EMPLOYMENT AGREEMENT
This sets forth an amendment and restatement of the Employment Agreement made
effective as of January 1, 1997 between (i) COMMUNITY BANK SYSTEM, INC., a
Delaware corporation and registered bank holding company, and COMMUNITY BANK,
N.A., a national banking association, both having offices located in Dewitt, New
York (collectively, the "Employer"), and (ii) SANFORD A. BELDEN, an individual
currently residing at 9 Lynacres Boulevard, Fayetteville, New York ("Employee").
This amended and restated agreement supersedes the original version of this
agreement dated January 1, 1997 and supersedes the employment agreement between
the parties, effective as of January 1, 1995, which provided for employment for
a term ending on December 31, 1997. This amended and restated Agreement is
effective as of October 31, 1999.
W I T N E S S E T H
IN CONSIDERATION of the promises and mutual agreements and covenants
contained herein, and other good and valuable consideration, the parties agree
as follows:
1. Employment.
-----------
(a) Term. Employer shall continue to employ Employee, and Employee shall
continue to serve, as Director, President and Chief Executive Officer of
Employer for a six year term commencing on January 1, 1997 and ending on
December 31, 2002 ("Period of Employment"), subject to termination as provided
in paragraph 3 hereof.
(b) Salary. During the period of January 1, 1997 through December 31, 1997,
Employer shall pay Employee base salary at an annual rate of $300,000 ("Base
Salary"). Employee's Base Salary for the period January 1, 1998 through December
31, 1998 shall be $350,000. Employee's Base Salary for the period January 1,
1999 through December 31, 1999 shall be $400,000. Employee's Base Salary for the
period January 1, 2000 through December 31, 2000 shall be $450,000. Beginning
July 1, 2000, negotiations will reopen to determine base salary for the final
two years of the contract. Employee's Base Salary is payable in accordance with
Employer's regular payroll practices for executive employees.
(c) Salary Increase Adjustments. A fiscal year in which Employer's
reportable Return on Average Assets ("ROAA") is less than 1.0%, exclusive of
non-recurring charges (as determined in accordance with generally accepted
accounting principles by the independent accounting firm then employed by
Employer to prepare Employer's audited financial statements), which charges
shall be discounted from the ROAA calculation, under this paragraph l(c), shall
be considered an "Adjustment Year." Employer may renegotiate the scheduled
increase in Employee's Base Salary under Paragraph l(b) of this Agreement, for
the one year period following an Adjustment Year.
(d) Incentive Compensation. Employee shall be entitled to annual incentive
compensation opportunities pursuant to the terms of the Management Incentive
Plan which has been approved by the Board of Directors of Employer to cover key
personnel of Employer. Upon termination of Employee's employment pursuant to
subparagraph 3(a), 3(b), 3(c) or 6, Employee shall be entitled to a pro rata
portion (based on Employee's complete months of active employment in the
applicable year) of the annual incentive award that is payable with respect to
the year during which the termination occurs or, in the case of a termination
upon Employee's disability pursuant to subparagraph 3(c), the date the
Disability Period began.
(e) Renegotiations. If Employee and Employer cannot agree on Employee's
Base Salary and incentive award for employment after December 31, 2000, then
Employee shall be entitled to be paid Base Salary and incentive award equal to
the Base Salary and incentive award paid in 2000 through the balance of the
contract at December 31, 2002. Beginning January 1, 2002 (12 months before the
end of the Period of Employment), Employee and Employer shall commence good
faith negotiations, to be completed by June 30, 2002, for Employee's continued
employment by Employer after the end of the Period of Employment.
2. Duties during the Period of Employment. Employee shall have full
responsibility, subject to the control of Employer's Board of Directors, for the
supervision of all aspects of Employer's business and operations, and the
discharge of such other duties and responsibilities to Employer as may from time
to time be reasonably assigned to Employee by Employer's Board of Directors.
Employee shall report to the Board of Directors of Employer. Employee shall
devote Employee's best efforts to the affairs of Employer, serve faithfully and
to the best of Employee's ability and devote all of Employee's working time and
attention, knowledge, experience, energy and skill to the business of Employer,
except that Employee may affiliate with professional associations, business and
civic organizations. Employee shall serve on the Board of Directors of, or as an
officer of Employer's affiliates, without additional compensation if requested
to do so by the Board of Directors of Employer. Employee shall receive only the
compensation and other benefits described in this Agreement for Employee's
duties as a Director of Employer.
