AMENDED AND RESTATED BANK OF SMITHTOWN SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
EXHIBIT
1
AMENDED
AND RESTATED BANK OF SMITHTOWN
THIS
AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT
AGREEMENT
(the
"Agreement") is entered into as of this 30th day of January, 2007, by and
between the Bank of Smithtown, with its main office in Smithtown, New York
(the
"Bank"), and ▇▇▇▇▇▇▇ ▇. 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; and
WHEREAS,
the Executive and the Bank executed a Supplemental Executive Incentive
Retirement Agreement on May 27, 2004 which set forth the terms and conditions
of
the payment of supplemental retirement benefits to the Executive;
and
WHEREAS,
the Bank and the Executive desire to correct an error in the agreement dated
May
27, 2004 and to restate the agreement to reflect the parties original intent
with respect to compensation to be included in the calculation of the benefits
payable to the Executive; and
WHEREAS,
the Bank and the Executive entered into an Amended and Restated Change In
Control Agreement on December 22, 2006, which provides, among other things,
that
the event which triggers the payment to him thereunder must occur within 36
months after a change in control; and
WHEREAS,
the Bank and the Executive also desire to amend the Supplemental Executive
Retirement Agreement dated May 27, 2004 so that it is consistent with the terms
of the Amended and Restated Change In Control Agreement.
NOW
THEREFORE, for 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) |
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.
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, 2004.
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 "Plan
Year"
means a
twelve-month period, commencing on January 1 and ending on the last day of
December of each year. The initial Plan Year shall commence on the Effective
Date of this Agreement and end on December 31.
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
for
any reason whatsoever, except a leave of absence approved by the Bank. For
purposes of this Agreement, if there is a dispute over the employment status
of
the Executive or the date of termination of the Executive's employment, the
Bank
shall have the sole and absolute right to decide the dispute, unless a Change
in
Control shall have occurred.
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) |
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. 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.
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.
3.4 Petition
for Benefit Payments.
If the
Executive dies before receiving any or all benefit payments to which he is
entitled under Section 2.1, Section 2.2, or Section 2.3, the Executive's
beneficiary(ies) or estate may petition the Bank's Board of Directors to have
the actuarially equivalent Accrual Balance corresponding to that particular
benefit paid to the Executive's beneficiary(ies) or estate in a single lump
sum
after deduction of any benefits already paid hereunder. The Bank's Board of
Directors shall have sole and absolute discretion about whether to pay the
remaining Accrual Balance in a lump sum. If payment of the remaining Accrual
Balance is paid in a single lump sum, the Bank shall have no further obligations
under this Agreement.
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:
| (a) |
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)
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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.
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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:
| (a) |
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;
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| (b) |
establish
and revise the method of accounting for the
Agreement;
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| (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.
|
(a)
|
If to the Bank, to: | Board of Directors | |
| Bank of Smithtown | |||
| ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ | |||
| ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ | |||
|
(b)
|
If to the Executive, to: | ||
| ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ | |||
| ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ |
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 contains the entire understanding between the Bank and the Executive
concerning the subject matter hereof and supercedes the prior agreement between
the Bank and the Executive dated May 27, 2004.
IN
WITNESS WHEREOF,
the
Executive and a duly authorized Bank officer have signed this Agreement as
of
the day and year first written above.
| BANK OF SMITHTOWN | ||
| |
|
|
| By: | ||
| ▇▇▇▇▇ ▇▇▇▇▇▇, Executive Vice President | ||
| EXECUTIVE | ||
| ▇▇▇▇▇▇▇ ▇. Rock | ||
APPENDIX
A
For
purposes of the projections required under Section 2.4.1 of the Agreement,
the
following assumptions shall apply:
|
1.
|
The
Executive's base salary as of his termination date shall be projected
to
Normal Retirement Age at a five percent (5%) annual rate of increase
through and including the year in which his Normal Retirement Age
would
occur.
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2.
|
For
purposes of Section 2.1.2 of the Agreement, the value of employer
contributions under the Bank's 401(k) Plan, Executive Deferred
Compensation Plan and Long-Term Incentive Retirement Plan shall be
determined by reference to the value of such contributions on the
Executive's termination date.
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