EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
January 4, 2010 (the "Effective Date"), by and between Empire State Bank, N.A.,
a national banking association (the "Bank") and Thomas P. Sperzel ("Executive").
The Bank and Executive are sometimes collectively referred to herein as the
"parties." Any references to the "Company" shall mean ES Bancshares, Inc., the
holding company of the Bank.
WHEREAS, Executive is serving as Senior Vice President and Chief Financial
Officer of the Bank; and
WHEREAS, the Bank wishes to assure itself of the services of Executive as
an officer of the Bank for the period provided in this Agreement, and in order
to induce Executive to remain in the employ of the Bank and to provide further
incentive for Executive to achieve the financial and performance objectives of
the Bank, the parties desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the terms and conditions hereinafter provided, the parties hereby agree
as follows:
1. POSITION AND RESPONSIBILITIES.
During the term of this Agreement, Executive shall serve as Senior Vice
President and Chief Financial Officer of the Bank. Executive shall have such
duties, responsibilities and powers as are customary and appropriate for such
offices, including without limitation, keeping the board of directors of the
Bank (the "Board") fully informed of his activities.
2. TERM AND DUTIES.
(a) Two Year Contract; Annual Renewal. The term of Executive's employment
under this Agreement shall commence as of the Effective Date and shall continue
for a period of two (2) years (the "Employment Period"). Commencing on the first
anniversary date of the Effective Date, and continuing at each anniversary date
thereafter (the "Anniversary Date"), the Agreement shall renew for an additional
year such that the remaining term shall be two (2) years; provided, however, if
written notice of nonrenewal is provided to Executive at least thirty (30) days
and not more than sixty (60) days prior to an Anniversary Date, the term of this
Agreement shall not so renew, provided further that on an annual basis prior to
the issuance of the notice of nonrenewal or the deadline for the notice period
referenced above, which ever comes first, the Board shall conduct a performance
review of Executive for purposes of determining whether to provide notice of
nonrenewal. If (i) timely notice is not delivered to the Executive, or (ii) if
such performance review is not conducted as required above and its related
findings provided in its entirety to the Executive, the Agreement shall be
automatically extended for an additional year.
(b) Change in Control. In the event of a Change in Control (as defined in
Section 7 of this Agreement), the Employment Period shall no longer be
applicable, and the term of this Agreement shall be deemed amended such that
Executive's period of employment shall be automatically extended to the second
anniversary of the date on which such Change in Control occurs (the "Revised
Employment Period"), and shall be further extended automatically for one (1)
additional day each day following such Change in Control, unless either
Executive or the Bank elects not to extend the Revised Employment Period further
by giving written notice thereof to the other party, in which case the Revised
Employment Period shall become fixed and shall end on the second anniversary of
such written notice.
(c) Termination of Agreement. Notwithstanding anything contained in this
Agreement to the contrary, either Executive or the Bank may terminate
Executive's employment with the Bank at any time during the term of this
Agreement, subject to the terms and conditions of this Agreement.
(d) Continued Employment Following Expiration of Term. Nothing in this
Agreement shall mandate or prohibit a continuation of Executive's employment
following the expiration of the term of this Agreement, upon such terms and
conditions as the Bank and Executive may mutually agree.
(e) Duties. During the term of this Agreement, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence approved by the Board, Executive shall devote substantially
all of his business time, attention, skill, and efforts to the faithful
performance of his duties hereunder, including activities and services related
to the organization, operation and management of the Bank, and shall take all
reasonably necessary and appropriate actions to promote, develop and extend the
business of the Bank.
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
(a) Base Salary. In consideration of Executive's performance of the duties
set forth in Section 2, the Bank shall provide Executive the compensation
specified in this Agreement. The Bank shall pay Executive a salary of
$____________ per year ("Base Salary"). The Base Salary shall be payable in
accordance with the Bank's regular payroll practices. During the term of this
Agreement, the Board may consider increasing, but not decreasing, Executive's
Base Salary on an annual basis, as the Board deems appropriate. Any increase in
Base Salary shall become "Base Salary" for purposes of this Agreement.
(b) Bonus. Executive shall be entitled to participate in any bonus plan of
the Bank in which Executive is eligible to participate. Nothing paid to
Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which Executive is entitled under this Agreement.
(c) Employee Benefits. The Bank shall provide Executive with employee
benefit plans, arrangements, life insurance and perquisites substantially
equivalent to those in which Executive was participating or from which he was
deriving benefit immediately prior to the commencement of the term of this
Agreement, and the Bank shall not, without Executive's prior written consent,
make any changes in such plans, arrangements or perquisites that would adversely
affect Executive's rights or benefits thereunder, except as to any changes that
are applicable to all participating employees. Without limiting the generality
of the foregoing provisions of this Section 3(c), Executive will be entitled to
participate in and receive benefits under any employee benefit plans including,
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident insurance plans, medical
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coverage or any other employee benefit plan or arrangement made available by the
Bank in the future to its senior executives, including any stock benefit plans,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements (collectively, the "Benefit
Plans").