3. Termination. Employee's employment by Employer shall be subject to
termination as follows:
(a) Expiration of the Term. This Agreement shall terminate automatically at
the expiration of the Period of Employment unless the parties enter into a
written agreement extending Employee's employment, except for the continuing
obligations of the parties as specified hereunder.
(b) Termination Upon Death. This Agreement shall terminate upon Employee's
death. In the event this Agreement is terminated as a result of Employee's
death, Employer shall continue payments of Employee's Base Salary for a period
of 90 days following Employee's death to the beneficiary designated by Employee
on the "Beneficiary Designation Form" attached to this Agreement as Appendix A.
Employee's beneficiary shall be free to dispose of any restricted stock
previously granted to Employee by Employer. Additionally, Employer shall treat
as immediately exercisable all unexpired stock options held by Employee that are
not exercisable or that have not been exercised, so as to permit the Beneficiary
to purchase the balance of Community Bank System, Inc. ("CBSI") Stock not yet
purchased pursuant to said options until the end of the exercise period provided
in the original grant of the option right.
(c) Termination Upon Disability. Employer may terminate this Agreement upon
Employee's disability. For the purpose of this Agreement, Employee's inability
to perform Employee's duties hereunder by reason of physical or mental illness
or injury for a period of 26 successive weeks (the "Disability Period") shall
constitute disability. The determination of disability shall be made by a
physician selected by Employer and a physician selected by Employee; provided,
however, that if the two physicians so selected shall disagree, the
determination of disability shall be submitted to arbitration in accordance with
the rules of the American Arbitration Association and the decision of the
arbitrator shall be binding and conclusive on Employee and Employer. During the
Disability Period, Employee shall be entitled to 100% of Employee's Base Salary
otherwise payable during that period, reduced by any other benefits to which
Employee may be entitled for the Disability Period on account of such disability
(including, but not limited to, benefits provided under any disability insurance
policy or program, worker's compensation law, or any other benefit program or
arrangement). Upon termination pursuant to this disability provision, Employee
shall be free to dispose of any restricted stock granted to Employee.
Additionally, Employer shall treat as immediately exercisable all unexpired
stock options held by Employee that are not exercisable or that have not been
exercised, so as to permit the Employee to purchase the balance of CBSI Stock
not yet purchased pursuant to said options until the end of the exercise period
provided in the original grant of the option right.
(d) Termination for Cause. Employer may terminate Employee's employment
immediately for "cause" by written notice to Employee. For purposes of this
Agreement, a termination shall be for "cause" if the termination results from
any of the following events:
(i) Material breach of this Agreement;
(ii) Documented misconduct as an executive or director of Employer, or any
subsidiary or affiliate of Employer for which Employee is performing services
hereunder including, but not limited to, misappropriating any funds or property
of any such company, or attempting to obtain any personal profit (x) from any
transaction to which such company is a party or (y) from any transaction with
any third party in which Employee has an interest which is adverse to the
interest of any such company, unless, in either case, Employee shall have first
obtained the written consent of the Board of Directors of Employer;
(iii) Unreasonable neglect or refusal to perform the duties assigned to
Employee under or pursuant to this Agreement, unless cured within 60 days;
(iv) Conviction of a crime involving moral turpitude;
(v) Adjudication as a bankrupt, which adjudication has not been contested
in good faith, unless bankruptcy is caused directly by Employer's unexcused
failure to perform its obligations under this Agreement;
(vi) Documented failure to follow the reasonable, written instructions of
the Board of Directors of Employer, provided that the instructions do not
require Employee to engage in unlawful conduct; or
(vii) Any documented violation of the rules or regulations of the Office of
the Comptroller of the Currency or of any other regulatory agency.
Notwithstanding any other term or provision of this Agreement to the contrary,
if Employee's employment is terminated for cause, Employee shall forfeit all
rights to payments and benefits otherwise provided pursuant to this Agreement;
provided, however, that Base Salary shall be paid through the date of
termination.
(e) Termination For Reasons Other Than Cause. In the event Employer
terminates Employee prior to December 31, 2002 for reasons other than cause,
Employee shall be entitled to severance equal to the greater of (i) the sum of
the annual Base Salary in effect at the time of termination and the most recent
payment to Employee under the Management Incentive Plan, or (ii) amounts payable
through the balance of the unexpired term of this Agreement.
