EXHIBIT 10.14
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PENN FEDERAL SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE MARCH 1, 2003
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005
Purpose
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The purpose of the Plan is to provide supplemental retirement benefits
to a select group of employees who contribute materially to the continued
growth, development and future business success of Penn Federal Savings Bank and
its Affiliates. The Plan shall be unfunded for tax purposes and for purposes of
Title I of ERISA.
The Plan has been amended and restated effective January 1, 2005,
except where otherwise provided herein or required by applicable law. The Plan
is intended to comply with Section 409A of the Internal Revenue Code of 1986, as
amended, and the regulations and guidance of general applicability issued
thereunder, and shall be administered and operated accordingly.
The rights of any person who terminates employment on or before any
amendment to this Plan shall be determined solely under the terms of the Plan in
effect as of the date of his termination of employment, unless such person again
becomes a Participant hereunder, or unless otherwise required by Section 409A of
the Code or other applicable law.
ARTICLE I
Definitions
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For purposes of the Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
"Affiliates" shall mean any entity that, directly or indirectly,
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through one or more intermediaries, controls, is controlled by, or is
under common control with the Company.
"Annual Benefit" shall mean with respect to any Participant, an annual
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benefit equal to the percentage of the Participant's Final Average
Compensation set forth in a Participant's Plan Agreement.
Notwithstanding the foregoing, where the Plan Agreement expresses the
Annual Benefit as a unit benefit, then the Annual Benefit shall be
equal to the percent of the Participant's Final Average Compensation
set forth in the Participant's Plan Agreement times the number of the
Participant's Years of Credited Service set forth in a Participant's
Plan Agreement, calculated through the last day of the month in which
the Participant experiences a Termination of Employment. A
Participant's Annual Benefit shall not exceed any maximum Annual
Benefit set forth in his Plan Agreement, nor be less than any minimum
Annual Benefit set forth in his Plan Agreement.
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"Beneficiary" shall mean one or more persons, estates or other
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entities, designated in accordance with Article 9, that are entitled to
receive benefits under the Plan upon the death of a Participant.
"Beneficiary Designation Form" shall mean the form established from
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time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
"Board" shall mean the board of directors of the Company.
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"Change in Control" shall mean a "change in the ownership of the
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Company", a "change in the effective control of the Company", or a
"change in the ownership of a substantial portion of the Company's
assets", all within the meaning of Section 409A.
"Claimant" shall have the meaning set forth in Section 13.1.
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"Code" shall mean the Internal Revenue Code 1986, as it may be amended
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from time to time.
"Committee" shall mean the committee described in Article 11.
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"Company" shall mean Penn Federal Savings Bank.
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"Compensation" shall mean the annual cash compensation relating to
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services performed by a Participant for the Company and its Affiliates
during any calendar year, whether or not paid in such calendar year or
included on the Federal Income Tax Form W-2 for such calendar year,
excluding bonuses of any type or nature, fringe benefits, stock
options, other stock based compensation, relocation expenses,
non-monetary awards, and automobile and other allowances paid to a
Participant for employment services rendered (whether or not such
allowances are included in the Participant's gross income).
Compensation shall be calculated before reduction for compensation
voluntarily deferred or contributed by the Participant pursuant to all
qualified or non-qualified plans of the Company and its Affiliates and
shall be calculated to include amounts not otherwise included in the
Participant's gross income; provided, however, that all such amounts
will be included in compensation only to the extent that, had there
been no such plan, the amount would have been payable in cash to the
Participant.
"Early Retirement Date" shall mean the later of (i) the date that the
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Participant attains age 55, and (ii) the date of the Participant's
Termination of Employment, which event occurs pursuant to the Normal
Retirement Date.
"Early Retirement Monthly Benefit" shall mean a monthly amount equal to
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the Participant's Monthly Benefit at his Normal Retirement Date,
reduced by .16666% (or the appropriate fraction thereof) for each month
or portion thereof by which the Participant's Early Retirement Date
precedes his Normal Retirement Date (2 percent annually). By way of
illustration, if a Participant elects to receive his Plan benefit at
age 55 rather than age 65, and his Monthly Benefit at his Normal
Retirement Date is 5.83 percent of Compensation (70 percent annually),
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then his Early Retirement Monthly Benefit will be 4.1666 percent of
Compensation (50 percent annually) ((70% - (2% times 10)/12).
"Employee" shall mean a person who is classified as an employee of the
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Company or its Affiliates.