(d) Paid Time Off. Executive shall be entitled to paid vacation time of
four (4) weeks each year during the term of this Agreement (measured on a fiscal
or calendar year basis, in accordance with the Bank's usual practices), as well
as sick leave, holidays and other paid absences in accordance with the Bank's
policies and procedures for senior executives. Any unused paid time off during
an annual period shall be treated in accordance with the Bank's personnel
policies as in effect from time to time.
(e) Expense Reimbursements. Upon submission of appropriate invoices or
vouchers as the Bank shall specify, the Bank shall pay or reimburse Executive
for all reasonable expenses incurred by Executive in the performance of his
duties hereunder in furtherance of the business, and in keeping with the
policies of the Bank and its subsidiaries and affiliates, provided that such
payment or reimbursement shall be made as soon as practicable but in no event
later than March 15 of the year following the year in which such the right to
such payment or reimbursement occurred.
4. OUTSIDE ACTIVITIES.
Executive may serve as a member of the board of directors (or a committee
thereof) of business, civic, corporate, community and charitable organizations
subject to the Executive giving notice thereof to the Board, provided that in
each case such service shall not materially interfere with the performance of
his duties under this Agreement or present any conflict of interest. Such
service to and participation in outside organizations shall be presumed for
these purposes to be for the benefit of the Bank, and the Bank shall reimburse
Executive his reasonable expenses associated therewith.
5. WORKING FACILITIES AND EXPENSES.
Executive's principal place of employment shall be the Bank's principal
executive offices. The Bank shall provide Executive, at his principal place of
employment, with a private office, stenographic services and other support
services and facilities suitable to his position with the Bank and necessary or
appropriate in connection with the performance of his duties under this
Agreement. The Bank shall reimburse Executive for his ordinary and necessary
business expenses incurred in connection with the performance of his duties
under this Agreement, including, without limitation, fees for organizations that
Executive and the Board mutually agree are necessary and appropriate to further
the business of the Bank, and travel and reasonable entertainment expenses.
Reimbursement of such expenses shall be made upon submission of appropriate
invoices or vouchers as the Bank shall specify.
6. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the term of this Agreement, the provisions of this Section 6 shall apply;
provided, however, that in the event such Event of Termination occurs within
eighteen (18) months following a Change in Control (as defined in Section 7
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hereof), Section 7 shall apply instead. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following:
(i) the involuntary termination of Executive's employment hereunder by
the Bank for any reason other than termination governed by Section 7 (in
connection with or following a Change in Control), Section 9 (due to
Disability), or Section 10 (for Just Cause); or
(ii) Executive's resignation from the Bank's employ upon any of the
following, unless consented to by Executive:
(A) failure to appoint Executive to the position set forth in
Section 1, or a material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the
position and responsibilities described in Section 1, to which
Executive has not agreed in writing (and any such material change
shall be deemed a continuing breach of this Agreement by the Bank);
(B) a relocation of Executive's principal place of employment to
a location that is more than twenty (20) miles from the location of
the Bank's principal executive offices as of the date of this
Agreement;
(C) a material reduction in the benefits and perquisites,
including Base Salary, to Executive from those being provided as of
the Effective Date (except for any reduction that is part of a
reduction in pay or benefits that is generally applicable to officers
or employees of the Bank);
(D) a liquidation or dissolution of the Company or the Bank; or
(E) a material breach of this Agreement by the Company or the
Bank.
Upon the occurrence of any event described in clause (ii) above, Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation for "Good Reason" upon not less than thirty (30) days prior written
notice given within a reasonable period of time (not to exceed ninety (90) days)
after the event giving rise to the right to elect, which termination by
Executive shall be an Event of Termination. The Bank shall have thirty (30) days
to cure the condition giving rise to the resignation for Good Reason, provided,
that the Bank may elect to waive said thirty (30) day period.
(b) Upon the occurrence of an Event of Termination, the Bank shall pay
Executive, or, in the event of his subsequent death, his designated beneficiary
or beneficiaries, or, if there are no designated beneficiaries, his estate, as
the case may be, as severance pay or liquidated damages, or both, a lump sum
cash payment equal to three (3) times the sum of (i) the average annual rate of
Base Salary paid in the last three (3) years ending in the year of termination
and (ii) the average annual rate of bonus awarded to Executive during the prior
three (3) years. Such payments shall be paid within sixty (60) days of the
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Executive's Separation from Service (within the meaning of Section 409A of the
Code) and shall not be reduced in the event Executive obtains other employment
following the Event of Termination.