(f) Employer shall have the right of first refusal to purchase from
Employee or Employee's estate, shares of CBSI stock acquired pursuant to the
exercise of stock options after date of termination, in the event Employee or
Employee's estate elects to dispose or transfer such acquired shares. Such right
of first refusal shall expire ten years from the date of termination.
4. Fringe Benefits.
(a) Benefit Plans. During the Period of Employment, Employee shall be
eligible to participate in any employee pension benefit plans (as that term is
defined under Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended), Employer-paid group life insurance plans, medical plans,
dental plans, long-term disability plans, business travel insurance programs and
other fringe benefit programs maintained by Employer for the benefit of its
executive employees. Participation in any of Employer's benefit plans and
programs shall be based on, and subject to satisfaction of, the eligibility
requirements and other conditions of such plans and programs. Employer may
require Employee to submit to an annual physical, to be performed by a physician
of his own choosing. Employee shall be reimbursed for related expenses not
covered by Employer's health insurance plan, or any other plan in which Employee
is enrolled. Employee shall not be eligible to participate in Employer's
Severance Pay Plan maintained for other employees not covered by employment
agreements.
(b) Expenses. Upon submission to Employer of vouchers or other required
documentation, Employee shall be reimbursed for Employee's actual out-of-pocket
travel and other expenses reasonably incurred and paid by Employee in connection
with Employee's duties hereunder. Reimbursable expenses must be submitted to the
Personnel Committee of Employer's Board of Directors for review on a quarterly
basis.
(c) Other Benefits. During the Period of Employment, Employee also shall be
entitled to receive the following benefits:
(i) Paid vacation of 4 weeks during each calendar year (with no carry over
of unused vacation to a subsequent year) and any holidays that may be provided
to all employees of Employer in accordance with Employer's holiday policy;
(ii) Reasonable sick leave;
(iii) Employer paid membership for Employee at the Century Club and the
Onondaga Country Club, subject to nondeductible tax treatment by Employer or a
reimbursement to Employee for taxes owed by Employee in connection with such
benefit;
(iv) The use of an Employer-owned automobile of Employee's choice, the
purchase and replacement of which shall be subject to the approval of the
Personnel Committee of the Board of Directors of Employer; and
(v) Reimbursement of the purchase price of a car telephone and all
Employer-related business charges incurred in connection with the use of such
telephone.
(d) Supplemental Retirement Benefits. The terms and conditions for the
payment of Supplemental Retirement Benefits shall be set forth in a separate
written agreement between the parties.
5. Stock Options. Employer shall cause the Personnel Committee of the Board
of Directors of Employer to review whether Employee should be granted options to
purchase shares of common stock of Community Bank System, Inc. Such review may
be conducted pursuant to the terms of the Community Bank System, Inc. 1994
Long-Term Incentive Compensation Program or independently, as the Personnel
Committee shall determine. Reviews shall be conducted no less frequently than
annually.
6. Change of Control.
(a) If Employee's employment with Employer (as an employee) shall cease for
any reason, including Employee's voluntary termination but not including
Employee's termination for "cause" (as described in paragraph 3(d)) within 2
years following a "Change of Control" that occurs during the Period of
Employment, Employer shall:
(i) Retain the services of Employee, on an independent contractor basis, as
a consultant to Employer for a period of no less than 36 months at an annual
consulting fee rate equal to the total of Employee's Base Salary in effect at
the time of Employee's termination plus an amount equal to the Management
Incentive paid to the Employee in the year previous to the "Change of Control";
(ii) Provide Employee with fringe benefits, or the cash equivalent of such
benefits, identical to those described in paragraph 4(a) for the period during
which Employee is retained as a consultant pursuant to (i) above. To the extent
the benefits provided to Employee in 6(a)(ii) above are deemed taxable benefits,
Employer shall reimburse Employee for taxes owed by Employee on the benefits and
tax reimbursement;
(iii) Treat as immediately exercisable all unexpired stock options
described in paragraph 5 that are not otherwise exercisable or that have not
been exercised and permit Employee to dispose of any restricted stock granted to
Employee; and
(iv) Pay to Employee the difference between the total purchase price paid
by Employee for the home owned by him in the Syracuse area and the proceeds of
the sale of such home by Employee following the termination of his employment
not later than December 31, 2004 if he elects to move outside of the
metropolitan Syracuse area and he establishes to the satisfaction of the Board
of Directors of Employer that he is unable despite reasonable efforts to sell
the home within one year from the termination of his employment for a sum equal
to the purchase price, or, in lieu thereof, Employer will purchase the home for
a sum equal to the price Employee paid for it.
