Document:

ex10-2_032912.htm

 

 

EXHIBIT 10.2

 

CHANGE IN CONTROL AGREEMENT

 

This Agreement is entered into this 28th day of March, 2012 by and between Fairport Savings Bank (the “Bank”), a federally chartered savings association with its principal executive office at 45 South Main Street, Fairport, New York 14450, and Leslie Zornow (“Executive”).

 

WHEREAS, the parties wish to protect both the interests of the Bank and the Executive in the event of a change in control of the Bank; and

 

WHEREAS, the parties intend that this Agreement shall accomplish both the interests of the Bank and the Executive in such instance;

 

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

 

1.           CHANGE IN CONTROL: DEFINTION. For purposes of this Agreement, a “Change in Control” shall mean a change in control of the Bank or the Bank’s mid-tier holding company (the “Company”) or mutual holding company (the “MHC”), of a nature that: (i) would be required to be reported in response to Item 1(a) 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) 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 Bank or the Company representing 25% or more of the combined voting power of Bank’s or the Company’s outstanding securities except for any securities purchased by the Bank’s employee stock ownership plan or trust; or (b) individuals who constitute the Board of Directors (“Board”) 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 members of the entire Board then in office shall be considered, for purposes of this clause (b), 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 Bank or 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 Bank or the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are exchanged for or converted into cash or property or securities not issued by the Company; or (e) a tender offer is made for 25% or more of the voting securities of the Bank or the Company, and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Bank or the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. It is not intended that a “Change In Control” shall be triggered solely in the event that of a change of the Bank’s charter from a federal charter to a state charter.

 

  

  

  

2.           NON-QUALIFYING CHANGE IN CONTROL. Notwithstanding anything in preceding section to the contrary, a Change in Control shall not be deemed to have occurred upon the issuance of common stock by the Company in a minority stock offering, or upon conversion of the Company’s mutual holding company parent to stock form, or in connection with any reorganization used to effect such a conversion.

 

3.           CHANGE IN CONTROL BENEFITS. No benefit shall be payable under this Agreement unless Executive is terminated due to a Change in Control, as set forth above. If any of the events described in Section 1 hereof constituting a Change in Control shall have occurred, Executive shall be entitled to the following benefits provided for in sub-paragraphs (a), (b) and (c) below upon his/her subsequent Separation from Service (as defined in Code Section 409A and the regulations thereunder) within twenty-four (24) months following such Change in Control, except in the event that Executive’s voluntary resignation is not for “good reason” or his/her involuntary termination is “for cause” (as subsequently addressed herein):

 

(a)           Executive shall receive as severance pay or liquidated damages, or both, an amount equal to two times the sum of: (i) the highest annual rate of Base Salary paid to Executive at any time under this Agreement, and (ii) the greater of (x) the average annual cash bonus paid to Executive with respect to the three completed fiscal years prior to the termination, or (y) the cash bonus paid to Executive with respect to the fiscal year ended prior to the termination; provided however, that in no event shall total severance compensation from all sources equal or exceed three times Executive’s average annual compensation over the five fiscal years preceding the fiscal year in which the Separation from Service occurs (for purposes of this provision and only for purposes of this provision, compensation shall mean any payment of money or provision of any other thing of value in consideration of employment, including, without limitation, Base Salary, commissions, bonuses, pension and profit sharing plans, severance payments, retirement, director or committee fees, fringe benefits, and the payment of expense items without accountability or business purpose or that do not meet the IRS requirement for deductibility by the Bank). Such payments, less applicable withholdings, shall be made in accordance with the Bank’s regular bi-weekly payroll practices, starting on the first payroll period following the Executive’s “Separation from Service,” as defined in Code Section 409A(a)(2)(A)(i) and Treasury Regulations § 1.409A-1(h), and ending  on the last payroll period that provides the Executive with one year of severance payments; provided however, if Executive is a “Specified Employee,” as defined in Code Section 409A (a)(2)(B)(i) and Treasury Regulations § 1.409A-1(i), and if the amount exceeds the “permitted amount” under such Code Sections (i.e., $500,000, as of January 1, 2012), then payment of amounts in excess of the “permitted amount” shall be delayed until the first day of the seventh full month following Executive’s Separation from Service.

