DIRECTOR SUPPLEMENTAL RETIREMENT
INCOME AND DEFERRED COMPENSATION AGREEMENT
FOR MARTIN LUKACS
MAGYAR SAVINGS BANK
NEW BRUNSWICK, NEW JERSEY
FEBRUARY 1, 2004
FINANCIAL INSTITUTION CONSULTING CORPORATION
700 COLONIAL ROAD, SUITE 102
MEMPHIS, TENNESSEE 38117
WATS: 1-800-873-0089
FAX: (901) 684-7414
(901) 684-7400
DIRECTOR SUPPLEMENTAL RETIREMENT
INCOME AND DEFERRED COMPENSATION AGREEMENT
FOR MARTIN LUKACS
This Director Supplemental Retirement Income and Deferred Compensation
Agreement (the "Agreement"), effective as of the 1st day of February, 2004,
formalizes the understanding by and between MAGYAR SAVINGS BANK (the "Bank"), a
state chartered savings bank having its principal place of business in New
Brunswick, New Jersey, and MARTIN LUKACS (hereinafter referred to as
"Director"). All prior non-qualified deferred compensation agreements, including
any and all Joinder Agreements, with respect to Director and MAGYAR SAVINGS
BANK, are hereby superceded and replaced by this Agreement
W I T N E S S E T H :
WHEREAS, the Director serves the Bank as a member of the board; and
WHEREAS, the Bank recognizes the valuable services heretofore performed
by the Director and wishes to encourage his continued service; and
WHEREAS, the Director wishes to be assured that he will be entitled to a
certain amount of additional compensation for some definite period of time from
and after retirement from active service with the Bank or other termination of
service and wishes to provide his beneficiary with benefits from and after
death; and
WHEREAS, the Bank and the Director wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to the
Director after retirement or other termination of service and/or death benefits
to his beneficiary after death; and
WHEREAS, the Bank has adopted this Director Supplemental Retirement
Income and Deferred Compensation Agreement which controls all issues relating to
benefits as described herein and;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Director agree as follows:
SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the
meanings below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit Account" shall be REPRESENTED by the bookkeeping
entries required to record the Director's (i) Phantom Contributions plus
(ii) accrued interest, equal to the Interest Factor, earned to-date on
such amounts. However, neither the existence of such bookkeeping entries
nor the Accrued Benefit Account itself shall be deemed to create either
a trust of any kind, or a fiduciary relationship between the Bank and
the Director or any Beneficiary.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Administrator" means the Bank.
1.4 "Bank" means MAGYAR SAVINGS BANK and any successor thereto.
1.5 "Beneficiary" means the person or persons (and their heirs) designated
as Beneficiary in Exhibit B of this Agreement to whom the deceased
Director's benefits are payable. If no Beneficiary is so designated,
then the Director's Spouse, if living, will be deemed the Beneficiary.
If the Director's Spouse is not living, then the Children of the
Director will be deemed the Beneficiaries and will take on a per stirpes
basis. If there are no Children, then the Estate of the Director will be
deemed the Beneficiary.
1.6 "Benefit Age" means the later of: (i) the Director's sixty-fifth (65th)
birthday or (ii) the actual date the Director's full-time service with
the Bank terminates.
3
1.7 "Benefit Eligibility Date" means the date on which the Director is
entitled to receive any benefit(s) pursuant to Section(s) III or V of
this Agreement. It shall be the first day of the month following both
the attainment of the Directors' Benefit Age and his actual retirement
from the Board of Directors.
1.8 "Board of Directors" means the board of directors of the Bank.
1.9 "Cause" means termination of the Director's service on the Board of
Directors due to: (i) actions or inactions which constitute a breach of
the bylaws of the Bank or (ii) the Director's personal dishonesty,
willful misconduct, willful malfeasance, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, regulation (other than traffic
violations or similar offenses), or final cease-and-desist order,
material breach of any provision of this Plan, or gross negligence in
matters of material importance to the Bank.
1.10 "Change in Control" of the Bank shall mean and include the following:
(1) a Change in Control of a nature that would be required to be
reported in response to Item 1(a) of the current report of Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); or
(2) a change in control of the Bank within the meaning of 12 C.F.R.
574.4; or
(3) a Change in Control at such time as
(i) any "person" (as the term is used in sections 13(d) and
14(d) of 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
representing Twenty Percent (20.0%) or more of the
combined voting power of the Bank's outstanding
securities ordinarily having the right to vote at the
election of directors, except for (i) any stock of the
Bank purchased by the Holding Company in connection with
the conversion of the Bank to stock form, and (ii) any
stock purchased by the Bank's Employee Stock Ownership
Plan and/or trust; or
(ii) individuals who constitute the board of directors on the
date hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date
hereof
4
whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Bank's
stockholders was approved by the Bank's Nominating
Committee which is comprised of members of the Incumbent
Board, shall be, for purposes of this clause (ii),
considered as though he were a member of the Incumbent
Board; or
(iii) merger, consolidation, or sale of all or substantially
all of the assets of the bank occurs; or
(iv) a proxy statement is issued soliciting proxies from the
members (or stockholders) of the Bank by someone other
than the current management of the Bank, seeking member
(or stockholder) approval of a plan of reorganization,
merger, or consolidation of the Bank with one or more
corporations as a result of which the outstanding shares
of the class of the Bank's securities are exchanged for
or converted into cash or property or securities not
issued by the Bank.
For purposes of this Subsection 1.10, the term "stockholder(s)" and
"members" shall be considered one and the same. For purposes of this
Subsection 1.10, the term "Holding Company" shall mean the holding
company (including any successor thereto) organized to acquire the
capital stock of the Bank upon the Bank's conversion from mutual to
stock form.
1.11 "Children" means all natural or adopted children of the Director and
issue of any predeceased child or children.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.13 "Contribution(s)" means those annual total contributions comprised of
both the Elective Contributions and the Emeritus Contributions which the
Bank is required to make to the Retirement Income Trust Fund on behalf
of the Director in accordance with Subsection 2.1(a) and in the amounts
set forth in Exhibit A of the Agreement. Such Contributions, for the
first Plan Year, shall include any and all amounts accrued by the Bank
to pay the benefits promised to the Director under any prior
non-qualified deferred compensation agreements including any Joinder
Agreements previously executed by the Bank and the Director.
5
1.14 (a) "Disability Benefit" means the benefit payable to the Director
following a determination, in accordance with Subsection 6.1(a), that he
is no longer able, properly and satisfactorily, to perform his duties at
the Bank.
(b) "Disability Benefit-Supplemental" (if applicable) means the benefit
payable to the Director's Beneficiary upon the Director's death in
accordance with Subsection 6.1(b).
1.15 "Effective Date" of this Agreement shall be February 1, 2004.
1.16 "Elective Contribution" shall refer to the Director's voluntary monthly
pre-tax deferral of board fees, committee fees and/or retainer plus
interest compounded annually at a rate equal to the Interest Factor. The
Director may elect to change his voluntary deferral amount by submitting
to the Bank a Notice of Adjustment of Elective Contribution thirty (30)
days prior to the end of any Plan Year.
1.17 "Emeritus Contribution" shall refer to the amounts necessary to support
an annual amount payable to the Director at Benefit Age based upon a
percentage, as stated in Appendix A, of the Director's total board fees,
committee fees and/or retainer in the twelve months prior to the
Director's Benefit Eligibility Date. The percentage shall be determined
by the following formula: ten percent (10%) plus two and one-half
percent (2 1/2%) for each year of service as a Director, with a minimum
of fifty percent (50%), provided the Director has served for at least
five (5) years, and a maximum of sixty percent (60%). Notwithstanding
the foregoing, any Director who serves as Board Chairman for a five-year
term (other than the current Chairman) shall be entitled to receive
seventy-five percent (75%).
1.18 "Estate" means the estate of the Director.
1.19 "Interest Factor" means monthly compounding, discounting or annuitizing,
as applicable, at a rate set forth in Exhibit A.
