EMPLOYMENT AGREEMENT
Exhibit 10 (m)
This
Employment
Agreement
(the
“Agreement”) is made and entered into as of November 6, 2006 by and among
State
Bancorp, Inc.,
a New
York business corporation (the “Company”), State
Bank of Long Island,
a
banking corporation organized and operating under the laws of the State of
New
York (the “Bank”), and Xxxxxx
X. X’Xxxxx,
an
individual (the “Executive”).
INTRODUCTORY
STATEMENT
The
Company is a bank holding company whose common stock is listed for
trading
on
the Nasdaq Stock Market Global Market. The Bank is a wholly owned subsidiary
of
the Company and conducts a commercial and consumer banking business in the
New
York metropolitan area. The Executive has substantial prior experience as
a
senior executive at public and private banking companies in the New York
metropolitan area, including service as chief executive officer. The Board
of
Directors of the Company (the “Company Board”) and the Board of Directors of the
Bank (the “Bank Board”) have determined that it is in the best interest of the
Company and the Bank to anticipate and provide for a management transition
arising from the eventual retirement of the incumbent Chairman and Chief
Executive Officer by securing the services of a seasoned banking executive
with
prior experience as a chief executive in exchange for a compensation package
that conserves tangible capital and creates a substantial focus on creation
of
shareholder value. The Company and the Bank wish to employ the Executive,
and
the Executive is willing to accept employment, for such purposes.
The
terms
and conditions which the Company, the Bank and the Executive have agreed
to are
as follows.
AGREEMENT
1. Employment.
The
Company and the Bank hereby offer to employ the Executive, and the
Executive
hereby accepts such employment, during the period and on the terms and
conditions set forth in this Agreement.
2. Employment
Period; Remaining Unexpired
Employment Period.
(a) The
Bank
shall employ the Executive for
a
period of five (5) years beginning on the date of this Agreement (the
“Employment Commencement Date”) and ending on the fifth (5th) anniversary of the
Employment Commencement Date (the “Employment Period”).
(b) Except
as
otherwise expressly provided in this Agreement, any reference in this Agreement
to the term “Remaining Unexpired Employment Period” as of any date shall mean
the period beginning on such date and ending on the last day of the Employment
Period.
(c) Nothing
in this Agreement shall be deemed to prohibit the Bank or the Company from
terminating the Executive’s employment before the end of the Employment Period
with or without notice and for any reason or without reason. This Agreement
shall determine the relative rights and obligations of the Company, the Bank
and
the Executive in the event of any such termination. In addition, nothing
in this
Agreement shall require a termination, or prohibit a continuation, of the
Executive’s employment at the expiration of the Employment Period. Any such
continuation shall be on an “at-will” basis unless the Company, the Bank and the
Executive agree otherwise.
3. Duties/Investment.
(a) The
Executive shall initially serve in the positions
of
President and Chief Operating Officer of the Bank and of the Company, shall
have
such power, authority and responsibility and perform such duties as are
customarily associated with such positions and shall report to the Chairman
and
Chief Executive Officer and to the Bank Board and the Company Board. Upon
the
retirement or other cessation of service of the incumbent as Chief Executive
Officer (the “Transition Date”), the Executive shall be elected to the position
of Chief Executive Officer of the Bank and the Company, shall have such power,
authority and responsibility and perform such duties as are prescribed by
or
under the Bank’s By-Laws and as are customarily associated with such position
and shall report only to the Company Board and the Bank Board.
(b) The
Executive shall also serve as a member of the Bank Board and the Company
Board
and as an officer or director of any subsidiary or affiliate of the Bank
or the
Company, if duly elected or appointed to serve in such capacities.
(c) The
Executive shall devote his full business time and attention (other than during
weekends, holidays, approved vacation periods, and periods of illness or
approved leaves of absence) to the business and affairs of the Company and
the
Bank and shall use all of his skill and efforts to advance their best interests.
On the Employment Commencement Date, the Executive shall execute a copy of
the
Company’s Code of Business Conduct and Ethics.
(d) Within
a
reasonable period after the Employment Commencement Date, the Executive agrees
to invest $1,000,000 in the Company’s Common Stock on a basis reasonably
acceptable to the Company and the Executive consistent with the Company’s stock
ownership guidelines for executives.
4. Outside
Activities.
The
Executive may serve as a member of the boards of directors or other
governing
bodies of such business, community and charitable organizations as he may
disclose to and as may be approved by the Company Board, or the Compensation
Committee or Executive Committee thereof (which approval shall not be
unreasonably withheld); provided,
however,
that
such service shall not materially interfere with the performance of his duties
under this Agreement. The Executive may also engage in personal business
and
investment activities which do not materially interfere with the performance
of
his duties hereunder; provided,
however,
that
such activities are not prohibited under any code of conduct or investment
or
securities trading policy established by the Bank or the Company and generally
applicable to all similarly situated executives. As of the date of this
Agreement, the Executive has disclosed to, the Company Board has approved,
the
Executive’s service as a director of the entities enumerated on Exhibit A to
this Agreement.
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5. Working
Facilities and Expenses.
The
Executive’s principal place of employment shall be at the Company’s
executive
offices as of the date of this Agreement, or at such other location as the
Company and the Executive may mutually agree upon. The Company or the Bank
shall
provide the Executive at his principal place of employment with a private
office, secretarial services and other support services and facilities
(including but not limited to a Company owned or leased automobile) suitable
to
his positions with the Company and the Bank and necessary or appropriate
in
connection with the performance of his assigned duties under this Agreement.