"Equivalent Actuarial Value" shall mean, unless otherwise specified in
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the Plan Agreement, a benefit of equivalent value to another form of
benefit, computed on the basis of an interest rate factor of 7 percent
per annum. Notwithstanding the foregoing, the Equivalent Actuarial
Value of any payment made on account of a Change in Control shall be
determined by using the discount rate under Treasury Regulation Section
1.280G-1, Q&A 32, or the successor regulation thereto on the date of
the payment (i.e., as of the effective date of the Plan, 120 percent of
the applicable Federal rate as determined under Section 1274(d) and the
regulations thereunder, compounded semiannually). For purposes of
Section 3.2 (regarding death benefits), Equivalent Actuarial Value
shall be determined using the applicable long-term Federal rate under
Section 1274(d) and the regulations thereunder, compounded
semiannually, as in effect on the date of the Participant's death.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
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as it may be amended from time to time.
"Final Average Compensation" shall mean the amount determined by
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dividing by two the Participant's aggregate Compensation during the two
Plan Years (whether or not consecutive) in the five Plan Year period
immediately prior to his Termination of Employment (or if Termination
of Employment occurs during the month of December then including the
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Plan Year in which Termination of Employment occurs) that results in
the largest total.
"Holding Company" shall mean PennFed Financial Services, Inc.
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"Monthly Benefit" shall mean one twelfth (1/12) of the Participant's
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Annual Benefit.
"Normal Retirement Date" shall mean the later of (i) the date of the
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Participant's Termination of Employment or (ii) the Participant's
attainment of age sixty-five (65).
"Participant" shall mean any Employee (i) who is selected to
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participate in the Plan, (ii) who signs a Plan Agreement, and (iii)
whose signed Plan Agreement is accepted by the Committee. A spouse or
former spouse of a Participant shall not be treated as a Participant in
the Plan or have an Annual Benefit under the Plan, even if he or she
has an interest in the Participant's benefits under the Plan as a
result of applicable law or property settlements resulting from legal
separation or divorce.
"Payout Period" shall mean the number of consecutive months set forth
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as the Payout Period in a Participant's Plan Agreement, commencing on
the first day of the calendar month next following the Participant's
Normal Retirement Date, except as otherwise provided in Section 3.1.
Notwithstanding the foregoing, the Payout Period for Plan benefits
commencing on an Early Retirement Date shall be extended by one month
for each full month by which the Participant's Early Retirement Date
precedes his Normal Retirement Date. To illustrate, if a
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Participant with a Payout Period of 180 months on his Normal Retirement
Date elects an Early Retirement Date of age 62, then the Payout Period
will be 216 months (180, plus 1 times 36 months).
"Plan" shall mean this Supplemental Executive Retirement Plan, which
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shall be evidenced by this instrument and by each Plan Agreement, as
they may be amended from time to time.
"Plan Agreement" shall mean a written agreement, as may be amended from
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time to time (which may not change the Payout Periods), which is
entered into by and between the Company and a Participant. Should there
be more than one Plan Agreement, the Plan Agreement bearing the latest
date of acceptance by the Company shall supersede all previous Plan
Agreements in their entirety and shall govern such entitlement. The
terms of any Plan Agreement may be different for any Participant, and
any Plan Agreement may limit the benefits otherwise provided under the
Plan.
"Plan Year" shall have the same meaning as the fiscal year of the
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Company.
"Pre-2005 Accrued Benefit" shall mean the Equivalent Actuarial Value of
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the Participant's Monthly Benefit as of December 31, 2004, determined
as if the Participant experienced a voluntary Termination of Employment
other than a Termination of Cause on December 31, 2004, and received a
payment of the benefits with the maximum value available from the Plan
on the earliest date possible under the Plan to receive a payment of
benefits following his Termination of Employment. The amount described
in the preceding sentence may be increased to equal the present value
of the benefit the Participant actually becomes entitled to under the
terms of the Plan as in effect on October 3, 2004, without regard to
any further services provided by the Participant after December 31,
2004, or any other events affecting the amount of or the entitlement to
benefits (other than a Participant election regarding the time or form
of an available benefit). The determination of a Participant's Pre-2005
Accrued Benefit shall be determined in accordance with Section 409A.
"Section 409A" means Section 409A of the Code and the regulations and
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guidance of general applicability issued thereunder.
"Section 409A Transition Rule Election" shall mean an election made by
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a Participant, or an amendment to the Plan, prior to December 31, 2007
(or such later date as permitted by Section 409A) regarding Change in
Control payments under Section 11.2. A Section 409A Transition Rule
Election made prior to December 31, 2006 shall (a) apply only to
amounts that would not otherwise be payable under the terms of the Plan
during 2006, and (b) not cause any amounts that would not otherwise be
payable under the Plan after 2006 to be payable in 2006. A Section 409A
Transition Rule Election made during 2007 shall (a) apply only to
amounts that would not otherwise be payable under the terms of the Plan
during 2007, and (b) not cause any amounts that would not otherwise be
payable under the Plan after 2007 to be payable in 2007. No Transition
Rule election shall violate any constructive receipt or other tax rule
that would result in the acceleration of taxation of Plan payments.
