ESB FINANCIAL CORPORATION AMENDED AND RESTATED DIRECTOR RETIREMENT AGREEMENT
Exhibit
10.7
[Form
for Director Agreement at Company Level]
ESB
FINANCIAL CORPORATION
AMENDED
AND RESTATED DIRECTOR RETIREMENT AGREEMENT
THIS
AMENDED AND RESTATED AGREEMENT is made and entered into this 20th day of
November
2007, by and between ESB Financial Corporation, located in Ellwood City,
Pennsylvania (“ESB Financial”), ESB Bank, a wholly-owned subsidiary of ESB
Financial, also located in Ellwood City, Pennsylvania (the “Bank”), and
____________ (the “Director”), intending to be legally bound
hereby. ESB Financial and the Bank are collectively referred to
herein as the “Corporation.”
INTRODUCTION
ESB
Financial, the Bank and the Director previously entered into a certain Amended
and Restated Director Retirement Agreement dated as of November 21, 2006 (the
“Prior Agreement”). This Agreement amends and restates the Prior
Agreement in its entirety as hereinafter set forth in order to comply with
the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), including the final regulations issued by the Internal Revenue
Service in April 2007. No benefits payable under this Agreement shall
be deemed to be grandfathered for purposes of Section 409A of the
Code.
This
Agreement shall at all times be characterized as a “top hat” plan of deferred
compensation maintained for a select group of management or highly compensated
employees, as described under Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974, as amended, and any regulations
relating thereto (“ERISA”). The Agreement has been and shall continue
to be operated in compliance with Section 409A of the Code. The
Agreement is an unfunded plan for tax purposes. The provisions of the
Agreement shall be construed to effectuate such intentions.
AGREEMENT
The
Director, the Corporation and the Bank agree as follows:
Article
1
Definitions
Whenever
used in this Agreement, the following words and phrases shall have the meanings
specified:
1.1 “Base
Board Fees” means the regular monthly Bank and ESB Financial board fees and
does not include committee fees, advisory board fees, director emeritus fees,
liaison fees or other income that might be received by the
Director.
1.2 “Change
in Control” means a change in the ownership of ESB Financial or the Bank, a
change in the effective control of ESB Financial or the Bank or a change in
the
ownership of a substantial portion of the assets of ESB Financial or the Bank,
in each case as provided under Section 409A of the Code and the regulations
thereunder.
1.3 “Code”
means the Internal Revenue Code of 1986, as amended.
1.4 “Deferred
Retirement” means the Director has met the eligibility requirements
described in Article 2 and has a Separation from Service after his Normal
Retirement Age for any reason other than following a Change in
Control.
1.5 “Deferred
Retirement Date” means the first day of the month coincident with or next
following the date of the Director’s Separation from Service subsequent to the
Director’s Normal Retirement Age.
1.6 “Early
Termination” means the Director has met the eligibility requirements
described in Article 2 but has a Separation from Service before Normal
Retirement Age for any reason other than following a Change in
Control.
1.7 “Early
Termination Date” means the month, day and year in which Early Termination
occurs.
1.8 “Effective
Date” means February 11, 2005, except that the amendment and restatement of
this Agreement shall be effective as of the date first written
above.
1.9 “Normal
Retirement Age” means the Director’s 75th
birthday.
1.10 “PlanYear”
means the calendar year. In the year of inception, the Plan Year
commences on the Effective Date of this Agreement and ends on December 31st of the same
year.
1.11 “Separation
from Service” means a termination of a Director’s services (whether as an
employee or as an independent contractor) to ESB Financial and the Bank for
any
reason. Whether a Separation from Service has occurred shall be
determined in accordance with the requirements of Section 409A of the Code
based
on whether the facts and circumstances indicate that ESB Financial, the Bank
and
the Director reasonably anticipated that no further services would be performed
after a certain date or that the level of bona fide services the Director 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. For purposes of this Agreement, if there is a dispute over
the service status of the Director or the date of the Director’s Separation from
Service, the Bank shall have the sole and absolute right to decide the
dispute.
1.12 “Specified
Employee” means a key employee within the meaning of Section 409A of the
Code and the regulations thereunder.
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1.13 “Termination
for Cause” has the meaning set forth in Section 6.2.