The
Company shall reimburse the Executive for such ordinary and necessary travel,
entertainment and business expenses consistent with past practice or as the
Executive and the Company shall mutually agree are necessary and appropriate
for
business purposes, upon presentation of an itemized account of such expenses
in
such form as the Company may reasonably require.
6. Compensation.
For
his
services under this Agreement during the Employment Period, the Bank and
the
Company shall provide the Executive with a compensation package consisting
of
the following:
(i) a base salary; (ii) a stock-based signing bonus in the form of a restricted
stock grant; (iii) an annual incentive; and (iv) a long-term incentive in
the
form of stock options, as follows:
(i) Base
Salary.
The
Company and the Bank shall pay the Executive a base salary at the annual
rate of
Fifty Thousand Dollars ($50,000), payable in approximately equal installments
in
accordance with the Bank’s customary payroll practices for senior officers. The
Company Board, or the Compensation Committee or Executive Committee thereof,
shall review the Executive’s annual rate of salary at such times during the
Employment Period as it deems appropriate, but not less frequently than once
every twelve (12) months, and may, in its discretion, approve a salary increase.
(ii) Annual
Incentive.
The
Executive shall be eligible for an annual incentive award, which may be payable
in cash or stock-based compensation, on a basis no less favorable than members
of the office of the Chairman of the Company (the “Annual Bonus”). The Executive
shall have a target Annual Bonus (the “Target Bonus”) of $225,000.
(iii) Long-term
Incentive.
In
consideration of the Executive’s acceptance of employment and execution of this
Agreement, the
Company shall grant to the Executive non-qualified stock options (the “Initial
Stock Options”) to purchase a number of shares of Common Stock of the Company
(“Common Stock”) equal to the quotient of (i) One Million Dollars ($1,000,000)
divided by (ii) thirty-four percent (34%) of the closing sales price for
a share
of Common Stock as reported in the New York City Edition of the Wall Street
Journal for the fourth (4th) trading day after the Company's issuance of
a press
release announcing the Executive's employment as President and Chief Operating
Officer of the Company (the date of such announcement, the “Announcement Date”).
Twenty (20%) of the Initial Stock Options shall vest and become exercisable
on
each anniversary of the Announcement Date until all of the Initial Stock
Options
have become exercisable. The Initial Stock Options shall have a term that
expires on the tenth (10th) anniversary of the Announcement Date or, if earlier,
at the date and time of the Executive’s discharge with Cause (as defined herein)
and an exercise price per share equal to fair market value of the Common
Stock
subject to the Initial Stock Options on the date of grant. The Initial Stock
Options shall be evidenced by a written stock option agreement in a form
prescribed by the Company that is consistent with the terms of this Agreement
and otherwise is substantially the same as the form of stock option agreement
used by the Company for other executive officer stock option grants as of
the
date of this Agreement.
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(iv) Signing
Bonus.
In
consideration of the Executive’s acceptance of employment and execution of this
Agreement, the Company shall pay to the Executive a signing bonus (the “Signing
Bonus”) by delivery to the Executive of a number of shares of Common Stock equal
to the quotient of (A) One Million Five Hundred Thousand Dollars ($1,500,000.00)
divided by (B) the average of the closing sales price for a share of Common
Stock as reported in the New York City Edition of the Wall Street Journal
for
each trading day during the period of seven (7) consecutive trading days
commencing on the fourth (4th) trading day after the Announcement Date (such
period, the “Averaging Period” and such number of shares of Common Stock, the
“Bonus Stock”). The Signing Bonus shall be delivered by issuance to the
Executive of a certificate evidencing the Bonus Stock with a record date
of the
last day of the Averaging Period. The Executive may, in his discretion, timely
file an election under section 83(b) of the Internal Revenue Code of 1986,
as
amended (the “Code”) with respect to the Bonus Stock. The Bonus Stock shall vest
in twenty (20) equal quarterly installments commencing with the end of the
first
quarter in which the Employment Commencement Date occurs, subject to
acceleration upon death, Disability and termination without Cause or termination
by the Executive with Good Reason The Signing Bonus shall be in lieu of
participation during the Employment Period in any non-qualified deferred
compensation or supplemental executive retirement program provided for other
senior executives of the Bank or the Company, however denominated (except
for
any program providing for the voluntary or mandatory deferral of compensation
otherwise earned and payable).
7. Employee
Benefit Plans and Programs.
(a) Except
as
expressly provided herein to the contrary, during the Employment
Period, the Executive shall be treated as an employee of the Bank and the
Company and shall be entitled to participate in and receive benefits under
any
and all qualified retirement, pension, savings, profit-sharing or stock bonus
plans, any and all group life, health (including
hospitalization, medical and major medical), dental,
accident
and long-term disability insurance plans, and any other employee benefit
and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees
of,
the Bank and the Company, in accordance with the terms and conditions of
such
employee benefit plans and programs and compensation plans and programs and
consistent with the Bank’s and the Company’s customary practices.
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(b) The
Company and the Bank shall provide the Executive and his eligible dependents
with coverage under the Bank’s and the Company’s group health (including
hospitalization, medical and major medical), dental and vision care plans
through the last day of the first calendar month in which the both the Executive
and his spouse are eligible for coverage under Medicare. In lieu thereof,
the
Bank and the Company may provide substitute coverage by direct payment to
the
carrier of the Executive’s share of premiums for continuation coverage under the
corresponding plan of a prior employer or for coverage under an individual
policy providing substantially equivalent benefits and approved by the Executive
(which approval shall not be unreasonably withheld or delayed). The Company
may
require the Executive, while employed, to pay a portion of the premium cost
of
such coverage; provided,
however, that
the
Executive’s dollar cost for any period shall not exceed the dollar cost borne by
senior executives of the Company for corresponding coverage. Following the
Executive’s termination of employment, the Company shall use all reasonable
efforts to have such coverage continued and the Company may require the
Executive to pay the full premium cost for such coverage (but in no event
in
excess of the aggregate premium cost paid by the Company and an actively
employed executive for the same or substantially similar coverage), provided
that if the Company cannot provide continuing coverage under its then existing
plans, it shall have no obligation to acquire alternative coverage. The
obligation to provide this coverage shall survive the termination of the
Agreement unless the Executive is terminated with Cause or resigns without
Good
Reason (as defined in this Agreement).