(v) Subject to Employer's right to make the single lump sum payment
described in paragraph 6(a)(vi) below, if any portion of the amounts paid to, or
value received by, Employee following a "Change of Control" (whether paid or
received pursuant to this paragraph 6 or otherwise) constitutes an "excess
parachute payment" within the meaning of Internal Revenue Code Section 280G,
then the parties shall negotiate a restructuring of payment dates and/or methods
(but not payment amounts) to minimize or eliminate the application of Internal
Revenue Code Section 280G. If an agreement to restructure payments cannot be
reached within 60 days of the date the first payment is due under this paragraph
6, then payments shall be made without restructuring. Subject to paragraph
6(a)(vi), Employee shall be responsible for all taxes and penalties payable by
Employee as a result of Employee's receipt of an "excess parachute payment."
(vi) Notwithstanding the foregoing of this paragraph 6(a), the Board of
Directors of Employer may elect, in its sole discretion, to pay all benefits due
Employee pursuant to this paragraph 6 (except for the benefit set forth in
paragraph 6(a)(iv) which shall continue pursuant to its terms) in a single lump
sum payment within 90 days following a Change of Control and Employee's
termination of employment with Employer. In the event a single lump sum payment
is made pursuant to the foregoing sentence, the amount of the payment shall be
increased to the extent necessary to hold Employee harmless from any tax
liability attributable to such single lump sum payment.
(b) As provided in paragraph 6(a) above, Employee may voluntarily terminate
his employment with Employer within 2 years following a Change of Control, and
receive all of the payments specified in 6(a) above. In the event of such a
voluntary termination, the payments specified in paragraph 6(a)(i) shall be
reduced by any non-Employer related wages or self-employment income derived (or,
in the case of a single lump sum payment, reasonably expected to be derived) by
Employee during the consulting period. (c) For purposes of paragraph 6, a
"Change of Control" shall be deemed to have occurred if:
(i) any "person," including a "group" as determined in accordance with the
Section 13(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act"), is or
becomes the beneficial owner, directly or indirectly, of securities of Employer
representing 30% or more of the combined voting power of Employer's then
outstanding securities;
(ii) as a result of, or in connection with, any tender offer or exchange
offer, merger or other business combination (a "Transaction"), the persons who
were directors of Employer before the Transaction shall cease to constitute a
majority of the Board of Directors of Employer or any successor to Employer;
(iii) Employer is merged or consolidated with another corporation and as a
result of the merger or consolidation less than 70% of the outstanding voting
securities of the surviving or resulting corporation shall then be owned in the
aggregate by the former stockholders of Employer, other than (A) affiliates
within the meaning of the Exchange Act, or (B) any party to the merger or
consolidation;
(iv) a tender offer or exchange offer is made and consummated for the
ownership of securities of Employer representing 30% or more of the combined
voting power of Employer's then outstanding voting securities; or
(v) Employer transfers substantially all of its assets to another
corporation which is not controlled by Employer.
7. Withholding. Employer shall deduct and withhold from compensation and
benefits provided under this Agreement all necessary income and employment taxes
and any other similar sums required by law to be withheld.
8. Covenants.
(a) Confidentiality. Employee shall not, without the prior written consent
of Employer, disclose or use in any way, either during his employment by
Employer or thereafter, except as required in the course of his employment by
Employer, any confidential business or technical information or trade secret
acquired in the course of Employee's employment by Employer. Employee
acknowledges and agrees that it would be difficult to fully compensate Employer
for damages resulting from the breach or threatened breach of the foregoing
provision and, accordingly, that Employer shall be entitled to temporary
preliminary injunctions and permanent injunctions to enforce such provision.
This provision with respect to injunctive relief shall not, however, diminish
Employer's right to claim and recover damages. Employee covenants to use his
best efforts to prevent the publication or disclosure of any trade secret or any
confidential information concerning the business or finances of Employer or
Employer's affiliates, or any of its or their dealings, transactions or affairs
which may come to Employee's knowledge in the pursuance of his duties or
employment.
