SOUND FEDERAL SAVINGS
AMENDED AND RESTATED
DIRECTOR RETIREMENT PLAN
White Plains, New York
Originally Effective January 1, 2004
As Amended and Restated Effective January 1, 2005
SOUND FEDERAL SAVINGS
AMENDED AND RESTATED
DIRECTOR RETIREMENT PLAN
THIS AMENDED AND RESTATED DIRECTOR RETIREMENT PLAN (the "Plan"), sponsored
by Sound Federal Savings, a federally chartered savings association (the
"Association"), to provide Participants (as defined herein) or their
beneficiaries with retirement income benefits, amends and restates in its
entirety the Sound Federal Savings Director Retirement Plan. The original
effective date of this Plan was January 1, 2004. This Plan is hereby amended and
restated effective as of January 1, 2005, in accordance with the terms set forth
herein.
WHEREAS, the Association maintains the Directors Retirement Plan, effective
as of January 1, 2004 for the benefit of certain directors of the Association;
and
WHEREAS, the directors serve the Association as members of the Board of
Directors (the "Board of Directors"); and
WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code"), requires that certain types of nonqualified deferred compensation
arrangements comply with its terms or be subject to current taxes and penalties;
and
WHEREAS, the Board of Directors now desires to amend and restate the
Directors Retirement Plan effective as of January 1, 2005, in order to comply
with Code Section 409A, and for certain other purposes.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Association and the directors agree as follows:
Article I
Definitions
Section 1.01 Definitions.
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In this document, whenever the context so indicates, the singular or the
plural number and the masculine or feminine gender shall be deemed to include
the other, the terms "he," "his," and "him," shall refer to a Participant or a
beneficiary of a Participant, as the case may be, and, except as otherwise
provided, or unless the context otherwise requires, the capitalized terms shall
have the following meanings:
(a) "Annual Retirement Benefit" means, unless otherwise set forth herein, a
retirement benefit paid as 100% of the sum of the annual fees paid to a
Director for attendance at regular monthly Board of Directors' meetings for
the calendar year in which the Director's Retirement Date occurs, plus the
amount of any annual stipend paid to a Director in that year.
(b) "Association" means Sound Federal Savings, White Plains, New York.
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(c) "Board of Directors" means the Board of Directors of the Association.
(d) "Change in Control" of the Association shall mean (i) a change in ownership
of the Association under paragraph (1) below, or (ii) a change in effective
control of the Association under paragraph (2) below, or (iii) a change in
the ownership of a substantial portion of the assets of the Association
under paragraph (3) below:
(1) Change in the ownership of the Association. A change in the ownership
of the Association shall occur on the date that any one person, or
more than one person acting as a group (as defined in Proposed
Treasury Regulation Section 1.409A-3(g)(5)(v)(B)), acquires ownership
of stock of the corporation that, together with stock held by such
person or group, %%constitutes more than 50% of the total fair market
value or total voting power of the stock of such corporation.
(2) Change in the effective control of the Association. A change in the
effective control of the Association shall occur on the date that
either (i) any one person, or more than one person acting as a group
(as defined in Proposed Treasury Regulation Section
1.409A-3(g)(5)(v)(B)), acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such
person or persons) ownership of stock of the corporation possessing
35% or more of the total voting power of the stock of such
corporation; or (ii) a majority of members of the corporation's board
of Directors is replaced during any 12-month period by Directors whose
appointment or election is not endorsed by a majority of the members
of the corporation's board of Directors prior to the date of the
appointment or election, provided that this sub-section (ii) is
inapplicable where a majority shareholder of the Association is
another corporation.
(3) Change in the ownership of a substantial portion of the Association's
assets. A change in the ownership of a substantial portion of the
Association's assets shall occur on the date that any one person, or
more than one person acting as a group (as defined in Proposed
Treasury Regulation Section 1.409A-3(g)(5)(v)(B)), acquires (or has
acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) assets from the
corporation that have a total gross fair market value equal to or more
than 40% of the total gross fair market value of (i) all of the assets
of the Association, or (ii) the value of the assets being disposed of,
either of which is determined without regard to any liabilities
associated with such assets.
(4) For all purposes hereunder, the definition of Change in Control shall
be construed to be consistent with the requirements of Proposed
Treasury Regulation Section 1.409A-3(g), except to the extent that
such proposed regulations are superseded by subsequent guidance. In
addition, for purposes of this Section 1.01(d) only, "Association"
shall be construed to mean also "Company."