(c) In
addition to coverage under any group-term life insurance program maintained
generally for employees of the Bank and the Company, the Bank and the Company
shall pay directly to the carrier all required premiums under [Name of insurer
and policy number deleted for privacy reasons] that are become due during
the
period beginning on the Employment Commencement Date and ending on the last
day
of the calendar year in which the Executive attains age 65. The obligation
to
make these payments shall survive the termination or expiration of this
Agreement for any reason other than the Executive’s discharge with Cause or
resignation without Good Reason (as defined in this Agreement).
8. Indemnification
and Insurance.
(a) During
the Employment Period and thereafter, the Bank and the Company shall cause
the
Executive to be covered by any policy or contract of insurance obtained by
them
to insure their respective directors and officers against personal liability
for
acts or omissions in connection with service as an officer or director or
service
in
other capacities at their request. The coverage provided to the Executive
pursuant to this section 8 shall be of the same scope and on the same terms
and
conditions as the coverage (if any) provided to other officers or directors
of
the Bank and the Company.
(b) To
the
maximum extent permitted under applicable law, during the Employment Period
and
thereafter, the Bank and the Company shall indemnify the Executive against
and
hold him harmless from any costs, liabilities, losses and exposures to the
fullest extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Bank or any
subsidiary or affiliate thereof.
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9. Termination
of Employment
Due to Death.
(a) The
Executive’s employment with the Bank and the Company shall terminate,
automatically and without any further action on the part of any party to
this
Agreement, on the date of the Executive’s death. In such event:
(i) The
Bank
and the Company shall pay to the Executive’s estate his earned but unpaid
compensation (including, without limitation, salary,
any
Annual Incentive payable in respect of a completed fiscal year, and all other
items which constitute wages under applicable law) as of the date of his
termination of employment. This payment shall be made at the time and in
the
manner prescribed by law applicable to the payment of wages but in no event
later than 30 (thirty) days after the date of the Executive’s termination of
employment.
(ii) The
Bank
and the Company shall provide the benefits, if any, due to the Executive’s
estate, surviving dependents or designated beneficiaries under the employee
benefit plans and programs and compensation plans and programs maintained
for
the benefit of the officers and employees of the Bank and the Company. The
time
and manner of payment or other delivery of these benefits and the recipients
of
such benefits shall be determined according to the terms and conditions of
the
applicable plans and programs.
The
payments and benefits described in sections 9(a)(i) and (ii) shall be referred
to in this Agreement as the “Standard
Termination Entitlements.”
(b) In
addition to the Standard Termination Entitlements, in the event of the
Executive’s death during the
Employment Period, the entire unvested portion of the Signing Bonus and the
Initial Stock Options shall vest as of the Executive’s date of death.
10. Termination
Due to Disability.
The
Bank
and the Company may terminate the Executive’s employment upon a
determination,
by
vote of a majority of the members of the Company Board, or the members of
the
Compensation Committee or Executive Committee thereof, acting in reliance
on the
written advice of a medical professional acceptable to them, that the Executive
is suffering from a physical or mental impairment which, at the date of the
determination, has prevented the Executive from performing his assigned duties
on a substantially full-time basis for a period of at least sixty (60) days
during the period of six (6) months ending with the date of the determination
or
is likely to result in death or prevent the Executive from performing his
assigned duties on a substantially full-time basis for a period of at least
sixty (60) days during the period of six (6) months beginning with the date
of
the determination. In such event:
(a) The
Bank
shall pay and deliver to the Executive
(or
in the event of his death before payment, to his estate, surviving dependents
or
beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In
addition to the Standard Termination Entitlements (i) the Signing Bonus and
the
Initial Stock Options shall continue to vest as if the Executive remained
in the
active service of the Bank and the Company and (ii) upon the Executive’s death
prior to full vesting, any unvested portion of the Signing Bonus and the
Initial
Stock Options shall vest as of the Executive’s date of death.
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A
termination of employment due to disability under this section 10 shall be
effected
by notice of termination given to the Executive by the Bank and the Company
and
shall take effect on the later of the effective date of termination specified
in
such notice or sixty (60) days after the date on which the notice of termination
is deemed given to the Executive.
11. Discharge
with Cause.
(a) The
Bank
and the Company may terminate the Executive’s employment during the Employment
Period, and such termination shall be deemed to have occurred
with “Cause” only if the Company Board and the Bank Board, by majority vote of
their entire membership, each determines that the Executive (i) has willfully
failed or refused to perform his assigned duties under this Agreement in
any
material respect (including, for these purposes, the Executive’s inability to
perform such duties as a result of drug or alcohol dependency); (ii) has
committed gross negligence in the performance of, or is guilty of continual
neglect of, his assigned duties; (iii) has been convicted or entered a plea
of
guilty or nolo
contendere
to, the
commission of a felony or any other crime involving dishonesty, personal
profit
or other circumstance likely, in the reasonable judgment of the Company Board
and Bank Board, to have a material adverse effect on the Bank and the Company
or
their business, operations or reputation taken as a whole; (iv) has violated,
in
any material respect, any law, rule, regulation, written agreement or final
cease-and-desist order applicable to the Bank in his performance of services
for
the Bank or the Company or the Company’s or the Bank’s Code of Conduct; or (v)
has willfully and intentionally breached the material terms of this Agreement
in
any material respect. For purposes of this section 11, no act or failure
to act
on the part of the Executive shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best interests of the Bank
and the Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Company Board or the Bank Board or the
Executive Committee thereof or based upon the written advice of counsel for
the
Company shall be conclusively presumed to be done, or omitted to be done,
by the
Executive in good faith and in the best interests of the Bank and the Company.