1.20 "Payout Period" means the time frame during which certain benefits
payable hereunder shall be distributed. Payments shall be made in
monthly installments commencing on the first day of the
6
month following the occurrence of the event which triggers distribution
and continuing for a period of one hundred eighty (180) months. Should
the Director make a Timely Election to receive a lump sum benefit
payment, the Director's Payout Period shall be deemed to be one (1)
month.
1.21 "Phantom Contributions" means those annual Contributions which the Bank
is no longer required to make on behalf of the Director to the
Retirement Income Trust Fund. Rather, once the Director has exercised
the withdrawal rights provided for in Subsection 2.2, the Bank shall be
required to record the annual amounts set forth in Exhibit A of the
Agreement in the Director's Accrued Benefit Account, pursuant to
Subsection 2.1.
1.22 "Plan Year" shall mean the twelve (12) month period commencing January 1
and ending December 31.
1.23 "Retirement Income Trust Fund" means the trust fund account established
by the Director and into which annual Contributions will be made by the
Bank on behalf of the Director pursuant to Subsection 2.1. The
contractual rights of the Bank and the Director with respect to the
Retirement Income Trust Fund shall be outlined in a separate writing to
be known as the Martin Lukacs Grantor Trust agreement.
1.24 "Spouse" means the individual to whom the Director is legally married at
the time of the Director's death, provided, however, that the term
"Spouse" shall not refer to an individual to whom the Director is
legally married at the time of death if the Director and such individual
have entered into a formal separation agreement or initiated divorce
proceedings.
1.25 "Supplemental Retirement Income Benefit" means an annual amount (BEFORE
taking into account federal and state income taxes), payable in monthly
installments throughout the Payout Period. Such benefit is projected
pursuant to the Agreement for the purpose of determining the
Contributions to be made to the Retirement Income Trust Fund (or Phantom
Contributions to be recorded in the Accrued Benefit Account). The annual
Contributions and Phantom Contributions have been actuarially
determined, using the assumptions set forth in Exhibit A, in order to
fund for the projected Supplemental Retirement Income Benefit. The
Supplemental
7
Retirement Income Benefit for which Contributions (or Phantom
Contributions) are being made (or recorded) is set forth in Exhibit A.
1.26 "Timely Election" means the Director has made an election to change the
form of his benefit payment(s) by filing with the Administrator a Notice
of Election to Change Form of Payment (Exhibit C of this Agreement). In
the case of benefits payable from the Accrued Benefit Account, such
election shall have been made prior to the event which triggers
distribution and at least two (2) years prior to the Director's Benefit
Eligibility Date. In the case of benefits payable from the Retirement
Income Trust Fund, such election may be made at any time.
SECTION II
BENEFIT FUNDING
2.1 (a) RETIREMENT INCOME TRUST FUND AND ACCRUED BENEFIT ACCOUNT. The
Director shall establish the Martin Lukacs Grantor Trust into which the
Bank shall be required to make annual Contributions on the Director's
behalf, pursuant to Exhibit A and this Section II of the Agreement. A
trustee shall be selected by the Director. The trustee shall maintain an
account, separate and distinct from the Director's personal
contributions, which account shall constitute the Retirement Income
Trust Fund. The trustee shall be charged with the responsibility of
investing all contributed funds. Distributions from the Retirement
Income Trust Fund of the Martin Lukacs Grantor Trust may be made by the
trustee to the Director, for purposes of payment of any income or
employment taxes due and owing on Contributions by the Bank to the
Retirement Income Trust Fund, if any, and on any taxable earnings
associated with such Contributions which the Director shall be required
to pay from year to year, under applicable law, prior to actual receipt
of any benefit payments from the Retirement Income Trust Fund. If the
Director exercises his withdrawal rights pursuant to Subsection 2.2, the
Bank's obligation to make Contributions to the Retirement Income Trust
Fund shall cease and the Bank's obligation to record Phantom
Contributions in the Accrued Benefit Account shall immediately commence
pursuant to Exhibit A and this Section II of the Agreement. To the
extent this Agreement is inconsistent with the Martin Lukacs Grantor
Trust Agreement, the Martin Lukacs Grantor Trust Agreement shall
supersede this Agreement.
8
The annual Contributions (or Phantom Contributions) required to be made
by the Bank to the Retirement Income Trust Fund (or recorded by the Bank
in the Accrued Benefit Account) have been actuarially determined and are
set forth in Exhibit A which is attached hereto and incorporated herein
by reference. Contributions shall be made by the Bank to the Retirement
Income Trust Fund (i) within seventy-five (75) days of establishment of
such trust, and (ii) within the first thirty (30) days of the beginning
of each subsequent Plan Year, unless this Section expressly provides
otherwise. Phantom Contributions, if any, shall be recorded in the
Accrued Benefit Account within the first thirty (30) days of the
beginning of each applicable Plan Year, unless this Section expressly
provides otherwise. Phantom Contributions shall accrue interest at a
rate equal to the Interest Factor, during the Payout Period, until the
balance of the Accrued Benefit Account has been fully distributed.
Interest on any Phantom Contribution shall not commence until such
Payout Period commences.
The Administrator shall review the schedule of annual Contributions (or
Phantom Contributions) provided for in Exhibit A (i) within thirty (30)
days prior to the close of each Plan Year and (ii) if the Director is
employed by the Bank until attaining Benefit Age, on or immediately
before attainment of such Benefit Age. Such review shall consist of an
evaluation of the accuracy of all assumptions used to establish the
schedule of Contributions (or Phantom Contributions). Provided that (i)
the Director has not exercised his withdrawal rights pursuant to
Subsection 2.2 and (ii) the investments contained in the Retirement
Income Trust Fund have been deemed reasonable by the Bank, the
Administrator shall prospectively amend or supplement the schedule of
Contributions provided for in Exhibit A should the Administrator
determine during any such review that AN INCREASE in or SUPPLEMENT TO
the schedule of Contributions is necessary in order to adequately fund
the Retirement Income Trust Fund so as to provide an annual benefit (or
to provide the lump sum equivalent of such benefit, as applicable) equal
to the Supplemental Retirement Income Benefit, on an after-tax basis,
commencing at Benefit Age and payable for the duration of the Payout
Period.
(b) WITHDRAWAL RIGHTS NOT EXERCISED.
(1) CONTRIBUTIONS MADE ANNUALLY
If the Director does not exercise any withdrawal rights pursuant to
Subsection 2.2, the annual Contributions to the Retirement Income Trust
Fund shall continue each year, unless this
9
Subsection 2.1(b) specifically states otherwise, until the earlier of
(i) the last Plan Year that Contributions are required pursuant to
Exhibit A, or (ii) the Plan Year of the Director's termination of
service.
(2) TERMINATION FOLLOWING A CHANGE IN CONTROL
If the Director does not exercise his withdrawal rights pursuant to
Subsection 2.2 and a Change in Control occurs at the Bank, followed
within thirty-six (36) months by either (i) the Director's involuntary
termination of service, or (ii) Director's voluntary termination of
service after: (A) a material change in the Director's function, duties,
or responsibilities, which change would cause the Director's position to
become one of lesser responsibility, importance, or scope from the
position the Director held at the time of the Change in Control, (B) a
relocation of the Director's principal place of service by more than
thirty (30) miles from its location prior to the Change in Control, or
(C) a material reduction in the benefits and perquisites to the Director
from those being provided at the time of the Change in Control, the
Emeritus Contributions as set forth on Schedule A shall continue to be
required of the Bank. The Bank shall be required to make an immediate
lump sum Contribution to the Director's Retirement Income Trust Fund in
an amount equal to: (i) the full Emeritus Contribution required for the
Plan Year in which such termination occurs, if not yet made, plus (ii)
the present value (computed using a discount rate equal to the Interest
Factor) of all remaining Emeritus Contributions to the Retirement Income
Trust Fund, and (iii) the present value (computed using the a discount
rate equal to the Interest Factor) of the interest only component of the
Elective Contribution; provided, however, that, if necessary, an
additional amount shall be contributed to the Retirement Income Trust
Fund which is sufficient to provide the Director with after-tax benefits
(assuming a constant tax rate equal to the rate in effect as of the date
of Director's termination) beginning at Benefit Age following such
termination, equal in amount to that benefit which would have been
payable to the Director if no secular trust had been implemented and the
benefit obligation had been accrued under APB Opinion No. 12, as amended
by FAS 106.
