Exhibit 10.3
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
EXECUTIVE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of June, 2002, by
and between County National Bank a bank organized and existing under the laws of
the State of Maryland (hereinafter referred to as the "Bank") and Xxx X. Xxxxx,
President/Chief Executive Officer of the Bank (hereinafter referred to as the
"Executive".)
WHEREAS, the Executive is now in the employ of the Bank and has
faithfully served the Bank, it is the consensus of the Board of Directors
(hereinafter referred to as the "Board") that the Executive's services have been
of exceptional merit, in excess of the compensation paid and an invaluable
contribution to the profits and position of the Bank in its field of activity.
The Board further believes that the Executive's experience, knowledge of
corporate affairs, reputation and industry contacts are of such value, and the
Executive's continued services so essential to the Bank's future growth and
profits, that it would suffer severe financial loss should the Executive
terminate his services;
ACCORDINGLY, the Board has adopted the County National Bank Executive
Supplemental Retirement Plan (hereinafter referred to as the "Executive Plan")
and it is the desire of the Bank and the Executive to enter into this Agreement
under which the Bank will agree to make certain payments to the Executive upon
the Executive's retirement, to the Executive's beneficiary(ies) in the event of
the Executive's death or otherwise as set forth herein.
FURTHERMORE, it is the intent of the parties hereto that this Executive
Plan be considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Executive and be considered a
non-qualified benefit plan for purposes of the Employee Retirement Security Act
of 1974, as amended ("ERISA"). The Executive is aware of the Bank's financial
status and has had substantial input in the design and operation of the
Executive Plan; and
NOW THEREFORE, in consideration of services the Executive has performed
in the past and those to be performed in the future, and based upon mutual
promises and covenants herein contained, the Bank and the Executive agree as
follows:
I. DEFINITIONS
A. Effective Date
The Effective Date shall be June 3, 2002.
B. Plan Year
Any reference to "Plan Year" shall mean a calendar year from
January 1st through December 31st. In the year of implementation,
the term "Plan Year" shall mean
the period from the Effective Date through December 31st of the
year of the Effective Date.
C. Normal Retirement Date
The Normal Retirement Date shall mean the first day of the
calendar month following the month in which the Executive reaches
the Normal Retirement Age.
D. Termination of Services
Termination of Service shall mean the Executive's voluntary
resignation of service or the Bank's discharge of the Executive
without cause, in each case prior to the Normal Retirement Date.
E. Pre-Retirement Account
A Pre-Retirement Account shall be established as a liability
account on the books of the Bank for the benefit of the Executive.
The Pre-Retirement account shall be increased or decreased by the
Index Retirement Benefit each Plan Year, until the earlier of (i)
Executive's Termination of Service, or (ii) the Executive's
retirement on or after the Normal Retirement Date.
F. Index Retirement Benefit
The Index Retirement Benefit for the Executive shall be equal to
the excess (if any) of the Index for that Plan Year over the Cost
of Funds Expense for that Plan Year divided by a factor equal to
1.06 minus the marginal tax rate.
G. Index
The Index for the plan Year shall be the aggregate annual
after-tax income from the life insurance contract(s) described
hereinafter as defined by FASB Technical Bulletin 85-4. This Index
shall be applied as if such insurance contract(s) were purchased
on the Effective Date.
Company #1
Insurance Company: Jefferson Pilot Life Insurance Company
Policy Form: Flexible Premium Adjustable Life
Policy Name Executive Security Plan VI
Insured's Age & Sex: 65 Male
Riders: None
Ratings: None
Option: Level
Face Amount: $502,000
Premiums Paid: $300,000
# of Premium Payments: 1
Assumed Purchase Date: June 3, 2002
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Company #2
Insurance Company: Union Central Life Insurance Company
Policy Form: Universal Life Insurance
Policy Name COLI-UL
Insured's Age & Sex: 65 Male
Riders: None
Ratings: None
Option: Level
Face Amount: $498,150
Premiums Paid: $300,000
# of Premium Payments: 1
Assumed Purchase Date: June 3, 2002
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates they were actually
purchased shall be used in calculations under this Agreement. If
such contracts of life insurance are not purchased or are
subsequently surrendered or lapsed, then the Bank shall receive
annual policy illustrations that assume the above described
policies were purchased or had not subsequently surrendered or
lapsed. Said illustrations shall be received from the respective
insurance companies and will indicate the increase in policy
values for purposes of calculating the amount of the Index.