(c) Upon the occurrence of an Event of Termination, the Bank shall pay
Executive, or in the event of his subsequent death, his designated beneficiary
or beneficiaries, or, if there are no designated beneficiaries, his estate, as
the case may be, a lump sum cash payment reasonably estimated to be equal to the
present value of the contributions that would have been made on the Executive's
behalf under the Bank's Benefit Plans (as defined in Section 3(c) of this
Agreement), as if Executive had continued working for the Bank for the remaining
unexpired Employment Period under the Agreement following such Event of
Termination, earning the salary and credited service that would have been
achieved during such period, where such present values are to be determined
using a discount rate of six percent (6%) and, in the case of defined benefit
plans, the mortality tables prescribed under Section 72 of the Code. The amount
payable hereunder shall be paid as soon as reasonably practicable following the
occurrence of the Event of Termination but in no event shall be paid later than
two and one-half months following the end of the calendar year in which the
Event of Termination occurs.
(d) Upon the occurrence of an Event of Termination, the Bank shall provide
at the Bank's expense for the remaining unexpired Employment Period under this
Agreement, life insurance and non-taxable medical and dental coverage
substantially comparable, as reasonably available, to the coverage maintained by
the Bank for Executive prior to the Event of Termination, except to the extent
such coverage may be changed in its application to all Bank employees.
(e) Upon the occurrence of an Event of Termination, Executive shall have
the right within thirty (30) days following such Event of Termination, upon the
surrender of stock options, stock, warrants, stock appreciation rights, phantom
stock rights or other equity or equity rights (collectively, "Stock Rights")
issued to Executive by the Bank or its parent, subsidiaries and affiliates, to a
lump sum payment equal to the product of:
(i) The excess of (A) the Fair Market Value (as herein defined) of a
share of stock of the same class as the stock that constitutes or is
subject to the Stock Right, determined as of the date of termination of
employment, over (B) the exercise price per share, if any, for such Stock
Right, as specified in or under the relevant plan or program; multiplied by
(ii) The number of shares with respect to which Stock Rights are being
surrendered.
For purposes of this Section 6(e), for purposes of determining Executive's right
following an Event of Termination to exercise any Stock Rights not surrendered
pursuant hereto, Executive shall be deemed to be fully vested in and entitled to
exercise all Stock Rights under any stock option or rights plan or program
maintained by, or covering employees of, the Bank or its subsidiaries, even if
Executive is not so vested or entitled to then exercise such rights under such
plan or program.
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(f) For purposes of this Agreement, "Fair Market Value" means the fair
market value per share of the Company's common stock ("Common Stock"). For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date the Executive
exercises his right under Section 6(e) of this Agreement (or, if such day is not
a trading day in the U.S. markets, on the nearest preceding trading day), as
reported with respect to the principal market (or the composite of the markets,
if more than one) or national quotation system in which such shares are then
traded, or if no such closing prices are reported, the mean between the high bid
and low asked prices that day on the principal market or national quotation
system then in use.
(g) For purposes of this Agreement, a "Separation from Service" shall have
occurred if the Bank and Executive reasonably anticipate that either no further
services will be performed by the Executive after the date of the Event of
Termination (whether as an employee or as an independent contractor) or the
level of further services performed will not exceed forty-nine percent (49%) of
the average level of bona fide services in the twelve (12) months immediately
preceding the Event of Termination. For all purposes hereunder, the definition
of Separation from Service shall be interpreted consistent with Treasury
Regulation Section 1.409A-1(h)(ii). If Executive is a Specified Employee, as
defined in Code Section 409A and any payment to be made under paragraph (b) or
(c) of this Section 6 shall be determined to be subject to Code Section 409A,
then if and to the extent necessary to comply with Code Section 409A and avoid
additional tax thereunder, such payment or a portion of such payment (to the
minimum extent possible) shall be delayed and shall be paid on the first day of
the seventh month following Executive's Separation from Service.
7. CHANGE IN CONTROL.
(a) Any payments made to Executive pursuant to this Section 7 are in lieu
of any payments that may otherwise be owed to Executive pursuant to this
Agreement under Section 6, such that Executive shall either receive payments
pursuant to Section 6 or pursuant to Section 7, but not pursuant to both
Sections.
