ESB FINANCIAL CORPORATION AMENDED AND RESTATED DIRECTOR RETIREMENT AGREEMENT
Exhibit 10.6
[Form for Director Agreement at Company Level]
THIS AMENDED AND RESTATED AGREEMENT is made and entered into this 21st day of November
2006, by and between ESB Financial Corporation, located in Ellwood City, Pennsylvania (“ESB
Financial”), ESB Bank, a wholly-owned subsidiary of ESB Financial, also located in Ellwood City,
Pennsylvania (the “Bank”), and (the “Director”), intending to be legally bound hereby.
ESB Financial and the Bank are collectively referred to herein as the “Corporation.”
INTRODUCTION
ESB Financial and the Director previously entered into a certain Director Retirement Agreement
dated as of , 200___(the “Prior Agreement”). This Agreement amends and restates the Prior
Agreement in its entirety as hereinafter set forth in order to comply with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), including the guidance
issued to date by the Internal Revenue Service (the “IRS”) and the proposed regulations issued by
the IRS in the fall of 2005. No benefits payable under this Agreement shall be deemed to be
grandfathered for purposes of Section 409A of the Code.
This Agreement shall at all times be characterized as a “top hat” plan of deferred
compensation maintained for a select group of management or highly compensated employees, as
described under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security
Act of 1974, as amended, and any regulations relating thereto (“ERISA”). The
Agreement has been and shall continue to be operated in compliance with Section 409A of the
Code. The Agreement is an unfunded plan for tax purposes. The provisions of the Agreement shall
be construed to effectuate such intentions.
AGREEMENT
The Director and the Corporation agree as follows:
Article 1
Definitions
Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings
specified:
1.1 “Base Board Fees” means the regular monthly Bank and ESB Financial board fees and does not
include committee fees, advisory board fees, director emeritus fees, liaison fees or other income
that might be received by the Director.
1.2 “Change in Control” means a change in the ownership of ESB Financial or the Bank, a change
in the effective control of ESB Financial or the Bank or a change in the ownership of a substantial
portion of the assets of ESB Financial or the Bank, in each case as provided under Section 409A of
the Code and the regulations thereunder.
1.3 “Code” means the Internal Revenue Code of 1986, as amended.
1.4 “Deferred Retirement” means the Director has met the eligibility requirements described in
Article 2 and has a Separation from Service after his Normal Retirement Age for any reason other
than following a Change in Control.
1.5 “Deferred Retirement Date” means the first day of the month coincident with or next
following the date of the Director’s Separation from Service subsequent to the Director’s Normal
Retirement Age.
1.6 “Early Termination” means the Director has met the eligibility requirements described in
Article 2 but has a Separation from Service before Normal Retirement Age for any reason other than
following a Change in Control.
1.7 “Early Termination Date” means the month, day and year in which Early Termination occurs.
1.8 “Effective Date” means February 11, 2005.
1.9 “Normal Retirement Age” means the Director’s 75th birthday.
1.10 “Plan Year” means the calendar year. In the year of inception, the Plan Year commences
on the Effective Date of this Agreement and ends on December 31st of the same year.
1.11 “Separation from Service” means a separation from service within the meaning of Section
409A of the Code and the regulations thereunder for any reason other than death, provided that a
bona fide leave of absence which is approved by the Board of Directors of the Bank shall not
constitute a separation from service. In addition, if the Director becomes a director emeritus, he
will not have a separation from service until his service as a director emeritus ceases. For
purposes of this Agreement, if there is a dispute over the service status of the Director or the
date of the Director’s Separation from Service, the Bank shall have the sole and absolute right to
decide the dispute.
1.12 “Specified Employee” means a key employee within the meaning of Section 409A of the Code
and the regulations thereunder.
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1.13 “Termination for Cause” has the meaning set forth in Section 6.2.
