PATHFINDER BANCORP, INC.

PATHFINDER BANK

CHANGE IN CONTROL AGREEMENT

 

 

 

This Agreement is made effective as of the December 31, 2018 by and between
Pathfinder Bank (the "Bank"), a New York chartered stock commercial bank, with
its principal administrative office at 214 West First Street, Oswego, New York
13126-2547, jointly with Pathfinder Bancorp, Inc., the sole stockholder of the
Bank, and Ronald Tascarella the ("Executive").  Any reference to "Company"
herein shall mean Pathfinder Bancorp, Inc. or any successor thereto. Any
reference to "Employer" herein shall mean both the Bank and the Company or any
successors thereto.  

 

 

WHEREAS, the Employer believes it is in the best interests to enter into a
change in control agreement (the “Agreement”) in order to provide Executive with
certain benefits in the event of a Change in Control of the Employer, as herein
after defined, and incorporate the changes required by the new tax laws.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

 

1.CHANGE IN CONTROL DEFINED

 

For purposes of this Agreement, a "Change in Control" of the Bank or Company
shall mean a Change in Control of a nature that (i) would be required to be
reported in response to Item 5.01 of the current report on 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 (ii) results in a Change in
Control of the Bank or the Company within the meaning of the Home Owners Loan
Act, as amended, and applicable rules and regulations promulgated there under,
as in effect at the time of the Change in Control (collectively, the “HOLA”); or
(iii) without limitation such a Change in Control shall be deemed to have
occurred at such time as (a) 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 Company representing 25% or more of the combined voting power of Company's
outstanding securities except for any securities purchased by the Employer’s
employee stock ownership plan or trust; or (b) individuals who constitute the
Company’s 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 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 Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Bank or the Company or
similar transaction in which the Bank or Company is not the surviving
institution occurs; or (d) a proxy statement soliciting proxies from
stockholders of the Company, by someone other than the current management of the
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations or financial institutions, and as a result such proxy solicitation
a plan of reorganization, merger consolidation or similar transaction involving
the Company is approved by the requisite vote of the Company’s stockholders; or
(e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.  

 

 

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2.BENEFITS DUE TO EXECUTIVE IN THE EVENT OF CHANGE IN CONTROL

 

If any of the events described in Section 1 hereof constituting a Change in
Control have occurred, Executive shall be entitled to the benefits provided in
paragraphs (a), (b), (c), (d) and (e) of this Section 2 upon his dismissal from
employment within twelve (12) months of the Change in Control (“Dismissal”).
Notwithstanding any other provision of this Agreement, a voluntary termination
by the Executive shall not be deemed a “Dismissal”, although the following
actions by the employer shall be deemed a “Dismissal”: (i) material change in
Executive’s function, duties, or responsibilities, which change would cause
Executive’s position to become one of lesser responsibility, importance or scope
from the position and attributes thereof;  (ii) relocation of Executive’s
principal place of employment by more than 30 miles from its location at the
effective date of this agreement; or, (iii) a material reduction in the benefits
and prerequisites to the Executive from those being provided as of the effective
date of this Agreement, provided that Executive provides written notice to the
Employer within ninety (90) days of the initial existence of an event described
in this paragraph and the Employer has at least thirty (30) days to remedy such
events described paragraph unless the Employer decides to waive such period and
make an immediate payment hereunder.  

 

(a)Upon the occurrence of a Change in Control followed by the Executive's
Dismissal, the Employer shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to two (2) times his
most recent annual base salary, including bonuses and any other cash
compensation paid to the Executive within the most recent twelve (12) month
period.  Such Payment shall be made by the Employer on the Date of
Dismissal.  Notwithstanding the foregoing, in the event the Executive is a
Specified Employee (within the meaning of Treasury Regulations §1.409A-1(i)),
then, to the extent necessary to avoid penalties under Code Section 409A, no
payment shall be made to the Executive prior to the first day of the seventh
month following the Executive’s Date of Dismissal in excess of the “permitted
amount” under Code Section 409A.  For these purposes, the “permitted amount”
shall be an amount that does not exceed two times the lesser of: (i) the sum of
Executive’s annualized compensation based upon the annual rate of pay for
services provided to the Employer for the calendar year preceding the year in
which occurs the Executive’s Date of Dismissal or (ii) the maximum amount that
may be taken into account under a tax-qualified plan pursuant to Code Section
401(a)(17) for the calendar year in which occurs the Executive’s Date of
Dismissal.  Payment of the “permitted amount” shall be made within thirty days
following the Executive’s Date of Dismissal.  Any payment in excess of the
permitted amount shall be made to the Executive on the first day of the seventh
month following the Executive’s Date of Dismissal.      

