BANK OF SMITHTOWN SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT Amended and Restated Effective January 1, 2005
Exhibit
99.3
BANK
OF SMITHTOWN
Amended
and Restated Effective January 1, 2005
THIS SECOND AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the “Agreement”) is entered
into as of this _______ day of ________________, 2008, by and between the Bank
of Smithtown, with its main office in Smithtown, New York (the “Bank”), and
Xxxxxxx X. Rock, Chairman, President and Chief Executive Officer (the
“Executive”).
WHEREAS, the Executive has contributed
substantially to the success of the Bank, and the Bank therefore desires that
the Executive continue in its employ; and
WHEREAS, to encourage the Executive to
remain an employee of the Bank, the Bank is willing to provide supplemental
retirement benefits to the Executive, payable out of the Bank’s general
assets.
WHEREAS, certain modifications are
necessary to bring the Agreement into compliance with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended, and all
regulations and guidance issued thereunder (collectively referred to herein as
“Section 409A)
NOW THEREFORE, in consideration of the
foregoing promises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
1
DEFINITIONS
Whenever used in this Agreement, the
following terms shall have the meanings specified:
1.1 “Accrual Balance” means the
amount required to be accrued by the Bank under generally accepted accounting
principles to account for benefits that may become payable to the Executive
under this Agreement.
1.2 “Change in Control” means any
of the following:
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(a)
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Merger: The
Company merges into or consolidates with another corporation, or merges
another corporation into the Company and, as a result, less than a
majority of the combined voting power of the resulting corporation
immediately after the merger or consolidation is held by persons who were
stockholders of the Company immediately before the merger or
consolidation;
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(b)
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Acquisition of Significant
Share Ownership: A report on Schedule 13D or another
form or schedule (other than Schedule 13G) is filed or is required to be
filed under Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, if the schedule discloses that the filing person(s) has or have
become the beneficial owner(s) of 25% or more of a class of the Company’s
voting securities, but this clause (b) shall not apply to beneficial
ownership of Company voting shares held in a fiduciary capacity by an
entity of which the Company directly or indirectly beneficially owns 50%
or more of its outstanding voting
securities;
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(c)
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Change in Board
Composition: During any period of two consecutive years,
individuals who constitute the Company’s Board of Directors at the
beginning of the two-year period cease for any reason to constitute at
least a majority of the Company’s Board of Directors; provided, however,
that for purposes of this clause (c), each director who is first elected
by the board (or first nominated by the board for election by
stockholders) by a vote of at least two-thirds (2/3) of the directors who
were directors at the beginning of the period shall be deemed to have been
a director at the beginning of the two-year period;
or
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(d)
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Sale of Assets: The
Company sells to a third party all or substantially all of its
assets.
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1.3 “Company” means Smithtown
Bancorp, Inc. or any successor thereto.
1.4 “Disability” means the
Executive suffers a sickness, accident or injury which has been determined by
the carrier of any individual or group disability insurance policy covering the
Executive, or by the Social Security Administration, to be a disability
rendering the Executive totally and permanently disabled. The Executive must
submit proof to the Bank of the carrier’s or Social Security Administration’s
determination upon request. Notwithstanding the foregoing, if any
provision of this Agreement would cause a payment of deferred compensation to be
made upon the occurrence of the Executive’s Disability, then such payment shall
not be made unless such Disability also constitutes a “disability” within the
meaning of Section 409A. Any payment that would have been made except
for the application of the preceding sentence shall be made in accordance with
the time of payment schedule that would have applied in the absence of a
Disability.
1.5 “Early Termination” means the
Executive’s Termination of Employment with the Bank before Normal Retirement Age
for reasons other than: Termination for Cause, death, Disability, Termination
under Article 5 of this Agreement, or termination for reasons other than
Termination for Cause within 36 months on or after the effective date of a
Change in Control.
1.6 “Early Termination Date” means
the month, day and year in which Early Termination occurs.
1.7 “Effective Date” means January
1, 2005 with respect to the second amended and restated
Agreement. The original effective date was January 1,
2004.. The Agreement was also amended and restated on January 30,
2007.