1.14 “Years of Service” means the total number of continuous years of service as a Director of
the Bank or ESB Financial, inclusive of any approved leaves of absences and service as a member of
the Board of Directors of any bank acquired by the Bank or ESB Financial, including all years of
service accrued prior to the Effective Date; provided, however, that a year of service as a
director of both the Bank and ESB Financial concurrently shall only count as one year of service;
and provided further, that any service as a director emeritus or as an advisory director shall be
excluded in determining Years of Service.
Article 2
Eligibility to Participate
Eligibility to Participate
To be entitled to any benefit under this Agreement, the Director must have a minimum of 5
Years of Service as a director of the Bank or ESB Financial (as opposed to service as a director of
any bank or company acquired by the Bank or ESB Financial) and a minimum of 10 total Years of
Service.
Article 3
Retirement Benefits
Retirement Benefits
3.1 Annual Normal Retirement Benefit. If the Director satisfies the requirements of Article 2
and remains in continuous service as a member of the Board of Directors of the Bank or ESB
Financial from the Effective Date of this Agreement until Normal Retirement Age, the Corporation
shall pay to the Director the benefit described in this Section 3.1 in lieu of any other benefit
under this Agreement.
3.1.1 Amount of Benefit. The Annual Normal Retirement Benefit under this Section 3.1
will be determined using the following formula:
The Director’s Base Board Fees earned during the last full calendar year prior to
his retirement date (or, if earlier, the last full calendar year prior to becoming a
director emeritus), multiplied by a ratio ranging from 25% to 50% based on the
Director’s total Years of Service as follows:
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| Years of Service | Retirement Percentage | |||
10 |
25.0 | % | ||
11 |
27.5 | % | ||
12 |
30.0 | % | ||
13 |
32.5 | % | ||
14 |
35.0 | % | ||
15 |
37.5 | % | ||
16 |
40.0 | % | ||
17 |
42.5 | % | ||
18 |
45.0 | % | ||
19 |
47.5 | % | ||
20 or more |
50.0 | % | ||
3.1.2 Payment of Benefit. The Corporation shall pay the annual benefit to the Director
each year for five years, with the annual benefits to be paid in equal monthly installments on
the first day of each month commencing with the month following the Director’s Separation from
Service and continuing for the 59 months that follow, subject to Section 3.5 hereof.
3.2 Early Termination Benefit. Upon Early Termination, the Corporation shall pay to the
Director the benefit described in this Section 3.2 in lieu of any other benefit under this
Agreement.
3.2.1 Amount of Benefit. The benefit under this Section 3.2 is the Early Termination
Annual Benefit set forth in Schedule A for the Plan Year ended immediately prior to the Early
Termination Date, subject to Section 3.5 hereof.
3.2.2 Payment of Benefit. The Corporation shall pay the benefit to the Director (or his
beneficiary if Separation from Service was due to death) in a lump sum payment within 60 days
of the Director’s Early Termination Date.
3.3 Deferred Retirement Benefit. If the Director satisfies the requirements of Article 2 and
remains in continuous service as a member of the Board of Directors of the Bank or ESB Financial
from the Effective Date of this Agreement until his Deferred Retirement Date, the Corporation shall
pay to the Director the benefit described in this Section 3.3 in lieu of any other benefit under
this Agreement.
3.3.1 Amount of Benefit. The Deferred Retirement Benefit under this Section 3.3 will be
determined using the same formula as set forth in Section 3.1.1 above.
3.3.2
Payment of Benefit. The Corporation shall pay the annual benefit to the Director
each year for five years, with the annual benefits to be paid in equal monthly installments on
the first day of each month commencing with the month following the Director’s Separation from Service and continuing for the 59 months that follow, subject
to Section 3.5 hereof.
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3.4 Change in Control Annual Benefit. If the Director satisfies the requirements of Article 2
and is in the active service of the Corporation at the time of a Change in Control, and does not
resign his service with the Corporation prior to the consummation of the transaction which
constitutes the Change in Control, the Corporation shall pay to the Director the benefit described
in this Section 3.4 in lieu of any other benefit under this Agreement.