(3) TERMINATION FOR CAUSE
If the Director does not exercise his withdrawal rights pursuant to
Subsection 2.2, and is terminated for Cause pursuant to Subsection 5.2,
no further Contribution(s) to the Retirement
10
Income Trust Fund shall be required of the Bank, and if not yet made, no
Contribution shall be required for the Plan Year in which such
termination for Cause occurs.
(4) VOLUNTARY OR INVOLUNTARY TERMINATION OF SERVICE.
If the Director does not exercise his withdrawal rights pursuant to
Subsection 2.2, and the Director's service with the Bank is voluntarily
or involuntarily terminated for any reason, including a termination due
to disability of the Director but excluding termination for Cause, or
termination following a Change in Control within thirty-six (36) months
of such Change in Control, no further Contribution(s) to the Retirement
Income Trust Fund shall be required of the Bank, and if not yet made, no
Contribution shall be required for the Plan Year in which such
termination for Cause occurs; provided, however, that, if necessary, an
additional amount shall be contributed to the Retirement Income Trust
Fund which is sufficient to provide the Director with after-tax benefits
(assuming a constant tax rate equal to the rate in effect as of the date
of Director's termination) beginning at the Director's Benefit Age
following such termination, equal in amount to that benefit which would
have been payable to the Director if no secular trust had been
implemented and the benefit obligation had been accrued under APB
Opinion No. 12, as amended by FAS 106.
(5) DEATH DURING SERVICE.
If the Director does not exercise any withdrawal rights pursuant to
Subsection 2.2, and dies while employed by the Bank, and if, following
the Director's death, the assets of the Retirement Income Trust Fund are
insufficient to provide the Supplemental Retirement Income Benefit to
which the Director is entitled, the Bank shall be required to make a
Contribution to the Retirement Income Trust Fund equal to the sum of the
remaining Contributions set forth on Exhibit A, after taking into
consideration any payments under any life insurance policies that may
have been obtained on the Director's life by the Retirement Income Trust
Fund. Such final contribution shall be payable in a lump sum to the
Retirement Income Trust Fund within thirty (30) days of the Director's
death.
11
(c) WITHDRAWAL RIGHTS EXERCISED.
(1) PHANTOM CONTRIBUTIONS MADE ANNUALLY.
If the Director exercises his withdrawal rights pursuant to Subsection
2.2, no further Contributions to the Retirement Income Trust Fund shall
be required of the Bank. Thereafter, Phantom Contributions shall be
recorded annually in the Director's Accrued Benefit Account within
thirty (30) days of the beginning of each Plan Year, commencing with the
first Plan Year following the Plan Year in which the Director exercises
his withdrawal rights. Such Phantom Contributions shall continue to be
recorded annually, unless this Subsection 2.1(c) specifically states
otherwise, until the earlier of (i) the last Plan Year that Phantom
Contributions are required pursuant to Exhibit A, or (ii) the Plan Year
of the Director's termination of service.
(2) TERMINATION FOLLOWING A CHANGE IN CONTROL
If the Director exercises his withdrawal rights pursuant to Subsection
2.2, Phantom Contributions shall commence in the Plan Year following the
Plan Year in which the Director first exercises his withdrawal rights.
If a Change in Control occurs at the Bank, and within thirty-six (36)
months of such Change in Control, the Director's service is either (i)
involuntarily terminated, or (ii) voluntarily terminated by the Director
after: (A) a material change in the Director's function, duties, or
responsibilities, which change would cause the Director's position to
become one of lesser responsibility, importance, or scope from the
position the Director held at the time of the Change in Control, (B) a
relocation of the Director's principal place of service by more than
thirty (30) miles from its location prior to the Change in Control, or
(C) a material reduction in the benefits and perquisites to the Director
from those being provided at the time of the Change in Control, the
Phantom Contribution set forth below shall be required of the Bank. The
Bank shall be required to record a lump sum Phantom Contribution in the
Accrued Benefit Account within ten (10) days of the Director's
termination of service equal to (i) the full Emeritus Contribution
required for the Plan Year in which such termination occurs, if not yet
made, plus (ii) the present value (computed using a discount rate equal
to the Interest Factor) of all remaining Emeritus Contributions to the
Retirement Income Trust Fund, and (iii) the present value (computed
using the a discount rate equal to the Interest Factor) of the interest
only component of the Elective Contribution. The amount of such final
Phantom Contribution shall be actuarially determined based on the
Phantom Contribution required, at such time, in order to provide a
benefit via this Agreement equal in amount to that benefit which would
have been payable to the Director if no
12
secular trust had been implemented and the benefit obligation had been
accrued under APB Opinion No. 12, as amended by FAS 106. (Such actuarial
determination shall reflect the fact that amounts shall be payable from
both the Accrued Benefit Account as well as the Retirement Income Trust
Fund and shall also reflect the amount and timing of any withdrawal(s)
made by the Director from the Retirement Income Trust Fund pursuant to
Subsection 2.2.)
(3) TERMINATION FOR CAUSE
If the Director is terminated for Cause pursuant to Subsection 5.2, the
entire balance of the Director's Accrued Benefit Account at the time of
such termination, which shall include any Phantom Contributions which
have been recorded plus interest accrued on such Phantom Contributions,
shall be forfeited.
(4) VOLUNTARY AND INVOLUNTARY TERMINATION OF SERVICE.
If the Director exercises his withdrawal rights pursuant to Subsection
2.2, and the Director's service with the Bank is voluntarily or
involuntarily terminated for any reason including termination due to
disability of the Director, but excluding termination for Cause, or
termination following a Change in Control, within thirty (30) days of
such termination of service, no further Phantom Contributions shall be
required of the Bank. Interest, at a rate equal to the Interest Factor,
shall accrue on such Phantom Contributions until the Director's Benefit
Eligibility Date.
(5) DEATH DURING SERVICE.
If the Director exercises his withdrawal rights pursuant to Subsection
2.2, and dies while employed by the Bank, Phantom Contributions included
on Exhibit A shall be required of the Bank. Such Phantom Contributions
shall commence in the Plan Year following the Plan Year in which the
Director exercises his withdrawal rights and shall continue through the
Plan Year in which the Director dies. The Bank shall also be required to
record a final Phantom Contribution within thirty (30) days of the
Director's death. The amount of such final Phantom Contribution shall be
actuarially determined based on the Phantom Contribution required at
such time (if any), in order to provide a benefit via this Agreement
equivalent to the Supplemental Retirement Income Benefit commencing
within thirty (30) days of the date the Administrator receives notice of
the Director's death and continuing for the duration of the Payout
Period. (Such actuarial determination shall reflect the fact that
amounts shall be payable from the Accrued Benefit
13
Account as well as the Retirement Income Trust Fund and shall also
reflect the amount and timing of any withdrawal(s) made by the Director
pursuant to Subsection 2.2.)
2.2 WITHDRAWALS FROM RETIREMENT INCOME TRUST FUND.
Exercise of withdrawal rights by the Director pursuant to the Martin
Lukacs Grantor Trust agreement shall terminate the Bank's obligation to
make any further Contributions to the Retirement Income Trust Fund, and
the Bank's obligation to record Phantom Contributions pursuant to
Subsection 2.1(c) shall commence. For purposes of this Subsection 2.2,
"exercise of withdrawal rights" shall mean those withdrawal rights to
which the Director is entitled under Article III of the Martin Lukacs
Grantor Trust agreement and shall exclude any distributions made by the
trustee of the Retirement Income Trust Fund to the Director for purposes
of payment of income taxes in accordance with Subsection 2.1 of this
Agreement and the tax reimbursement formula contained in the trust
document, or other trust expenses properly payable from the Martin
Lukacs Grantor Trust pursuant to the provisions of the trust document.