1.8 “Final Average Compensation”
means the highest average amount of base salary paid to the Executive for
the three consecutively completed calendar years preceding the Executive’s
termination of employment.
1.9
“Normal Retirement Age” means the Executive’s 60th
birthday.
1.10 “Normal Retirement Date” means
the later of Normal Retirement Age or the Executive’s Termination of Employment
with the Bank.
1.11 reserved
1.12 “Social Security Benefit”
means the amount, based upon the Executive’s estimated earnings history to the
date of Termination of Employment, to which the Executive would be entitled
under the old age provisions of the Social Security Act upon attainment of the
normal Social Security retirement age.
1.13 “Termination for Cause” means
Termination of Employment because of the Executive’s personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar infractions)
or a final cease-and-desist order.
1.14 “Termination of Employment”
with the Bank means that the Executive shall have ceased to be employed by the
Bank by reason of his death, Disability or upon his “Separation from
Service”. For purposes of this Agreement, a “Separation
from Service” means a termination of the Executive’s services (whether as an
employee or a an independent contractor) to the Bank, other than by reason of
death or Disability. Whether a Separation from Service has occurred
shall be determined in accordance with the requirements of Section 409A based on
whether the facts and circumstances indicate that the Bank and the Executive
reasonably anticipated that no further services would be performed after a
certain date or that the level of bona fide services the Executive would perform
after such date (whether as an employee or as an independent contractor) would
permanently decrease to no more than twenty percent (20%) of the average level
of bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding thirty six (36) month
period.
ARTICLE
2
LIFETIME
BENEFITS
2.1 Normal
Retirement Benefit. Upon the Executive’s
Termination of Employment on or after the Normal Retirement Age for reasons
other than death or Termination for Cause, the Bank shall pay to the Executive
the benefit described in Section 2.1.1, less any reduction pursuant to Section
2.1.2, instead of any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under
this Section 2.1 is seventy percent (70%) of the Executive’s Final Average
Compensation, subject to reduction as set forth in Section 2.1.2.
2.1.2 Benefit Reduction. The annual
benefit under this Section 2.1 shall be reduced by the sum of the following
amounts:
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(a)
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Fifty
percent (50%) of the amount of the Executive’s annual Social Security
Benefit;
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(b)
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The
value of employer contributions under the Bank’s 401(k)
Plan;
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(c)
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The
value of employer contributions under the Bank’s Executive Deferred
Compensation Plan; and
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(d)
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The
value of employer contributions under the Bank’s Long-Term Incentive
Retirement Plan.
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2.1.3 Payment of Benefit. Beginning with the month
after the Executive’s Normal Retirement Date, the Bank shall pay the annual
benefit to the Executive in 12 equal monthly installments on the first day of
each month. The annual benefit shall be paid to the Executive for life with 15
years of payments guaranteed.
2.1.4 Application of Reduction. If
any benefit described in Subsection 2.1.2 is not payable as a single life
annuity or does not commence at the same time as the Executive’s benefit under
this Agreement, the Bank shall, for purposes of this section, convert the value
of such benefit into an actuarially equivalent single life annuity benefit
commencing at the same time as the benefit under this Agreement. If the
Executive would be entitled to a benefit described in Subsection 2.1.2, but for
his failure to apply for such benefit, Subsection 2.1.2 will be applied as if
the Executive had applied for and received the benefit. Changes in a
benefit described in Subsection 2.1.2 that occur after commencement of the
Executive’s benefit under this Agreement, because of changes in the plan or
program under which the benefit is provided or because of cost of living
adjustments, will not change the amount of the reduction under Subsection 2.1.2
hereof.
2.2 Early
Termination Benefit. Upon the
Executive’s Early Termination, the Bank shall pay to the Executive the benefit
described in this Section 2.2 instead of any other benefit under this
Agreement.
2.2.1 Amount of Benefit. The Early
Termination benefit under this Section 2.2 shall equal the Accrual Balance as of
the date immediately preceding the Early Termination Date.