3.4.1 Amount of Benefit. The annual benefit under this Section 3.4 is the Director’s
Base Board Fees earned during the last full calendar year prior to consummation of the Change
in Control (or, if earlier, the last full calendar year prior to becoming a director emeritus)
multiplied by 50%.
3.4.2 Payment of Benefit. The Corporation shall pay the annual benefit to the Director
each year for five years, with the annual benefits to be paid in equal monthly installments
commencing on the first day of the month following consummation of the Change in Control and
continuing for the 59 months that follow.
3.5 Six-Month Delay. If the Director is a Specified Employee upon reaching Normal Retirement
Age, then the monthly payments specified in Section 3.1.2 above shall not commence until the first
day of the month following the lapse of six months after reaching Normal Retirement Age, and shall
then continue for the 59 months that follow. If the Director is a Specified Employee upon Early
Termination, then the lump sum payment specified in Section 3.2.2 above shall be delayed until the
first day of the month following the lapse of six months after the Early Termination Date. If the
Director is a Specified Employee upon Deferred Retirement, then the monthly payments specified in
Section 3.3.2 above shall not commence until the first day of the month following the lapse of six
months after the Deferred Retirement Date, and shall then continue for the 59 months that follow.
Article 4
Death Benefits
Death Benefits
4.1 Death During Benefit Period. If the Director dies after the benefit payments have
commenced under this Agreement but before receiving all such payments, the Corporation shall pay
the remaining benefits to the Director’s beneficiary at the same time and in the same amounts they
would have been paid to the Director had the Director survived.
4.2 Death Before Benefit Payments Commence. If the Director is entitled to benefit payments
under this Agreement, but dies prior to the commencement of said benefit payments, the Corporation
shall pay the benefit payments to the Director’s beneficiary that the Director was entitled to
prior to death, except that the benefit payments shall commence on the first day of the month
following the date of the Director’s death.
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Article 5
Beneficiaries
Beneficiaries
5.1 Beneficiary Designations. The Director shall designate a beneficiary by filing a written
designation with the Corporation. The Director may revoke or modify the designation at any time by
filing a new designation. However, designations and revocations or modifications of designations
shall only be effective if they are filed with the Corporation as a written document, signed by the
Director and accepted by the Corporation during the Director’s lifetime. The Director’s beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases the Director, or
if the Director names a spouse as beneficiary and the marriage is subsequently dissolved. If the
Director dies without a valid beneficiary designation, all payments shall be made to the Director’s
estate.
5.2 Facility of Payment. If a benefit is payable to a minor, to a person declared
incapacitated, or to a person incapable of handling the disposition of his or her property, the
Corporation may pay such benefit to the guardian, legal representative or person having the care or
custody of such minor, incapacitated person or incapable person. The Corporation may require proof
of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Corporation from all liability with
respect to such benefit.
Article 6
General Limitations
General Limitations
6.1 Excess Parachute or Golden Parachute Payment. Notwithstanding any provision of this
Agreement to the contrary, the Corporation shall not pay any benefit under this Agreement to the
extent the benefit would be a parachute payment under Section 280G of the Code or would be a
prohibited golden parachute payment pursuant to 12 C.F.R. §359.2 and for which the appropriate
federal banking agency has not given written consent to pay pursuant to 12 C.F.R. §359.4.
6.2 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary,
the Corporation shall not pay any benefit under this Agreement if the Corporation terminates the
Director’s service for:
6.2.1 Gross negligence or gross neglect of duties;
6.2.2 Commission of a felony or of a gross misdemeanor involving moral turpitude; or
6.2.3 Fraud, disloyalty, dishonesty or willful violation of any law or significant
Corporation policy committed in connection with the Director’s service and resulting in an
adverse effect on the Corporation.