2.3 BENEFITS PAYABLE FROM RETIREMENT INCOME TRUST FUND
Notwithstanding anything else to the contrary in this Agreement, in the
event that the trustee of the Retirement Income Trust Fund purchases a
life insurance policy with the Contributions to and, if applicable,
earnings of the Trust, and such life insurance policy is intended to
continue in force beyond the Payout Period for the disability or
retirement benefits payable from the Retirement Income Trust Fund
pursuant to this Agreement, then the trustee shall have discretion to
determine the portion of the cash value of such policy available for
purposes of annuitizing the Retirement Income Trust Fund (it being
understood that for purposes of this Section 2.3, "annuitizing" does not
mean surrender of such policy and annuitizing of the cash value received
upon such surrender) to provide the disability or retirement benefits
payable under this Agreement, after taking into consideration the
amounts reasonably believed to be required in order to maintain the cash
value of such policy to continue such policy in effect until the death
of the Director and payment of death benefits thereunder.
14
SECTION III
RETIREMENT BENEFIT
3.1 (a) NORMAL FORM OF PAYMENT.
If (i) the Director is employed with the Bank until reaching his Benefit
Age and (ii) the Director has not made a Timely Election to receive a
lump sum benefit, this Subsection 3.1(a) shall be controlling with
respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the Director's Benefit
Age, shall be annuitized (using the Interest Factor) into monthly
installments and shall be payable for the Payout Period. Such benefit
payments shall commence on the Director's Benefit Eligibility Date.
Should Retirement Income Trust Fund assets actually earn a rate of
return, following the date such balance is annuitized, which is less
than the rate of return used to annuitize the Retirement Income Trust
Fund, no additional contributions to the Retirement Income Trust Fund
shall be required by the Bank in order to fund the final benefit
payment(s) and make up for any shortage attributable to the
less-than-expected rate of return. Should Retirement Income Trust Fund
assets actually earn a rate of return, following the date such balance
is annuitized, which is greater than the rate of return used to
annuitize the Retirement Income Trust Fund, the final benefit payment to
the Director (or his Beneficiary) shall distribute the excess amounts
attributable to the greater-than-expected rate of return. The Director
may at anytime during the Payout Period request to receive the unpaid
balance of his Retirement Income Trust Fund in a lump sum payment. If
such a lump sum payment is requested by the Director, payment of the
balance of the Retirement Income Trust Fund in such lump sum form shall
be made only if the Director gives notice to both the Administrator and
trustee in writing. Such lump sum payment shall be payable within thirty
(30) days of such notice. In the event the Director dies at any time
after attaining his Benefit Age, but prior to commencement or completion
of all monthly payments due and owing hereunder, (i) the trustee of the
Retirement Income Trust Fund shall pay to the Director's Beneficiary the
monthly installments (or a continuation of such monthly installments if
they have already commenced) for the balance of months remaining in the
Payout Period, or (ii) the Director's Beneficiary may request to receive
the unpaid balance of the Director's Retirement Income Trust Fund in a
lump sum payment. If a lump sum payment is requested by the Beneficiary,
payment of the balance of the Retirement Income Trust Fund in such lump
sum form shall be made only if the
15
Director's Beneficiary notifies both the Administrator and trustee in
writing of such election within ninety (90) days of the Director's
death. Such lump sum payment shall be payable within thirty (30) days of
such notice.
The Director's Accrued Benefit Account (if applicable), measured as of
the Director's Benefit Age, shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable for the Payout
Period. Such benefit payments shall commence on the Director's Benefit
Eligibility Date. In the event the Director dies at any time after
attaining his Benefit Age, but prior to commencement or completion of
all the payments due and owing hereunder, (i) the Bank shall pay to the
Director's Beneficiary the same monthly installments (or a continuation
of such monthly installments if they have already commenced) for the
balance of months remaining in the Payout Period, or (ii) the Director's
Beneficiary may request to receive the remainder of any unpaid benefit
payments in a lump sum payment. If a lump sum payment is requested by
the Beneficiary, the amount of such lump sum payment shall be equal to
the unpaid balance of the Director's Accrued Benefit Account. Payment in
such lump sum form shall be made only if the Director's Beneficiary (i)
obtains Board of Director approval, and (ii) notifies the Administrator
in writing of such election within ninety (90) days of the Director's
death. Such lump sum payment, if approved by the Board of Directors,
shall be made within thirty (30) days of such Board of Director
approval.
(b) ALTERNATIVE PAYOUT OPTION.
If (i) the Director is employed with the Bank until reaching his Benefit
Age, and (ii) the Director has made a Timely Election to receive a lump
sum benefit, this Subsection 3.1(b) shall be controlling with respect to
retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Director's Benefit Age, shall be paid to the Director in a lump sum on
his Benefit Eligibility Date. In the event the Director dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection
3.1(b) within thirty (30) days of the date the Administrator receives
notice of the Director's death.
16
The balance of the Director's Accrued Benefit Account (if applicable),
measured as of the Director's Benefit Age, shall be paid to the Director
in a lump sum on his Benefit Eligibility Date. In the event the Director
dies after becoming eligible for such payment (upon attainment of his
Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with
this Subsection 3.1(b) within thirty (30) days of the date the
Administrator receives notice of the Director's death.
SECTION IV
PRE-RETIREMENT DEATH BENEFIT
4.1 (a) NORMAL FORM OF PAYMENT.
If (i) the Director dies while employed by the Bank, and (ii) the
Director has not made a Timely Election to receive a lump sum benefit,
this Subsection 4.1(a) shall be controlling with respect to
pre-retirement death benefits.
The balance of the Director's Retirement Income Trust Fund, measured as
of the later of (i) the Director's death, or (ii) the date any final
lump sum Contribution is made pursuant to Subsection 2.1(b), shall be
annuitized (using the Interest Factor) into monthly installments and
shall be payable for the Payout Period. Such benefits shall commence
within thirty (30) days of the date the Administrator receives notice of
the Director's death. Should Retirement Income Trust Fund assets
actually earn a rate of return, following the date such balance is
annuitized, which is less than the rate of return used to annuitize the
Retirement Income Trust Fund, no additional contributions to the
Retirement Income Trust Fund shall be required by the Bank in order to
fund the final benefit payment(s) and make up for any shortage
attributable to the less-than-expected rate of return. Should Retirement
Income Trust Fund assets actually earn a rate of return, following the
date such balance is annuitized, which is greater than the rate of
return used to annuitize the Retirement Income Trust Fund, the final
benefit payment to the Director's Beneficiary shall distribute the
excess amounts attributable to the greater-than-expected rate of return.
The Director's Beneficiary may request to receive the unpaid balance of
the Director's Retirement Income Trust Fund in a lump sum payment. If a
lump sum payment is requested by the Beneficiary, payment of the balance
of the Retirement Income Trust Fund in such lump sum form shall be made
only if the Director's Beneficiary notifies both the Administrator and
trustee
17
in writing of such election within ninety (90) days of the Director's
death. Such lump sum payment shall be made within thirty (30) days of
such notice.
The Director's Accrued Benefit Account (if applicable), measured as of
the later of (i) the Director's death or (ii) the date any final lump
sum Phantom Contribution is recorded in the Accrued Benefit Account
pursuant to Subsection 2.1(c), shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable to the Director's
Beneficiary for the Payout Period. Such benefit payments shall commence
within thirty (30) days of the date the Administrator receives notice of
the Director's death, or if later, within thirty (30) days after any
final lump sum Phantom Contribution is recorded in the Accrued Benefit
Account in accordance with Subsection 2.1(c). The Director's Beneficiary
may request to receive the remainder of any unpaid monthly benefit
payments due from the Accrued Benefit Account in a lump sum payment. If
a lump sum payment is requested by the Beneficiary, the amount of such
lump sum payment shall be equal to the balance of the Director's Accrued
Benefit Account. Payment in such lump sum form shall be made only if the
Director's Beneficiary (i) obtains Board of Director approval, and (ii)
notifies the Administrator in writing of such election within ninety
(90) days of the Director's death. Such lump sum payment, if approved by
the Board of Directors, shall be payable within thirty (30) days of such
Board of Director approval.