"Specified Employee" shall mean a key employee described in Code
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Section 416(i) (determined without regard to paragraph (5) thereof) of
the Company or an Affiliate, provided
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the Company is publicly traded on an established securities market or
otherwise. For purposes of determining whether a Participant is a
Specified Employee, the identification date shall be December 31. The
determination of whether a Participant is a Specified Employee shall be
made by the Committee in accordance with Section 409A.
"Termination for Cause" or "Terminated for Cause" shall mean the
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involuntary termination of service of a Participant on account of
dishonesty, incompetence, willful misconduct, breach of a fiduciary
duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (excluding
violations which do not have a material adverse affect on the Company)
or final cease-and-desist order. No act or failure to act by the
Participant shall be considered willful unless the Participant acted or
failed to act with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interest of
the Company. The Participant shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered
to the Participant a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the entire membership
of the Board of Directors at a meeting of the Board duly called and
held for such purpose (after reasonable notice to the Participant and
an opportunity for the Participant, together with the Participant's
counsel, to be heard before the Board), stating that in the good faith
opinion of the Board of Directors the Participant has engaged in
conduct described in the preceding sentence and specifying the
particulars thereof in detail.
"Termination of Employment" shall mean the severing of employment with
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the Company and its Affiliates. Whether a Termination of Employment has
occurred will be determined based on the facts and circumstances
surrounding the termination of the Participant's employment and whether
the Company and the Participant intended for the Participant to provide
significant services for the Company and its Affiliates following such
termination. A Termination of Employment will not be considered to have
occurred if:
(a) the Participant continues to provide services as an
employee of the Company and its Affiliates at an annual rate
that is twenty percent (20%) or more of the services rendered,
on average, during the immediately preceding three full
calendar years of employment (or, if employed less than three
years, such lesser period) and the annual remuneration for
such services is twenty percent (20%) or more of the average
annual remuneration earned during the final three full
calendar years of employment (or, if less, such lesser
period), or
(b) the Participant continues to provide services to the
Company in a capacity other than as an employee of the Company
and its Affiliates at an annual rate that is fifty percent
(50%) or more of the services rendered, on average, during the
immediately preceding three full calendar years of employment
(or if employed less than three years, such lesser period) and
the annual remuneration for such services is fifty percent
(50%) or more of the average annual remuneration earned during
the final three full calendar years of employment (or if less,
such lesser period).
Notwithstanding anything herein to the contrary, no
Participant shall be considered to have experienced a
Termination of Employment unless his termination of employment
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with the Company and its Affiliates would constitute a
"separation from service" within the meaning of Section 409A.
"Trust" shall mean any trust established between the Company and the
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trustee named therein to provide benefits hereunder, as amended from
time to time.
"Years of Credited Service" shall mean the total number of Plan Years
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(or fraction thereof determined on a months basis) taken into account
under a Participant's Plan Agreement for purposes of calculating such
Participant's Annual Benefit.
ARTICLE 2
Selection, Enrollment, Eligibility
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2.1 Selection by Committee. Participation in the Plan shall be limited to a
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select group of management and highly compensated Employees, as
determined by the Committee in its sole discretion from time to time.
From that group, the Committee shall select, in its sole discretion,
Employees to participate in the Plan.
2.2 Enrollment Requirements. As a condition to participation, each selected
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Employee shall complete, execute and return to the Committee a Plan
Agreement. In addition, the Committee shall establish from time to time
such other enrollment requirements as it determines in its sole
discretion are necessary or appropriate.
2.3 Eligibility; Commencement of Participation. Provided an Employee
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selected to participate in the Plan has met all enrollment requirements
set forth in the Plan and required by the Committee, including
returning all required documents to the Committee, that Employee shall
commence participation in the Plan on the date his Plan Agreement is
executed by the Company.
2.4 Termination of Participation. If the Committee determines in good faith
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that a Participant no longer qualifies as a member of a select group of
management or highly compensated employees, as membership in such group
is determined in accordance with Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, the Committee shall have the right, in its sole
discretion but subject in all respects to Section 409A, to (i) cease
further benefit accruals hereunder and/or (ii) immediately distribute
in a single lump sum the Equivalent Actuarial Value of the Monthly
Benefits for the Payout Period, determined as if the Participant
experienced a Termination of Employment, and terminate the
Participant's participation herein.
ARTICLE 3
Benefits
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3.1 Payment of Benefits. Upon a Participant's Normal Retirement Date, the
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Company shall pay the Monthly Benefit to him during the Payout Period.
If the Participant experiences a Termination from Service prior to the
Normal Retirement Date but after attaining age 55, he shall immediately
commence to receive his Early Retirement Monthly Benefit for the Payout
Period. If such Termination from Service occurs prior to when the
Participant attains age 55, then upon attaining age 55, the Participant
shall commence to receive his Early Retirement
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Monthly Benefit for the Payout Period. Payments under this Section 3.1
are subject to Section 3.4.