Termination with Cause shall be effected by written notice to the Executive
setting forth with particularity the grounds for termination.
(b) If
the
Executive is discharged during the Employment Period with Cause, the Bank
and
the Company shall pay and provide to him (or, in the event of his death,
to his
estate, his surviving beneficiaries or dependents, as applicable) the Standard
Termination Entitlements only; any unvested Bonus Stock, any unexercised
options
to purchase Common Stock, whether or not vested shall be forfeited. While
a
proceeding to discharge the Executive with Cause is pending, the Company
Board
and the Bank Board may, by written notice to the Executive, temporarily suspend
the Executive’s duties and authority and, in such event, may also suspend the
payment of salary and other cash compensation and the vesting of Bonus Stock
and
the exercise of stock options, but not the Executive’s participation in
retirement, insurance and other employee benefit plans. If the Executive
is not
discharged within ninety (90) days after the commencement of such a suspension,
payments of salary and cash compensation shall resume, and all compensation
withheld during the period of suspension shall be promptly restored. If the
Executive is discharged without Cause during such ninety (90) day period,
all
compensation withheld during the period of suspension shall be promptly restored
and shall be paid in addition to amounts due to the Executive under this
Agreement on account of his discharge without Cause. If the Executive is
discharged with Cause not later than ninety (90) days after the commencement
of
such a suspension, all payments withheld during the period of suspension
shall
be deemed forfeited and shall not be included in the Standard Termination
Entitlements.
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12. Discharge
without Cause.
The
Bank
may discharge the Executive at any time during the Employment Period
and, unless such discharge constitutes a discharge with Cause:
(a) The
Bank
shall pay and deliver to the Executive
(or
in the event of his death before payment, to his estate, surviving dependents
or
beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In
addition to the Standard Termination Entitlements:
(i) The
shares of Bonus Stock (if any) and
the
Initial Stock Options that are not vested as of the date of termination of
employment) shall vest as of the date of termination of employment.
(ii) The
Bank
or the Company shall pay to the Executive (or, in the event of his death,
his
estate or designated beneficiaries) as soon as practicable, and in any event
within ten (10) business days, after termination of employment a pro rata
Annual
Bonus for the year of termination based on the Target Bonus.
(iii) The
Bank
or the Company shall pay to the Executive (or, in the event of his death,
his
estate or designated beneficiaries) as soon as practicable, and, subject
to
Section 21, in any event within ten (10) business days, after termination
of
employment, an additional lump sum payment equal to two times the sum of
the
Executive’s most recent Base Salary plus the Executive’s Target
Bonus.
(iv) If
the
Executive’s termination of employment occurs upon, following or in connection
with a Change of Control (as defined in this Agreement), (A) any options
to
purchase Common Stock (including but not limited to Initial Stock Options)
and
any unvested restricted stock or other Common Stock or stock-based awards
that
are scheduled to vest during the Remaining Unexpired Employment Period shall
vest as of the date of termination of employment and (B) if the Remaining
Unexpired Employment Period is less than 3 years, the Company shall pay to
the
Executive (or,
in
the event of his death, his estate or designated beneficiaries), subject
to
Section 21, as soon as practicable, and in any event within ten (10) business
days, after termination of employment a
lump
sum payment equal to three times the sum of the Executive’s most recent Base
Salary plus the Executive’s Target Bonus in lieu of the payment described in
section 12(b)(iii).
The
payments and benefits enumerated in
section
12(b)(i), (ii), (iii) and (iv) shall be referred to collectively in this
Agreement as the “Additional Termination Entitlements”.
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13. Resignation.
(a) The
Executive may resign from his employment with the Bank and the Company any
time.
A resignation under this section 13 shall be effected by notice of
resignation
given by the Executive to the Bank and the Company and shall take effect
on the
effective date of termination specified in such notice (which shall in no
event
be sooner than sixty (60) days after the notice is deemed given) or such
earlier
or later date as the Executive, the Company and the Bank may mutually agree
upon. The Executive’s resignation of any of the positions within the Bank and
the Company to which he has been assigned shall be deemed a resignation from
all
such positions unless the Bank, the Company and the Executor agree in writing
otherwise.
(b) The
Executive’s resignation shall be deemed to be for “Good Reason” if the effective
date of resignation occurs within six (6) months after any of the following,
where the Executive has given the Company notice of such event and a reasonable
opportunity to cure:
(i) the
failure of the Bank or the Company (whether by act or omission of the Bank
Board, the
Company Board or otherwise), to appoint or re-appoint or elect or re-elect
the
Executive to the position(s) with the Bank or the Company that he holds
immediately prior to such failure, or to a more senior position;
(ii) the
failure of the Bank or the Company (whether by act or omission of the Bank
Board, the Company Board or otherwise) to elect or appoint the Executive
as
their respective Chief Executive Officer upon the earliest to occur of January
1, 2008 and the date the incumbent Chairman and Chief Executive Officer
(determined as of the date of this Agreement) ceases to hold such position
or
the failure of the Company (whether by act or omission of the Company Board
or
otherwise) to elect or appoint the Executive to the position of President
within
the time frame contemplated by section 3(a) of this Agreement.