(b) ALTERNATIVE PAYOUT OPTION.
If (i) the Director dies while employed by the Bank, and (ii) the
Director has made a Timely Election to receive a lump sum benefit, this
Subsection 4.1(b) shall be controlling with respect to pre-retirement
death benefits.
The balance of the Director's Retirement Income Trust Fund, measured as
of the later of (i) the Director's death, or (ii) the date any final
lump sum Contribution is made pursuant to Subsection 2.1(b), shall be
paid to the Director's Beneficiary in a lump sum within thirty (30) days
of the date the Administrator receives notice of the Director's death.
The balance of the Director's Accrued Benefit Account (if applicable),
measured as of the later of (i) the Director's death, or (ii) the date
any final Phantom Contribution is recorded pursuant to
18
Subsection 2.1(c), shall be paid to the Director's Beneficiary in a lump
sum within thirty (30) days of the date the Administrator receives
notice of the Director's death.
SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF SERVICE
PRIOR TO BENEFIT AGE
5.1 VOLUNTARY OR INVOLUNTARY TERMINATION OF SERVICE OTHER THAN FOR CAUSE. In
the event the Director's service with the Bank is voluntarily or
involuntarily terminated prior to Benefit Age, for any reason, including
a Change in Control, but excluding (i) any disability related
termination for which the Board of Directors has approved early payment
of benefits pursuant to Subsection 6.1, (ii) the Director's
pre-retirement death, which shall be covered in Section IV, (iii) or
termination for Cause, which shall be covered in Subsection 5.2, the
Director (or his Beneficiary) shall be entitled to receive benefits in
accordance with this Subsection 5.1. Payments of benefits pursuant to
this Subsection 5.1 shall be made in accordance with Subsection 5.1 (a)
or 5.1 (b) below, as applicable.
(a) NORMAL FORM OF PAYMENT.
(1) DIRECTOR LIVES UNTIL BENEFIT AGE
If (i) after such termination, the Director lives until attaining his
Benefit Age, and (ii) the Director has not made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(a)(1) shall be
controlling with respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the Director's Benefit
Age, shall be annuitized (using the Interest Factor) into monthly
installments and shall be payable for the Payout Period. Such payments
shall commence on the Director's Benefit Eligibility Date. Should
Retirement Income Trust Fund assets actually earn a rate of return,
following the date such balance is annuitized, which is less than the
rate of return used to annuitize the Retirement Income Trust Fund, no
additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a rate
of return, following the date such balance is annuitized, which is
greater than
19
the rate of return used to annuitize the Retirement Income Trust Fund,
the final benefit payment to the Director (or his Beneficiary) shall
distribute the excess amounts attributable to the greater-than-expected
rate of return. The Director may at anytime during the Payout Period
request to receive the unpaid balance of his Retirement Income Trust
Fund in a lump sum payment. If such a lump sum payment is requested by
the Director, payment of the balance of the Retirement Income Trust Fund
in such lump sum form shall be made only if the Director gives notice to
both the Administrator and trustee in writing. Such lump sum payment
shall be payable within thirty (30) days of such notice. In the event
the Director dies at any time after attaining his Benefit Age, but prior
to commencement or completion of all monthly payments due and owing
hereunder, (i) the trustee of the Retirement Income Trust Fund shall pay
to the Director's Beneficiary the monthly installments (or a
continuation of the monthly installments if they have already commenced)
for the balance of months remaining in the Payout Period, or (ii) the
Director's Beneficiary may request to receive the unpaid balance of the
Director's Retirement Income Trust Fund in a lump sum payment. If a lump
sum payment is requested by the Beneficiary, payment of the balance of
the Retirement Income Trust Fund in such lump sum form shall be made
only if the Director's Beneficiary notifies both the Administrator and
trustee in writing of such election within ninety (90) days of the
Director's death. Such lump sum payment shall be made within thirty (30)
days of such notice.
The Director's Accrued Benefit Account (if applicable), measured as of
the Director's Benefit Age, shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable for the Payout
Period. Such benefit payments shall commence on the Director's Benefit
Eligibility Date. In the event the Director dies at any time after
attaining his Benefit Age, but prior to commencement or completion of
all the payments due and owing hereunder, (i) the Bank shall pay to the
Director's Beneficiary the same monthly installments (or a continuation
of such monthly installments if they have already commenced) for the
balance of months remaining in the Payout Period, or (ii) the Director's
Beneficiary may request to receive the remainder of any unpaid benefit
payments in a lump sum payment. If a lump sum payment is requested by
the Beneficiary, the amount of such lump sum payment shall be equal to
the unpaid balance of the Director's Accrued Benefit Account. Payment in
such lump sum form shall be made only if the Director's Beneficiary (i)
obtains Board of Director approval, and (ii) notifies the Administrator
in writing of such election within ninety (90) days of the Director's
death. Such lump sum
20
payment, if approved by the Board of Directors, shall be made within
thirty (30) days of such Board of Director approval.
(2) DIRECTOR DIES PRIOR TO BENEFIT AGE
If (i) after such termination, the Director dies prior to attaining his
Benefit Age, and (ii) the Director has not made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(a)(2) shall be
controlling with respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the date of the
Director's death, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period. Such
payments shall commence within thirty (30) days of the date the
Administrator receives notice of the Director's death. Should Retirement
Income Trust Fund assets actually earn a rate of return, following the
date such balance is annuitized, which is less than the rate of return
used to annuitize the Retirement Income Trust Fund, no additional
contributions to the Retirement Income Trust Fund shall be required by
the Bank in order to fund the final benefit payment(s) and make up for
any shortage attributable to the less-than-expected rate of return.
Should Retirement Income Trust Fund assets actually earn a rate of
return, following the date such balance is annuitized, which is greater
than the rate of return used to annuitize the Retirement Income Trust
Fund, the final benefit payment to the Director's Beneficiary shall
distribute the excess amounts attributable to the greater-than-expected
rate of return. The Director's Beneficiary may request to receive the
unpaid balance of the Director's Retirement Income Trust Fund in the
form of a lump sum payment. If a lump sum payment is requested by the
Beneficiary, payment of the balance of the Retirement Income Trust Fund
in such lump sum form shall be made only if the Director's Beneficiary
notifies both the Administrator and trustee in writing of such election
within ninety (90) days of the Director's death. Such lump sum payment
shall be made within thirty (30) days of such notice.
The Director's Accrued Benefit Account (if applicable), measured as of
the date of the Director's death, shall be annuitized (using the
Interest Factor) into monthly installments and shall be payable for the
Payout Period. Such payments shall commence within thirty (30) days of
the date the Administrator receives notice of the Director's death. The
Director's Beneficiary may request to receive the unpaid balance of the
Director's Accrued Benefit Account in the form of a lump
21
sum payment. If a lump sum payment is requested by the Beneficiary,
payment of the balance of the Accrued Benefit Account in such lump sum
form shall be made only if the Director's Beneficiary (i) obtains Board
of Director approval, and (ii) notifies the Administrator in writing of
such election within ninety (90) days of the Director's death. Such lump
sum payment, if approved by the Board of Directors, shall be made within
thirty (30) days of such Board of Director approval.
(b) ALTERNATIVE PAYOUT OPTION.
(1) DIRECTOR LIVES UNTIL BENEFIT AGE
If (i) after such termination, the Director lives until attaining his
Benefit Age, and (ii) the Director has made a Timely Election to receive
a lump sum benefit, this Subsection 5.1(b)(1) shall be controlling with
respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Director's Benefit Age, shall be paid to the Director in a lump sum on
his Benefit Eligibility Date. In the event the Director dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection
5.1(b)(1) within thirty (30) days of the date the Administrator receives
notice of the Director's death.
The balance of the Director's Accrued Benefit Account (if applicable),
measured as of the Director's Benefit Age, shall be paid to the Director
in a lump sum on his Benefit Eligibility Date. In the event the Director
dies after becoming eligible for such payment (upon attainment of his
Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with
this Subsection 5.1(b)(1) within thirty (30) days of the date the
Administrator receives notice of the Director's death.