(b) For purposes of this Agreement, the term "Change in Control" shall mean
any of the following events:
(i) any "person" (as the term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Bank or the Company
representing twenty-five percent (25%) or more of the combined voting power
of such outstanding securities, except for any securities purchased by any
employee stock ownership plan or trust established by the Bank or the
Company; or
(ii) individuals who constitute the Board on the Effective Date (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the
Effective Date whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
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nomination for election by stockholders of the Bank or the Company was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this Subsection (B), considered as though they
were members of the Incumbent Board; or
(iii) a sale of all or substantially all the assets of the Bank or the
Company, or a plan of reorganization, merger, consolidation, or similar
transaction occurs in which the security holders of the Bank or the Company
immediately prior to the consummation of the transaction do not own at
least fifty and one tenth of one percent (50.1%) of the securities of the
surviving entity to be outstanding upon consummation of the transaction; or
(iv) a proxy statement is issued soliciting proxies from stockholders
of the Bank or the Company by someone other than the current management of
the Bank or the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Bank or the Company, or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan are
to be exchanged for or converted into cash or property or securities not
issued by the Bank or the Company; or
(v) a tender offer is made for twenty-five percent (25%) or more of
the voting securities of the Bank or the Company, and stockholders owning
beneficially or of record twenty-five percent (25%) or more of the
outstanding securities of the Bank or the Company have tendered or offered
to sell their shares pursuant to such tender offer and such tendered shares
have been accepted by the tender offeror.
(c) Upon the occurrence of a Change in Control followed within eighteen
(18) months by an Event of Termination (as defined in Section 6 hereof), the
Bank shall pay Executive, or in the event of his death, his designated
beneficiary or beneficiaries, or, if there are no designated beneficiaries, his
estate, as the case may be, a lump sum cash payment equal to three (3) times the
sum of: (i) his current Base Salary, plus (ii) the highest rate of bonus paid to
Executive during the three (3) year period ending in the year prior to the year
of the Change in Control. Such payment shall be made in a lump sum within sixty
(60) days of the Event of Termination.
(d) Upon the occurrence of a Change in Control followed within eighteen
(18) months by an Event of Termination (as defined in Section 6 hereof), the
Bank shall pay Executive, or in the event of his death, his designated
beneficiary or beneficiaries, or, if there are no designated beneficiaries, his
estate, as the case may be, a lump sum cash payment reasonably estimated to be
equal to the present value of the contributions that would have been made on
Executive's behalf under the Company or the Bank's Benefit Plans, as if
Executive had continued working for the Bank for the remaining unexpired
Employment Period or Revised Employment Period under the Agreement following
such Event of Termination, earning the salary and credited service that would
have been achieved during such period, where such present values are to be
determined using a discount rate of six percent (6%) and, in the case of defined
benefit plans, the mortality tables prescribed under Section 72 of the Code.
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Such payment shall be made to Executive no later than two and one half months
after the end of the calendar year in which the Event of Termination occurred.
(e) Upon the occurrence of a Change in Control followed within eighteen
(18) months by an Event of Termination (as defined in Section 6 hereof), the
Bank (or its successor) shall provide at the Bank's (or its successor's)
expense, for the remaining unexpired Employment Period or Revised Employment
Period under this Agreement, life insurance and non-taxable medical and dental
coverage substantially comparable, as reasonably available, to the coverage
maintained by the Company or the Bank for Executive prior to his termination,
except to the extent such coverage may be changed in its application to all Bank
employees and then the coverage provided to Executive shall be commensurate with
such changed coverage.
(f) Except as otherwise provided by Section 18 hereof or as otherwise
provided by then applicable law, in the event of an Event of Termination within
eighteen (18) months following a Change in Control, Executive shall have the
right within thirty (30) days following such Event of Termination, upon the
surrender of stock options, stock, warrants, stock appreciation rights or
phantom stock rights (collectively, "Stock Rights") issued to Executive by the
Bank or its subsidiaries and affiliates, to a lump sum payment equal to the
product of:
(i) The excess of (A) the Fair Market Value (as defined in Section
6(f) of this Agreement) of shares of stock of the same class as the stock
that constitutes or is subject to the Stock Right, determined as of the
date of the Change in Control, over (B) the exercise price per share, if
any for Stock Right, as specified in or under the relevant plan or program;
multiplied by
(ii) The number of shares with respect to which Stock Rights are being
surrendered.
For purposes of this Section 7(f), for purposes of determining Executive's right
following a Change of Control to exercise any Stock Rights not surrendered
pursuant hereto, Executive shall be deemed to be fully vested in and entitled to
exercise all Stock Rights under any stock option or rights plan or program
maintained by, or covering employees of, the Bank or its subsidiaries, even if
Executive is not so vested or entitled to then exercise such rights under such
plan or program.
