DIRECTOR SUPPLEMENTAL RETIREMENT PLAN
DIRECTOR AGREEMENT
THIS AGREEMENT is made and entered into this 22nd day of May, 2000, by
and between Mechanics Savings Bank, a Bank organized and existing under the laws
of the state of Pennsylvania, (hereinafter referred to as the, "Bank"), and
[Director], a member of the Board of Directors of the Bank (hereinafter referred
to as the, "Director").
WHEREAS, the Director is now on the Board of the Bank (hereinafter
referred to as the, "Board") and has for many years faithfully served the Bank.
It is the consensus of the Board of Directors that the Director's services have
been of exceptional merit, in excess of the compensation paid and an invaluable
contribution to the profits and position of the Bank in its field of activity.
The Board further believes that the Director's experience, knowledge of
corporate affairs, reputation and industry contacts are of such value, and the
Director's continued services so essential to the Bank's future growth and
profits, that it would suffer severe financial loss should the Director
terminate his service on the Board;
ACCORDINGLY, the Board has adopted the Mechanics Savings Bank Director
Supplemental Retirement Plan (hereinafter referred to as the, "Director Plan")
and it is the desire of the Bank and the Director to enter into this agreement
which the Bank will agree to make certain payments to the Director upon the
Director's retirement and to the Director's beneficiary(ies) in the event of the
Director's death pursuant to the Director Plan;
FURTHERMORE, it is the intent of the parties hereto that this Director
Plan be considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Director, and to be considered a
non-qualified benefit plan for purposes of the Employee Retirement Security Act
of 1974, as amended ("ERISA"). The Director is fully advised of the Bank's
financial status and has had substantial input in the design and operation of
this benefit plan; and
NOW THEREFORE, in consideration of services the Director has performed
in the past and those to be performed in the future, and based upon the mutual
promises and covenants herein contained, the Bank and the Director agree as
follows:
I. DEFINITIONS
A. Effective Date:
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The effective Date of the Plan shall be April 24, 2000.
B. Plan Year:
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Any reference to the "Plan Year" shall mean a calendar year
from January 1st to December 31st. In the year of
implementation, the term "Plan Year" shall mean the period
from the Effective Date to December 31st of the year of the
Effective Date.
C. Retirement Date:
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Retirement Date shall mean retirement from service with the
Bank which becomes effective on the first day of the calendar
month following the month in which the Director reaches age
seventy-two (72) or such later date ad the Director may
actually retire.
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D. Termination of Service:
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Termination of Service shall mean the Director's voluntary
resignation from service on the Board or failure of
re-election to the Board, prior to the Normal Retirement Age
[Subparagraph I (J)].
E. Pre-Retirement Account:
----------------------
A Pre-Retirement Account shall be established as a liability
reserve account on the books of the Bank for the benefit of
the Director. Prior to the Director's Termination of Service
or the Director's retirement, whichever event shall first
occur, such liability reserve account shall be increased or
decreased each Plan Year, until the aforestated event occurs,
by the Index Retirement Benefit [Subparagraph I (F)]. If,
however, the Director's service terminates with the Bank due
to ill health or medical disability, then the aforestated
liability reserve account shall be increased or decreased each
Plan Year by the Index retirement Benefit as set forth
hereinabove until the Director's Normal Retirement Age
[Subparagraph I (J)]. Whether the Director's service has been
terminated due to ill health or medical disability shall be a
determination made solely within the discretion of the Board.
F. Index Retirement Benefit:
------------------------
The Index Retirement Benefit for each Director in the Director
Plan for each Plan Year shall be equal to the excess (if any)
of the Index [Subparagraph I (G)] for that Plan Year over the
Cost of Funds Expense [Subparagraph I (H)] for that Plan Year.
G. Index:
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The Index for any Plan Year shall be the aggregate annual
after-tax income from the life insurance contract(s) described
hereinbelow as defined by FASB Technical Bulletin 85-4. This
Index shall be applied as if such insurance contracts were
purchased on the Effective Date of the Director Plan.
Insurance Company: ING Southland Life Insurance Company
Policy Form: Flexible Premium Adjustable Life
Policy Name: Max Universal Life
Insured's Age and Sex:
Riders: None
Ratings: None
Option: Level
Face Amount: $
Premium Paid: $
Number of Premium Payments: Single
Assumed Purchase Date: April 24, 2000
If such contracts of Life insurance are actually purchased by
the Bank, then the actual policies as of the date they were
actually purchased shall be used in calculations under this
Director Plan. If such contracts of life insurance are not
purchased or are subsequently surrendered or lapsed, then the
Bank shall receive annual policy illustrations that assume
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the above-described policies were purchased, or had not
subsequently surrendered or lapsed, which illustrations will
be received from the respective insurance companies and will
indicate the increase in policy values for purposed of
calculating the amount of the Index.