 

In the event of Executive’s death, the foregoing severance/liquidated damages payment(s) payable upon a qualifying Change in Control, shall be made to Executive’s surviving spouse, or if no surviving spouse, to his estate. In the event that the Company or the Bank enters into an agreement that would cause a Change in Control of

 

  

2

  

the Bank, and Executive dies after such agreement is executed but prior to consummation of the Change in Control, which payments shall commence upon, and shall be contingent upon, the actual consummation of the Change in Control. The present value of the payment required hereunder, less applicable withholdings, shall be made in accordance with the Bank’s regular bi-weekly payroll practices, starting on the first payroll period following the Executive’s “Separation from Service,” as defined in Code Section 409A(a)(2)(A)(i) and Treasury Regulations § 1.409A-1(h), and ending  on the last payroll period that provides the Executive with one year of severance payments; provided however, if Executive is a “Specified Employee,” as defined in Code Section 409A (a)(2)(B)(i) and Treasury Regulations § 1.409A-1(i), and if the amount exceeds the “permitted amount” under such Code Sections (i.e., $500,000, as of January 1, 2012), then payment of amounts in excess of the “permitted amount” shall be delayed until the first day of the seventh full month following Executive’s Separation from Service.  For these purposes, present value shall be determined using the applicable federal rate under Code Section 1274(d).

(b)           Upon the occurrence of a Change in Control followed by the Executive’s Separation from Service within twenty-four (24) months following such Change in Control, unless such Separation from Service is “for cause”, or Executive’s resignation is not for “good reason”, as such terms are defined herein, the Bank will continue, at the Bank’s expense, life, health and disability insurance coverage substantially identical to the coverage maintained by the Bank for Executive prior to the Change in Control, except to the extent such coverage is changed in its application to all employees of the Bank. Such coverage shall cease twelve (12) months from the date of Executive’s Separation from Service.

 

(c)           The term “for cause” shall mean, for purposes of this Agreement only, the following: involuntary termination of the Executive’s employment by a vote of at least a majority of the entire membership of the Board because of 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, the willful commission of any act that in the judgment of the Board would likely cause substantial economic damage to the Bank or the Company or substantial injury to the business reputation of the Bank or the Company, or material breach of any provision of this Agreement.

 

The Bank may not terminate Executive’s employment “for cause” under this Agreement unless (1) the Bank shall have first provided Executive with written notice of the intended termination and the reason for such termination (“breach”) and (2) if such breach is susceptible to cure or remedy, a period of thirty (30) days shall have elapsed between the delivery of such notice and the termination of Executive’s employment without the Executive having, in the reasonable opinion of the Bank, effectively cured or remedied such breach.

 

  

3

  

(d)           The term “good reason” shall mean, for purposes of this Agreement only, the following: (i) a significant reduction in Executive’s duties, position or responsibilities, or Executive’s removal from his/her position and responsibilities (unless offered a comparable position (i.e., a position of equal or greater organizational level, duties, authority compensation and status) within twenty-four (24) months after a Change in Control; (ii) within twenty-four (24) months following a Change in Control, there is a material reduction in Executive’s compensation, compared to the compensation provided to Executive immediately prior to the Change in Control; or (iii) within twenty-four (24) months following a Change in Control Executive is permanently relocated to a workplace more than thirty-five (35) miles from Executive’s primary workplace immediately preceding a Change in Control.

 

Executive may not resign for “good reason” unless Executive has provided the Bank with a written notice informing the Bank of the existence of the “good reason” condition, which notice must be delivered to the Bank not later than 90 days after the initial occurrence of the “good reason” condition that forms the basis for the Executive’s resignation for “good reason.”  The Bank shall have 30 days to cure such “good reason” condition; provided however, that the Bank may waive its right to cure.  Thereafter, Executive must actually resign no later than 60 days after the expiration of the 30 day-cure period (or 60 days after the Bank has informed the Executive in writing that the Bank has waived the 30-day cure period).