(g) Notwithstanding anything to the contrary set forth in this Section 7 or
otherwise in this Agreement, if at any time Executive is suspended and/or
temporarily prohibited from participating in the conduct of the Company or the
Bank's affairs by notice served under or pursuant to then applicable law,
including under or pursuant to the relevant provisions of the Federal Deposit
Insurance Act, as amended, (the "FDIA") the Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may, in its discretion, (i) pay to Executive all or part of the compensation
withheld while its obligations under this Agreement were suspended; and (ii)
reinstate in whole or in part any of its obligations that were suspended.
Moreover, notwithstanding anything to the contrary set forth in this Section 7
or otherwise in this Agreement, if Executive is removed and/or permanently
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prohibited from participating in the conduct of the Company or the Bank's
affairs by an order issued under or pursuant to then applicable law, including
under the relevant provisions of the FDIA, Executive shall be deemed to have
been terminated for Just Cause, and all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the parties shall not be affected.
(h) If Executive is a Specified Employee, as defined in Code Section 409A
and any payment to be made under paragraph (c) or (d) of this Section 7 shall be
determined to be subject to Code Section 409A, then if and to the extent
necessary to comply with Code Section 409A and avoid additional tax thereunder,
such payment or a portion of such payment (to the minimum extent possible) shall
be delayed and shall be paid on the first day of the seventh month following
Executive's Separation from Service.
8. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES.
If the payments and benefits pursuant to Section 7 hereof, either alone or
together with other payments and benefits which the Executive has the right to
receive from the Bank, would constitute a "parachute payment" under Section 280G
of the Code, then the payments and benefits payable by the Bank pursuant to
Section 7 hereof shall be reduced by the minimum amount necessary to result in
no portion of the payments and benefits under Section 7 being non-deductible to
the Bank pursuant to Section 280G of the Code and subject to the excise tax
imposed under Section 4999 of the Code. If the payments and benefits under
Section 7 are required to be reduced, the cash severance shall be reduced first,
followed by a reduction in the fringe benefits. The determination of any
reduction in the payments and benefits to be made pursuant to Section 7 shall be
based upon the opinion of independent tax counsel selected by the Bank and paid
by the Bank. Such counsel shall promptly prepare the foregoing opinion, but in
no event later than ten (10) days from the Event of Termination, and may use
such actuaries as such counsel deems necessary or advisable for the purpose.
Nothing contained herein shall result in a reduction of any payments or benefits
to which the Executive may be entitled upon termination of employment under any
circumstances other than as specified in this Section 8, or a reduction in the
payments and benefits specified in Section 7 below zero.
9. TERMINATION FOR DISABILITY.
(a) Termination of Executive's employment based on "Disability" shall be
construed to comply with Section 409A of the Code and shall be deemed to have
occurred if: (i) Executive is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death, or last for a continuous period of not
less than twelve (12) months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death, or last
for a continuous period of not less than 12 months, Executive is receiving
income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company or the Bank; or (iii)
Executive is determined to be totally disabled by the Social Security
Administration. The provisions of Sections 9(b) and (c) shall apply upon the
termination of the Executive's employment based on Disability.
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(b) In the event the Board determines that Executive is Disabled, Executive
will no longer be obligated to perform services under this Agreement. Upon
Executive's termination due to Disability, the Bank shall pay Executive, as
disability pay, a monthly amount equal to the Executive's monthly rate of Base
Salary for up to one year following the termination of Executive's employment
due to Disability. Notwithstanding any other provision to the contrary, the
Bank's obligation for any payments required to be made under this Section 9(b)
shall be reduced by any proceeds received by Executive from any short-term or
long-term disability plans or any other disability policy or plan maintained by
the Bank for Executive. These disability payments will end on the earlier of:
(i) the date Executive returns to the full-time employment of the Bank; (ii)
Executive's full-time employment by another employer; (iii) the expiration of
the one year term following the termination of Executive's employment due to
Disability; or (iv) Executive's death.
(c) The Bank shall cause to be continued life insurance and non-taxable
medical and dental coverage substantially comparable, as reasonable available,
to the coverage maintained by the Bank for Executive prior to the termination of
his employment based on Disability, except to the extent such coverage may be
changed in its application to all Bank employees or not available on an
individual basis to an employee terminated based on Disability. This coverage
shall cease upon the earlier of: (i) the date Executive returns to the full-time
employment of the Bank; (ii) Executive's full-time employment by another
employer; (iii) the expiration of the remaining unexpired Employment Period
under this Agreement; or (iv) Executive's death.