6.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the
Corporation shall not pay any benefit under this Agreement if the Director is subject to a final
removal or prohibition order issued by an appropriate federal banking agency pursuant to
Section 8(e) of the Federal Deposit Insurance Act.
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Article 7
Claims and Review Procedures
Claims and Review Procedures
7.1 Claims Procedure. A Director or beneficiary (“claimant”) who has not received benefits
under the Agreement that he or she believes should be paid shall make a claim for such benefits as
follows:
7.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the
Bank a written claim for the benefits.
7.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days
after receiving the claim. If the Bank determines that special circumstances require
additional time for processing the claim, the Bank can extend the response period by an
additional 90 days by notifying the claimant in writing, prior to the end of the initial
90-day period, that an additional period is required. The notice of extension must set forth
the special circumstances and the date by which the Bank expects to render its decision.
7.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall
notify the claimant in writing of such denial. The Bank shall write the notification in a
manner calculated to be understood by the claimant. The notification shall set forth:
7.1.3.1 The specific reasons for the denial,
7.1.3.2 A reference to the specific provisions of the Agreement on which the denial
is based,
7.1.3.3 A description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is needed,
7.1.3.4 An explanation of the Agreement’s review procedures and the time limits
applicable to such procedures, and
7.1.3.5 A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the
opportunity for a full and fair review by the Bank of the denial, as follows:
7.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days
after receiving the Bank’s notice of denial, must file with the Bank a written request for
review.
7.2.2 Additional Submissions – Information Access. The claimant shall have the opportunity
to submit written comments, documents, records and other information relating to the claim as
part of the claimant’s written request for review. The Bank shall also provide
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the claimant,
upon request and free of charge, reasonable access to, and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim
for benefits.
7.2.3 Considerations on Review. In considering the review, the Bank shall take into account
all materials and information the claimant submits relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60
days after receiving the request for review. If the Bank determines that special circumstances
require additional time for processing the claim, the Bank can extend the response period by an
additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day
period, that an additional period is required. The notice of extension must set forth the
special circumstances and the date by which the Bank expects to render its decision.
7.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on
review. The Bank shall write the notification in a manner calculated to be understood by the
claimant. If the Bank denies part or all of the claim, the notification shall set forth:
7.2.5.1 The specific reasons for the denial,
7.2.5.2 A reference to the specific provisions of the Agreement on which the denial
is based,
7.2.5.3 A statement that the claimant is entitled to receive, upon request and free
of charge, reasonable access to, and copies of, all documents, records and other
information relevant to the claimant’s claim for benefits, and
7.2.5.4 A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a), and
7.2.5.5 If an internal rule, guideline, protocol or other similar criterion was
relied upon in making the adverse determination on review, a statement that a copy of
the rule, guideline, protocol or other similar criterion will be provided without charge
to the claimant upon request.
Article 8
Amendment and Termination
Amendment and Termination
8.1 Amendment or Termination of Agreement.
8.1.1 General. This Agreement may be amended or terminated only by a written agreement
signed by the Corporation and the Director, except
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as provided in Article 6 and except as provided
below. A termination of this Agreement will not be a distributable event, except in the two
circumstances set forth in Section 8.1.2 below. Notwithstanding anything in the Agreement to the
contrary, the Corporation may amend in good faith any terms of the Agreement, including
retroactively to the extent permitted by law, in order to comply with Section 409A of the Code.