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(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder.
(f) "Company" means Sound Federal Bancorp, Inc.
(g) "Director" means a member of the Board of Directors serving on the Board of
Directors on January 1, 2004.
(h) "Participant" means a Director who satisfies the eligibility requirements
set forth in Section 2.01 (a) of the Plan.
(i) "Plan" means this Sound Federal Savings Amended and Restated Director
Retirement Plan.
(j) "Retirement Date" means the date on which a Director retires from the Board
of Directors. For this purpose, a Director shall be considered to have
retired from the Board of Directors upon his Separation from Service for
any reason, including but not limited to death or Disability, unless such
Separation from Service is as a result of the Board of Directors having
"just cause," which shall be determined by the Board of Directors and shall
include any of the following: (i) gross negligence or gross neglect, (ii)
the commission of a felony or gross misdemeanor involving moral turpitude,
fraud, or dishonesty, (iii) the willful violation of any law, rule or
regulation (other than a traffic violation or similar offense), (iv)
misappropriation of or other intentional misconduct damaging to the
property or business of the Association, the Company or any subsidiary of
the Association, (v) an intentional failure to perform stated duties, or
(vi) a breach of fiduciary duty involving personal profit.
(k) "Separation from Service" means
(1) the Participant's death, retirement or termination of employment with
the Association.
(2) No Separation from Service shall be deemed to occur due to military
leave, sick leave or other bona fide leave of absence if the period of
such leave does not exceed six months or, if longer, so long as the
Participant's right to reemployment is provided by law or contract. If
the leave exceeds six months and the Participant's right to
reemployment is not provided by law or by contract, then the
Participant shall be deemed to have a Separation from Service on the
first date immediately following such six-month period.
(3) The Participant shall not be treated as having a Separation from
Service if the Participant provides more than insignificant services
for the Association following the Participant's actual or purported
termination of employment with the Association. Services shall be
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treated as not being insignificant if such services are performed at
an annual rate that is at least equal to 20% of the services rendered
by the Participant for the Association, on average, during the
immediately preceding three full calendar years of employment (or if
employed less than three years, such shorter period of employment) and
the annual base compensation for such services is at least equal to
20% of the average base compensation earned during the final three
full calendar years of employment (or if employed less than three
years, such shorter period of employment).
(4) Where the Participant continues to provide services to a previous
employer in a capacity other than as an employee, a Separation from
Service will not be deemed to have occurred if the Participant is
providing services at an annual rate that is 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 base compensation for such
services is 50% or more of the annual base compensation earned during
the final three full calendar years of employment (or if less, such
lesser period).
(l) "Specified Employee" means a "key employee" of a publicly traded company,
as defined in Code Section 416(i) or, if different, within the meaning of
Code Section 409A and the Proposed Regulations or other guidance issued
thereunder.
Article II
Eligibility and Benefits
Section 2.01 Eligibility.
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(a) All Directors shall be eligible to participate in this Plan. Service with
the board of directors of any entity other than the Association shall not
be credited for any purpose under this Plan.
(b) A Director's participation in the Plan shall terminate upon his death or
upon his ceasing to be a member of the Board of Directors, unless a benefit
is otherwise payable pursuant to the terms of the Plan.
Section 2.02 Determination of Benefits.
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(a) A Director who retires or dies at or after age 70 with fifteen (15) or more
years of continuous service on the Board of Directors shall receive 100% of
his or her Annual Retirement Benefit, payable in accordance with Section
2.03(a) herein.
(b) A Director who retires or dies at or after age 60 with five (5) or more
years of continuous service on the Board of Directors shall receive an
Annual Retirement Benefit equal to the amount calculated by multiplying the
Annual Retirement Benefit by the lesser of 100%, or a fraction, the
numerator of which is the number of years of service and the denominator of
which is fifteen (15). The maximum Annual Retirement Benefit is equal to
100% of the Director's Annual Retirement Benefit.
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(c) Directors who retire before age 60 (other than due to Disability) receive
no benefits under this Plan, regardless of years of continuous service.
(d) A Director who incurs a Disability shall be entitled to the Annual
Retirement Benefit calculated in accordance with Section 2.02(b) upon his
Separation from Service with the Board of Directors, notwithstanding his
age upon termination due to Disability. For this purpose, "Disability" has
the meaning set forth in Proposed Treasury Regulation Section
1.409A-3(g)(4).
(e) A Director who is terminated for just cause pursuant to Section 5.05 shall
forfeit all benefits hereunder.