1.14 “Years
of Service” means the total number of continuous years of service as a
Director of the Bank or ESB Financial, inclusive of any approved leaves of
absences and service as a member of the Board of Directors of any bank acquired
by the Bank or ESB Financial, including all years of service accrued prior
to
the Effective Date; provided, however, that a year of service as a director
of
both the Bank and ESB Financial concurrently shall only count as one year of
service; and provided further, that any service as a director emeritus or as
an
advisory director shall be excluded in determining Years of
Service.
Article
2
Eligibility
to Participate
To
be
entitled to any benefit under this Agreement, the Director must have a minimum
of 5 Years of Service as a director of the Bank or ESB Financial (as opposed
to
service as a director of any bank or company acquired by the Bank or ESB
Financial) and a minimum of 10 total Years of Service.
Article
3
Retirement
Benefits
3.1 Annual
Normal Retirement Benefit. If the Director satisfies the
requirements of Article 2 and remains in continuous service as a member of
the
Board of Directors of the Bank or ESB Financial from the Effective Date of
this
Agreement until Normal Retirement Age, the Corporation shall pay to the Director
the benefit described in this Section 3.1 in lieu of any other benefit under
this Agreement.
3.1.1 Amount
of Benefit. The Annual Normal Retirement Benefit under this
Section 3.1 will be determined using the following formula:
The
Director’s Base Board Fees earned during the last full calendar year prior to
his retirement date (or, if earlier, the last full calendar year prior to
becoming a director emeritus), multiplied by a ratio ranging from 25% to 80%
based on the Director’s total Years of Service as follows:
3
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Years
of Service
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Retirement
Percentage
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10
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25.0%
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11
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27.5%
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12
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30.0%
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13
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32.5%
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14
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35.0%
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15
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37.5%
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16
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40.0%
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17
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42.5%
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18
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45.0%
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19
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47.5%
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20 or more |
80.0%
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3.1.2 Payment
of Benefit. The Corporation shall pay the annual benefit to the
Director each year for five years, with the annual benefits to be paid in equal
monthly installments on the first day of each month commencing with the month
following the Director’s Separation from Service and continuing for the 59
months that follow, subject to Section 3.5 hereof.
3.2 Early
Termination Benefit. Upon Early Termination, the Corporation
shall pay to the Director the benefit described in this Section 3.2 in lieu
of
any other benefit under this Agreement.
3.2.1 Amount
of Benefit. The benefit under this Section 3.2 is the Early
Termination Annual Benefit set forth in Schedule A for the Plan Year ended
immediately prior to the Early Termination Date, subject to Section 3.5
hereof.
3.2.2 Payment
of Benefit. The Corporation shall pay the benefit to the
Director (or his beneficiary if Separation from Service was due to death) in
a
lump sum payment within 60 days of the Director’s Early Termination
Date.
3.3 Deferred
Retirement Benefit. If the Director satisfies the requirements
of Article 2 and remains in continuous service as a member of the Board of
Directors of the Bank or ESB Financial from the Effective Date of this Agreement
until his Deferred Retirement Date, the Corporation shall pay to the Director
the benefit described in this Section 3.3 in lieu of any other benefit under
this Agreement.
3.3.1 Amount
of Benefit. The Deferred Retirement Benefit under this Section
3.3 will be determined using the same formula as set forth in Section 3.1.1
above.
3.3.2 Payment
of Benefit. The Corporation shall pay the annual benefit to the
Director each year for five years, with the annual benefits to be paid in equal
monthly installments on the first day of each month commencing with the month
following the Director’s Separation from Service and continuing for the 59
months that follow, subject to Section 3.5 hereof.
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3.4 Change
in Control Annual Benefit. If the Director satisfies the
requirements of Article 2 and is in the active service of the Corporation at
the
time of a Change in Control, and does not have a Separation from Service prior
to the consummation of the transaction which constitutes the Change in Control,
the Corporation shall pay to the Director the benefit described in this Section
3.4 in lieu of any other benefit under this Agreement.
3.4.1 Amount
of Benefit. The annual benefit under this Section 3.4 is the
Director’s Base Board Fees earned during the last full calendar year prior to
consummation of the Change in Control (or, if earlier, the last full calendar
year prior to becoming a director emeritus) multiplied by 80%.
3.4.2 Payment
of Benefit. The
Corporation shall pay the annual benefit to the Director each year for five
years, with the annual benefits to be paid in equal monthly installments
commencing on the first day of the month following consummation of the Change
in
Control and continuing for the 59 months that follow.