(2) DIRECTOR DIES PRIOR TO BENEFIT AGE
If (i) after such termination, the Director dies prior to attaining his
Benefit Age, and (ii) the Director has made a Timely Election to receive
a lump sum benefit, this Subsection 5.1(b)(2) shall be controlling with
respect to pre-retirement death benefits.
22
The balance of the Retirement Income Trust Fund, measured as of the date
of the Director's death, shall be paid to the Director's Beneficiary
within thirty (30) days of the date the Administrator receives notice of
the Director's death.
The balance of the Director's Accrued Benefit Account (if applicable),
measured as of the date of the Director's death, shall be paid to the
Director's Beneficiary within thirty (30) days of the date the
Administrator receives notice of the Director's death.
5.2 TERMINATION FOR CAUSE.
If the Director is terminated for Cause, all benefits under this
Agreement, other than those which can be paid from previous
Contributions to the Retirement Income Trust Fund (and earnings on such
Contributions), shall be forfeited. Furthermore, no further
Contributions (or Phantom Contributions, as applicable) shall be
required of the Bank for the year in which such termination for Cause
occurs (if not yet made). The Director shall be entitled to receive a
benefit in accordance with this Subsection 5.2.
The balance of the Director's Retirement Income Trust Fund shall be paid
to the Director in a lump sum on his Benefit Eligibility Date. In the
event the Director dies prior to his Benefit Eligibility Date, his
Beneficiary shall be entitled to receive the balance of the Director's
Retirement Income Trust Fund in a lump sum within thirty (30) days of
the date the Administrator receives notice of the Director's death.
SECTION VI
OTHER BENEFITS
6.1 (a) DISABILITY BENEFIT.
If the Director's service is terminated prior to Benefit Age due to a
disability which meets the criteria set forth below, the Director may
request to receive the Disability Benefit in lieu of the retirement
benefit(s) available pursuant to Section 5.1 (which is (are) not
available prior to the Director's Benefit Eligibility Date).
23
In any instance in which: (i) it is determined by a duly licensed,
independent physician selected by the Bank, that the Director is no
longer able, properly and satisfactorily, to perform his regular duties
as an officer, because of ill health, accident, disability or general
inability due to age, (ii) the Director requests payment under this
Subsection in lieu of Subsection 5.1, and (iii) Board of Director
approval is obtained to allow payment under this Subsection, in lieu of
Subsection 5.1, the Director shall be entitled to the following lump sum
benefit(s). The lump sum benefit(s) to which the Director is entitled
shall include: (i) the balance of the Retirement Income Trust Fund, plus
(ii) the balance of the Accrued Benefit Account (if applicable). The
benefit(s) shall be paid within thirty (30) days following the date of
the Director's request for such benefit is approved by the Board of
Directors. In the event the Director dies after becoming eligible for
such payment(s) but before the actual payment(s) is (are) made, his
Beneficiary shall be entitled to receive the benefit(s) provided for in
this Subsection 6.1(a) within thirty (30) days of the date the
Administrator receives notice of the Director's death.
(b) DISABILITY BENEFIT - SUPPLEMENTAL.
Furthermore, if Board of Director approval is obtained within thirty
(30) days of the Director's death, the Bank shall make a direct, lump
sum payment to the Director's Beneficiary in an amount equal to the sum
of all remaining Contributions (or Phantom Contributions) set forth in
Exhibit A, but not required pursuant to Subsection 2.1(b) (or 2.1(c))
due to the Director's disability-related termination. Such lump sum
payment, if approved by the Board of Directors, shall be payable to the
Director's Beneficiary within thirty (30) days of such Board of Director
approval.
6.2 ADDITIONAL DEATH BENEFIT - BURIAL EXPENSE.
Upon the Director's death, the Director's Beneficiary shall also be
entitled to receive a one-time lump sum death benefit in the amount of
Ten Thousand Dollars ($10,000). This benefit shall be paid directly from
the Bank to the Beneficiary and shall be provided specifically for the
purpose of providing payment for burial and/or funeral expenses of the
Director. Such death benefit shall be payable within thirty (30) days of
the date the Administrator receives notice of the Director's death. The
Director's Beneficiary shall not be entitled to such benefit if the
Director is terminated for Cause prior to death.
24
SECTION VII
BENEFICIARY DESIGNATION
The Director shall make an initial designation of primary and secondary
Beneficiaries upon execution of this Agreement and shall have the right to
change such designation, at any subsequent time, by submitting to (i) the
Administrator, AND (ii) the trustee of the Retirement Income Trust Fund, in
substantially the form attached as Exhibit B to this Agreement, a written
designation of primary and secondary Beneficiaries. Any Beneficiary designation
made subsequent to execution of this Agreement shall become effective only when
receipt thereof is acknowledged in writing by the Administrator.
SECTION VIII
NON-COMPETITION
8.1 NON-COMPETITION DURING SERVICE.
In consideration of the agreements of the Bank contained herein and of
the payments to be made by the Bank pursuant hereto, the Director hereby
agrees that, for as long as he remains in the service of the Bank, he
will devote substantially all of his time, skill, diligence and
attention to the business of the Bank, and will not actively engage,
either directly or indirectly, in any business or other activity which
is, or may be deemed to be, in any way competitive with or adverse to
the best interests of the business of the Bank, unless the Director has
the prior express written consent of the Bank.
8.2 BREACH OF NON-COMPETITION CLAUSE.
(a) CONTINUED SERVICE FOLLOWING BREACH.
In the event (i) any breach by the Director of the agreements and
covenants described in Subsection 8.1 occurs, and (ii) the Director
continues service at the Bank following such breach, all further
Contributions to the Retirement Income Trust Fund (or Phantom
Contributions recorded in the Accrued Benefit Account) shall immediately
cease, and all benefits under this Agreement, other than those which can
be paid from previous Contributions to the Retirement Income Trust Fund
(and earnings on such Contributions), shall be forfeited. The Director
(or his Beneficiary) shall be entitled to receive a benefit from the
Retirement Income Trust Fund in accordance with Subpart (1) or (2)
below, as applicable.
25
(1) DIRECTOR LIVES UNTIL BENEFIT AGE
If, following such breach, the Director lives until attaining his
Benefit Age, he shall be entitled to receive a benefit from the
Retirement Income Trust Fund in accordance with this Subsection
8.2(a)(1). The balance of the Retirement Income Trust Fund, measured as
of the Director's Benefit Age, shall be paid to the Director in a lump
sum on his Benefit Eligibility Date. In the event the Director dies
after attaining his Benefit Age but before actual payment is made, his
Beneficiary shall be entitled to receive the lump sum benefit in
accordance with this Subsection 8.2(a)(1) within thirty (30) days of the
date of the Administrator receives notice of the Director's death.
(2) DIRECTOR DIES PRIOR TO BENEFIT AGE
If, following such breach, the Director dies prior to attaining his
Benefit Age, his Beneficiary shall be entitled to receive a benefit from
the Retirement Income Trust Fund in accordance with this Subsection 8.2
(a)(2). The balance of the Retirement Income Trust Fund, measured as of
the date of the Director's death, shall be paid to the Director's
Beneficiary in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Director's death.
(b) TERMINATION OF SERVICE FOLLOWING BREACH.
In the event (i) any breach by the Director of the agreements and
covenants described in Subsection 8.1 occurs, and (ii) the Director's
service with the Bank is terminated due to such breach, such termination
shall be deemed to be for Cause and the benefits payable to the Director
shall be paid in accordance with Subsection 5.2 of this Agreement.
8.3 NON-COMPETITION FOLLOWING SERVICE.
(a) DIRECTOR AGREES NOT TO COMPETE
The Director expressly agrees that, as consideration for the covenants
of the Bank contained herein and as a condition to the performance by
the Bank of its obligations hereunder, from and after any voluntary or
involuntary termination of service, other than a termination of service
related to a Change in Control, and continuing throughout the Payout
Period or, with respect to Section 8.3 (c), for two years following
termination of service, he will not without the prior written consent of
the Bank, serve as an officer or director or employee of any bank
holding company, bank, savings association or mortgage company with its
principal office within the
26
bank's trading area, and which offers products or services in the bank's
trading area competing with those offered by the Bank.
