual
bonus or similar cash incentive compensation paid to the Executive or accrued
on
the Executive's behalf during the three (3) most recently completed calendar
years preceding the effective date of the Change in Control. The sum due under
this Section shall be paid, at the election of the Executive, in one lump sum
within thirty (30) calendar days after such termination or monthly for a period
of thirty-six (36) months from the date of termination.
(b) An
amount
equal to the contributions and benefits the Executive would have received for
the thirty-six months under any tax-qualified or non-qualified benefit or
retirement programs in which she participated prior to his termination (with
the
amount of the benefits determined by reference to the benefits received by
the
Executive (or the accruals made on his behalf) under such programs during the
most recently completed calendar year preceding his termination. The sum due
under this Section shall be paid, at the election of the Executive, in one
lump
sum within thirty (30) calendar days after such termination or monthly for
a
period of thirty-six (36) months from the date of termination.
(c) The
Executive shall become fully vested in all unvested restricted stock awards
and
other stock-based benefits provided by the Company or the Bank, and all unvested
stock options shall be fully vested and exercisable by the Executive as of
his
termination date.
(d) The
Executive shall, for a period of thirty-six (36) months following termination,
continue to participate in any benefit plans of the Company and the Bank that
provide health, dental, medical, life or disability insurance, or similar
coverage, upon terms no less favorable than the most favorable terms provided
to
senior executives of the Company or the Bank during such period. In the event
that the Company or the Bank is unable to provide the coverage referred to
in
the preceding sentence by reason of the Executive no longer being an employee,
the Company and the Bank shall provide the Executive with comparable coverage
on
an individual policy basis or, if individual coverage is not available, provide
a cash payment equivalent to the value of such individual coverage.
4. Adjustment
of Certain Payments and Benefits.
(a) Tax
Indemnification.
Notwithstanding anything in this Agreement to the contrary and except as set
forth below, in the event it shall be determined that any payment, benefit
or
distribution made or provided by the Company or the Bank to or for the benefit
of the Executive (whether made or provided pursuant to the terms of this
Agreement or otherwise) (each referred to herein as a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or any interest or penalties are incurred
by
the Executive with respect to such excise tax (the excise tax, together with
any
such interest and penalties, are herein collectively referred to as the "Excise
Tax"), the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that, after payment by the Executive
of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Determination
of Gross-Up Payment.
Subject
to the provisions of Section 4(c), all determinations required to be made under
this Section 4, including whether and when a Gross-Up Payment is required,
the
amount of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by a certified public accounting firm
reasonably acceptable to the Company and the Bank as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations to the Company, the Bank and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been
a
Payment, or such earlier time as is requested by the Company and the Bank.
All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Bank. Any Gross-Up Payment, as determined pursuant to this Section
4,
shall be paid to the Executive within five business days of the later of (i)
the
due date for the payment of any Excise Tax, and (ii) the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company, the Bank and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code, at the time of
the
initial determination by the Accounting Firm hereunder, it is possible that
a
Gross-Up Payment will not have been made by the Company and the Bank which
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company and the Bank
exhaust their remedies pursuant to Section 4(c) and the Executive thereafter
is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company or the Bank to or for the
benefit of the Executive.
(c)
Treatment
of Claims.
The
Executive shall notify the Company and the Bank in writing of any claim by
the
Internal Revenue Service that, if successful, would require a Gross-Up Payment
to be made. Such notification shall be given as soon as practicable, but no
later than ten business days, after the Executive is informed in writing of
such
claim and shall apprise the Company and the Bank of the nature of such claim
and
the date on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the thirty (30) day period following
the date on which it gives such notice to the Company and the Bank (or any
shorter period ending on the date that payment of taxes with respect to such
claim is due). If the Company or the Bank notifies the Executive in writing
prior to the expiration of this period that it desires to contest such claim,
the Executive shall:
(i)
give
the Company and the Bank any information reasonably requested by the Company
and
the Bank relating to such claim;
(ii)
take such action in connection with contesting such claim as the
Company
and the Bank shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect
to such claim by an attorney reasonably selected by the Company and
the
Bank;
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(iii)
cooperate with the Company and the Bank in good faith in order to
effectively contest such claim; and
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(iv)
permit the Company and the Bank to participate in any proceedings relating
to
such claim; provided, however, that the Company and the Bank shall bear and
pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and indemnity and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or related taxes, interest
or penalties imposed as a result of such representation and payment of costs
and
expenses. Without limitation on the foregoing provisions of this Section 4(c),
the Company and the Bank shall control all proceedings taken in connection
with
such contest and, at their option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority with respect to such claim and may, at their option, either direct
the
Executive to pay the tax claimed and xxx for a refund or contest the claim
in
any permissible manner. Further, the Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company and the Bank
shall determine; provided, however, that if the Company directs the Executive
to
pay such claim and xxx for a refund, the Company and the Bank shall advance
the
amount of such payment to the Executive on an interest-free basis (including
interest or penalties with respect thereto). Furthermore, the Company's and
the
Bank's control of the contest shall be limited to issues with respect to which
a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) Adjustments
to the Gross-Up Payment.