In either case, references to the life insurance contracts are
merely for purposes of calculating a benefit. The Bank has no
obligation to purchase such life insurance and, if purchased,
the Directors and their beneficiary(ies) shall have no
ownership interest in such policy and shall always have no
greater interest in the benefits under this Director Plan than
that of an unsecured creditor of the Bank.
H. Cost of Funds Expense:
---------------------
The Cost of Funds Expense for any Plan Year shall be
calculated by taking the sum of the amount of premiums for the
life insurance policies described in the definition of "Index"
plus the amount of any after-tax benefits paid to the Director
pursuant to the Director Plan (Paragraph II hereinafter) plus
the amount of all previous years after-tax Costs of Funds
Expense, and multiplying that sum by the Average After-Tax
Cost of Funds [Subparagraph I (K)]. The Bank, no more than
annually, may modify the calculation of the Cost of Funds
Expense as set forth herein.
I. Change of Control:
-----------------
Change of Control means the cumulative transfer of more than
fifty percent (50%) of the voting stock of the Bank or the
Bank's holding company from the Effective Date of this
Director Plan. For the purposes of this Director Plan,
transfers on account of deaths or gifts, transfers between
family members or transfers to a qualified retirement plan
maintained by the Bank shall not be considered in determining
whether there has been a Change of Control.
J. Normal Retirement Age:
---------------------
Normal Retirement Age shall mean the date on which the
Director attains age ___________ (___).
K. Average After-Tax Cost of Funds:
-------------------------------
Average After-Tax Cost of Funds means, at any particular time,
a ratio, the numerator of which is the total interest expense
as set forth on Schedule RI-Income Statement on the Bank's
most recently filed Consolidated Report of Condition and
Income (the "Call Report") and the denominator of which is an
amount equal to: (i) the amount of deposits in domestic
offices (sum of total of Columns A and C from Schedule RC-E of
the Call Report), plus (ii) the amount of Federal funds
purchased and securities sold under agreement to repurchase,
as set forth on Schedule RC-Balance sheet of the Call Report.
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II. INDEX BENEFITS
A. Retirement Benefits:
-------------------
Subject to Subparagraph II (D) hereinafter, a Director who
remains on the Board until the Normal Retirement Age
[Subparagraph I (J)] shall be entitled to receive the balance
in the Pre-Retirement Account in ten (10) equal annual
installments commencing thirty (30) days following the
Director's retirement. In addition to these payment and
commencing in conjunction therewith, the Index Retirement
Benefit [Subparagraph I (F)] for each Plan Year subsequent to
the Director's retirement, and including the remaining portion
of the Plan Year following said retirement, shall be paid to
the Director until the Director's death.
B. Termination of Service:
----------------------
(i) Directors who began serving the Bank on or before the
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1st day of January, 2000.
------------------------
Subject to Subparagraph II (D), should a Director who
began serving the Bank on or before the 1st day of
January, 2000, suffer a Termination of Service the
Director shall be entitled to receive the balance in
the Pre-Retirement Account payable to the director in
ten (10) equal annual installments commencing thirty
(30) days following the Director's Normal Retirement
Age [Subparagraph I (J)]. In addition to these
payments and commencing in conjunction therewith, the
Index Retirement Benefit for each Plan Year
subsequent to the year in which the Director attains
Normal Retirement Age, and including the remaining
portion of the Plan Year in which the Director
attains Normal Retirement Age, shall be paid to the
Director until the Director's death.
(ii) Directors who began serving the Bank subsequent to
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the 1st day of January, 2000.
----------------------------
Subject to Subparagraph II (D), would a Director who
began serving the Board subsequent to the 1st day of
January, 2000, suffer a Termination of Service the
Director shall be entitled to receive ten percent
(10%), times the number of full years of service on
the Board from and after the Director's third
anniversary of service with the Bank from the date of
first service (to a maximum of 100%), times the
balance in the Pre-Retirement Account payable to the
director in ten (10) equal annual installments
commencing thirty (30) days following the Director's
Normal Retirement Age [Subparagraph I (J)]. In
addition to these payments and commencing in
conjunction therewith, ten percent (10%) times the
number of full years of service on the Board from and
after the Director's third anniversary of service
with the Bank from the date of first service (to a
maximum of 100%), times the Index Retirement Benefit
for each Plan Year subsequent to the year in which
the Director attains Normal Retirement Age, and
including the remaining portion of the Plan Year in
which the director attains Normal Retirement Age,
shall be paid to the Director until the Director's
death.