(b) BENEFITS PAID FROM ACCRUED BENEFIT ACCOUNT.
Director understands and agrees that, following Director's voluntary or
involuntary termination of service, the Bank's obligation, if any, to
make payments to the Director from the Accrued Benefit Account shall be
conditioned on the Director's forbearance from actively engaging, either
directly or indirectly in any business or other activity which is, or
may be deemed to be, in any way competitive with or adverse to the best
interests of the Bank, unless the Director has the prior written consent
of the Bank. In the event of the Director's breach of the covenants and
agreements contained herein, further payments to the Director from the
Accrued Benefit Account, if any, shall cease and Director's rights to
amounts credited to the Accrued Benefit Account shall be forfeited.
(c) BENEFITS PAID FROM RETIREMENT INCOME TRUST FUND.
Director understands and agrees that Director's violation of these
provisions following a voluntary or involuntary termination of service,
other than a termination of service following a Change in Control, will
cause irreparable harm to the Bank. In the event of Director's violation
of this Section 8.3 within three (3) years of such voluntary or
involuntary termination of service, Director agrees to pay or cause the
Retirement Income Trust Fund to pay to the Bank, as liquidated damages
an amount equal to 10% of the after-tax contributions, which the Bank
has made on Director's behalf to the Retirement Income Trust Fund. Said
liquidated damages payment shall be separate from, and in addition to,
any amounts forfeited from the Accrued Benefit Account.
(d) CHANGE IN CONTROL.
In the event of a Change in Control, this Section 8.3 shall be null and
void.
27
SECTION IX
DIRECTOR'S RIGHT TO ASSETS
The rights of the Director, any Beneficiary, or any other person
claiming through the Director under this Agreement, shall be solely those of an
unsecured general creditor of the Bank. The Director, the Beneficiary, or any
other person claiming through the Director, shall only have the right to receive
from the Bank those payments or amounts so specified under this Agreement. The
Director agrees that he, his Beneficiary, or any other person claiming through
him shall have no rights or interests whatsoever in any asset of the Bank,
including any insurance policies or contracts which the Bank may possess or
obtain to informally fund this Agreement. Any asset used or acquired by the Bank
in connection with the liabilities it has assumed under this Agreement shall not
be deemed to be held under any trust for the benefit of the Director or his
Beneficiaries, unless such asset is contained in the rabbi trust described in
Section XII of this Agreement. Any such asset shall be and remain a general,
unpledged asset of the Bank in the event of the Bank's insolvency.
SECTION X
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 Agreement, other than
those Contributions required to be made to the Retirement Income Trust Fund. The
Director, his Beneficiaries or any successor in interest to him shall be and
remain simply a general unsecured 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 in its sole discretion to either purchase
assets to meet its obligations undertaken by this Agreement or to refrain from
the same and to determine the extent, nature, and method of such asset
purchases. Should the Bank decide to purchase assets such as life insurance,
mutual funds, disability policies or annuities, the Bank reserves the absolute
right, in its sole discretion, to replace such assets from time to time or to
terminate its investment in such assets at any time, in whole or in part. At no
time shall the Director be deemed to have any lien, right, title or interest in
or to any specific 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 examination and by supplying such additional information necessary to
obtain such insurance or annuities.
28
SECTION XI
ACT PROVISIONS
11.1 NAMED FIDUCIARY AND ADMINISTRATOR. The Bank, as Administrator, shall be
the Named Fiduciary of this Agreement. As Administrator, the Bank shall
be responsible for the management, control and administration of the
Agreement as established herein. The Administrator may delegate to
others certain aspects of the management and operational
responsibilities of the Agreement, including the employment of advisors
and the delegation of ministerial duties to qualified individuals.
11.2 CLAIMS PROCEDURE AND ARBITRATION. In the event that benefits under this
Agreement are not paid to the Director (or to his Beneficiary in the
case of the Director's death) and such claimants feel they are entitled
to receive such benefits, then a written claim must be made to the
Administrator within sixty (60) days from the date payments are refused.
The Administrator shall review the written claim and, if the claim is
denied, in whole or in part, it shall provide in writing, within ninety
(90) days of receipt of such claim, its specific reasons for such
denial, reference to the provisions of this Agreement upon which the
denial is based, and any additional material or information necessary to
perfect the claim. Such writing by the Administrator shall further
indicate the additional steps which must be undertaken by claimants if
an additional review of the claim denial is desired.
If claimants desire a second review, they shall notify the Administrator
in writing within sixty (60) days of the first claim denial. Claimants
may review this Agreement or any documents relating thereto and submit
any issues and comments, in writing, they may feel appropriate. In its
sole discretion, the Administrator shall then review the second claim
and provide a written decision within sixty (60) days of receipt of such
claim. This decision shall state the specific reasons for the decision
and shall include reference to specific provisions of this Agreement
upon which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Plan and the Agreement or the meaning and effect of
the terms and conditions thereof, then claimants may submit the dispute
to mediation, administered by the American Arbitration Association
29
("AAA") (or a mediator selected by the parties) in accordance with the
AAA's Commercial Mediation Rules. If mediation is not successful in
resolving the dispute, it shall be settled by arbitration administered
by the AAA under its Commercial Arbitration Rules, and judgment on the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
SECTION XII
MISCELLANEOUS
12.1 NO EFFECT ON EMPLOYMENT RIGHTS. Nothing contained herein will confer
upon the Director the right to be retained in the service of the Bank
nor limit the right of the Bank to discharge or otherwise deal with the
Director without regard to the existence of the Agreement.
12.2 STATE LAW. The Agreement is established under, and will be construed
according to, the laws of the state of New Jersey, to the extent such
laws are not preempted by the Act and valid regulations published
thereunder.
12.3 SEVERABILITY. In the event that any of the provisions of this Agreement
or portion thereof, are held to be inoperative or invalid by any court
of competent jurisdiction, then: (1) insofar as is reasonable, effect
will be given to the intent manifested in the provisions held invalid or
inoperative, and (2) the validity and enforceability of the remaining
provisions will not be affected thereby.
12.4 INCAPACITY OF RECIPIENT. In the event the Director is declared
incompetent and a conservator or other person legally charged with the
care of his person or Estate is appointed, any benefits under the
Agreement to which such Director is entitled shall be paid to such
conservator or other person legally charged with the care of his person
or Estate.
12.5 UNCLAIMED BENEFIT. The Director shall keep the Bank informed of his
current address and the current address of his Beneficiaries. The Bank
shall not be obligated to search for the whereabouts of any person. If
the location of the Director is not made known to the Bank as of the
date upon which any payment of any benefits from the Accrued Benefit
Account may first be made, the Bank shall delay payment of the
Director's benefit payment(s) until the location of the
30
Director is made known to the Bank; however, the Bank shall only be
obligated to hold such benefit payment(s) for the Director until the
expiration of thirty-six (36) months.
12.6 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Agreement, no individual acting as an employee or
agent of the Bank, or as a member of the Board of Directors shall be
personally liable to the Director or any other person for any claim,
loss, liability or expense incurred in connection with the Agreement.
12.7 GENDER. Whenever in this Agreement 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.
12.8 EFFECT ON OTHER CORPORATE BENEFIT AGREEMENTS. Nothing contained in this
Agreement shall affect the right of the Director to participate in or be
covered by any qualified or non-qualified pension, profit sharing,
group, bonus or other supplemental compensation or fringe benefit
agreement constituting a part of the Bank's existing or future
compensation structure.