If,
after the receipt by the Executive of an amount advanced by the Company or
the
Bank pursuant to Section 4(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
or the Bank's compliance with the requirements of Section 4(c)) promptly pay
to
the Company or the Bank the amount of such refund (together with any interest
paid or credited thereon after applicable taxes). If, after the receipt by
the
Executive of an amount advanced by the Company or the Bank pursuant to Section
4(c), a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and such denial of refund occurs prior to
the
expiration of thirty (30) days after such determination, then such advance
shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of the Gross-Up Payment
required to be paid.
5. Term. This
Agreement shall take effect on the Effective Date first set forth above and
shall remain in effect for so long as the Executive remains an employee of
the
Company and the Bank, subject to the rights of the Executive hereunder upon
the
occurrence of a Terminating Event.
6. Withholding.
All
payments made by the Company or the Bank under this Agreement shall be net
of
any tax or other amounts required to be withheld by the Company or the Bank
under applicable law.
7. No
Mitigation.
The
Company and the Bank agree that, if the Executive's employment is terminated
during the term of this Agreement, the Employee is not required to seek other
employment or to attempt in any way to reduce amounts payable to the Executive
under this Agreement; further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive
as a
result of employment with another employer, by retirement benefits, or offset
against any amount claimed to be owed by the Executive to the Company or the
Bank or any of their affiliates.
8. Assignment.
Except
as otherwise provided herein, neither the Company and the Bank, nor the
Executive, may assign this Agreement or any interest therein, by operation
of
law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer or assignment shall be null and
void
and of no effect. In the event of the Executive's death after a Terminating
Event, but prior to the completion of all payments due the Executive under
Section 3 of this Agreement, the Company or the Bank shall continue to make
such
payments to the Executive's duly designated beneficiary(ies) or
estate.
9. Successors.
In
addition to any obligations imposed by law upon any successors, the Company
and
the Bank shall require any successors (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company and the Bank, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company and
the Bank would be required to perform if no such succession had taken
place.
10. Severability. If
any
portion or provision of this Agreement shall be declared illegal or
unenforceable for any reason, then the remaining portions or provisions of
this
Agreement shall be unaffected and shall continue in full force and effect to
the
fullest extent permitted by law.
11. Amendment
and Waiver.
This
Agreement may be amended or modified only by means of a written instrument
signed by the Executive and the duly authorized representatives of the Company
and the Bank. No
waiver
of any provision of this Agreement shall be effective unless made in writing
and
signed by the waiving party. The failure of any party to require the performance
of any term or obligation of this Agreement, or the waiver by any party of
a
breach of this Agreement, shall not prevent any subsequent enforcement of such
term or obligation or be deemed a waiver of any subsequent breach of this
Agreement.
12. Notices.
Any
notices, requests, demands or other communications provided for by this
Agreement shall be sufficient if in writing and delivered in person or sent
by
registered or certified mail, postage prepaid, to the Executive at the last
address the Executive has filed in writing with the Company or the Bank, or
to
the Company at its main office, to the attention of the Board of
Directors.
13. Source
of Payments.
All
payments provided for in this Agreement shall be timely paid in cash or check
from the general funds of the Bank. The Company, however, unconditionally
guarantees payment and provision of all amounts and benefits due hereunder
to
the Executive and, if such amounts and benefits are not paid or provided by
the
Bank, such amounts and benefits shall be paid or provided by the
Company.
14. Effect
of Prior Agreements and Existing Benefit Plans.
This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment or change in control agreement between the
Bank
or any predecessor of the Bank and the Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation inuring to
the
Executive of a kind elsewhere provided. No provision of this Agreement shall
be
interpreted to mean that the Executive is subject to receiving fewer benefits
than those available to his without reference to this Agreement.
15. No
Contract of Employment.
Nothing
in this Agreement shall be construed as creating an express or implied contract
of employment and, except as otherwise agreed to in writing between the
Executive, the Company and/or the Bank, the Executive shall not have any right
to be retained in the employ of the Company or the Bank.
16. Arbitration.
Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three (3)
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from the location of the Company, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the
arbitrator's award in any court having jurisdiction; provided, however, that
the
Executive shall be entitled to seek specific performance of his right to be
paid
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
17. Payment
of Legal Fees.
All
reasonable legal fees paid or incurred by the Executive pursuant to any dispute
or question of interpretation relating to this Agreement shall be paid or
reimbursed by the Company or the Bank, only if the Executive is successful
pursuant to a legal judgment, arbitration or settlement.
18. Governing
Law.
The
provisions of this Agreement shall be constructed in accordance with the laws
of
the State of New York, without regard to conflicts of law principles
thereof.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
ATTEST:
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SMITHTOWN
BANCORP, INC.
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By:
Xxxxxxx X. Rock
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Title:
Chairman, President & CEO
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ATTEST:
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BANK
OF SMITHTOWN
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By:
Xxxxxxx X. Rock
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Title:
Chairman, President & CEO
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WITNESS:
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Xxxxxx
X. Xxxxxxx
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