(b) No Competition. Employee's employment is subject to the condition that
during the term of his employment hereunder and for the period specified in
Paragraph 8(c) below, Employee shall not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, director,
individual proprietor, lender, consultant or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of, any
entity or business (a "Competitive Operation") which competes in the banking
industry or with any other business conducted by Employer or by any group,
affiliate, division or subsidiary of Employer, in the states of New York and
Pennsylvania. Employee shall keep Employer fully advised as to any activity,
interest, or investment Employee may have in any way related to the banking
industry. It is understood and agreed that, for the purposes of the foregoing
provisions of this paragraph, (i) no business shall be deemed to be a business
conducted by Employer or any group, division, affiliate or subsidiary of
Employer unless 5% or more of Employer's consolidated gross sales or operating
revenues is derived from, or 5% or more of Employer's consolidated assets are
devoted to, such business; (ii) no business conducted by any entity by which
Employee is employed or in which he is interested or with which he is connected
or associated shall be deemed competitive with any business conducted by
Employer or any group, division or subsidiary of Employer unless it is one from
which 2% or more of its consolidated gross sales or operating revenues is
derived, or to which 2% or more of its consolidated assets are devoted; and
(iii) no business which is conducted by Employer at the Date of Termination and
which subsequently is sold by Employer shall, after such sale, be deemed to be a
Competitive Operation within the meaning of this paragraph. Ownership of not
more than 5% of the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph.
(c) Non-Competition Period. If Employee's employment with Employer shall
cease for any reason during the Period of Employment as defined in Paragraph
1(a) of this Agreement, the "non-competition period" shall begin on the date of
Employee's termination and end on the later of (i) the second anniversary of the
date of Employee's termination, or (ii) December 31, 2002.
(d) Certain Affiliates of Employer. It is understood that Employee may have
access to technical knowledge, trade secrets and customer lists of affiliates of
Employer or companies which Employer's parent may acquire in the future and may
serve as a member of the board of directors or as an officer or employee of an
affiliate of Employer. Employee covenants that he shall not, during the term of
his employment by Employer or for the period specified in 8(c) above, in any
way, directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director, individual proprietor, lender, consultant or
otherwise aid or assist anyone else in any business or operation which competes
with or engages in the business of such an affiliate.
(e) Termination of Payments. Upon the breach by Employee of any covenant
under this paragraph 8, Employer may offset and/or recover from Employee
immediately any and all severance benefits paid to Employee under paragraph 3(e)
hereof in addition to any and all other remedies available to Employer under the
law or in equity.
(f) The non-competition provisions of paragraphs 8(b) and 8(c) shall not
apply if Employee's employment ceases within the two-year period following a
Change of Control within the meaning of paragraph 6.
9. Notices. Any notice which may be given hereunder shall be sufficient if
in writing and mailed by certified mail, return receipt requested, to Employee
at his residence and to Employer at 5790 Widewaters Parkway, Dewitt, New York
13214, or at such other addresses as either Employee or Employer may, by similar
notice, designate.
10. Rules, Regulations and Policies. Employee shall abide by and comply
with all of the rules, regulations, and policies of Employer, including without
limitation Employer's policy of strict adherence to, and compliance with, any
and all requirements of the banking, securities, and antitrust laws and
regulations.
11. No Prior Restrictions. Employee affirms and represents that Employee is
under no obligations to any former employer or other third party which is in any
way inconsistent with, or which imposes any restriction upon, the employment of
Employee by Employer, or Employee's undertakings under this Agreement.
12. Return of Employer's Property. After Employee has received notice of
termination or at the end of the term hereof, whichever first occurs, Employee
shall forthwith return to Employer all documents and other property in his
possession belonging to Employer.
13. Construction and Severability. The invalidity of any one or more
provisions of this Agreement or any part thereof, all of which are inserted
conditionally upon their being valid in law, shall not affect the validity of
any other provisions to this Agreement; and in the event that one or more
provisions contained herein shall be invalid, as determined by a court of
competent jurisdiction, this instrument shall be construed as if such invalid
provisions had not been inserted.
14. Governing Law. This Agreement was executed and delivered in New York
and shall be construed and governed in accordance with the laws of the State of
New York.
15. Assignability and Successors. This Agreement may not be assigned by
Employee or Employer, except that this Agreement shall be binding upon and shall
inure to the benefit of the successor of Employer through merger or corporate
reorganization.