3.2 Death Benefits.
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(a) If the Participant dies before having commenced receiving
benefits under Section 3.1, then his Beneficiary shall receive no later
than 120 days after the Committee is notified of and confirms the
Participant's death, a lump sum cash payment equal to the Equivalent
Actuarial Value of the Participant's Monthly Benefit. If the
Participant dies after he has commenced receiving benefits under
Section 3.1, then the remaining payments to the Participant shall
continue to be made to the Participant's Beneficiary commencing on the
first day of the month in which the Participant's death occurs.
(b) In addition to the death benefit provided in Section
3.2(a), but subject to, and limited by, all of the provisions of this
Plan, a Participant's Beneficiary shall, upon the death of the
Participant, receive a lump sum death benefit equal to $1,000,000
reduced by the death benefit paid to the Participant under the Penn
Federal Savings Bank Supplemental Executive Death Benefit Plan. This
benefit shall be paid to the Participant's Beneficiary as soon as
practicable following the date of the Participant's death.
3.3 Acceleration of Pre-2005 Accrued Benefit. The Committee may accelerate
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the payment of the Participant's Pre-2005 Accrued Benefit, at such time
and in such manner as the Committee may determine, in which case the
accelerated benefit shall be equal to the Equivalent Actuarial Value of
such unpaid Pre-2005 Accrued Benefit.
3.4 Delayed Distribution for Specified Employees. If the Participant is a
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Specified Employee at the time of his Termination of Employment, his
Monthly Benefit or Early Retirement Monthly Benefit, as applicable,
shall commence to be distributed on the first day of the month
following the date which is six months after the date of the
Participant's Termination of Employment. Payments which are required to
be deferred in accordance with the preceding sentence shall be paid
with the initial payment.
3.5 Tax Withholding from Distributions. The Company, an Affiliate, or the
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trustee of the Trust, if any, shall withhold from any payments made to
a Participant all federal, state and local income, employment and other
taxes required to be withheld by the Company, an Affiliate, or the
trustee of the Trust, in connection with such payments, in amounts and
in a manner to be determined in the sole discretion of the Company and,
if applicable, the trustee of the Trust.
ARTICLE 4
In-Service Withdrawals and Distributions
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No in-service withdrawals or distributions are permitted under the
Plan.
ARTICLE 5
Vesting
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Unless the Participant's Plan Agreement provides otherwise, the
Participant shall be fully vested in his Monthly Benefit after the completion of
10 Years of Service. For this purpose, Years of Service credited prior to the
effective date of this Plan shall be taken into account.
ARTICLE 6
Participant Contributions
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Participant contributions are neither permitted nor required under the
Plan.
ARTICLE 7
Funding
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7.1 Funding Generally. The Company's and its Affiliate's obligations under
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the Plan shall be an unfunded and unsecured promise to pay. The Company
and its Affiliates shall not be obligated under any circumstances to
fund in advance its obligations under the Plan, and when the benefit
amount is paid it shall be expensed out of the general assets of the
Company and its Affiliates. The Company may not fund the Plan in a
manner that would violate Section 409A.
7.2 Option to Fund Informally. Notwithstanding Section 7.1, the Company and
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its Affiliates may, at its sole option, or by agreement, informally
fund its obligations under the Plan in whole or in part, provided,
however, that in no event shall such informal funding be construed to
create any trust fund, escrow account or other security for any
Participant with respect to the payment of any benefit under the Plan,
other than as permitted by Internal Revenue Service and Department of
Labor rules and regulations for unfunded supplemental retirement plans.
ARTICLE 8
Regulatory Provisions
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The obligations of the Company to a Participant under the Plan are
subject to the following restrictions:
8.1 Termination for Cause. If a Participant's service as an Employee is
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Terminated for Cause, no benefits shall be paid to him under the Plan.
If the Participant has commenced receiving his Monthly Benefit and it
is subsequently determined that he was Terminated for Cause, then his
Monthly Benefit shall immediately cease and the Participant shall be
obligated to return to the Company or the Holding Company, whichever is
applicable, the cumulative amount of the Monthly Benefit previously
paid under the Plan.
8.2 Temporary Suspension or Prohibition. If a Participant is suspended
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and/or temporarily prohibited from participating in the conduct of the
Company's affairs by a notice served under Section 8(e)(3) or (g)(1) of
the Federal Deposit Insurance Act ("FDIA"), 12 U.S.C. Section
1818(e)(3) and (g)(1), the Company's obligations to such Participant
under the Plan shall be suspended as of the date of service of such
notice, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Company may in its discretion reinstate in
whole or in part any of its obligations which were suspended.