 

(b)Upon the occurrence of a Change in Control followed by the Executive's
Dismissal of employment, the Employer will cause to be continued life insurance
and non-taxable medical and dental coverage substantially identical to the
coverage maintained by the Employer for Executive prior to his Dismissal.   Such
coverage and payments shall cease upon the expiration of twenty four (24)
months.

 

(c)Upon the occurrence of a Change in Control, Executive shall become fully
vested in and entitled to all benefits granted to him pursuant to any stock
option plan of the Bank or Company.

 

(d)Upon the occurrence of a Change in Control, Executive shall become fully
vested in and entitled to all benefits granted to him pursuant to any
nonqualified deferred compensation plan of the Bank or Company, applicable to
him, if any.

 

(e)Upon the occurrence of a Change in Control, the Executive shall become fully
vested in and entitled to all benefits awarded to him under the Bank's or the
Company’s recognition and retention plan or any restricted stock plan in effect.

 

(f)Notwithstanding the preceding paragraphs of this Section 2, in the event
that:

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(i)the aggregate payments or benefits to be made or afforded to Executive under
said paragraphs (the "Termination Benefits") would be deemed to include an
"excess parachute payment" under Section 280G of the Internal Revenue Code or
any successor thereto, and

 

(ii)if such Termination Benefits were reduced to an amount (the "Non‑Triggering
Amount"), the value of which is one dollar ($1.00) less than an amount equal to
the total amount of payments permissible under Section 280G of the Internal
Revenue Code or any successor thereto, then the Termination Benefits to be paid
to Executive shall be so reduced so as to be a Non‑Triggering Amount.

 

(g)Notwithstanding the foregoing, there will be no reduction in the Payment
otherwise payable to Executive during any period during which Executive is
incapable of performing his duties hereunder by reason of disability.

 

(h)For purposes of Section 2, a Dismissal shall be construed to require a
“Separation from Service” as defined in Code Section 409A and the Treasury
Regulations thereunder, provided, however, that the Employer and Executive
reasonably anticipate that the level of bona fide services Executive would
perform after termination would permanently decrease to a level that is less
than 50% of the average level of bona fide services performed (whether as an
employee or an independent contractor) over the immediately preceding 36-month
period.  

 

 

3.

TERMINATION FOR CAUSE

 

The term “Termination for Cause” shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease‑and‑desist order, or material
breach of any provision of this Agreement.  In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the financial services industry.  For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Employer.  Notwithstanding the foregoing, Executive shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three‑fourths of the members of the Boards of Directors of the
Company and the Bank at a meeting of said Boards called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Boards), finding that in the good
faith opinion of the Boards, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in
detail.  Notwithstanding any provision in paragraph 2, the Executive shall not
have the right to receive Termination Benefits for any period after Termination
for Cause.

 

4.NO ATTACHMENT

 

(a)Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect any such action shall be null, void, and of
no effect.

 

(b)This Agreement shall be binding upon, and inure to the benefit of, Executive
and the Employer and their respective successors and assigns.

 

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5.  MODIFICATION AND WAIVER

 

(a)This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.

 

(b)No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel.  No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future as to any act other than that specifically waived.

 

6.SEVERABILITY

 

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

 

7.EMPLOYMENT AT WILL

 

Except for the limited benefits granted herein, nothing in this Agreement shall
be construed to create an employment contract and the parties acknowledge that
the Executive’s employment remains “at will”.

 

8.AGREEMENT TERM

 

The initial “Agreement Term” shall begin on the date this agreement is executed
and shall continue through December 31, 2018.  As of December 31, 2018, and as
of each December 31st thereafter, the agreement term shall extend automatically
for one year unless the Bank gives notice to the executive prior to the date of
such extension that the agreement term will not be extended.   Notwithstanding
the foregoing, if a Change in Control occurs during the agreement term, the
agreement term shall continue through and terminate on the first anniversary of
the date on which the Change in Control occurs.  