16. Miscellaneous. This Agreement constitutes the entire understanding and
agreement between the parties with respect to the subject matter hereof and
shall supersede all prior understandings and agreements, including the January
1, 1997 version of this Agreement and an employment agreement made effective as
of January 1, 1995. This Agreement cannot be amended, modified, or supplemented
in any respect, except by a subsequent written agreement entered into by the
parties hereto. The services to be performed by Employee are special and unique;
it is agreed that any breach of this Agreement by Employee shall entitle
Employer (or any successor or assigns of Employer) , in addition to any other
legal remedies available to it, to apply to any court of competent jurisdiction
to enjoin such breach. The provisions of paragraphs l(e), 6 and 8 hereof shall
survive the termination of this Agreement.
17. Counterparts. This Agreement may be executed in counterparts (each of
which need not be executed by each of the parties), which together shall
constitute one and the same instrument.
18. Jurisdiction, Venue and Fees. The jurisdiction of any proceeding
between the parties arising out of, or with respect to, this Agreement shall be
in a court of competent jurisdiction in New York State, and venue shall be in
Onondaga County. Each party shall be subject to the personal jurisdiction of the
courts of New York State. If Employee is the prevailing party in a proceeding to
collect payments due pursuant to this Agreement and prevails in collecting
payments due in the proceeding or settlement of the proceeding, Employer shall
reimburse Employee for reasonable attorneys' fees incurred by Employee in
connection with such proceeding.
The foregoing is established by the following signatures of the parties.
COMMUNITY BANK SYSTEM, INC.
By: /S/ James A. Gabriel
-------------------------
Its: Chairman
--------------
COMMUNITY BANK, N.A.
By: /s/ James A. Gabriel
Its: Chairman
--------------
/s/ SANFORD A. BELDEN
----------------------
SANFORD A. BELDEN
APPENDIX A
BENEFICIARY DESIGNATION FORM
Pursuant to the Employment Agreement between (i) Community Bank System,
Inc. and Community Bank, N.A., and (ii) Sanford A. Belden, dated as of January
1, 1997 ("Agreement"), I, Sanford A. Belden, hereby designate
Elizabeth G. Belden, my wife as the beneficiary of amounts payable upon my death
in accordance with paragraph 3(b) of the Agreement. My beneficiary's current
address is 9 Lynacres Boulevard Fayetteville, NY 13066.
Dated: 3/19/97
-------
/s/ Sanford A. Belden
- ----------------------
Sanford A. Belden
/s/ Susan D. Abbott
- ----------------------
Witness
SUPPLEMENTAL RETIREMENT PLAN AGREEMENT
This sets forth an amendment and restatement of the Supplemental Retirement
Plan Agreement made effective as of April 1, 1997 between (i) COMMUNITY BANK
SYSTEM, INC., a Delaware corporation and registered bank holding company, and
COMMUNITY BANK, N.A., a national banking association, both having offices
located in Dewitt, New York (collectively, the "Employer"), and (ii) SANFORD A.
BELDEN, an individual currently residing at 9 Lynacres Boulevard, Fayetteville,
New York ("Employee"). This amended and restated agreement supersedes the
original version of this agreement dated April 1, 1997, supersedes paragraph 6
of the employment agreement between the parties, effective as of January 1,
1995, and is entered into pursuant to paragraph 4(d) of the employment agreement
between the parties, effective as of January 1, 1997 and as amended ("Employment
Agreement"). This amended and restated Agreement is effective as of October 31,
1999.
WITNESSETH IN CONSIDERATION of the promises and mutual agreements and
covenants contained herein, and other good and valuable consideration, the
parties agree as follows:
1. Supplemental Retirement Benefit. (a) Employer shall pay Employee an
annual supplemental retirement benefit equal to the product of (i) 5% times
Employee's number of years of service, considering only the Employee's first 10
years of service, plus 2% times Employee's number of years of service in excess
of ten years, times (ii) Employee's final average compensation, with the product
of (i) times (ii) reduced by Employee's other retirement benefits.
(b) For purposes of this paragraph 1, and subject to paragraph 2, "years of
service" shall be credited to Employee in the same manner as years of service
are credited to Employee under the Community Bank System, Inc. Pension Plan, as
amended through December 31, 1994 ("Pension Plan"); and no more than 15 years of
service will be taken into account under paragraphs 1 and 2.
(c) For purposes of this paragraph 1, Employee's "final average
compensation" shall be the annual average of Employee's Base Salary (as defined
in the Employment Agreement) and cash bonus received during the five consecutive
calendar years preceding Employee's termination.