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8.3 Permanent Suspension or Prohibition. If a Participant is removed and/or
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permanently prohibited from participating in the conduct of the
Company's affairs by an order issued under Section 8(e)(4) or (g)(1) of
the FDIA, 12 U.S.C. Section 1818(e)(4) and (g)(1), all obligations of
the Company to such Participant under the Plan shall terminate as of
the effective date of the order, but vested rights of the contracting
parties shall not be affected.
8.4 Default. If the Company is in default (as defined in Section 3(x)(1) of
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the FDIA), all obligations of the Company to Participants and
Beneficiaries under the Plan shall terminate as of the date of default,
but this provision shall not affect any vested rights of the
contracting parties.
8.5 Termination by Regulators. All obligations of the Company to
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Participants and Beneficiaries under the Plan shall be terminated,
except to the extent determined that continuation of the Plan is
necessary for the continued operation of the Company: (i) by the
Director of the Office of Thrift Supervision (the "OTS Director") or
his designee, at the time the Federal Deposit Insurance Corporation
enters into an agreement to provide assistance to or on behalf of the
Company under the authority contained in Section 13(c) of the FDIA; or
(ii) by the OTS Director or his designee, at the time the OTS Director
or his designee approves a supervisory merger to resolve problems
related to operation of the Company or when the Company is determined
by the OTS Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected
by any such action.
8.6 Other Regulatory Restrictions on Payment. Notwithstanding anything
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herein to the contrary, (1) any payments made by the Company under the
Plan shall be subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder and (2)
payments contemplated to be made by the Company under the Plan shall
not be immediately payable to the extent such payments are barred or
prohibited by an action or order issued by the Federal Deposit
Insurance Corporation.
8.7 Time of Repayment. Any benefit payment suspended or delayed in
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accordance with this Article 8 shall be paid as soon as practicable
after the earliest date on which the Company reasonably determines that
such payment should be made.
ARTICLE 9
Beneficiary Designation
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9.1 Beneficiary. Each Participant shall have the right, at any time, to
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designate his Beneficiary(ies) (both primary as well as contingent) to
receive any benefits payable under the Plan upon the death of the
Participant. The Beneficiary designated under the Plan may be the same
as or different from the Beneficiary designated under any other plan of
the Company or its Affiliates in which the Participant participates.
9.2 Beneficiary Designation: Change; Spousal Consent. A Participant shall
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designate his Beneficiary by completing and signing the Beneficiary
Designation Form and returning it to the Committee. A Participant shall
have the right to change a Beneficiary by completing, signing and
otherwise complying with the terms of the Beneficiary Designation Form
and the Committee's rules and procedures, as in effect from time to
time. If the Participant names someone other than his spouse as a
Beneficiary, a spousal consent, in the form designated
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by the Committee, must be signed by that Participant's spouse and
returned to the Committee. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be canceled. The Committee shall be entitled to
rely on the last Beneficiary Designation Form filed by the Participant
and accepted by the Committee prior to his death.
9.3 Acknowledgment. No designation or change in designation of a
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Beneficiary shall be effective until received and acknowledged in
writing by the Committee.
9.4 No Beneficiary Designation. If a Participant fails to designate a
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Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease a Participant or die prior to
complete distribution of the Participant's benefits, then a
Participant's designated Beneficiary shall be deemed to be his
surviving spouse. If a Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the Participant's estate.
9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the
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proper Beneficiary to receive payments pursuant to the Plan, the
Committee shall have the right, exercisable in its discretion, to cause
the Company and its Affiliates to withhold such payments until this
matter is resolved to the Committee's satisfaction.
9.6 Discharge of Obligations. The payment of benefits under the Plan to a
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Beneficiary shall fully and completely discharge the Company and its
Affiliates and the Committee from all further obligations under the
Plan with respect to the Participant.
ARTICLE 10
Leave of Absence
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If a Participant is authorized by the Company or its Affiliates for any
reason to take a leave of absence from employment with the Company or its
Affiliates, such Participant shall continue to be considered employed by the
Company during such leave of absence (and therefore not to have experienced a
Termination of Employment) and service during the leave of absence shall be
credited for purposes of determining the Participant's Years of Credited
Service. This Article 10 shall be applied in a manner consistent with Section
409A.
ARTICLE 11
Termination, Change in Control, Amendment or Modification
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11.1 Termination. Although the Company anticipates that it will continue as
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a sponsor of the Plan for an indefinite period of time, there is no
guarantee that it will continue as a sponsor of the Plan or will not
terminate its sponsorship of the Plan at any time in the future.
Accordingly, the Company reserves the right to terminate its
sponsorship of the Plan at any time with respect to any or all of its
Participants, by action of the Board. If an Affiliate terminates its
sponsorship of the Plan, then the Plan shall terminate with respect to
Participants employed by that Affiliate. Upon termination of
sponsorship of the Plan by the Company or an Affiliate, the Annual and
Monthly Benefit of each affected Participant shall be determined as if
he had experienced a
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Termination of Employment on the date Plan sponsorship is terminated.