2.2.2 Payment of
Benefit. Beginning with the month after the Executive attains
Normal Retirement Age, the Bank shall pay the Early Termination benefit to the
Executive in 12 equal monthly installments on the first day of each
month. The benefit shall be paid to the Executive for life with 15
years of payments guaranteed.
2.3 Disability
Benefit. If the
Executive terminates employment because of Disability before the Normal
Retirement Age, the Bank shall pay to the Executive the benefit described in
this Section 2.3 instead of any other benefit under this Agreement.
2.3.1 Amount of Benefit. The
Disability annual benefit under this Section 2.3 shall equal the Normal
Retirement benefit described in Section 2.1 of the Agreement.
2.3.2 Payment of Benefit. Beginning
with the month after Normal Retirement Age, the Bank shall pay the Disability
annual benefit to the Executive in 12 equal monthly installments on the first
day of each month. The annual benefit shall be paid to the Executive for life,
with 15 years of payments guaranteed.
2.4 Change in
Control Benefit.
If the Executive’s employment with the Bank terminates
for reasons other than a Termination for Cause within 36 months on or after the
effective date of a Change in Control, the Bank shall pay to the Executive the
benefit described in this Section 2.4 instead of any other benefit under this
Agreement. However, no benefits shall be payable if the Executive is
terminated under Article 5 of this Agreement.
2.4.1 Amount of Benefit. The
benefit under this Section 2.4 shall equal the Normal Retirement benefit
described in Section 2.1 of the Agreement, determined by projecting the
Executive’s Final Average Compensation under Section 2.1.2 to the Executive’s
Normal Retirement Age and using the assumptions set forth in Appendix A
hereto.
2.4.2 Payment of Benefit. The Bank shall pay the
Change in Control benefit under Section 2.4 of this Agreement to the Executive
in an actuarially equivalent lump sum within three days after the Executive’s
Termination of Employment.
2.5 Change in
Control Payout of Vested Normal Retirement Benefit, Vested Early Termination
Benefit or Vested Disability Benefit Being Paid at the Time of a Change in
Control. Subject
to compliance with Section 409A, if a Change in Control occurs at any time
during the entire supplemental retirement benefit payment period and at such
time the Executive (or his beneficiary or estate) is receiving a benefit under
Section 2.1.3, Section 2.2.2, or Section 2.3.2 or Article 3 hereof, the Bank
shall pay the remaining supplemental retirement benefits to the Executive, the
Executive’s beneficiaries, or the Executive’s estate in a lump sum within three
days after the effective date of the Change in Control. The lump sum payment due
to the Executive, beneficiaries, or estate as a result of a Change in Control
shall be an amount equal to the actuarial equivalent of the Accrual Balance
amount corresponding to the particular benefit then being paid to the Executive,
beneficiaries, or estate after deduction of any benefits already paid during the
period from Termination of Employment to payment of the lump sum
amount. For purposes of this Section 2.5 only, a “Change in Control”
means a “change in ownership,” “change in effective control” or “change in
ownership of a substantial portion of assets” for purposes of Section
409A.
ARTICLE
3
DEATH
BENEFITS
3.1 Death
During Active Service. Except as provided in
Section 5.1, if the Executive dies in active service to the Bank before Normal
Retirement Age, instead of any benefit payable under this Agreement, the Bank
shall pay to the Executive’s beneficiary(ies) the benefit the Executive would
have received if the Executive had retired on the date immediately preceding his
death and was deemed to be of Normal Retirement Age. The annual
benefit shall be paid to the Executive’s beneficiary(ies) for 15
years.
3.2 Death
During Benefit Period. If the Executive dies after
benefit payments under Article 2 of this Agreement have commenced but before
receiving all such payments, the Bank shall pay the remaining benefits to the
Executive’s beneficiary(ies) at the same time and in the same amounts they would
have been paid to the Executive had the Executive survived.