 

9.PROPRIETARY INFORMATION

 

The parties agree to the protection of the Bank’s proprietary information as
follows:

 

 

(a)

Nondisclosure of Confidential Information

 

 

(i)

Access.  The Executive acknowledges that employment with the Bank necessarily
involves exposure to, familiarity with, and opportunity to learn highly
sensitive, confidential and proprietary information of the Bank and its
subsidiaries, which may include information about products and services,
markets, customers and prospective customers, vendors and suppliers,
miscellaneous business relationships, investment products, pricing, billing and
collection procedures, proprietary software and other intellectual property,
financial and accounting data, personnel and compensation, data processing and
communications, technical data, marketing strategies, research and development
of new or improved products and services, and know-how regarding the business of
the Bank and its products and services (collectively referred to herein as
“Confidential Information”)

 

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(ii)

Valuable Asset.  The Executive further acknowledges that the Confidential
Information is a valuable, special, and unique asset of the Bank, such that the
unauthorized disclosure or use by persons or entities outside the Bank would
cause irreparable damage to the business of the Bank.  Accordingly, the
Executive agrees that during and after the Executive’s employment with the Bank,
until the Confidential Information becomes publicly known, the Executive shall
not directly or indirectly disclose to any person or entity, use for any purpose
or permit the exploitation, copying or summarizing of, any Confidential
Information of the Bank, except as specifically required in the proper
performance of his duties for the Bank.

 

 

(iii)

Duties.  The Executive agrees to take all appropriate action, whether by
instruction, agreement or otherwise, to endure the protection, confidentiality
and security of the Confidential Information and to satisfy his obligations
under this Agreement.  Prior to lecturing or publishing articles which reference
to Bank and its business, the Executive will provide to an officer of the Bank a
copy of the material to be presented for the Bank to review and approve in order
to ensure that no Confidential Information is disclosed.

 

 

(iv)

Confidential Relationship.  The Bank considers its Confidential Information to
constitute “trade secrets” which are protected from unauthorized disclosure
under applicable law.  However, whether or not the Confidential Information
constitutes trade secrets, the Executive acknowledges and agrees that the
Confidential Information is protected from unauthorized disclosure or use due to
his covenants under this Section 9 and his fiduciary duties as an executive of
the Bank.

 

 

(v)

Return of Documents.  The Executive acknowledges and agrees that the
Confidential Information is and at all times shall remain the sole and exclusive
property of the Bank.  Upon the termination of his employment with the Bank or
upon request by the Bank, the Executive will promptly return to the Bank in good
condition all documents, data and records of any kind, whether in hardcopy or
electronic form, which contain any Confidential Information, including any and
all copies thereof, as well as all materials furnished to or acquired by the
Executive during the course of the Executive’s employment with the Bank.

 

 

(b)

Enforcement.  For purposes of this Section 9, the term “Bank” shall include the
Bank and the Company and all of their subsidiaries.  Each such entity shall be
an intended third party beneficiary of this Agreement and shall have the right
to enforce the provisions of this Agreement against the Executive individually
or collectively with any one or more of the other subsidiaries.  

 

 

(c)

Equitable Relief.  The Executive acknowledges and agreed that, by reason of the
sensitive nature of the Confidential Information of the Bank referred to in this
Agreement, in addition to recovery of damages and any other legal relief to
which the Bank may be entitled in the event of the Executive’s violation of this
Agreement, the Bank shall also be entitled to equitable relief, including such
injunctive relief as may be necessary to protect the interests of the Bank in
such Confidential Information and as may be necessary to specifically enforce
the Executive’s obligations under this Agreement.

 

10.HEADINGS FOR REFERENCE ONLY

 

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

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11.GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of New York, but only
to the extent not superseded by federal law.

 

12.ARBITRATION

 

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect.  Judgment may be entered on the
arbitrator's award in any court having jurisdiction.  

 

13.SUCCESSOR TO THE EMPLOYER

 

The Employer shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Employer's obligations
under this Agreement, in the same manner and to the same extent that the
Employer would be required to perform if no such succession or assignment had
taken place.

 

14.REQUIRED PROVISION

Notwithstanding anything herein contained to the contrary, any payments to
Executive by the Bank, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the
Federal Deposit Insurance Act, 12 U.S.C. § 1828(k), and the regulations
promulgated thereunder in 12 C.F.R. Part 359.

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SIGNATURES

 

 

IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed and
its seal to be affixed hereunto by its duly authorized officer, and Executive
has signed this Agreement, on the day and date first above written.

 

 

 

 

 

PATHFINDER BANK

 

 

Date: December 31, 2018

By: /s/ Thomas W. Schneider

 

Thomas W. Schneider

 

President and Chief Executive Officer

 

 

 

 

 

 

PATHFINDER BANCORP, INC.

 

 

Date: December 31, 2018

By: /s/ Thomas W. Schneider

 

Thomas W. Schneider

 

President and Chief Executive Officer

 

 

 

 

 

 

 

EXECUTIVE

 

 

Date: December 31, 2018

By: /s/ Ronald Tascarella

 

 

 

 

 

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