(iii) the
failure of the Bank’s shareholders or the Company’s shareholders to elect or
re-elect the Executive to membership at the expiration of his term of membership
(whether or not the Executive is a nominee for election), unless such failure
is
a result of the Executive’s refusal to stand for election or attainment of a
mandatory retirement age generally imposed all employee-members of the
Board;
(iv) a
material failure by the Bank or the Company, whether by amendment of its
certificate of incorporation or organization, by-laws, action of its Board
or
otherwise, to vest in the Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement or the functions, duties and
responsibilities associated with a more senior position, provided that the
Executive shall have given written notice of such failure to the Bank and
the
Company, and the Bank and the Company shall not have substantially cured
such
failure within thirty (30) days after such notice is deemed given;
(v) any
reduction of the Executive’s rate of Base Salary in effect from time to time,
whether or not material, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion
of
the Executive’s cash compensation as and when due;
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(vi) any
change in the terms and conditions of any compensation or benefit program
in
which the Executive participates (other than an across-the-board change having
substantially the same effect on all similarly situated employees) which,
either
individually or together with other changes, has a material adverse effect
on
the aggregate value of his total compensation package; provided that the
Executive shall have given written notice of such material adverse effect
to the
Bank and the Company, and the Bank and the Company shall not have substantially
cured such failure within thirty (30) days after such notice is deemed
given;
(vii) any
material breach by the Bank or the Company of any material term, condition
or
covenant contained in this Agreement (including but not limited any failure
to
provide the Executive with a Recommended Compensation Package for any portion
of
the Employment Period after the Initial Employment Period; provided that
the
Executive shall have given notice of such material breach to the Bank and
the
Company, and the Bank and the Company shall not have substantially cured
such
breach within thirty (30) days after such notice is deemed given;
or
(viii) a
change
in the Executive’s principal place of employment to a place that is not the
principal executive office of the Company or other mutually agreeable location,
or a relocation of the Company’s principal executive office to a location that
is both more than twenty-five miles farther away from the Executive’s principal
residence than the distance between the Executive’s principal residence and
principal place of employment immediately prior to the change or relocation
and
more than fifty (50) miles away from the location of the Bank’s principal
executive office on the date of this Agreement.
In
all
other cases, a resignation by the Executive shall be deemed to be without
Good
Reason.
(c) In
the
event of the Executive’s resignation, the Bank and the Company shall pay and
deliver the Standard Termination Entitlements. In addition, if the Executive’s
resignation
is deemed to be a resignation with Good Reason, the Bank and the Company
shall
also pay and deliver the Additional Termination Entitlements.
14. Terms
and Conditions of the Additional Termination Entitlements.
The
Bank,
the Company and the Executive hereby stipulate that the damages which may
be
incurred by the Executive following any termination of employment are not
capable
of
accurate measurement as of the date first above written and that the Additional
Termination Entitlements constitute reasonable damages under the circumstances
and shall be payable without any requirement of proof of actual damage and
without regard to the Executive’s efforts, if any, to mitigate damages. The
Bank, the Company and the Executive further agree that the Bank and the Company
may condition the payment and delivery of the Additional Termination
Entitlements on the receipt of the Executive’s resignation from any and all
positions which he holds as an officer, director or committee member with
respect to the Company, the Bank or any subsidiary or affiliate and on the
execution by the Executive of a reasonable release of the Company and the
Bank
that is limited to employment-related claims.
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15. Definition
of “Change
of Control”; Pending Change of Control; “in connection with the occurrence of a
Change of Control.
For
the
purpose of this Agreement, a “Change
of Control” shall mean a change in the ownership or effective control of the
Company or the Bank or a change in the ownership of a substantial portion
of the
assets of the Company or the Bank within the meaning of regulations implementing
Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended
(the
“Code”).
16. Excise
Tax.
(a) Anything
in this Agreement to the contrary notwithstanding, in the event that
Xxxxx Xxxxxx and Company LLC or such other accounting firm as shall be
designated by the Company prior to the effective time of a Change of Control
(the “Accounting Firm”) shall determine that receipt of all payments, benefits
or distributions by the Company or its affiliates in the nature of compensation
to or for the Executive’s benefit, whether paid or payable pursuant to this
Agreement or otherwise (a “Payment”) would subject the Executive to the excise
tax under Section 4999 of the Code, the Accounting Firm shall determine whether
to reduce any of the Payments paid or payable pursuant to this Agreement
that
are taxable in the year in which the change in ownership or control occurs
(the
“Agreement Payments”) to the Reduced Amount (as defined below). The Agreement
Payments shall be reduced to the Reduced Amount only if the Accounting Firm
determines that the Executive would have a greater Net After-Tax Receipt
(as
defined below) of aggregate Payments if the Executive’s Agreement Payments were
reduced to the Reduced Amount. If such a determination is not made by the
Accounting Firm, the Executive shall receive all Agreement Payments to which
the
Executive is entitled under this Agreement.
(b) If
the
Accounting Firm determines that aggregate Agreement Payments should be reduced
to the Reduced Amount, the Company shall promptly give the Executive notice
to
that effect and a copy of the detailed calculation thereof, and the Executive
may then elect, in the Executive’s sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long as after such
election the present value (determined for all purposes of section 16 of
this
Agreement in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of
Code)
of the aggregate Agreement Payments equals the Reduced Amount), and shall
advise
the Company in writing of the Executive’s election within ten days of the
Executive’s receipt of notice. If no such election is made by the Executive
within such ten-day period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as after such election the
present value of the aggregate Agreement Payments equals the Reduced Amount)
and
shall notify the Executive promptly of such election. All determinations
made by
the Accounting Firm under this section 11 shall be binding upon the Company
and
the Executive in the absence of manifest error and shall be made within 60
days
of the effective time of the Change of Control. As promptly as practicable
following such determination, the Company shall pay to or distribute for
the
Executive’s benefit such Agreement Payments as are then due to the Executive
under this Agreement and shall promptly pay to or distribute for the Executive’s
benefit in the future such Agreement Payments as become due to the Executive
under this Agreement. All fees and expenses of the Accounting Firm shall
be
borne solely by the Company.