(d) For purposes of this paragraph 1, Employee's "other retirement
benefits" shall mean the sum of
(i) the annual benefit payable to Employee from the Pension Plan, plus
(ii) the estimated annual benefit payable to Employee pursuant to the
Federal Social Security Act, plus
(iii) the annual benefit payable to Employee under the defined benefit
pension plan maintained by Farm Credit (in which Employee was a participant
prior to his employment with Employer), plus
(iv) the annual benefit that could be provided by (A) Employer
contributions (other than elective deferrals) made on Employee's behalf under
the Community Bank System, Inc. Employee Savings and Retirement Plan, and under
the Deferred Compensation Plan for Certain Executive Employees of Community Bank
System, Inc., (B) First Bank System contributions (other than elective
deferrals) made on Employee's behalf under the defined contribution plan
maintained by First Bank System (in which Employee was a participant prior to
his employment with Employer), and (C) earnings on contributions under (A) and
(B) at an assumed rate of 8% per year, if such contributions and earning were
converted to a benefit payable at the same time and in the same form as the
benefit paid under this paragraph 1, using the factors applied to determine
actuarial equivalents under the Pension Plan at the time payments begin under
this paragraph 1. As of the date of this Agreement, the aggregate amount of
"other retirement benefits" is reflected on Appendix B to this Agreement.
(e) For purposes of paragraph 1, Employee's Social Security Benefit
("Benefit") will be valued by the actual Benefit Employee receives or is
qualified to receive at the time Employee elects to receive the supplemental
retirement benefit, or if Employee has not yet qualified for the Benefit, the
Benefit will be valued by the maximum benefit available to a then 62 year old
individual.
(f) For the purposes of paragraph 1, Employee's Pension Plan Benefit will
be Employee's accrued benefit under the Plan, determined as of the date Employee
elects to receive the supplemental retirement plan benefit, adjusted for the
timing and form of benefit.
(g) The supplemental retirement benefit described in paragraph 1 shall be
payable commencing on the first day of the month following the later of (i)
Employee's receipt of all payment due under the terms of his Employment
Agreement, or (ii) termination of employment with Employer.
(h) The supplemental retirement benefit described in this paragraph 1 shall
be paid in the form of an actuarially reduced Joint and 50% Survivor benefit
with Employee's spouse as survivor annuitant; provided however, that if Employee
simultaneously commences receipt of Employer's Pension Plan benefit, then the
benefit under this paragraph 1 shall be paid in the same form as Employee's
Pension Plan Benefit. If Employee or his beneficiaries shall receive payment of
Employee's benefit under the Pension Plan in a form other than a single life
annuity for Employee's life and/or prior to Employee's attainment of age 65, the
supplement retirement benefit under this paragraph 1 shall be converted to the
same form of payment and/or subject to the same early retirement reduction,
using the factors applied to determine actuarial equivalents and early
retirement benefits under the Pension Plan at the time payments begin.
(i) Employer shall establish a "grantor trust" (as that term is defined in
Internal Revenue Code Section 671) to aid it in the accumulation and payment of
the supplemental retirement benefit described in this paragraph 1; provided that
the trust shall be established with the intention that the creation and funding
of the trust shall not result in the recognition of gross income by Employee of
any amount credited under the trust prior to the date the amount is paid or made
available. Assets of the trust, and any other assets set aside by Employer to
satisfy its obligations under this Agreement, shall remain at all times subject
to the claims of Employer's general creditors. Employee and his beneficiaries
shall not have any rights under this paragraph 1 that are senior to the claims
of general unsecured creditors of Employer. Notwithstanding any other term or
provision of this agreement or the trust, immediately prior to the effective
date of a Change of Control (as defined in the Employment Agreement), Employer
shall fully fund the trust (using the same actuarial assumptions used to
establish funding in the Pension Plan) for all benefits earned pursuant to this
Agreement through the effective date of the Change of Control.
(j) The right to receive the supplemental retirement benefit described in
this paragraph 1 shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge or encumbrance, nor subject to attachment,
garnishment, levy, execution or other legal or equitable process for the debts,
contracts or liabilities of Employee or his beneficiaries.
2. Change of Control
(a) If Employee's employment with Employer shall cease for any reason,
including Employee's voluntary termination but not including Employee's
termination for "cause", within 2 years following a "Change of Control", (as
those quoted terms are defined in the Employment Agreement), Employer shall:
(i) Credit Employee under this agreement with the greater of 3 years of
service or the years of service Employee is retained as a consultant under the
terms of paragraph 6 of the Employment Agreement for purposes of determining
Employee's supplemental retirement benefit described in paragraph 1; and
(ii) Credit Employee under this agreement with two additional years of
service for purposes of determining Employee's supplemental retirement benefit
described in paragraph 1.