Section 2.03 Time and Manner of Payment.
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(a) The Annual Retirement Benefits provided in Section 2.02(a), (b), (c) or (d)
of the Plan shall be payable for twenty (20) years. Said benefit shall be
paid to the Director (or his beneficiary or estate, as applicable) in equal
monthly installments commencing upon the first business day of the month
coincident with or immediately following the Director's Retirement Date,
and shall continue for a period of twenty (20) years.
(b) In the following circumstances and to the following extent, the Plan
administrator may, in its sole discretion, authorize the acceleration of
the payment of benefits under the Plan:
(1) Unforeseeable Emergency.
----------------------
In the event that a Participant has suffered an unforeseeable
emergency, the Plan administrator may, in its sole discretion and to
the extent permitted under Section 409A of the Code, allow such
Participant to obtain a lump sum payment of an amount not to exceed
the lesser of the present value of the then remaining benefits
otherwise payable to the Participant and the amount necessary to
alleviate the unforeseeable emergency. Such lump sum payment shall be
in lieu of the equivalent benefits that would otherwise be payable to
a Participant. For these purposes an "unforeseeable emergency" means a
severe financial hardship to the Participant resulting from an illness
or accident of the Participant, the Participant's spouse, or a
dependent (as defined in Code Section 152(a)) of the Participant, loss
of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. Amounts allowed as a
hardship distribution may not exceed the amounts necessary to satisfy
such emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of the distribution, after taking into account
the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise, or by
liquidation of the Participant's assets (to the extent the liquidation
of such assets would not itself cause severe financial hardship).
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(2) Compliance with Domestic Relations Order.
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To the extent required to comply with the terms of a domestic
relations order (within the meaning of Section 414(p) of the Code)
directed to and served upon the Plan, the Plan administrator may
direct the payment of all or any portion of the benefit to which a
Participant is entitled to at any time or in accordance with any
benefit payment schedule set forth in such order. Such lump sum
payment shall be in lieu of the benefits that would otherwise be
payable to a Participant.
(3) Compliance with Certificate of Divestiture.
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To the extent necessary to effect compliance with a certificate of
divestiture (within the meaning of Section 1043(b)(2) of the Code),
the Plan administrator may permit a lump sum payment in an amount up
to the present value of the then remaining benefits otherwise payable
to the Participant under this Plan. Such lump sum payment shall be in
lieu of the benefits that would otherwise be payable to a Participant.
(c) Notwithstanding anything in the Plan to the contrary, to the extent
required under Section 409A of the Code, no payment to be made to a
Specified Employee shall be made sooner than six (6) months after such
Specified Employee's Separation from Service.
Article III
Change in Control
Section 3.01 Change in Control.
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(a) Notwithstanding any other provision in this Plan to the contrary, in the
event of a Change in Control, each Director serving on the Board of
Directors on the date of the Change in Control will be credited with years
of service assuming the Director would have remained a member of the Board
of Directors until age 70. The lump sum equivalent to the present value of
the benefit due under Article II shall be paid to the Director at the time
of the Change in Control. Notwithstanding the foregoing, the Director may
elect to receive his Annual Retirement Benefit following a Change in
Control in annual installments over a 5, 10 or 15 year period (provided,
however, that such alternative forms of distribution shall be the actuarial
equivalent of monthly installments for 20 years). The Director shall make
this election on the Change in Control Election Form attached hereto as
Exhibit A. Such election, if made, shall be made no later than December 31,
2005.
(b) A Director who has retired prior to a Change in Control shall receive
immediately upon a Change in Control a lump sum payment equal to the
present value of the then remaining Annual Retirement Benefit payable to
such Director.
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Article IV
Administration
The administration of the Plan, the exclusive power to interpret it, and
the responsibility for carrying out its provisions are vested in the Association
or its designee. The Association or its designee shall have the authority to
resolve any question under the Plan. The determination of the Association or its
designee as to the interpretation of the Plan or any disputed question shall be
conclusive and final to the extent permitted by applicable law. Claims for
benefits under the Plan shall be submitted in writing to the Association or to
an individual designated by the Association for this purpose.
Article V
General Provisions
Section 5.01 No Funding.
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(a) All amounts payable in accordance with the Plan shall constitute a general
unsecured obligation of the Association. Such amounts, as well as any
administrative costs relating to the Plan, shall be paid out of the general
assets of the Association.
(b) The Association may, for administrative reasons, establish a grantor trust
with an independent trustee for the benefit of Participants in the Plan.