11
(c) As
a
result of the uncertainty in the application of Sections 280G and 4999 of
the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that amounts will have been paid or distributed by the Company
to
or for the benefit of the Executive pursuant to this Agreement which should
not
have been so paid or distributed (“Overpayment”) or that additional amounts
which will have not been paid or distributed by the Company to or for the
benefit of the Executive pursuant to this Agreement could have been so paid
or
distributed (“Underpayment”), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that the Accounting Firm, based
upon
the assertion of a deficiency by the Internal Revenue Service against either
the
Company or the Executive which the Accounting Firm believes has a high
probability of success determines that an Overpayment has been made, the
Executive shall pay any such Overpayment to the Company together with interest
at the applicable federal rate provided for in section 7872(f)(2) of the
Code;
provided, however, that no amount shall be payable by the Executive to the
Company if and to the extent such payment would not either reduce the amount
on
which the Executive is subject to tax under section 1 and section 4999 of
the Code or generate a refund of such taxes. In the event that the Accounting
Firm, based upon controlling precedent or substantial authority, determines
that
an Underpayment has occurred, any such Underpayment shall be promptly paid
by
the Company to or for the benefit of the Executive together with interest
at the
applicable federal rate provided for in Section 7872(f)(2) of the
Code.
(d) For
purposes hereof, the following terms have the meanings set forth
below:
(i) “Reduced
Amount” shall mean the greatest amount of Agreement Payments that can be paid
that would not result in the imposition of the excise tax under section 4999
of
the Code if the Accounting Firm determines to reduce Agreement Payments pursuant
to section 16(a).
(ii) “Net
After-Tax Receipt” shall mean the present value (as determined in accordance
with sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment
net of
all taxes imposed on the Executive with respect thereto under sections 1
and
4999 of the Code and under applicable state and local laws, determined by
applying the highest marginal rate under section 1 of the Code and under
state
and local laws which applied to the Executive’s taxable income for the
immediately preceding taxable year, or such other rate(s) as the Executive
certifies, in the Executive’s sole discretion, as likely to apply to him in the
relevant tax year(s).
17. Confidentiality.
Unless
he
obtains the prior written consent of the Company, the Executive shall keep
confidential
and shall refrain from using for the benefit of himself, or any person or
entity
other than the Company or any entity which is a subsidiary of the Company,
any
material document or information obtained from the Company, or from its
subsidiaries, in the course of his employment with any of them concerning
their
properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources
or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided,
however,
that
nothing in this section 18 shall prevent the Executive, with or without the
Company’s consent, from participating in or disclosing documents or information
in connection with any judicial or administrative investigation, inquiry
or
proceeding to the extent that such participation or disclosure is compelled
under applicable law; in such event, the Executive shall, to the extent
practicable under the circumstances, notify the Company in advance of and
afford
the Company an opportunity, at it own expense, to take action to prevent
or
limit the scope of such participation or disclosure.
12
18. Noncompetition.
(a) The
Executive agrees that, while he is employed
by the Company and for one year thereafter he will not engage in Competition
(as
defined below). The Executive shall be deemed to be engaging in “Competition” if
he directly or indirectly, owns, manages, operates, controls or participates
in
the ownership, management, operation or control of or is connected as an
officer, employee, partner, director, consultant or otherwise with, or has
any
financial interest in, any business engaged in the financial services business
(a “Competing Business”) in any city or county in which the Company or its
affiliates operates a commercial banking or other material financial services
business which is a material part of such business and is in material
competition with the business conducted by the Company at the time of the
termination of his employment with the Company. Ownership for personal
investment purposes only of less than 2% of the voting stock of any publicly
held corporation shall not constitute a violation hereof. In no event shall
services in any capacity described on Exhibit A attached here to be deemed
a
violation of this section 18(a). In no event shall the Executive have any
obligation under this Section 18(a) following a Change of Control.
(b) The
Executive acknowledges that the Company would be irreparably injured by a
violation of this section 18 or of section 17 or section 19 and he agrees
that
the Company, in addition to any other remedies available to it for such breach
or threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, or other equivalent relief, restraining the Executive
from
any actual or threatened breach of sections 17, 18 or 19. If a bond is required
to be posted in order for the Company to secure an injunction or other equitable
remedy, the parties agree that said bond need not be more than a nominal
sum.