10. TERMINATION FOR DEATH.
In the event of Executive's death during the term of this Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive's Base Salary at the rate in effect at the
time of Executive's death for a period of one (1) year from the date of
Executive's death, and the Bank shall continue to provide non-taxable medical,
dental and other insurance benefits normally provided for Executive's family (in
accordance with its customary co-pay percentages) for one (1) year after
Executive's death. Notwithstanding any other provision to the contrary, the Bank
is obligated to provide payments of Base Salary under this Section 10 only if,
on the date of the Executive's death, the Bank is the owner and beneficiary of a
life insurance policy for which the Bank pays or paid the premium(s) on the life
of Executive. The Bank shall use its best efforts to continue or obtain a life
insurance policy from a life insurance company, which has an A.M. Best Company
financial strength rating of at least an A-, provided that the life insurance
premiums are reasonable, as determined solely in the discretion of the Board.
Such payments are in addition to any other life insurance or other benefits that
Executive's beneficiaries may be entitled to receive under any of the Company or
the Bank's Benefit Plans. Notwithstanding the foregoing, if Executive incurs an
Event of Termination under Section 6 hereof and prior to commencement of
continued salary or other benefit payment thereunder Executive dies, such
payments shall continue to be made to Executive's designated beneficiary, if
any, estate or legal representative, as the case may be.
11. TERMINATION FOR JUST CAUSE.
(a) The Bank may terminate Executive's employment at any time, but any
termination other than termination for "Just Cause," as defined herein, shall
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not prejudice Executive's right to compensation or other benefits under this
Agreement. Executive shall have no right to receive compensation or other
benefits for any period after termination for "Just Cause" (except as expressly
provided otherwise in this Agreement). The phrase "Just Cause" as used herein,
shall exist when there has been a good faith determination by the Board that
there shall have occurred one or more of the following events with respect to
Executive: (i) the conviction of Executive of a felony; (ii) the willful
commission by Executive of a criminal or other act that, in the reasonable
judgment of the Board will likely cause substantial economic damage to the Bank
or substantial injury to the business reputation of the Bank; (iii) the
commission by Executive of an act of fraud in the performance of his duties on
behalf of the Bank; (iv) the continuing willful and material failure of
Executive to perform his duties to the Bank (other than any such failure
resulting from Executive's incapacity due to physical or mental illness) after
written notice thereof (specifying the particulars thereof in reasonable detail)
and a reasonable opportunity to be heard and cure such failure are given to
Executive by the Board; or (v) an order of a federal or state regulatory agency
or a court of competent jurisdiction requiring the termination of Executive's
employment by the Bank. Notwithstanding the foregoing, Just Cause shall not be
deemed to exist unless there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-fourths
of the entire membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to Executive and an opportunity for
Executive and his counsel to be heard before the Board prior to the time the
Board decision is made), finding that in the good faith opinion of the Board
Executive was guilty of conduct described above and specifying the particulars
thereof. Prior to holding a meeting at which the Board is to make a final
determination whether Just Cause exists, if the Board determines in good faith
at a meeting of the Board, by not less than a majority of its entire membership,
that there is probable cause for it to find that Executive was guilty of conduct
constituting Just Cause as described above, the Board may suspend Executive from
his duties hereunder for a reasonable period of time not to exceed fourteen (14)
days pending a further meeting at which Executive shall be given the opportunity
to be heard before the Board. Upon a finding of Just Cause, the Board shall
deliver to Executive a Notice of Termination, as more fully described in Section
12 below.
(b) For purposes of this Section 11, no act or failure to act on the part
of Executive shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of the Bank. Any act, or failure to
act, based upon the direction of the Board or based upon the advice of counsel
for the Bank shall be conclusively presumed to be done, or omitted to be done,
by Executive in good faith and in the best interests of the Bank.
12. NOTICE OF TERMINATION.
(a) Any purported termination by the Bank for Just Cause shall be
communicated by Notice of Termination to Executive. If, within thirty (30) days
after any Notice of Termination for Just Cause is given, Executive notifies the
Bank that a dispute exists concerning the termination, the parties shall
promptly proceed to arbitration, as provided in Section 22. Notwithstanding the
pendency of any such dispute, the Bank shall discontinue paying Executive's
compensation until the dispute is finally resolved in accordance with this
Agreement. If it is determined that Executive is entitled to compensation and
benefits under Section 6 or 7, the payment of such compensation and benefits by
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the Bank shall commence immediately following the date of resolution by
arbitration, with interest due Executive on the cash amount that would have been
paid pending arbitration (at the prime rate as published in The Wall Street
Journal from time to time).