4.           INTERNAL REVENUE CODE SAFE HARBOR. Notwithstanding anything in this Agreement to the contrary, in no event shall the aggregate payments or benefits to be made or afforded to the Executive under paragraph 3, subsections (a)-(c) (collectively the “Termination Benefits”) constitute a “parachute payment” under Section 280G of the Code or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount, the value of which is one dollar ($1.00) less than an amount equal to three (3) times the Executive’s “base amount,” as determined in accordance with said Code Section 280G. The allocation of the reduction required hereby among Termination Benefits provided by the preceding paragraphs of this Section 5 shall be determined by the Executive, provided, however, that if it is determined that such election by Executive shall be in violation of Code Section 409A, the allocation of the required reduction shall be pro-rata.

 

5.           COMPLIANCE WITH CODE SECTION 409A. Notwithstanding anything to the contrary contained herein, to the extent that the Bank determines that any Termination Benefits are subject to Code Section 409A of the Code, this Agreement shall incorporate the terms and conditions necessary for such Termination Benefits to avoid the consequences described in Section 409A(a)(1), and to the maximum extent permitted under applicable law the Agreement shall be interpreted in a manner that results in its conforming to the requirements of Sections 409A(a)(2), (3) and (4) and any Department of Treasury or Internal Revenue Service regulations or other interpretive guidance issued under Section 409A (whenever issued).

 

6.           ERISA WELFARE PLAN COMPLIANCE.  It is intended that this Agreement comply with any ERISA regulations concerning the creation, maintenance or administration of welfare benefit plans and that it not constitute a pension plan.

 

  

4

  

 

 

7.           CLAWBACK OF TERMINATION BENEFITS. The Termination Benefits provided for herein are each not deemed to be “earned” until such payment is made to Executive. Accordingly, in the event that Executive fails to comply with his/her post-termination obligations, as outlined below, before all Termination Benefits have been paid, the Bank shall be under no obligation to make any further payments following discovery of Executive’s failure to comply.

 

(a)           Post-Termination Obligations: For a period of one (1) year from Executive’s Separation from Service, Executive shall not, either directly or indirectly, engage in any business or activity in competition with the business of the Bank, or be a directors, officer or employee or consultant to any bank, savings bank, savings association or credit union, operating in Monroe County, New York, if such entity has assets of less than $1.0 billion.

 

(b)           Executive will not, during or after the term of his/her employment, disclose any knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to the appropriate Federal and/or State regulatory body, including by not limited to, the Federal Deposit Insurance Corporation (“FDIC”), or other federal banking agency with jurisdiction over the Bank or Executive). Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank, and Executive may disclose any information regarding the Bank which is otherwise publicly available.

 

(c)           In the event of a breach or threatened breach by Executive of the provisions of this Section 7, in addition to the immediate termination of any obligation on the part of the Bank to continue to pay Executive the Termination Benefits, the Bank will also be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from Executive.

 

8.           ACCOUNTING RESTATEMENT. Notwithstanding any other provision herein, in addition to compensation clawbacks that may be required under Section 304 of the Sarbanes-Oxley Act of 2002 or Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (or pursuant to any listing requirement of the stock exchanges on which the Company’s stock is traded), if the Bank is required to prepare an accounting restatement due to the material noncompliance of the Bank with any financial reporting requirement under the securities laws, the Executive shall reimburse the Bank for (i) any bonus or

 

  

5

  

other incentive-based or equity-based compensation received by the Executive from the Bank during the twelve (12) month period following the first public issuance or filing with the Commission (whichever first occurs) of the financial document embodying such financial reporting requirement and; (ii) any profits realized from the sale of securities of the issuer during that twelve (12) month period.

 

9.           AT-WILL EMPLOYMENT. This Agreement shall not constitute, and cannot be construed as an Employment Agreement.  Accordingly, Executive understands and acknowledges that his/her employment is and remains “at-will” and is subject to termination by the Bank, at any time, for any reason.

 

10.           RELEASE.  In addition to any other obligations contained herein, Executive shall be required to execute a General Release releasing the Bank from any and all claims as a condition precedent to him/her receiving the Termination Benefits provided for by this Agreement.

 

11.           ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

 

12.           NO MODIFICATIONS OR WAIVER. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

 

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.

 

13.           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.

 

14.           GOVERNING LAW. This Agreement shall be governed in all respects, including validity, construction, capacity and performance, by the laws of the State of New York, but only to the extent not superseded by federal law.

 

15.           TAX WITHHOLDING. The Bank shall have the right to deduct from amounts paid as Termination Benefits any sums that federal, state, local or foreign tax law requires to be withheld (including FICA taxes for social security and/or Medicare, as applicable).