In either case, references to the life insurance contracts are
merely for purposes of calculating a benefit. The Bank has no
obligation to purchase such life insurance and, if purchased, the
Executive and the Executive's beneficiary(ies) shall have no
ownership interest in such policy(ies) and shall always have no
greater interest in the benefits under this Executive Plan than
that of an unsecured creditor of the Bank.
H. Cost of Funds Expense
The Cost of Funds Expense for any Plan Year shall be the after-tax
amount as calculated by taking the amount of the premium(s) for
the insurance contract(s) listed above (whether or not such
policies are purchased) times the Bank's investment portfolio
yield, plus the increase in the policy's cash surrender value
since the implementation date times the interest rate paid on
federal funds sold. The interest rates used for the portfolio
yield and fed funds sold will be an average for the Plan Year.
I. Change in Control
A Change in Control shall be deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other than
the acquisition by a tax-qualified retirement plan sponsored
by CN 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 50% of the
outstanding capital stock of Bancorp or the Bank entitled to
vote for the election of directors, unless the acquisition is
pursuant to (A)
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an offering of stock by Bancorp in which existing
shareholders of Bancorp do not sell the shares of stock that
they own in Bancorp, at the time of, or in connection with
the offering, or subsequent to the offering in a manner
contemplated at the time of the offering ("Voting Stock"),
(B) the laws of descent and distribution, or (C) bona fide
gift;
ii. 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 a tender offer or an exchange offer for more than
50% of the outstanding Voting Stock of Bancorp or the Bank;
iii. The effective time of (a) 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 60% of the Voting
Stock of the surviving or resulting corporation, or (b) 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 60% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group of the
control of the election of a majority of the Bank or
Bancorp's directors,
v. 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.
J. Normal Retirement Age
Normal Retirement Age shall mean the date on which the Executive
attains age sixty-five (65).
II. INDEX BENEFITS
A. Retirement
Subject to Subparagraph II (D) hereinafter, if the Executive is
continuously employed from the Effective Date until the Normal
Retirement Date, the Executive shall be entitled to receive the
balance in the Pre-Retirement Account in one hundred and twenty
(120) equal monthly installments commencing thirty
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(30) days following the Executive's retirement. In addition to
these payments and commencing in conjunction therewith, the Index
Retirement Benefit for each Plan Year subsequent to the
Executive's retirement, and including the portion of the Plan Year
following said retirement, shall be paid to the Executive until
the Executive's death.
B. Termination of Service
Subject to Subparagraph II (D), should an Executive suffer a
Termination of Service prior to retirement, the Executive shall be
entitled to receive zero percent (0%) of the balance in the
Executive's Pre-Retirement Account if the Executive has less than
five (5) years of service, at the time of the termination, with
the Bank, and one hundred percent (100%) if the Executive has
completed, at the time of the termination, five (5) years of
service, payable to the Executive either over 120 equal payments
commencing thirty (30) days following the Executive's Normal
Retirement Age or as may otherwise be determined by the Bank, in
its sole discretion.
If an Executive suffers a Termination of Service prior to
retirement and the Executive has a vested interest in the funds in
the Pre-Retirement Account, the funds in the Pre-Retirement
Account will earn an annual interest rate the same as paid on the
Bank's retail statement savings accounts, up to the Executive's
Normal Retirement Age.
C. Death
Should the Executive die will there is a balance in the
Executive's Pre-Retirement Account, said unpaid balance of the
Executive's Pre-Retirement Account shall be paid in a lump sum to
the individual or individuals the Executive may have designated in
a written designation filed with the Bank. In the absence of any
effective beneficiary designation, the unpaid balance shall be
paid as set forth herein to the duly qualified executor or
administrator of the Executive's estate. Said payment due
hereunder shall be made the first day of the second month
following the decease of the Executive.
D. Discharge for Cause
Should the Executive be Discharged for Cause at any time, all
benefits under this Executive Plan shall be forfeited. The term
"for cause" shall mean any of the following that result in an
adverse effect on the Bank: (i) gross negligence or gross neglect;
(ii) the commission of a felony or misdemeanor involving moral
turpitude, fraud, or dishonesty; (iii) the willful violation of
any law, rule or regulation (other than a traffic violation or
similar offense); (iv) an intentional failure to perform stated
duties; or (v) a breach of fiduciary duty involving personal
profit. If a dispute arises as to discharge "for cause", such
dispute shall be resolved by arbitration as set forth in Section
VI.B. of this Agreement.