19. Solicitation.
The
Executive hereby covenants and agrees that, for a period of one
(1)
year following his termination of employment with the Bank and the Company,
he
shall not, without the written consent of the Company, either directly or
indirectly:
(a) solicit,
offer employment to, or take any other action intended, or that a reasonable
person acting in like circumstances
would expect, to have the effect of causing any officer or employee of the
Company or any of its subsidiaries or affiliates to terminate his or her
employment and accept employment or become affiliated with, or provide services
for compensation in any capacity whatsoever to, any savings bank, savings
and
loan association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits, making
loans
or doing business within the cities and counties in which the Bank maintains
an
office as of the date of the executive’s termination of employment;
13
(b) provide
any information, advice or recommendation with respect to any such officer
or
employee of any savings bank, savings and loan association, bank, bank holding
company, savings and loan holding company, or other institution engaged in
the
business of accepting deposits, making loans or doing business within the
cities
and counties specified in section 16 that is intended, or that a reasonable
person acting in like circumstances would expect, to have the effect of causing
any officer or employee of the Company or any of its subsidiaries or affiliates
to terminate his employment and accept employment or become affiliated with,
or
provide services for compensation in any capacity whatsoever to, any savings
bank, savings and loan association, bank, bank holding company, savings and
loan
holding company, or other institution engaged in the business of accepting
deposits, making loans or conducting any other banking business in direct
or
indirect competition with the Company and its subsidiaries within the cities
and
counties specified in section 19(a);
(c) solicit,
provide any information, advice or recommendation or take any other action
intended, or that a reasonable person acting in like circumstances would
expect,
to have the effect of (i) causing any customer of the Company or its
subsidiaries to terminate an existing business or commercial relationship
with
them or (ii) interfering with their efforts to establish a business or
commercial relationship with any person or entity known by the Executive
to have
been identified by the Company or its subsidiaries as a potential customer
as of
the date of the Executive’s termination of employment.
20. No
Effect on Employee Benefit Plans or Programs.
The
termination of the Executive’s employment during the term of this
Agreement
or
thereafter, whether by the Company, the Bank or by the Executive, shall have
no
effect on the rights and obligations of the parties hereto under the Bank’s and
Company’s qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs,
or
compensation plans or programs, as may be maintained by, or cover employees
of,
the Bank or the Company from time to time.
21. Mandatory
Deferral of Compensation;
Section 409A.
(a) Notwithstanding
anything in this Agreement to the contrary, if, in the written opinion of
the
Company’s independent tax advisors, any payment or vesting of any
compensation,
other than Bonus Stock or resulting from the exercise of stock options, during
a
taxable year would be nondeductible for federal income tax purposes for such
taxable year due to the application of section 162(m) of the Code (or the
corresponding provisions of any succeeding statute) but would be deductible
for
such taxable year if section 162(m) of the Code (or corresponding provision
of a
succeeding statute) did not apply, the payment or delivery of such nondeductible
compensation shall be deferred. For each taxable year, such mandatory deferral
shall be applied in reverse chronological order such that the last payments
due
and payable for a taxable year are the first payments to be subject to the
mandatory deferral. All such deferred compensation shall be deposited in
a
grantor trust which meets the requirements of Revenue Procedure 92-65 (as
amended or superseded from time to time), the trustee of which shall be a
financial institution selected by the Executive with the approval of the
Company
(which approval shall not be unreasonably withheld or delayed), pursuant
to a
trust agreement the terms of which are approved by the Executive (which approval
shall not be unreasonably withheld or delayed). Deferred compensation payable
in
shares of Common Stock shall be deposited in such shares of Common Stock
and,
when distributed, shall be distributed in kind. Deferred Compensation payable
in
cash shall be deposited in cash. Provision shall be made for deferred
compensation deposited in cash, as well as accumulated cash dividends received
with respect to deposited Common Stock, to be adjusted for investment returns
on
the basis of investment benchmarks selected by the Executive from time to
time
with the approval of the Company (which approval shall not be unreasonably
withheld or delayed). Deferred Common Stock and other amounts deferred hereunder
(as adjusted for investment returns) shall be distributed to the Executive
at
the earliest of (a) January 1 of the calendar year following the calendar
year
in which the Executive’s termination of service (within the meaning of section
409A of the Code) occurs, (b) the Executive’s death; or (c) immediately prior to
the occurrence of a change in control of the Company (within the meaning
of
section 409A of the Code), or, if later, at the earliest date permitted under
section 409A of the Code and the regulations thereunder. This section shall
be
construed, administered and enforced so as to prevent the imposition of an
excise tax on the Executive under section 409A of the Code. Compensation
deferred under this section 21 shall be 100% vested.
14
(b) If
any
compensation or benefits provided by this Agreement may result in the
application of section 409A of the Code, the Company shall, in consultation
with
the Executive, modify the Agreement in the least restrictive manner necessary
in
order to exclude such compensation from the definition of “deferred
compensation” within the meaning of such section 409A or in order to comply with
the provisions of section 409A, other applicable provision(s) of the Code
and/or
any rules, regulations or other regulatory guidance issued under such statutory
provisions and without any diminution in the value of the payments to the
Executive.
22. Provisions
Relating to Common Stock.
(a) In
the
event any recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination,
repurchase, or exchange of Common stock for other securities, stock dividend
or
other special and nonrecurring dividend or distribution (whether in the form
of
cash, securities or other property), liquidation, dissolution, or other similar
corporate transaction or event, affects the Common Stock such that an adjustment
is appropriate in order to prevent the dilution or enlargement of the rights
of
the Executive with respect to Bonus Stock or Initial Stock Options deliverable
under this Agreement, the Company Board or its Compensation Committee shall,
in
such manner as it may determine, adjust any or all of (i) the number and
kind of
securities underlying Bonus Stock and Initial Stock Options, and (iii) the
exercise price of Initial Stock Options, to prevent such dilution or
enlargement.
(b) As
soon
as practicable, the Company shall prepare and file with the Securities and
Exchange Commission a registration statement on Form S-8 covering a sufficient
number of shares of Common Stock to provide for all of the Common Stock
contemplated to be issued or delivered to the Executive under this Agreement.
Thereafter, the Company shall take all actions required to maintain the
effectiveness of such registration statement until all Common Stock issuable
or
deliverable to the Executive under this Agreement has been so issued and/or
delivered or the Company’s obligation to issue or deliver any such Common Stock
has lapsed.
15
23. Successors
and Assigns.