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C. Death:
-----
Should the Director die prior to having received the balance
of the Pre-Retirement Account the Director may be entitled to
under the terms of this Director Plan, the entire unpaid
balance of the Director's Pre-Retirement Account shall be paid
in a lump sum to the individual or individuals the Director
may have designated in writing and filed with the Bank. In the
absence of any effective designation of beneficiary(ies), the
unpaid balance shall be paid as set forth herein to the duly
qualified executor or administrator of the Director's estate.
Said payment due hereunder shall be made the first day of the
second month following the decease of the Director. Provided,
however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder
if the Director dies on or before the 24th day of April, 2002.
D. Termination of Service and Discharge for Cause:
----------------------------------------------
Should the Director who began serving the Bank subsequent to
the 24th day of April, 2000 suffer a Termination of Service
prior to three (3) full years of service with the Bank from
the date of first service, or should any Director be
Discharged for Cause at any time, all benefits under this
Director Plan shall be forfeited. The term for "cause" shall
mean any of the following that result in an adverse effect on
the Bank (i) the conviction of a felony or gross misdemeanor
involving moral turpitude, fraud, or dishonesty; (ii) the
willful violation of any law, rule, or regulation (other than
a traffic violation or similar offense); (iii) an intentional
failure to perform stated duties; or (iv) a breach of
fiduciary duty involving personal profit. If a dispute arises
as to discharge for "cause," such dispute shall be resolved by
arbitration as set forth in this Director Plan.
E. Death Benefit:
-------------
Except as set forth above, there is no death benefit provided
under this Agreement.
III. RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any fund or
money with which to pay its obligations under this Director Plan. The Directors,
their beneficiary(ies) or any successor in interest shall be and remain simply a
general creditor of the Bank in the same manner as any other creditor having a
general claim for matured and unpaid compensation.
The Bank reserves the absolute right, at its sole discretion, to either fund the
obligations undertaken by this Director Plan or to refrain from funding the same
and to determine the extent, nature and method of such funding. should the Bank
elect to fund this Director Plan, in whole or in part, through the purchase of
life insurance, mutual funds, disability policies or annuities, the Bank
reserves the absolute right, in its sole discretion, to terminate such funding
at any time, in whole or in part. At no time shall any director be deemed to
have any lien nor right, title or interest in or to any specific funding
investment or to any assets of the Bank.
If the Bank elects to invest in a life insurance, disability or annuity policy
upon the life of the director, then the Director shall assist the Bank by freely
submitting to a physical exam and supplying such additional information
necessary to obtain such insurance annuities.
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IV. CHANGE OF CONTROL
Upon a Change of Control [Subparagraph I (I)], if the Director subsequently
suffers a Termination of Service [Subparagraph I (D)], then the Director shall
receive the benefits promised in this Director Plan upon attaining Normal
Retirement Age, as if the Director had been continuously serving the Bank until
the Director's Normal Retirement Age. The Director will also remain eligible for
all promised death benefits in this Director Plan. In addition, no sale, merger,
or consolidation of the Bank shall take place unless the new or surviving entity
expressly acknowledges the obligations under the Director Plan and agrees to
abide by its terms.
V. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor
any other beneficiary(ies) under this Director Plan shall have
any power or right to transfer, assign, anticipate,
hypothecate, mortgage, commute, modify or otherwise encumber
in advance any of the benefits payable hereunder nor shall any
of said benefits be subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the
Director or the Director's beneficiary(ies), nor be
transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the Director or any
beneficiary attempts assignment, commutation, hypothecation,
transfer or disposal of the benefits hereunder, the Bank's
liabilities shall forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest:
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The Bank shall not merge or consolidate into or with another
bank or sell substantially all of its assets to another bank,
firm or person until such bank, firm or person expressly
agrees, in writing, to assume and discharge the duties and
obligations of the Bank under this Director Plan. This
Director Plan shall be binding upon the parties hereto, their
successors, beneficiaries, heirs and personal representatives.
C. Amendment or Revocation:
-----------------------
It is agreed by and between the parties hereto that, during
the lifetime of the Director, this Director Plan may be
amended or revoked at any time or times, in whole or in part,
by the mutual written consent of the Director and the Bank.