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E. Death Benefit
Except as set forth above, there is no death benefit provided
under this Agreement. The Executive has no death benefit under any
insurance contract that may be purchased by the Bank under this
Executive Plan.
III. RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Executive
Plan. The Executive, the Executive's beneficiary(ies) or any successor
in interest shall be and remain simply a general creditor of the Bank
in the same manner as any other creditor having a general claim for
matured and unpaid compensation.
The Bank reserves the absolute right, at its sole discretion, to either
fund the obligations undertaken by the Executive Plan or to refrain
from funding the same and to determine the extent, nature and method of
such funding. Should the Bank elect to fund this Executive Plan, in
whole or in part, through the purchase of life insurance, mutual funds,
disability policies or annuities, the Bank reserves the absolute right,
in its sole discretion, to terminate such funding at any time, in whole
or in part. At no time shall any Executive be deemed to have any lien
or right, title or interest in or to any specific funding investment or
to any assets of the Bank.
If the Bank elects to invest in life insurance, disability or annuity
policy upon the life of the Executive, then the Executive shall assist
the Bank by freely submitting to a physical examination and supplying
such additional information necessary to obtain such insurance or
annuities.
IV. CHANGE OF CONTROL
Upon a Change of Control, if the Executive subsequently suffers
Termination of Service, then the Executive shall receive retirement
benefits following the Executive's Normal Retirement Date as if the
Executive had been continuously employed by the Bank from the Effective
Date until the Normal Retirement Date. The Executive will also remain
eligible for any and all promised death benefits in this Executive
Plan. In addition, no sale, merger or consolidation of the Bank shall
take place unless the new or surviving entity expressly acknowledges
the obligations under this Executive Plan and agrees to abide by its
terms.
V. MISCELLANEOUS
A. Alienability and Assignment Prohibition
Neither the Executive, no the Executive's surviving spouse, nor
any other beneficiary(ies) under this Executive plan shall have
any power or right to
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transfer, assign, anticipate, hypothecate, mortgage, commute,
modify or otherwise encumber in advance any of the benefits
payable hereunder nor shall any of said benefits be subject to
seizure for payment of any debts, judgments, alimony or separate
maintenance owed by the Executive or the Executive's
beneficiary(ies), nor be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise. In the event the
Executive or any beneficiary attempts assignment, commutation,
hypothecation, transfer or disposal of the benefits hereunder, the
Bank's liabilities therefor shall forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest
The Bank shall not merge or consolidate into or with another bank
or sell substantially all of its assets to another bank, firm or
person until such bank, firm or person expressly agrees, in
writing to assume and discharge the duties and obligations of the
Bank under this Agreement. This Agreement shall be binding upon
the parties hereto, their successors, beneficiaries, heirs and
personal representatives.
C. Amendment or Revocation
It is agreed by and between the parties hereto that, during the
lifetime of the Executive, this Agreement may be amended or
revoked at any time or times, in whole or in part, by the mutual
written consent of the Executive and the Bank.
D. Gender
Whenever words are used herein in the masculine or neuter gender,
they shall be read and construed as in the masculine, feminine, or
neuter gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans
Nothing contained in this Agreement shall affect the right of the
Executive to participate in or be covered by any qualified or
non-qualified pension, profit sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a
part of the Bank's existing or future compensation structure.
F. Headings
Headings and subheadings in this Agreement are inserted for
reference and convenience only and shall not be deemed a part of
the Executive Plan.
G. Applicable Law
The validity and interpretation of this Agreement shall be
governed by the laws of the State of Maryland.
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H. 12 U.S.C. 1828(k)
Any payments made pursuant to this Agreement are subject to and
conditioned upon their compliance with 12 U.S.C. 1828(k) or any
regulations promulgated thereunder.
I. Partial Invalidity
If any term, provision, or covenant or condition of this Agreement
is determined by an arbitrator or a court, as the case may be, to
be invalid, void or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid,
void or unenforceable, and this Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
J. Employment
No provision of this Agreement shall be deemed to restrict or
limit any existing employment agreement by and between the Bank
and the Executive, nor shall any conditions herein create specific
employment rights to the Executive nor limit the right of the Bank
to discharge the Executive with or without cause. In a similar
fashion, no provision shall limit the Executive's rights to
voluntary sever the Executive's employment at any time.