This
Agreement will inure to the benefit of and be binding upon the Executive,
his
legal representatives and testate or intestate
distributees, and the Bank and the Company and their respective successors
and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Bank and the Company
may be
sold or otherwise transferred. Failure of the Bank or the Company to obtain
from
any successor its express written assumption of their obligations hereunder
at
least 60 days in advance of the scheduled effective date of any such succession
shall be deemed a material breach of this Agreement.
24. Notices.
Any
communication required or permitted to be given under this Agreement,
including
any notice, direction, designation, consent, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as
it is
delivered personally, or five (5) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below or at such other address as one such party
may
by written notice specify to the other party:
If
to the
Executive, to the most address on file for him in the Company’s or the Bank’s
personnel records, with a copy to:
Xxxxxxx
Xxxxxxxx & Wood LLP
Two
World
Financial Center
Xxx
Xxxx,
XX 00000
Attention:
W. Xxxxxx Xxxxxx, Esq.
If
to the
Bank:
000
Xxxxxxxx Xxxxxx
Xxx
Xxxx
Xxxx, XX 00000-0000
Attention:
General Counsel
with
a copy to:
Wachtell,
Lipton, Xxxxx & Xxxx
00
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxx X. Xxxxx, Esq.
If
to the
Company:
000
Xxxxxxxx Xxxxxx
Xxx
Xxxx
Xxxx, XX 00000-0000
Attention:
General Counsel
with
a copy to:
Wachtell,
Lipton, Xxxxx & Xxxx
0x
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxx X. Xxxxx, Esq.
16
25. Reimbursement
for Attorneys’ Fees.
The
Company shall indemnify the Executive against reasonable costs, including
legal
fees and expenses, incurred by him in connection with or arising out of any
action suit or proceeding in which he may be involved as a result of his
efforts, in good faith, to defend or enforce
his rights under this Agreement; provided, however, that he shall have
substantially prevailed on the merits. The Company shall reimburse the Executive
for his reasonable attorneys’ fees and costs incurred in the structuring and
negotiation of this Agreement.
26. Severability.
A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect
the
validity or enforceability of any other provision hereof.
27. Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or
conditions
hereof shall not be deemed a waiver of such term, covenant, or condition.
A
waiver of any provision of this Agreement must be made in writing, designated
as
a waiver, and signed by the party against whom its enforcement is sought.
Any
waiver or relinquishment of any right or power hereunder at any one or more
times shall not be deemed a waiver or relinquishment of such right or power
at
any other time or times.
28. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
Agreement.
29. Governing
Law.
Except
to
the extent preempted by federal law, this Agreement shall be governed by
and
construed and enforced in accordance
with the laws of the State of New York applicable to contracts entered into
and
to be performed entirely within the State of New York by parties all of whom
are
citizens and residents of the State of New York.
30. Headings
and Construction.
The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any section. Any reference to
a
section number shall refer to a section of this Agreement, unless otherwise
stated.
17
31. Entire
Agreement; Modifications.
This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supersedes in its entirety any and all prior agreements,
understandings or representations
relating to the subject matter hereof. No modifications of this Agreement
shall
be valid unless made in writing and signed by the parties hereto.
32. Non-Duplication.
Any
compensation or benefits provided to the Executive
by
any direct or indirect subsidiary of the Company or the Bank shall be applied
to
offset the obligations of the Company and the Bank hereunder in such manner
as
the Company and the Bank may mutually agree, it being intended that this
Agreement set forth the aggregate compensation and benefits payable to the
Executive for all services to the Company, the Bank and all of their respective
direct or indirect subsidiaries and affiliates.
33. Required
Regulatory Provisions.
Notwithstanding
anything herein contained to the contrary, any payments to the Executive
by the
Bank or the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance
Act, 12 U.S.C. Section 1828(k), and any regulations promulgated
thereunder.
18
In
Witness Whereof,
the Bank
and the Company have caused this Agreement to be executed and the Executive
has
hereunto set his hand, all as of the day and year first above
written.
s/
Xxxxxx. X. X’Xxxxx
Xxxxxx
X.
X’Xxxxx
State
Bancorp, Inc.
Attest:
By:
s/Xxxxx
X. Xxxxxxxx By:
s/
Xxxxxx X. Xxxxxxxx, Xx.
Name:
Xxxxx X. Xxxxxxxx Name:
Xxxxxx X. Xxxxxxxx, Xx.
Title:
Secretary Title:
Chairman & CEO
[Seal]
State
Bank
of Long Island
Attest:
By:
s/
Xxxxx X. Xxxxxxxx By:
s/Xxxxxx
X. Xxxxxxxx, Xx.
Name:
Xxxxx X. Xxxxxxxx Name:
Xxxxxx X. Xxxxxxxx, Xx.
Title:
Secretary Title:
Chairman & CEO
[Seal]
EXHIBIT
A
Prudential
Insurance Company of America. Serve as Independent Trustee of the $65B mutual
fund complex.
Catholic
Healthcare System of NY. Serve as trustee and finance chair.
Catholic
Healthcare Foundation, Inc. Serve as trustee of affiliated charitable
foundation.
Niagara
University. Member of the Board of Trustees
Friendly
Sons of St. Xxxxxxx in the City of New York. 2nd
Vice
President.
Galway
Bay Foundation, Inc. President & Founder of personal charitable foundation
specializing in supporting programs for the emotionally/physically challenged,
affordable housing and educational
institutions.
Xxxxx
Xxxxxx Foundation, Manhasset, NY. Secretary/Treasurer of foundation created
by
close friend lost on Sept. 11, 2001. Dedicated to working with disadvantaged
populations in Manhasset,
Great Neck and Bayshore, LI.