The Equivalent Actuarial Value of the Participant's Monthly Benefits
(as determined under this Section 11.1) shall be paid to affected
Participants in a lump sum. The termination of sponsorship of the Plan
or the termination of the Plan shall not adversely affect any
Participant who has become entitled to the payment of any benefits
under the Plan as of the date of termination. Notwithstanding the
foregoing, the timing and manner of distributing benefits in connection
with the Plan termination must comply with Section 409A. Accordingly,
unless Section 409A permits otherwise, the Plan may be terminated only
if: (a) all arrangements sponsored by the Company and its Affiliates
that are required to be aggregated with this Plan under Section 409A
are terminated; (b) no payments other than payments that would be
payable under the terms of the Plan or an aggregated plan if the
termination had not occurred are made within 12 months of the
termination of the arrangements; (c) all payments are made within 24
months of the termination of the Plan and related arrangements; and (d)
the Company and its Affiliates do not adopt a new arrangement that
would be required to be aggregated with this Plan under Section 409A if
the same Participant participated in both arrangements, within five
years of the termination of the Plan. The Plan will automatically
terminate upon the completion of all distributions to Participants in
accordance with the terms hereof.
11.2 Change in Control. Upon a Change in Control, the Annual and Monthly
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Benefit of each affected Participant shall be determined as if he had
experienced a Termination of Employment on the effective date of the
Change in Control. The Equivalent Actuarial Value of each Participant's
Monthly Benefit (as determined under this Section 11.2) shall be paid
to the Participant in a cash lump sum within 10 days of the effective
time of the Change in Control, unless the terms of the Change in
Control provide otherwise and are consistent with Section 409A, and do
not give rise to any additional parachute payments under Code Section
280G. Because the payment of Change in Control benefits prior to the
amendment of this Plan to comply with Section 409A permitted such
payments to be made in monthly amounts or as a lump sum, the amendment
of this Section 11.2 to limit the form of Change in Control benefit
payments to a lump sum shall be considered made pursuant to a Section
409A Transition Rule Election occurring during 2006.
11.3 Amendment. The Company may, at any time, amend or modify the Plan in
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whole or in part by action of the Board; provided, however, that no
amendment or modification shall be effective to decrease or restrict
the value of a Participant's Annual Benefit determined at the time the
amendment or modification is made, calculated as if the Participant had
experienced a Termination of Employment as of the effective date of the
amendment or modification. The amendment or modification of the Plan
shall not affect any Participant who has become entitled to the payment
of benefits under the Plan as of the date of the amendment or
modification. No amendment shall be permitted that causes the Plan to
violate the requirements of Section 409A.
11.4 Effect of Payment. The full payment of the applicable benefit under the
-----------------
Plan shall completely discharge all obligations to a Participant and
his designated Beneficiaries under the Plan.
ARTICLE 12
Administration
--------------
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12.1 Committee Duties. The Plan shall be administered by a Committee which
-----------------
shall consist of the Board, or such committee as the Board shall
appoint. Members of the Committee may be Participants under the Plan.
The Committee shall also have the discretion and authority to (i) make,
amend, interpret, and enforce all appropriate rules and regulations for
the administration of the Plan and (ii) decide or resolve any and all
questions including interpretations of the Plan, as may arise in
connection with the Plan. Any individual on the Committee who is a
Participant shall not vote or act on any matter relating solely to
himself. When making a determination or calculation, the Committee
shall be entitled to rely on information furnished by a Participant or
the Company.
12.2 Agents. In the administration of the Plan, the Committee may, from time
------
to time, employ agents and delegate to them such administrative duties
as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may
be counsel to the Company and its Affiliates.
12.3 Binding Effect of Decisions. The decision or action of the Committee
-----------------------------
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
12.4 Indemnity of Committee. The Company shall indemnify and hold harmless
----------------------
the members of the Committee, and any person to whom the duties of the
Committee may be delegated, against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to
act with respect to the Plan, except in the case of gross misconduct by
the Committee or any of its members or any such delegate.
12.5 Information. To enable the Committee to perform its functions, the
-----------
Company and its Affiliates shall supply full and timely information to
the Committee as the Committee may reasonably request.
ARTICLE 13
Other Benefits and Agreements
-----------------------------
The benefits provided for a Participant under the Plan are in addition
to any other benefits available to such Participant under any other plan or
program sponsored by the Company or its Affiliates. The Plan shall supplement
and shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided therein.