8.1.2 Termination. Under no circumstances may the Agreement permit the acceleration of the
time or form of any payment under the Agreement prior to the payment events specified herein,
except as provided in this Section 8.1.2. The Corporation may, in its discretion, elect to
terminate the Agreement in either of the following two circumstances set forth below and accelerate
the payment of the entire unpaid balance of the Director’s vested benefits as of the date of such
payment in accordance with Section 409A of the Code:
| (ii) | the Agreement is terminated and (1) all arrangements sponsored by the Corporation that would be aggregated with the Agreement under Treasury Regulation §1.409A-1(c) if the Director participated in all of the arrangements are terminated, (2) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within 12 months of the termination of the arrangements; (3) all payments are made within 24 months of the termination of the arrangements; and (4) neither ESB Financial nor the Bank adopts a new arrangement that would be aggregated with the Agreement under Treasury Regulation §1.409A-1(c) if the Director participated in both arrangements, at any time within five years following the date of termination of the Agreement, or | ||
| (ii) | the Agreement is terminated within 12 months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by the Director under the Agreement are included in the Director’s gross income in the later of (1) the calendar year in which the termination of the Agreement occurs, or (2) the first calendar year in which the payment is administratively practicable. |
Article 9
Miscellaneous
Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Director and the Corporation, and their
successors, beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Service. This Agreement is not a service policy or contract. It does not
give the Director the right to remain a member of the Board of Directors of the Corporation, nor
does it interfere with the Corporation’s right to terminate the Director’s service. It also does
not require the Director to remain a Board member nor interfere with the Director’s right to
terminate service at any time.
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9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned,
pledged, attached or encumbered in any manner.
9.4 Tax Withholding. The Corporation shall withhold any taxes that are required to be
withheld from the benefits provided under this Agreement.
9.5 Applicable Law. This Agreement and all rights hereunder shall be governed by the laws of
the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States
of America.
9.6 Reorganization. The Corporation shall not merge or consolidate into or with another
company, or reorganize, or sell substantially all of its assets to another company, firm or person
unless such succeeding or continuing company, firm or person agrees to assume and discharge the
obligations of the Corporation under this Agreement.
9.7 Unfunded Arrangement. The Director and beneficiary are general unsecured creditors of the
Corporation for the payment of benefits under this Agreement. The benefits represent the mere
promise by the Corporation 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. Any insurance on the Director’s life is a general asset of the
Corporation to which the Director and beneficiary have no preferred or secured claim.
9.8 Changes in Statutes or Regulations. If any statutory or regulation provision referenced
herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the
references in this Agreement to such statutory or regulatory provision shall be deemed to be a
reference to such section as amended, re-numbered or replaced.
9.9 Entire Agreement. This Agreement constitutes the entire agreement between the Corporation
and the Director as to the subject matter hereof. No rights are granted to the Director by virtue
of this Agreement other than those specifically set forth herein.
9.10 Administration. The Corporation shall have all powers which are necessary to administer
this Agreement, including but not limited to:
9.10.1 Interpreting the provisions of the Agreement;
9.10.2 Establishing and revising the method of accounting for the Agreement;
9.10.3 Maintaining a record of benefit payments; and
9.10.4 Establishing rules and prescribing any forms necessary or desirable to administer
the Agreement.
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IN WITNESS WHEREOF, the Director and a duly authorized officer of ESB Bank have signed this
Agreement.
| DIRECTOR: | BANK: ESB Bank |
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| By | ||||||
| Title | ||||||
By execution hereof, ESB Financial Corporation consents to and agrees to be bound by the terms
and conditions of this Agreement.
| ATTEST: | CORPORATION: ESB Financial Corporation |
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| By | ||||||
| Title | ||||||
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BENEFICIARY DESIGNATION
I designate the following as beneficiary of any death benefits under the ESB Financial Corporation
Amended and Restated Director Retirement Agreement:
Primary: |
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Contingent: |
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| Note: To name a trust as beneficiary, please provide the name of the Trustee(s) and the exact name and date of the trust agreement. |
I understand that I may change these beneficiary designations by filing a new written designation
with the Corporation. I further understand that the designations will be automatically revoked if
the beneficiary predeceases me or, if I have named my spouse as beneficiary, in the event of the
dissolution of our marriage.
Signature |
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Date |
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Accepted by the Corporation this day of , 200_.
By |
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Title |
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