K. Use of Estimated Rates
The Bank shall base calculations and payments required to be made
prior to the receipt of final Cost of Funds Expense and/or the
Index for a particular year on good faith estimates. Such
calculations shall be finalized as soon as practicable following
the receipt of final Cost of Funds Expense and the Index for such
year, and the amount of any difference between payments made and
those due pursuant to such final calculations shall be corrected,
as determined by the Bank, either by (i) adjustment of future
payments, or (ii) by lump sum payment due to the Bank from the
recipient or due to the recipient from the Bank, within two
calendar months of the final calculations.
VI. ERISA PROVISION
A. Named Fiduciary and Plan Administrator
The "Named Fiduciary and Plan Administrator" of the Executive Plan
shall be County National Bank until its resignation or removal by
the Board. As Named Fiduciary and Plan Administrator, the Bank
shall be responsible for the management, control and
administration of the Executive Plan. The Named Fiduciary may
delegate to other certain aspects of the management and operation
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responsibilities of the Executive Plan including the employment of
advisors and the delegation of ministerial duties to qualified
individuals.
B. Claims Procedure and Arbitration
In the event a dispute arises over benefits under this Executive
Plan and benefits are not paid to the Executive (or to the
Executive's beneficiary(ies) in the case of the Executive's death)
and such claimants feel they are entitled to receive such
benefits, then a written claim must be made to the Named Fiduciary
and Plan Administrator named above within sixty (60) days from the
date payments are refused. The Named Fiduciary and Plan
Administrator shall review the written claim and if the claim is
denied, in whole or in part, they shall provide in writing within
sixty (60) days of receipt of such claim the specific reasons for
such denial, reference to the provisions of this Executive plan
upon which the denial is based and any additional material or
information necessary to perfect the claim Such written notice
shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A
claim shall be deemed denied if the Named Fiduciary and Plan
Administrator fails to take any action within the aforesaid
sixty-day period.
If claimants desire a second review they shall notify the Named
Fiduciary and Plan Administrator in writing within sixty (60) days
of the first claim denial. Claimants may review this Executive
Plan or any relating thereto and submit any written issues and
comments it may feel appropriate. In their sole discretion, the
Named Fiduciary and Plan Administrator shall then review the
second claim and provide a written decision within sixty (60) days
of receipt of such claim. This decision shall likewise state the
specific reasons for the decision and shall include reference to
specific provisions of the Agreement upon which the decision is
based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Agreement or the meaning and effect
of the terms and conditions thereof, then claimants may submit the
dispute to an arbitrator for final arbitration. The arbitrator
shall be selected by mutual agreement of the Bank and the
claimants. The arbitrator shall operate under any generally
recognized set of arbitration rules. The parties hereto agree that
they and their heirs, personal representatives, successors and
assigns shall be bound by the decision of such arbitrator with
respect to any controversy properly submitted to it for
determination.
Where a dispute arises as to the Bank's discharge of the Executive
"for cause", such dispute shall likewise be submitted to
arbitration as above described and the parties hereto agree to be
bound by the decision thereunder.
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VII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE
LAW, RULES OR REGULATIONS; TAX CONSEQUENCES
The Bank is entering into this Agreement upon the assumption that
certain existing tax laws, rules and regulations will continue into
effect in their current form. If any said assumptions should change and
said change has a detrimental effect on this Executive Plan, then the
Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control, this paragraph shall become null
and void effective immediately upon said Change of Control.
Notwithstanding anything herein to the contrary, the Executive may, in
the Executive's discretion, waive any or all benefits hereunder to the
extent that the amount of such benefit would be or cause an excess
parachute payment under Section 280G of the Internal Revenue Code of
1986, as amended.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read
this Agreement and has executed the original thereof on the first day set forth
hereinabove, and that, upon execution, each has received a conforming copy.
County National Bank
Glen Burnie, Maryland
/s/ Xxxxxxx X. Xxxx By: /s/ Xxxx X. Xxxxxx
-------------------------------- ----------------------------------------
Witness Xxxx X. Xxxxxx, Executive Vice President
Executive
/s/ Xxxxxxxx X. Xxxx By: /s/ Xxx X. Xxxxx
-------------------------------- ----------------------------------------
Witness Xxx X. Xxxxx, President/CEO
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