(b) Subject to paragraph 2(c) below, if any portion of the amounts paid to,
or value received by, Employee following a "Change of Control" constitutes an
"excess parachute payment" within the meaning of Internal Revenue Code Section
280G, then the parties shall negotiate a restructuring of payment dates and/or
methods (but not payment amounts) to minimize or eliminate the application of
Internal Revenue Code Section 280G. If an agreement to restructure payments
cannot be reached within 60 days of the date the first payment is due under this
Agreement, then payments shall be made without restructuring. Employee shall be
responsible for all taxes and penalties payable by Employee as a result of
Employee's receipt of an "excess parachute payment."
(c) Notwithstanding the foregoing of this paragraph 2, if the Board of
Directors of Employer elects to make a single lump sum payment to Employee
pursuant to paragraph 6(a)(vi) of the Employment Agreement, Employer shall pay
all benefits due Employee pursuant to this Agreement in an actuarial equivalent
single lump sum payment within 90 days following a Change of Control and
Employee's termination of employment with Employer. In the event a single lump
sum payment is made pursuant to the foregoing sentence, the amount of the
payment shall be increased to the extent necessary to hold Employee harmless
from any tax liability attributable to such single lump sum payment.
3. Construction and Severability. The invalidity of any one or more
provisions of this Agreement or any part thereof, all of which are inserted
conditionally upon their being valid in law, shall not affect the validity of
any other provisions to this Agreement; and in the event that one or more
provisions contained herein shall be invalid, as determined by a court of
competent jurisdiction, this instrument shall be construed as if such invalid
provisions had not been inserted.
4. Governing Law. This Agreement was executed and delivered in New York and
shall be construed and governed in accordance with the laws of the State of New
York.
5. Assignability and Successors. This Agreement may not be assigned by
Employee or Employer, except that this Agreement shall be binding upon and shall
inure to the benefit of the successor of Employer through merger or corporate
reorganization.
6. Miscellaneous. This Agreement constitutes the entire understanding and
agreement between the parties with respect to the subject matter hereof and
shall supersede all prior understandings and agreements, including the April 1,
1997 version of this Agreement and the employment agreement between Employer and
Employee dated January 1, 1995. This Agreement cannot be amended, modified, or
supplemented in any respect, except by a subsequent written agreement entered
into by the parties hereto.
7. Counterparts. This Agreement may be executed in counterparts (each of
which need not be executed by each of the parties), which together shall
constitute one and the same instrument.
8. Jurisdiction, Venue and Fees. The jurisdiction of any proceeding between
the parties arising out of, or with respect to, this Agreement shall be in a
court of competent jurisdiction in New York State, and venue shall be in
Onondaga County. Each party shall be subject to the personal jurisdiction of the
courts of New York State. If Employee is a party in a proceeding to collect
payments due pursuant to this Agreement and prevails in collecting payments due
in the proceeding or settlement of the proceeding, Employer shall reimburse
Employee for reasonable attorneys' fees incurred by Employee in connection with
such proceeding.
The foregoing is established by the following signatures of the parties.
COMMUNITY BANK SYSTEM, INC.
By: /S/ James A. Gabriel
-------------------------
Its: Chairman
--------------
COMMUNITY BANK, N.A.
By: /S/ James A. Gabriel
-------------------------
Its: Chairman
--------------
/s/ SANFORD A. BELDEN
-----------------------
SANFORD A. BELDEN
APPENDIX A
BENEFICIARY DESIGNATION FORM
Pursuant to the Supplemental Retirement Agreement between (i) Community
Bank System, Inc. and Community Bank, N.A., and (ii) Sanford A. Belden, dated as
of April 1, 1997 and amended and restated as of October 1, 1999 ("Agreement"),
I, Sanford A. Belden, hereby designate Elizabeth G. Belden, my wife, as the
beneficiary of amounts payable upon my death in accordance with paragraph 1 of
the Agreement. My beneficiary's current address is 9 Lynacres Boulevard,
Fayetteville, New York.
Dated: 11/19/99 /s/ Sanford A. Belden
-----------------------
Sanford A. Belden
/s/ Donna P. VanAuken
---------------------
Witness