3.5 Six-Month
Delay. If the Director is a Specified Employee upon reaching
Normal Retirement Age, then the monthly payments specified in Section 3.1.2
above shall not commence until the first day of the month following the lapse
of
six months after reaching Normal Retirement Age, and shall then continue for
the
59 months that follow. If the Director is a Specified Employee upon
Early Termination, then the lump sum payment specified in Section 3.2.2 above
shall be delayed until the first day of the month following the lapse of six
months after the Early Termination Date. If the Director is a
Specified Employee upon Deferred Retirement, then the monthly payments specified
in Section 3.3.2 above shall not commence until the first day of the month
following the lapse of six months after the Deferred Retirement Date, and shall
then continue for the 59 months that follow.
Article
4
Death
Benefits
4.1 Death
During Benefit Period. If the Director dies after the benefit
payments have commenced under this Agreement but before receiving all such
payments, the Corporation shall pay the remaining benefits to the Director’s
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived.
4.2 Death
Before Benefit Payments Commence. If the Director is
entitled to benefit payments under this Agreement, but dies prior to the
commencement of said benefit payments, the Corporation shall pay the benefit
payments to the Director’s beneficiary that the Director was entitled to prior
to death, except that the benefit payments shall commence on the first day
of
the month following the date of the Director’s death.
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Article
5
Beneficiaries
5.1 Beneficiary
Designations. The Director shall designate a beneficiary by
filing a written designation with the Corporation. The Director may
revoke or modify the designation at any time by filing a new
designation. However, designations and revocations or modifications
of designations shall only be effective if they are filed with the Corporation
as a written document, signed by the Director and accepted by the Corporation
during the Director’s lifetime. The Director’s beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the Director, or
if
the Director names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Director dies without a valid beneficiary
designation, all payments shall be made to the Director’s estate.
5.2 Facility of
Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition
of
his or her property, the Corporation may pay such benefit to the guardian,
legal
representative or person having the care or custody of such minor, incapacitated
person or incapable person. The Corporation may require proof of
incapacity, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely
discharge the Corporation from all liability with respect to such
benefit.
Article
6
General
Limitations
6.1 Excess
Parachute or Golden Parachute Payment. Notwithstanding any provision of
this Agreement to the contrary, the Corporation shall not pay any benefit under
this Agreement to the extent the benefit would be a parachute payment under
Section 280G of the Code or would be a prohibited golden parachute payment
pursuant to 12 C.F.R. §359.2 and for which the appropriate federal banking
agency has not given written consent to pay pursuant to 12 C.F.R.
§359.4.
6.2 Termination
for Cause. Notwithstanding any provision of this Agreement to the contrary,
the Corporation shall not pay any benefit under this Agreement if the
Corporation terminates the Director’s service for:
6.2.1 Gross negligence or gross neglect of
duties;
6.2.2 Commission of a felony or of a gross
misdemeanor involving moral turpitude; or
6
1.01. Removal. Notwithstanding
any provision of this Agreement to the contrary, the Corporation shall not
pay
any benefit under this Agreement if the Director is subject to a final removal
or prohibition order issued by an appropriate federal banking agency pursuant
to
Section 8(e) of the Federal Deposit Insurance Act.
Article
7
Claims
and Review Procedures
7.1 Claims
Procedure. A Director or beneficiary (“claimant”) who has not
received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:
7.1.1 Initiation
– Written Claim. The claimant initiates a claim by submitting to the Bank a
written claim for the benefits.
7.1.2 Timing
of Bank Response. The Bank shall respond to such claimant within 90 days
after receiving the claim. If the Bank determines that special circumstances
require additional time for processing the claim, the Bank can extend the
response period by an additional 90 days by notifying the claimant in writing,
prior to the end of the initial 90-day period, that an additional period is
required. The notice of extension must set forth the special circumstances
and
the date by which the Bank expects to render its decision.
7.1.3 Notice
of Decision. If the Bank denies part or all of the claim, the Bank shall
notify the claimant in writing of such denial. The Bank shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall set forth:
7.1.3.1 The
specific reasons for the denial,
7.1.3.2 A
reference to the specific provisions of the Agreement on which the denial is
based,
7.1.3.3 A
description of any additional information or material necessary for the claimant
to perfect the claim and an explanation of why it is needed,
7.1.3.4 An
explanation of the Agreement’s review procedures and the time limits applicable
to such procedures, and
7.1.3.5 A
statement of the claimant’s right to bring a civil action under ERISA Section
502(a) following an adverse benefit determination on review.