The assets, if any, placed in said trust shall be held separate and apart
from other Association funds and shall be used exclusively for the purposes
set forth in the Plan and the applicable trust agreement. The Association
shall be treated as "grantor" of said trust for purposes of Section 677 of
the Code. The agreement of said trust shall provide that its assets may be
used upon the insolvency or bankruptcy of the Association to satisfy claims
of the Association's general creditors and that the rights of such general
creditors are enforceable by them under federal and state law.
Notwithstanding anything herein to the contrary, in the event of a Change
in Control or imminent Change in Control, the Association shall establish a
grantor trust (if none has been previously established hereunder) and shall
transfer to such trust prior to the Change in Control, the present value of
an amount sufficient to fully fund the present value of the Annual
Retirement Benefit of each Director.
Section 5.02 Amendment of the Plan.
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The Association reserves the right to modify or amend the Plan, in whole or
in part, at any time, and from time to time. However, no modification or
amendment shall adversely affect the right of any Participant hereunder.
Section 5.03 Termination of the Plan.
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Subject to the requirements of Code Section 409A, in the event of complete
termination of the Plan, the Plan shall cease to operate and the Association
shall pay out to the Participant his benefit as if the Participant had
terminated employment as of the effective date of the complete termination. Such
complete termination of the Plan shall occur only under the following
circumstances and conditions:
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(1) The Board of Directors may terminate the Plan within 12 months of
a corporate dissolution taxed under Code section 331, or with approval
of a bankruptcy court pursuant to 11 U.S.C. ss.503(b)(1)(A), provided
that the amounts deferred under the Plan are included in the
Participant's gross income in the latest of (i) the calendar year in
which the Plan terminates; (ii) the calendar year in which the amount
is no longer subject to a substantial risk of forfeiture; or (iii) the
first calendar year in which the payment is administratively
practicable.
(2) The Board of Directors may terminate the Plan within the 30 days
preceding a Change in Control (but not following a Change in Control),
provided that the Plan shall only be treated as terminated if all
substantially similar arrangements sponsored by the Association are
terminated so that the Participant and all participants under
substantially similar arrangements are required to receive all amounts
of compensation deferred under the terminated arrangements within 12
months of the date of the termination of the arrangements.
(3) The Board of Directors may terminate the Plan provided that (i)
all arrangements sponsored by the Association that would be aggregated
with this Plan under Proposed Regulations Section 1.409A-1(c) if the
Participant covered by this Plan was also covered by any of those
other arrangements are also terminated; (ii) no payments other than
payments that would be payable under the terms of the arrangement if
the termination had not occurred are made within 12 months of the
termination of the arrangement; (iii) all payments are made within 24
months of the termination of the arrangements; and (iv) the
Association does not adopt a new arrangement that would be aggregated
with any terminated arrangement under Proposed Regulations Section
1.409A-1(c) if the Participant participated in both arrangements, at
any time within five years following the date of termination of the
arrangement.
Section 5.04 Non-alienation.
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Subject to any applicable law, no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void.
Section 5.05 Forfeiture for Just Cause.
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In the event that the Director's service as a Director is involuntarily
terminated for reason of serious misconduct, including by way of example, and
not by way of limitation, dishonesty or fraud on the part of such Participant in
his relationship with the Association, all benefits that would otherwise be
payable to him under the Plan shall be forfeited.
Section 5.06 Construction.
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(a) The Plan shall be construed, regulated and enforced under the laws of the
State of New York, without giving regard to any conflicts of laws
principles thereof.
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(b) The masculine pronoun shall mean the feminine wherever appropriate, and the
singular shall include the plural.
(c) The illegality or unenforceability of any particular provision of this
document shall not affect the other provisions and the Plan shall be
construed in all respects as if such invalid provision were omitted.
(d) The headings and subheadings in the Plan have been inserted for convenience
of reference only, and are to be ignored in any construction of the
provisions thereof.
Section 5.07 12 U.S.C. ss. 1828(k).
---------------------
Any payments made to a Director pursuant to this Plan, or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. ss. 1828(k) and
any regulations promulgated thereunder.
Section 5.08 Effective Date.
--------------
The original effective date of the Plan was January 1, 2004. The Plan is
hereby amended and restated effective January 1, 2005 in order to comply with
Code Section 409A.
Section 5.09 Late Payments.