3.3 Death
After Termination of Employment but Before Benefit Payments Commence. If the Executive
is entitled to benefit payments under Article 2 but dies before payments
commence, the benefits shall be payable to the Executive’s beneficiary(ies), but
payments shall commence on the first day of the month after the date of the
Executive’s death. Payments shall be made at the same time and in the same
amounts they would have been paid to the Executive had the Executive
survived.
ARTICLE
4
BENEFICIARIES
4.1 Beneficiary
Designations. The
Executive shall designate a beneficiary or beneficiaries by filing a written
designation form with the Bank. The Executive may revoke or modify the
designation at any time by filing a new designation. However, designations will
be effective only if signed by the Executive and accepted by the Bank during the
Executive’s lifetime. The Executive’s beneficiary designation shall be deemed
automatically revoked if the beneficiary predeceases the Executive, or if the
Executive names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Executive dies without a valid beneficiary designation, all
payments shall be made to the Executive’s estate.
4.2 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 Bank
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
Bank may require such proof of incapacity, minority or guardianship as the Bank
deems appropriate before distribution of the benefit. Distribution shall
completely discharge the Bank from all liability for such benefit.
ARTICLE
5
GENERAL
LIMITATIONS
5.1 Suicide
or Misstatement. The Bank shall
not pay any benefit under this Agreement if the Executive commits suicide within
three years after the date of this Agreement. Additionally, the Bank shall not
pay any benefit under this Agreement if the Executive has made any material
misstatement of fact on any application or resume provided to the Bank, or on
any application for any benefits provided by the Bank to the
Executive.
5.2 Removal. If the Executive
is removed from office or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued by the Bank’s primary banking
regulator, all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order.
ARTICLE
6
CLAIMS
AND REVIEW PROCEDURES
6.1 Claims
Procedure. A
person 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:
6.1.1 Initiation - Written
Claim. The claimant shall initiate a claim by submitting to
the Bank a written claim for benefits.
6.1.2 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 may
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.
6.1.3 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:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Agreement on which the denial
is based,
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(c)
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A
description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is
needed,
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(d)
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An
explanation of the Agreement’s review procedures and the time limits
applicable to such procedures, and
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(e) A
statement of the claimant’s right to bring a civil action under ERISA (the
Employee Retirement Income Security Act of 1974) Section 502(a) following an
adverse benefit determination on review.
6.2 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:
6.2.1 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.
6.2.2 Additional Submissions - Information
Access. The claimant shall then have the opportunity to submit
written comments, documents, records and other information relating to the
claim. The Bank shall also provide 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.
6.2.3 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.
6.2.4 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.
6.2.5 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. The notification shall set forth:
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(a)
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The
specific reasons for the denial,
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(b)
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A
reference to the specific provisions of the Agreement on which the denial
is based,
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(c)
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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 (as defined in applicable ERISA regulations) to
the claimant’s claim for benefits,
and
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(d)
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A
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).
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ARTICLE
7
MISCELLANEOUS
7.1
Actuarial
Equivalency. Whenever an
actuarial equivalent must be determined under
this Agreement, it shall be determined in the same manner, and with the same
interest and mortality factors, as such equivalent would be determined under the
provisions of the pension plan in effect at the time such determination is to be
made, or, if no pension plan is in effect on such date, using reasonable
actuarial factors selected by the Administrator.
7.2 Amendments
and Termination. This Agreement
may be amended or terminated only by a written agreement signed by the Bank and
the Executive.
7.3 Binding
Effect. This Agreement
shall bind the Executive and the Bank, and their beneficiaries, survivors,
executors, successors, administrators and transferees.
7.4 No
Guarantee of Employment. This Agreement is
not an employment policy or contract. It does not give the Executive the right
to remain an employee of the Bank, nor does it interfere with the Bank’s right
to discharge the Executive at any time. It also does not require the Executive
to remain an employee nor interfere with the Executive’s right to terminate
employment at any time.
7.5 Non-Transferability. Benefits under
this Agreement cannot be sold, transferred, assigned, pledged, attached, or
encumbered in any manner.