ARTICLE 14
Claims Procedures
-----------------
14.1 Presentation of Claim. Any Participant (such Participant being referred
---------------------
to below as a "Claimant") may deliver to the Committee a written claim
for a determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. All other claims must
be made within 180 days of the date on
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which the event that caused the claim to arise occurred. The claim must
state with particularity the determination desired by the Claimant.
14.2 Notification of Decision. The Committee shall consider a Claimant's
-------------------------
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect the
claim, and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 13.3 below.
14.3 Review of a Denied Claim. With 60 days after receiving a notice from
-------------------------
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 Decision on Review. The Committee shall render its decision on review
------------------
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
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(c) such other matters as the Committee deems relevant.
14.5 Legal Action. A Claimant's compliance with the foregoing provisions of
------------
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
the Plan.
ARTICLE 15
Trust
-----
15.1 Establishment of the Trust. The Company or its Affiliates may establish
--------------------------
the Trust upon such terms as it deems appropriate.
15.2 Interrelationship of the Plan and the Trust. The provisions of the
---------------------------------------------
Plan, including a Participant's Plan Agreement, shall govern the rights
of such Participant to receive distributions pursuant to the Plan. The
provisions of the Trust shall govern the rights of the Company, its
Affiliates, Participants and the creditors of the Company and its
Affiliates to the assets transferred to the Trust. The Company and its
Affiliates shall at all times remain liable to carry out its
obligations under the Plan.
15.3 Investment of Trust Assets. The trustee of the Trust shall be
-----------------------------
authorized, upon written instructions received from the Committee or
investment manager appointed by the Committee, to invest and reinvest
the assets of the Trust in accordance with the applicable trust
agreement.
15.4 Distributions From the Trust. The Company and its Affiliates'
--------------------------------
obligations under the Plan may be satisfied with Trust assets
distributed pursuant to the terms of the Trust and any such
distribution shall reduce the Company's and its Affiliates' obligations
under the Plan.
ARTICLE 16
Miscellaneous
-------------
16.1 Status of Plan. The Plan is intended to be a plan that is not qualified
--------------
within the meaning of Code Section 401(a) and that "is unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees" within the meaning of ERISA Sections 201(2),
301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted
to the extent possible in a manner consistent with that intent. The
Plan also is a deferred compensation plan within the meaning of Section
409A, and as such shall be operated, interpreted and administered in
accordance therewith.
16.2 Unsecured General Creditor. Participants and their beneficiaries,
----------------------------
heirs, successors and assigns shall have no legal or equitable rights,
interests or claims in any property or assets of the Company or its
Affiliates. For purposes of the payment of benefits under the Plan, any
and all assets of the Company or its Affiliates shall be, and remain
the general, unpledged and unrestricted assets of such entity. The
Company's and its Affiliates' obligation under the Plan shall be merely
of an unfunded and unsecured promise to pay money in the future.
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<page>
16.3 Liability. The Company's or its Affiliates' liability for the payment
---------
of benefits shall be defined only by the Plan including a Participant's
Plan Agreement. The Company or its Affiliates shall have no obligation
to a Participant under the Plan except as expressly provided in the
Plan including such Participant's Plan Agreement.
16.4 Nonassignability. Neither a Participant nor any other person shall have
----------------
any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are
expressly declared to be, unassignable and non-transferable. No part of
the amounts payable shall, prior to actual payment, be subject to
seizure, attachment, garnishment or sequestration for the payment of
any debts, judgments, alimony or separate maintenance allowed by a
Participant or any other person, be transferable by operation of law in
the event of a Participant's or any other person's bankruptcy or
insolvency or be transferable to a spouse as a result of a property
settlement or otherwise.
16.5 Not a Contract of Employment. The terms and conditions of the Plan,
-----------------------------
including a Participant's Plan Agreement, shall not be deemed to
constitute a contract of employment between the Company or its
Affiliates and a Participant. Nothing in the Plan shall be deemed to
give a Participant the right to be retained in the service of the
Company or its Affiliates or to interfere with the right of the Company
or its Affiliates to discipline or discharge such Participant at any
time.
16.6 Furnishing Information. A Participant will cooperate with the Committee
----------------------
by furnishing any and all information requested by the Committee and
take such other actions as may be requested in order to facilitate the
administration of the Plan and the payments of benefits hereunder,
including but not limited to, taking such physical examinations as the
Committee may deem necessary.
16.7 Terms. Whenever any words are used herein in the masculine, they shall
-----
be construed as though they were in the feminine in all cases where
they would so apply; and whenever any words are used herein in the
singular or in the plural, they shall be construed as though they were
used in the plural or the singular, as the case may be, in all cases
where they would so apply.
16.8 Captions. The captions of the articles, sections and paragraphs of the
--------
Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
16.9 Governing Law. Subject to ERISA, the provisions of the Plan shall be
--------------
construed and interpreted according to the internal laws of the State
of New Jersey without regard to its conflicts of laws and principles.