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Any payment due and payable under this Plan that is not made within thirty
(30) days after the date on which it is first due and payable shall continue to
bear interest or other earnings from the date it is first due through the date
of actual payment unless the delay in payment results solely from an act or
failure to act on the part of the payment recipient. Where a delay in excess of
thirty (30) days has occurred in the commencement of any series of payments, the
first payment made shall also include any previous installments that are due.
Section 5.10 Cashout of Small Benefits.
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If at any time the total present value of the payment due and payable to a
person under this Plan equals $10,000 or less, such entire present value shall
be paid to the recipient as soon as practicable. Any such payment shall be in
full settlement of such person's interest under this Plan.
Section 5.11 Required Regulatory Provisions.
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The following provisions are included for the purposes of complying with
various laws, rules and regulations applicable to the Association:
(a) Notwithstanding anything herein contained to the contrary, if the Director
is suspended from office and/or temporarily prohibited from participating
in the conduct of the affairs of the Association pursuant to a notice
served under section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance
Act (the "FDI Act"), 12 U.S.C. Section 1818(e)(3) or 1818(g)(1), the
Association's obligations under this Plan shall be suspended as of the date
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of service of such notice, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Association, in its discretion,
may (i) pay to the Director all or part of the compensation withheld while
the Association's obligations hereunder were suspended and (ii) reinstate,
in whole or in part, any of the obligations which were suspended.
(b) Notwithstanding anything herein contained to the contrary, if the Director
is removed and/or permanently prohibited from participating in the conduct
of the Association's affairs by an order issued under section 8(e)(4) or
8(g)(1) of the FDI Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all
prospective obligations of the Association under this Plan shall terminate
as of the effective date of the order, but vested rights and obligations of
the Association and the Director shall not be affected.
(c) Notwithstanding anything herein contained to the contrary, if the
Association is in default (within the meaning of section 3(x)(1) of the FDI
Act, 12 U.S.C. Section 1813(x)(1)), all prospective obligations of the
Association under this Plan shall terminate as of the date of default, but
vested rights and obligations of the Association and the Director shall not
be affected.
(d) Notwithstanding anything herein contained to the contrary, all prospective
obligations of the Association hereunder shall be terminated, except to the
extent that a continuation of this Plan is necessary for the continued
operation of the Association as determined: (i) by the Director of the OTS
or his designee or the Federal Deposit Insurance Corporation ("FDIC"), at
the time the FDIC enters into an agreement to provide assistance to or on
behalf of the Association under the authority contained in section 13(c) of
the FDI Act, 12 U.S.C. Section 1823(c); or (ii) by the Director of the OTS
or his designee at the time such Director or designee approves a
supervisory merger to resolve problems related to the operation of the
Association or when the Association is determined by such Director to be in
an unsafe or unsound condition. The vested rights and obligations of the
parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Plan.
Section 5.12 Compliance with Section 409A of the Code.
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The Plan is intended to be a non-qualified deferred compensation plan
described in Section 409A of the Code. The Plan shall be operated, administered
and construed to give effect to such intent. To the extent that a provision of
the Plan fails to comply with Code Section 409A and a construction consistent
with Code Section 409A is not possible, such provision shall be void ab initio.
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In addition, the Plan shall be subject to amendment, with or without advance
notice to Participants and other interested parties, and on a prospective or
retroactive basis, including but not limited to amendment in a manner that
adversely affects the rights of Participants and other interested parties, to
the extent necessary to effect such compliance.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first written above.
Attested to: SOUND FEDERAL SAVINGS
/s/ Anthony J. Fabiano By: /s/s Bruno J. Gioffre
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For the Board of Directors
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Exhibit A
SOUND FEDERAL SAVINGS
AMENDED AND RESTATED DIRECTOR RETIREMENT PLAN
CHANGE IN CONTROL ELECTION FORM
According to the terms of Section 3.01 of this Plan, I understand that in
the event of a Change in Control, unless I elect to receive my Annual Retirement
Benefit in installments, I shall receive a lump sum payment equal to the present
value of my Annual Retirement Benefit at the time of the Change in Control.
I may elect to receive my Annual Retirement Benefit in installments in
connection with or following a Change in Control and that such election must be
made no later than December 31, 2005.
In the event of a Change in Control of the Association, I hereby elect to
receive my Annual Retirement Benefit in the following form (check one):
________ Lump Sum Distribution
________ Substantially equal monthly payments over a period of:
__________ 5 Years
__________ 10 Years
__________ 15 Years
Signature ______________________________
Date __________________________________
Received by the Association this ______ day of _________________, 20___.
By ____________________________________
Title __________________________________
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