7
7.2 Review
Procedure. If the Bank denies part or all of the claim, the claimant shall
have the opportunity for a full and fair review by the Bank of the denial,
as
follows:
7.2.1
Initiation
– Written Request. To initiate the review, the claimant, within 60 days
after receiving the Bank’s notice of denial, must file with the Bank a written
request for review.
7.2.2
Additional Submissions – Information Access. The claimant shall have
the opportunity to submit written comments, documents, records and other
information relating to the claim as part of the claimant’s written request for
review. The Bank shall also provide the claimant, upon request and
free of charge, reasonable access to, and copies of, all documents, records
and
other information relevant (as defined in applicable ERISA regulations) to
the
claimant’s claim for benefits.
7.2.3
Considerations on Review. In considering the review, the Bank shall
take into account all materials and information the claimant submits relating
to
the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.
7.2.4
Timing of Bank Response. The Bank shall respond in writing to such
claimant within 60 days after receiving the request for review. If the Bank
determines that special circumstances require additional time for processing
the
claim, the Bank can extend the response period by an additional 60 days by
notifying the claimant in writing, prior to the end of the initial 60-day
period, that an additional period is required. The notice of extension must
set
forth the special circumstances and the date by which the Bank expects to render
its decision.
7.2.5
Notice of Decision. The Bank shall notify the claimant in writing of
its decision on review. The Bank shall write the notification in a manner
calculated to be understood by the claimant. If the Bank denies part or all
of
the claim, the notification shall set forth:
7.2.5.1 The specific reasons for the denial,
7.2.5.2
A
reference to the specific provisions of the Agreement on which the denial is
based,
7.2.5.3
A
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant to the claimant’s claim for benefits,
7.2.5.4
A
statement of the claimant’s right to bring a civil action under ERISA Section
502(a), and
8
7.2.5.5
If an internal rule, guideline, protocol or other similar criterion was relied
upon in making the adverse determination on review, a statement that a copy
of
the rule, guideline, protocol or other similar criterion will be provided
without charge to the claimant upon request.
Article
8
Amendment
and Termination
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8.1
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Amendment
or Termination of Agreement.
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8.1.1 General. This
Agreement may be amended or terminated only by a written agreement signed by
the
Corporation, the Bank and the Director, except as provided in Article 6 and
except as provided below. A termination of this Agreement will not be
a distributable event, except in the two circumstances set forth in Section
8.1.2 below. Notwithstanding anything in the Agreement to the
contrary, the Corporation may amend in good faith any terms of the Agreement,
including retroactively to the extent permitted by law, in order to comply
with
Section 409A of the Code.
8.1.2 Termination. Under
no circumstances may the Agreement permit the acceleration of the time or form
of any payment under the Agreement prior to the payment events specified herein,
except as provided in this Section 8.1.2. The Corporation may, in its
discretion, elect to terminate the Agreement in any of the following two
circumstances and accelerate the payment of the entire unpaid balance of the
Director’s vested benefits under Article 3 as of the date of such payment in
accordance with Section 409A of the Code:
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(i)
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the
Agreement is irrevocably terminated at a time that is not proximate
to a
downturn in the financial health of ESB Financial or the Bank and
(1) all
arrangements sponsored by ESB Financial and the Bank that would be
aggregated with the Agreement under Treasury Regulation 1.409A-1(c)
if the
Director participated in such arrangements are terminated, (2) no
payments
are made within 12 months of the date ESB Financial and the Bank
take all
necessary action to irrevocably terminate the arrangements, other
than
payments that would be payable under the terms of the arrangements
if the
termination had not occurred; (3) all payments are made within 24
months
of the date ESB Financial and the Bank take all necessary action
to
irrevocably terminate the arrangements; and (4) neither ESB Financial
nor
the Bank adopts a new arrangement that would be aggregated with the
Agreement under Treasury Regulation 1.409A-1(c) if the Director
participated in both arrangements, at any time within three years
following the date ESB Financial and the Bank take all necessary
action to
irrevocably terminate the Agreement;
or
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(ii)
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the
Agreement is terminated within 12 months of a corporate dissolution
taxed
under Section 331 of the Code, or with the approval of a bankruptcy
court
pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by
the Director under the Agreement are included in the Director’s gross
income in the later of (1) the calendar year in which the termination
of
the Agreement occurs, or (2) the first calendar year in which the
payment
is administratively practicable.