 

  

6

  

16.           CLAIMS PROCEDURES. All claims relating to any rights set forth in this Agreement shall be raised in the following manner:

 

(a)           Presentation of Claim. If any Executive or Beneficiary does not believe that he or she has received Termination Benefits to which he or she is entitled, such person (a “Claimant”) must file a written claim with the Bank under the procedures set forth in this Article. The claim must state with particularity the benefit or other determination desired by the Claimant. The claim must be accompanied with sufficient supporting documentation for the benefit or other determination requested by the Claimant.

 

(b)           Notification of Decision. The Bank shall consider a Claimant’s claim and shall notify the Claimant in writing within twenty-five (25) days of receipt of the claim that either:

 

(i)           the Claimant’s requested determination has been made, and that the claim for benefits has been allowed in full; or

 

(ii)           the Bank has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

 

(A)           specific reason or reasons the claim was denied;

 

(B)           specific reference(s) to the pertinent provisions of the Agreement upon which the decision was based;

 

(C)           a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

 

(D)           an explanation of the claim review procedure set forth below; and

 

(E)           a statement of the Claimant’s right to bring a civil action under ERISA in the event of an adverse determination upon review.

 

(c)           Review of a Denied Claim. Within sixty (60) days after receiving a notice from the Bank that a claim has been denied in whole or in part, but not thereafter, a Claimant (or the Claimant’s duly authorized representative) may file with the Board, if the initial claim was reviewed by the Bank or, if not, the Board’s designee, a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):

 

(i)           may submit any written comments, documents, records and other information relating to the claim;

 

  

7

  

(ii)           may, upon reasonable request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the Claimant’s claim;

 

(iii)           will be entitled to a review that takes into account all comments, documents, records and other information submitted by the Claimant related to the claim, without regard to whether such information was submitted or considered in the initial benefit determination; and

 

(iv)           will be informed of such other matters as the Board or its designee deems relevant.

 

(d)              Elective Arbitration. If a Claimant’s claim described in Section 16(a) is denied pursuant to Sections 15(b) (an “Arbitrable Dispute”), the Claimant may, in lieu of the Claimant’s right to bring a civil action under Section 502(a) of ERISA, and as the Claimant’s only further recourse, submit the claim to final and binding arbitration conducted before a panel of three arbitrators sitting in a location selected by the Bank within fifty (50) miles of Fairport, New York, in accordance with the rules of the American Arbitration Association then in effect. In the event the need for arbitration arises the Bank shall select one arbitrator and the Executive shall select one arbitrator. The arbitrators selected by the parties shall select a third arbitrator. The arbitrators shall not have any authority to add to or modify the provisions of this Agreement in any way. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

(e)           Following a Change in Control. Upon the occurrence of a Change in Control, an independent party selected jointly by the Executives in the Agreement prior to the Change in the Control and the Board or other appropriate person shall assume all duties and responsibilities of the Board or Bank under this Article 16.

 

17.           FEES AND COSTS. In the event of any dispute between the Executive and the Bank regarding this Agreement, whether instituted by formal legal proceedings or otherwise, including any action taken by Executive in defending against any action taken by the Bank, the prevailing party shall be reimbursed for all costs and expenses, including reasonable attorney’s fees, arising from such dispute, proceedings or actions. In the event of a settlement of such dispute, each party shall bear its own costs and expenses. Any reimbursement owed under this Section 16 shall be paid within ten (10) days of the furnishing to the non-prevailing party of written evidence of any costs or expenses incurred by the prevailing party.

 

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

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

  

8

  

 

 

SIGNATURES

 

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

 

	
ATTEST:

	  	
FAIRPORT SAVINGS BANK

	  	  	  
	  	  	  
	
/s/ Dana C. Gavenda

	
By:   

	
/s/ Lowell T. Twitchell

	
President and Chief Executive Officer

	  	
Chairman of the Board

	  	  	  
	  	  	  
	  	
By:   

	
/s/ Robert W. Sturn

	  	  	
Chairman of Compensation Committee

	  	  	  
	  	  	  
	
WITNESS:

	  	
EXECUTIVE

	  	  	  
	  	  	  
	
/s/ Molly L. Bailey

	
By:   