16.10 Notice. Any notice or filing required or permitted to be given to the
------
Committee under the Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below.
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<page>
Board of Directors
Penn Federal Savings Bank
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification. Any notice or filing
required or permitted to be given to a Participant under the Plan shall
be sufficient if in writing and hand-delivered, or sent by mail, to the
last known address of such Participant.
16.11 Successors. The provisions of the Plan shall bind and inure to the
----------
benefit of the Company or its Affiliates, and their successors and
assigns and the Participant and the Participant's designated
Beneficiaries.
16.12 Spouse's Interest. The interest in the benefits hereunder of a spouse
------------------
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable by
such spouse in any manner including, but not limited to, such spouse's
will, nor shall such interest pass under the laws of intestate
succession.
16.13 Validity. In case any provision of the Plan shall be illegal or invalid
--------
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but the Plan shall be constructed and enforced
as if such illegal or invalid provision had never been inserted herein.
16.14 Incompetent. If the Committee determines in its discretion that a
-----------
benefit under the Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the care
and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account of
the Participant, and shall be a complete discharge of any liability
under the Plan for such payment amount.
16.15 Court Order. The Committee is authorized to make any payments directed
-----------
by court order in any action in which the Plan or the Committee has
been named as a party. In addition, if a court determines that a spouse
or former spouse of a Participant has an interest in the Participant's
benefits under the Plan in connection with a property settlement or
otherwise, the Committee, in its sole discretion shall have the right,
notwithstanding any election made by the Participant, to immediately
distribute the spouse's or former spouse's interest in the
Participant's benefits under the Plan to that spouse or former spouse.
16.16 Distribution for FICA Taxes or on Account of Inclusion Pursuant to
-----------------------------------------------------------------------
Section 409A.
------------
(a) Distributions may be made to a Participant prior to when
amounts are otherwise distributable under the Plan to the
extent necessary to pay FICA taxes under Code Sections 3101,
3121(a) and 3121(v)(2), as well as the corresponding federal,
state, local or foreign income and withholding taxes
associated with those FICA taxes. Distributions
47
<page>
under this Section 16.16 shall be permitted only to the extent
allowed under Section 409A.
(b) Upon the inclusion of any portion of the benefit into the
Participant's income as a result of the failure of this Plan
to comply with the requirements of Section 409A, a lump sum
distribution shall be made as soon as is administratively
practicable following the discovery of the plan failure of an
amount equal to the lesser of (1) the Participant's
then-vested benefit, or (2) the amount includible in the
Participant's income as a result of the failure of the Plan to
comply with Section 409A. In the event the amount includible
in the Participant's income under Section 409A exceeds the
Participant's then-vested benefit, the excess shall be
distributed in a lump sum as soon as administratively
practicable after the Participant's vested interest in his
Plan benefits increases.
16.17 Insurance. The Company or its Affiliates, on its own behalf or on
---------
behalf of the trustee of the Trust, and, in its sole discretion, may
apply for and procure insurance on the life of any Participant, in such
amounts and in such forms as it may choose. The Company or its
Affiliates or the trustee of the Trust, as the case may be, shall be
the sole owner and beneficiary of any such insurance. No Participant
shall have any interest whatsoever in any such policy or policies, and
a Participant shall at the request of the Company submit to medical
examinations and supply such information and execute such documents as
may be required by the insurance company or companies to whom the
Company or its Affiliates has applied for insurance.
16.18 Legal Fees To Enforce Rights After Change in Control. The Company is
------------------------------------------------------
aware that upon the occurrence of a Change in Control, the Board (which
might then be comprised of new members) or stockholders of the Company,
its Affiliates, or of any successor corporation, might then cause or
attempt to cause the Company, its Affiliates, or such successor to
refuse to comply with its obligations under the Plan and might cause or
attempt to cause the Company or its Affiliates to institute, or may
institute, litigation seeking to deny Participants the benefits
intended under the Plan. In these circumstances, the purpose of the
Plan could be frustrated. Accordingly, if, following a Change in
Control, it should appear to any Participant that the Company, its
Affiliates, or any successor corporation has failed to comply with any
of its obligations under the Plan or any agreement thereunder, or, if
the Company, its Affiliates, or any other person takes any action to
declare the Plan void or unenforceable or institutes any litigation or
other legal action designed to deny, diminish or to recover from any
Participant the benefits intended to be provided, then the Company and
its Affiliates irrevocably authorizes such Participant to retain
counsel of his choice at the expense of the Company or its Affiliates
to represent such Participant in connection with the initiation or
defense of any litigation or other legal action, whether by or against
the Company, its Affiliates, or any director, officer, stockholder or
other Affiliate of the Company or any successor thereto in any
jurisdiction.
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The Company has signed the Plan as of __________, 2006.
PENN FEDERAL SAVINGS BANK
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
49