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9
Article
9
Miscellaneous
9.1 Binding
Effect. This Agreement shall bind the Director, the Corporation
and the Bank, and their successors, beneficiaries, survivors, executors,
administrators and transferees.
9.2 No
Guarantee of Service. This Agreement is not a service policy or
contract. It does not give the Director the right to remain a member
of the Board of Directors of the Corporation, nor does it interfere with the
Corporation’s right to terminate the Director’s service. It also does
not require the Director to remain a Board member nor interfere with the
Director’s right to terminate service at any time.
9.3 Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned, pledged,
attached or encumbered in any manner.
9.4 Tax
Withholding. The Corporation shall withhold any taxes that are
required to be withheld from the benefits provided under this
Agreement.
9.5 Applicable
Law. This Agreement and all rights hereunder shall be governed
by the laws of the Commonwealth of Pennsylvania, except to the extent preempted
by the laws of the United States of America.
9.6 Reorganization. The
Corporation shall not merge or consolidate into or with another company, or
reorganize, or sell substantially all of its assets to another company, firm
or
person unless such succeeding or continuing company, firm or person agrees
to
assume and discharge the obligations of the Corporation under this
Agreement.
9.7 Unfunded
Arrangement. The Director and any beneficiary are general
unsecured creditors of the Corporation for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Corporation
to pay such benefits. The rights to benefits are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance
on the Director’s life is a general asset of the Corporation to which the
Director and beneficiary have no preferred or secured claim.
9.8 Changes
in Statutes or Regulations. If any statutory or regulation
provision referenced herein is subsequently changed or re-numbered, or is
replaced by a separate provision, then the references in this Agreement to
such
statutory or regulatory provision shall be deemed to be a reference to such
section as amended, re-numbered or replaced.
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9.9 Entire
Agreement. This Agreement constitutes the entire agreement
between the Corporation, the Bank and the Director as to the subject matter
hereof. No rights are granted to the Director by virtue of this
Agreement other than those specifically set forth herein.
9.10 Administration. The
Corporation shall have all powers which are necessary to administer this
Agreement, including but not limited to:
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9.10.1 |
Interpreting
the provisions of the Agreement;
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9.10.2 |
Establishing
and revising the method of accounting for the Agreement;
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9.10.3 |
Maintaining
a record of benefit payments; and
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9.10.4 |
Establishing
rules and prescribing any forms necessary or desirable to administer
the
Agreement.
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IN
WITNESS WHEREOF, the Director and a duly authorized officer of ESB Bank have
signed this Agreement.
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DIRECTOR:
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ESB BANK: | ||||||||
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By:
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Name:
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Name: |
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| Title: | |||||||||
By
execution hereof, ESB Financial Corporation consents to and agrees to be bound
by the terms and conditions of this Agreement.
| ATTEST: | ESB FINANCIAL CORPORATION: | ||||
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By:
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Name:
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Name:
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Title:
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11
BENEFICIARY
DESIGNATION
ESB
FINANCIAL CORPORATION
AMENDED
AND RESTATED DIRECTOR RETIREMENT AGREEMENT
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_________________
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I
designate the following as beneficiary of any death benefits under the ESB
Financial Corporation Amended and Restated Director Retirement
Agreement:
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Primary: ______________________________________________________________________________________________________
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_____________________________________________________________________________________________________________
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Contingent: ___________________________________________________________________________________________________
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_____________________________________________________________________________________________________________
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Note: To
name a trust as beneficiary, please provide the name of the Trustee(s)
and
the exact name and date of the trust
agreement.
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I
understand that I may change these beneficiary designations by filing a new
written designation with the Corporation. I further understand that
the designations will be automatically revoked if the beneficiary predeceases
me
or, if I have named my spouse as beneficiary, in the event of the dissolution
of
our marriage.
Signature ______________________________
Date __________________________________
Accepted
by the Corporation this ______ day of _________________, 200_.
By ____________________________________
Title __________________________________
12