D. Gender:
------
Whenever in this Director Plan words are used in the masculine
or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so
apply.
E. Effect on Other Bank Benefit Plans:
----------------------------------
Nothing contained in this Director Plan shall affect the right
of the Director to participate in or be covered by any
qualified or non-qualified pension, profit-sharing, group,
bonus
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or other supplemental compensation or fringe benefit plan
constituting a part of the Bank's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Director Plan are inserted
for reference and convenience only and shall not be deemed a
part of this Director Plan.
G. Applicable Law:
--------------
The validity and interpretation of this Agreement shall be
governed by the laws of the State of Pennsylvania.
H. 12 U.S.C.ss.1828(k):
-------------------
Any payments made to the Director pursuant to this Director
Plan, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. ss. 1828(k) or any regulations
promulgated thereunder.
I. Partial Invalidity:
------------------
If any term, provision, covenant, or condition of this
Director Plan is determined by an arbitrator or a court, as
the case may be, to be invalid, void, or unenforceable, such
determination shall not render any other term, provision,
covenant, or condition invalid, void, or unenforceable, and
the Director Plan shall remain in full force and effect
notwithstanding such partial invalidity.
J. Continuation as Director:
------------------------
Neither this Agreement nor the payment of any benefits
thereunder shall be construed as giving to the Director any
right to be retained as a member of the Board to Directors of
the Bank.
VI. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Director
Plan shall be Mechanics Savings Bank, until its registration
or removal by the Board. As Named Fiduciary and Plan
Administrator, the Bank shall be responsible for the
management, control and administration to the Director Plan.
The Named Fiduciary may delegate to others certain aspects of
the management and operation responsibilities of the Director
Plan including the employment of advisors and the delegation
of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
--------------------------------
In the event a dispute arises over benefits under this
Director Plan and benefits are not paid to the Director (or to
the Director's beneficiary(ies) in the case to the Director's
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death) and such claimants feel they are entitled to receive
such benefits, then a written claim must be made to the Named
Fiduciary and Plan Administrator named above within sixty (60)
days from the date payments are refused. The Named Fiduciary
and Plan Administrator shall review the written claim and if
the claim is denied, in whole or in part, they shall provide
in writing within sixty (60) days of receipt of such claim its
specific reasons for such denial, reference to the provisions
of this Director Plan upon which the denial is based and any
additional material or information necessary to perfect the
claim. Such written notice shall further indicate the
additional steps to be taken by claimants if a further review
to the claim denial is desired. A claim shall be deemed denied
if the Name Fiduciary and Plan Administrator fail to take any
action within the aforesaid sixty- day period.
If claimants desire a second review they shall notify the
Named Fiduciary and Plan Administrator in writing within sixty
(60) days of the first claim denial. Claimants may review this
Director Plan or any documents relating thereto and submit any
written issues and comments it may feel appropriate. In their
sole discretion, the Named Fiduciary and Plan Administrator
shall then review the second claim and provide a written
decision within sixty (60) days of receipt to such claim. This
decision shall likewise state the specific reasons for the
decision and shall include reference to specific provisions of
the Plan Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Director Plan or the meaning and
effect to the terms and conditions thereof, then claimants may
submit the dispute to an Arbitrator for final arbitration. The
Arbitrator shall be selected by mutual agreement of the Bank
and the claimants. The Arbitrator shall operate under any
generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal
representatives, successors and assigns shall be bound by the
decision of such Arbitrator with respect to any controversy
properly submitted to it for determination.
Where a dispute arises as to the Bank's discharge of the
Director for "cause", such dispute shall likewise be submitted
to arbitration as above-described and the parties hereto agree
to be bound by the decision thereunder.
VII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF
CHANGES IN THE LAW, RULES OR REGULATIONS
The Bank is entering into this Agreement upon the assumption
that certain existing tax laws, rules and regulations will
continue in effect in their current form. If any said
assumptions should change and said change has a detrimental
effect on this Director to Plan, then the Bank reserves the
right to terminate or modify this Agreement accordingly. Upon
a Change to Control [Subparagraph I (I)], this paragraph shall
become null and void effective immediately upon said Change to
Control.
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IN WITNESS WHEREOF, the parties hereto acknowledge that each has
carefully read this Agreement and executed the original thereof on the 22nd day
of May, 2000, and that, upon execution, each has received a conforming copy.
MECHANICS SAVINGS BANK
Steelton, PA
_______________________________ By:_______________________________
Witness Title
_______________________________ By:_______________________________
Witness [Director]
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