12.9 SUICIDE. Notwithstanding anything to the contrary in this Agreement, if
the Director's death results from suicide, whether sane or insane,
within twenty-six (26) months after execution of this Agreement, all
further Contributions to the Retirement Income Trust Fund (or Phantom
Contributions recorded in the Accrued Benefit Account) shall thereupon
cease, and no Contribution (or Phantom Contribution) shall be made by
the Bank to the Retirement Income Trust Fund (or recorded in the Accrued
Benefit Account) in the year such death resulting from suicide occurs
(if not yet made). All benefits other than those available from previous
Contributions to the Retirement Income Trust Fund under this Agreement
shall be forfeited, and this Agreement shall become null and void. The
balance of the Retirement Income Trust Fund, measured as of the
Director's date of death, shall be paid to the Beneficiary within thirty
(30) days of the date the Administrator receives notice of the
Director's death.
12.10 INUREMENT. This Agreement shall be binding upon and shall inure to the
benefit of the Bank, its successors and assigns, and the Director, his
successors, heirs, executors, administrators, and Beneficiaries.
31
12.11 HEADINGS. Headings and sub-headings in this Agreement are inserted for
reference and convenience only and shall not be deemed a part of this
Agreement.
12.12 ESTABLISHMENT OF A RABBI TRUST. The Bank shall establish a rabbi trust
into which the Bank shall contribute assets which shall be held therein,
subject to the claims of the Bank's creditors in the event of the Bank's
"Insolvency" (as defined in such rabbi trust agreement), until the
contributed assets are paid to the Director and/or his Beneficiary in
such manner and at such times as specified in this Agreement. It is the
intention of the Bank that the contribution or contributions to the
rabbi trust shall provide the Bank with a source of funds to assist it
in meeting the liabilities of this Agreement.
12.13 SOURCE OF PAYMENTS. All payments provided in this Agreement shall be
timely paid in cash or check from the general funds of the Bank or the
assets of the rabbi trust, to the extent made from the Accrued Benefit
Account.
SECTION XIII
AMENDMENT/PLAN TERMINATION
13.1 AMENDMENT OR PLAN TERMINATION. The Bank intends this Agreement to be
permanent, and the Agreement may not be amended or terminated without
the express written consent of the parties. Any amendment or termination
of the Agreement shall be made pursuant to a resolution of the Board of
Directors of the Bank and shall be effective as of the date of such
resolution. No amendment or termination of the Agreement shall directly
or indirectly deprive the Director of all or any portion of the
Director's Retirement Income Trust Fund (and Accrued Benefit Account, if
applicable) as of the effective date of the resolution amending or
terminating the Agreement.
Notwithstanding the above, if the Director does not exercise any
withdrawal rights pursuant to Subsection 2.2, and if at any time after
the final Contribution immediately prior to Director's Benefits
Eligibility Date or the date that triggers distribution is made to the
Retirement Income Trust Fund the Director elects to terminate the
Retirement Income Trust Fund and receive a
32
distribution of the assets of the Retirement Income Trust Fund, then
upon such distribution this Agreement shall terminate.
13.2 DIRECTOR'S RIGHT TO PAYMENT FOLLOWING PLAN TERMINATION. In the event of
a termination of the Agreement, the Director shall be entitled to the
balance, if any, of his Retirement Income Trust Fund (and Accrued
Benefit Account, if applicable). However, if such termination is done in
anticipation of or pursuant to a "Change in Control," such balance(s)
shall include the final Contribution (or final Phantom Contribution)
made (or recorded) pursuant to Subsection 2.1(b)(2) (or 2.1(c)(2)).
Payment of the balance(s) of the Director's Retirement Income Trust Fund
(and Accrued Benefit Account, if applicable) shall not be dependent upon
his continuation of service with the Bank following the termination date
of the Agreement. Payment of the balance(s) of the Director's Retirement
Income Trust Fund (and Accrued Benefit Account, if applicable) shall be
made in a lump sum within thirty (30) days of the date of termination of
the Agreement.
SECTION XIV
EXECUTION
14.1 This Agreement and the Martin Lukacs Grantor Trust Agreement set forth
the entire understanding of the parties hereto with respect to the
transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject matter
hereof are merged into and superseded by this Agreement and the Martin
Lukacs Grantor Trust Agreement.
14.2 This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies
shall together constitute one and the same instrument.
33
IN WITNESS WHEREOF, the Bank and the Director have caused this Agreement
to be executed on the day and date first above written.
ATTEST: MAGYAR SAVINGS BANK:
/s/ Elizabeth E. Hance By: /s/ Robert E. Pastor
- ----------------------- ------------------------
Title: President/CEO
------------------------
WITNESS: DIRECTOR:
/s/ Karen LeBlon /s/ Martin A. Lukacs
- ----------------------- --------------------------------
34
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
MARTIN LUKACS
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be six percent (6%) per
annum, compounded monthly.
b. the Elective Contributions - shall be ten percent (10%) per
annum, compounded monthly.
c. the Emeritus Contributions - shall be six percent (6%) per
annum, compounded monthly.
d. the Retirement Income Trust Fund - for purposes of annuitizing
the balance of the Retirement Income Trust Fund over the Payout
Period, the trustee of the Martin Lukacs Grantor Trust shall
exercise discretion in selecting the appropriate rate given the
nature of the investments contained in the Retirement Income
Trust Fund and the expected return associated with the
investments. For these purposes, if the trustee of the
Retirement Income Trust Fund has purchased a life insurance
policy, the trustee shall have the discretion to determine the
portion of the cash value of such policy available for purposes
of annuitizing the Retirement Income Trust Fund, in accordance
with Section 2.3 of the Agreement.
2. The amount of the annual Emeritus Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued Benefit
Account) has been based on the annual interest-adjusted accounting
accruals which would be required of the Bank through the earlier of the
Director's death or Benefit Age, (i) pursuant to APB Opinion No. 12, as
amended by FAS 106 and (ii) assuming a discount rate equal to six
percent (6%) per annum, in order to provide a portion of the unfunded,
non-qualified Supplemental Retirement Income Benefit. The Emeritus
Contributions are calculated to support a benefit based upon 50% of the
Director's total board fees, committee fees and/or retainer in the
twelve months prior to Director's Benefit Eligibility Date.
3. The amount of the annual Elective Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued Benefit
Account) has been based on the annual interest-adjusted accounting
accruals which would be required of the Bank through the earlier of the
Director's death or Benefit Age, (i) pursuant to APB Opinion No. 12, as
amended by FAS 106 and (ii) assuming a discount rate equal to ten
percent (10%) per annum, in order to provide a portion of the unfunded,
non-qualified Supplemental Retirement Income Benefit. Director has
elected a monthly, pre-tax deferral of board fees, committee fess and/or
retainer in the amount of $1,500 per month for 79 months.
4. Supplemental Retirement Income Benefit means an actuarially determined
annual amount equal to Fifty-Three Thousand Six Hundred and Sixteen
Dollars ($39,028) at age 65 if paid entirely from the Accrued Benefit
Account or Thirty-Four Thousand Three Hundred and Fourteen Dollars
($24,978) at age 65 if paid from the Retirement Income Trust Fund.
Exhibit A
35
The Supplemental Retirement Income Benefit:
o the definition of Supplemental Retirement Income Benefit has
been incorporated into the Agreement for the sole purpose of
actuarially establishing the amount of annual Contributions (or
Phantom Contributions) to the Retirement Income Trust Fund (or
Accrued Benefit Account). The amount of any actual retirement,
pre-retirement or disability benefit payable pursuant to the
Agreement will be a function of (i) the amount and timing of
Contributions (or Phantom Contributions) to the Retirement
Income Trust Fund (or Accrued Benefit Account) and (ii) the
actual investment experience of such Contributions (or the
monthly compounding rate of Phantom Contributions).
5. Schedule of Annual Gross Contributions/Phantom Contributions
PLAN YEAR ELECTIVE CONTRIBUTIONS EMERITUS CONTRIBUTIONS TOTAL CONTRIBUTIONS
- --------- ---------------------- ---------------------- -------------------
2004 $74,261 $38,805 $113,066
2005 26,782 14,169 40,951
2006 12,238 15,769 28,007
2007 11,862 17,513 29,375
2008 13,104 19,412 32,516
2009 14,476 21,478 35,954
2010 15,992 23,726 39,718
2011 17,331 16,187 33,519
Exhibit A - Cont'd.
36