(b) Any other purported termination by the Bank or by Executive shall be
communicated by a "Notice of Termination" (as defined in Section 12(c)) to the
other party. If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the parties shall promptly
proceed to arbitration as provided in Section 22. Notwithstanding the pendency
of any such dispute, the Bank shall continue to pay Executive his Base Salary,
and other compensation and benefits in effect when the notice giving rise to the
dispute was given (except as to termination of Executive for Just Cause);
provided, however, that such payments and benefits shall not continue beyond the
date that is thirty-six (36) months from the date the Notice of Termination is
given. In the event the voluntary termination by Executive of his employment is
disputed by the Bank, and if it is determined in arbitration that Executive is
not entitled to termination benefits pursuant to this Agreement, he shall return
all cash payments made to him pending resolution by arbitration, with interest
thereon at the prime rate as published in The Wall Street Journal from time to
time, if it is determined in arbitration that Executive's voluntary termination
of employment was not taken in good faith and not in the reasonable belief that
grounds existed for his voluntary termination. If it is determined that
Executive is entitled to receive severance benefits under this Agreement, then
any continuation of Base Salary and other compensation and benefits made to
Executive under this Section 12 shall offset the amount of any severance
benefits that are due to Executive under this Agreement.
(c) For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
13. NONCOMPETITION.
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with Sections 13(b), 13(c) and 13(d).
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party other than litigation in which Executive or his family is a
party; provided that such information and assistance does not materially
interfere with the Executive's subsequent employment or self-employment.
(c) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever (except
for such disclosure as may be required to be provided to the Office of the
Comptroller of the Currency ("OCC"), the Federal Deposit Insurance Corporation
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("FDIC"), or other bank regulatory agency with jurisdiction over the Bank or
Executive). Notwithstanding the foregoing, Executive may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of the
Bank, and Executive may disclose any information regarding the Bank which is
otherwise publicly available or which Executive is otherwise legally required to
disclose. In the event of a breach or threatened breach by Executive of the
provisions of this Section 13, the Bank will be entitled to an injunction
restraining Executive from disclosing, in whole or in part, the knowledge of the
past, present, planned or considered business activities of the Bank or
affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
(d) Subject to Section 13(e), upon any termination of Executive's
employment hereunder pursuant to Section 6 or 7 of this Agreement, Executive
agrees not to compete with the Bank for a period of one (1) year following such
termination in any city, town or county in which the Company or the Bank has an
office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination, except as
agreed to pursuant to a resolution duly adopted by the Board. Executive agrees
that during such period and within said cities, towns and counties, Executive
shall not work for or advise, consult or otherwise serve with, directly or
indirectly, any entity whose business materially competes with the depository,
lending or other business activities of the Bank. The parties hereto,
recognizing that irreparable injury will result to the Bank, its business and
property in the event of Executive's breach of this Section 13, agree that in
the event of any such breach by the Executive, the Bank will be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employers, employees and all persons acting for or with Executive.
Executive represents and admits that Executive's experience and capabilities are
such that Executive can obtain employment in a business engaged in other lines
and/or of a different nature than the Bank, and that the enforcement of a remedy
by way of injunction will not prevent Executive from earning a livelihood.
Nothing herein will be construed as prohibiting the Bank from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages from Executive.
(e) Notwithstanding any other provision of this Agreement, the parties
understand, acknowledge and agree that the provisions of Section 13(d) shall not
apply in the event of Executive's termination of employment if: (i) Executive is
not entitled to receive severance benefits under any circumstances or determines
within ninety (90) days of such termination to waive any such severance payments
(and repays any severance benefits he has already received), except in the case
of termination for Just Cause; (ii) such termination follows a Change in
Control; (iii) such termination constitutes an involuntary termination not for
Just Cause; or (iv) such termination constitutes a resignation for Good Reason.
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14. KEYMAN LIFE INSURANCE
The Bank shall have the right to obtain and hold a "keyman" life insurance
policy on the life of Executive with the Bank as beneficiary of the policy.
Executive agrees to provide any information reasonably required for the issuance
of such policy and to submit himself to any physical examination reasonably
required for such policy.
15. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that Executive is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
16. NO ATTACHMENT; BINDING ON SUCCESSORS.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
17. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
18. REGULATORY RESTRICTIONS.
The parties understand and agree that at the time any payment would
otherwise be made or benefit provided under Section 6 or 7 under this Agreement,
depending on the facts and circumstances existing at such time, the satisfaction
of such obligations by the Bank may be deemed by a regulatory authority to be
illegal, an unsafe or unsound banking practice, or for some other reason not
properly due or payable by the Bank in accordance with rules and regulations
promulgated by the OCC, the FDIC or otherwise. The Bank agrees that to the
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extent reasonably feasible, it will in good faith seek to determine the position
of the appropriate regulatory authority in advance of each payment or benefit
otherwise due under Section 6 or 7 hereof, including seeking the approval or
acquiescence of the appropriate regulatory authorities, if required. The parties
understand, acknowledge and agree that, notwithstanding any other provision of
this Agreement, the Bank shall not be obligated to make any payment or provide
any benefit under Section 6 or 7 of this Agreement where (i) an appropriate
regulatory authority does not approve or acquiesce as required, or (ii) the Bank
has been informed by a representative of the appropriate regulatory authority
that it is the position of such regulatory authority that making such payment or
providing such benefit would constitute an unsafe and unsound banking practice,
violate a written agreement with the regulatory authority, violate an applicable
rule or regulation, or would cause the representative of the regulatory
authority to recommend enforcement action against the Bank.
19. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
20. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
21. GOVERNING LAW.
Except to the extent preempted by federal law, this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York applicable to contracts entered into and to be performed entirely
within the State of New York by parties all of whom are citizens and residents
of the State of New York.
22. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by binding arbitration, as an alternative
to civil litigation and without any trial by jury to resolve such claims,
conducted by a panel of three arbitrators sitting in a location selected by
Executive within fifty (50) miles from the main office of the Bank, in
accordance with the rules of the American Arbitration Association's National
Rules for the Resolution of Employment Disputes ("National Rules") then in
effect. One arbitrator shall be selected by Executive, one arbitrator shall be
selected by the Bank and the third arbitrator shall be selected by the
arbitrators selected by the parties. If the arbitrators are unable to agree
within fifteen (15) days upon a third arbitrator, the arbitrator shall be
appointed for them from a panel of arbitrators selected in accordance with the
National Rules. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The Bank shall pay for the cost of such arbitration,
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including the costs and fees of the American Arbitration Association and/or the
selected arbitrators.
23. PAYMENT OF LEGAL FEES.
(a) To the extent permitted by then applicable law, the Bank shall, on or
after the date of a Change of Control, indemnify, hold harmless and defend
Executive from and against reasonable costs, including reasonable legal fees,
costs and expenses, incurred by him in connection with or arising out of any
action, suit or proceeding (including arbitration pursuant to Section 22 of this
Agreement) in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement.
(b) In the event the Bank exercises its right to terminate the Executive's
employment for "Just Cause," but it is determined by a court of competent
jurisdiction or by an arbitrator pursuant to Section 22 of this Agreement that
"Just Cause" as defined in this Agreement did not exist for such termination, or
if in any event it is determined by any such court or arbitrator that the Bank
has failed to make timely payment of any amounts owed to the Executive under
this Agreement, the Executive shall be entitled to reimbursement for all
reasonable costs, including attorney's fees, incurred in challenging such
termination or collecting such amounts. Such reimbursement shall be in addition
to all rights to which the Executive is otherwise entitled under this Agreement.
(c) The Bank shall, upon execution of this Agreement, reimburse the
Executive for his reasonable legal fees for review of the Agreement up to a
maximum of $2,000.
24. INDEMNIFICATION.
During the term of this Agreement and for a period of six (6) years
thereafter, the Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors and officers liability
insurance policy at its expense, and shall indemnify Executive (and his heirs,
executors and administrators) to the fullest extent permitted under applicable
law against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Company or
the Bank (whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys fees and
the cost of reasonable settlements (such settlements must be approved by the
Board). If such action, suit or proceeding is brought against Executive in his
capacity as an officer or director of the Company or the Bank, however, such
indemnification shall not extend to matters as to which Executive is finally
adjudged to be liable for willful misconduct in the performance of his duties.
25. SUCCESSOR TO THE BANK.
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
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26. SOURCE OF PAYMENTS; NO DUPLICATION OF PAYMENTS.
(a) All the payments provided in this Agreement shall be timely paid in
cash or check from the general funds of the Bank.
(b) Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement dated as of January __,
2010 governing the terms and conditions of Executive's employment by the Company
(the "Company Agreement"), such compensation payments and benefits paid by the
Bank will be subtracted from any amount due Executive under this Agreement.
Payments pursuant to this Agreement and the Company Agreement shall be allocated
in proportion to the level of activity and the time expended on such activities
by Executive as determined by the Company and the Bank on a quarterly basis.
27. NOTICE.
For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered personally or five days after mailing if mailed
by certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address listed below, or at such other address as
one such party may by written notice specify to the other party: (a) if to the
Bank: Empire State Bank, N.A., 68 North Plan Road, Newburgh, NY 12550,
Attention: Corporate Secretary; and (b) if to the Executive: to the most recent
address on file for him in the Bank's personnel records.
[signature page follows]
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SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed by
its duly authorized representative, and Executive has signed this Agreement, on
the date first above written.
EMPIRE STATE BANK, N.A.
February 16, 2010 By:/s/ Michael Ostrow
- ------------------------------------ ---------------------------------
Date Michael Ostrow
---------------------------------
Director Authorized to Sign
EXECUTIVE
March 31, 2010 /s/ Thomas P. Sperzel
- ------------------------------------ ---------------------------------
Date Thomas P. Sperzel
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