7.6 Successors;
Binding Agreement. By an assumption
agreement in form and substance satisfactory to the Executive, the Bank will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Bank to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Bank would be required to
perform this Agreement if no such succession had occurred. The Bank’s failure to
obtain such an assumption agreement before the succession becomes effective
shall be considered a breach of this Agreement and shall entitle the Executive
to the Change in Control benefit provided in Section 2.4.
7.7 Tax
Withholding. The Bank shall
withhold any taxes that are required to be withheld from the benefits provided
under this Agreement.
7.8 Applicable
Law. Except to the
extent preempted by the laws of the United States of America, the validity,
interpretation, construction, and performance of this Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the principles of conflict of laws of such
state.
7.9 Unfunded
Arrangement. The Executive and
the Executive’s beneficiary(ies) are general unsecured creditors of the Bank for
the payment of benefits under this Agreement. The benefits represent the mere
promise by the Bank to pay such benefits. The right to benefits under the
Agreement are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive’s life is a general asset of the Bank
to which the Executive and beneficiary(ies) have no preferred or secured
claim.
7.10 Administration. The Bank shall
have the powers that are necessary to administer this Agreement, including, but
not limited to, the power to:
(a)
interpret the provisions of the Agreement;
(b) establish
and revise the method of accounting for the Agreement;
(c)
maintain a record of benefit payments; and
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(d)
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establish
rules and prescribe forms necessary or desirable to administer the
Agreement.
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7.11 Named
Fiduciary. The Bank shall be
the named fiduciary and Plan Administrator (the “Administrator”) under this
Agreement. The named fiduciary may delegate to others certain aspects of the
management and operational responsibilities of the Agreement, including the
employment of advisors and the delegation of ministerial duties to qualified
individuals.
7.12 Severability. If for any reason
any provision of this Agreement is held invalid, such invalidity shall not
affect any other provision of this Agreement, and each such other provision
shall continue in full force and effect to the full extent consistent with law.
If any provision of this Agreement is held invalid in part, such invalidity
shall in no way affect the remainder of the provision, and the remainder of such
provision, together with all other provisions of this Agreement, shall continue
in full force and effect to the full extent consistent with law.
7.13 Headings. The headings of
sections herein are included solely for convenience of reference and shall not
affect the meaning or interpretation of any provision of this
Agreement.
7.14 Notices. All notices,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered by hand or mailed,
certified or registered mail, return receipt requested, with postage prepaid, to
the following addresses or to such other address(es) as either party may
designate by like notice.
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(a)
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If
to the Bank, to:
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Board
of Directors
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Bank
of Smithtown
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Xxx
Xxxx Xxxx Xxxxxx
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Xxxxxxxxx,
Xxx Xxxx 00000
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(b)
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If
to the Executive, to:
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The
address maintained in the records of the
Bank.
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and to
such other or additional person or persons as either party shall have designated
to the other party in writing by like notice.
7.15 Entire
Agreement. This Agreement
constitutes the entire agreement between the Bank and the Executive concerning
the subject matter hereof. No rights are granted to the Executive under this
Agreement other than those specifically set forth herein.
7.15 Specified
Employees. Despite any
contrary provision of this Agreement, if, when the Executive’s service
terminates, the Executive is a “specified employee,” as defined in Section 409A,
and if any payments under this Agreement will result in additional tax or
interest to the Executive because of Section 409A, the Executive shall not be
entitled to payment until the earliest of (i) the date that is at least six
months after termination of the Executive’s employment for reasons other than
the Executive’s death, (ii) the date of the Executive’s death, or (iii) any
earlier date that does not result in additional tax or interest to the Executive
under Section 409A. If any provision of this Agreement would subject
the Executive to additional tax or interest under Section 409A, the Bank shall
reform the provision. However, the Bank shall maintain to the maximum extent
practicable the original intent of the applicable provision without subjecting
the Executive to additional tax or interest.
IN WITNESS WHEREOF, the
Executive and a duly authorized Bank officer have signed this Second Amended and
Restated Agreement as of the day and year first written above.
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BANK
OF SMITHTOWN
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By:
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EXECUTIVE
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Xxxxxxx
X. Rock
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