	
/s/ Leslie J. Zornow

	
Assistant Treasurer

	  	  

 

 

 9ex10-3_032912.htm

 

 

EXHIBIT 10.3

 

FSB Community Bankshares, Inc. and

Fairport Savings Bank

Executive Compensation Clawback Agreement

WHEREAS, FSB Community Bankshares, Inc. (the “Company”) and Fairport Savings Bank (the “Bank”) are required to recover from certain current and former executive officers any excess incentive-based compensation, including bonus compensation or equity compensation, that was paid to such executives on the basis of incorrect financial information, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX”) and pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012 (“Dodd-Frank”); and

 

WHEREAS, in addition to Section 304 of SOX and Section 954 of Dodd-Frank, the Company and the Bank wish to adopt their own compensation clawback rules for certain current and former executive officers of the Company and the Bank, as set forth herein; and

 

WHEREAS, Kevin Maroney (the “Executive”), who is currently Executive Vice President and Chief Financial Officer, understands and acknowledges that he/she can be held liable for certain conduct which is detrimental or potentially detrimental to the Bank pursuant to the terms herein,

 

NOW THEREFORE, it is hereby agreed, by and between the Bank and Executive, as follows:

 

	
  

	
1.

	
Executive is entitled to participate in the FSB Community Bankshares, Inc. Annual Incentive Plan (“Incentive Plan”).  The Incentive Plan provides that Executive shall be eligible to receive a percentage of his/her Base Salary upon the achievement of pre-determined targets.  A copy of the Incentive Plan and of the Executive’s specific Incentive Plan formula (including all targets) is attached hereto as Schedule “A”, as approved annually, and incorporated by reference herein.

 

	
  

	
2.

	
Executive understands and acknowledges that he/she shall not be entitled to receive any payments due under the Incentive Plan and/or may be required to repay any payments previously received under the Incentive Plan under the following conditions:

 

	
  

	
A.

	
Executive’s Incentive Plan payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of the Bank’s financial statements; and the Board determines that Executive engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and a lower payment would have been made to Executive based upon the restated financial results.

 

	
  

	
B.

	
The Board determines that Executive has engaged in fraud, gross negligence or willful misconduct which has resulted in, or could result in, detriment to the Bank.

 

  

  

  

 

 

	
  

	
3.

	
In the event that the Bank determines, in its sole discretion, that one of the conditions set forth in paragraphs 2(A) or 2(B) of this Agreement have occurred, the Bank shall notify Executive, in writing, of its determination.  Executive will have ten (10) days within which to respond to the Bank’s notice and request reconsideration of the Bank’s determination.  If Executive fails to request reconsideration and/or the Bank elects not to reconsider its decision, or upon reconsideration, the Bank does not change its prior determination, Executive shall be liable to the Bank for repayment of all Incentive Plan payments paid to Executive by the Bank within the preceding three (3) years or during the period of the conduct set forth in paragraphs 2(A) or 2(B) of this Agreement, whichever is longer. The Bank also reserves the right to offset any such liability against any compensation, severance benefits or any remuneration owed to Executive by the Bank, to the extent permitted by applicable law, and provided further, that if any such right to set off is treated as an impermissible acceleration of payment of any deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended, then the Bank shall not exercise such set off rights with respect to such deferred compensation plans. In addition, Executive shall immediately become ineligible to receive any further Incentive Plan payments (regardless of whether the payments have been earned or accrued).

 

	
  

	
4.

	
Provided that the following repayment provisions do not result in an impermissible extension of credit to an officer of a publicly traded company within the meaning of Section 402 of the Sarbanes-Oxley Act of 2002, in the event that Executive must repay the Bank in compliance with Section 3 above, the parties agree that Executive must repay any amounts due within one (1) year from notification by the Bank of such repayment obligation.

 

	
  

	
5.

	
Notwithstanding the foregoing, to the extent not prohibited by applicable law (including, but not limited to, under Sections 302 and 402 of the Sarbanes-Oxley Act of 2002 and under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), the Bank shall have full discretion to decline to seek recovery under this Agreement or to shorten the time period for recovery set forth in paragraph 3 above.  The exercise of any such discretion must be approved by a majority of the Board.

 

	
  

	
6.

	
Should any repayment obligations under this Agreement trigger income tax penalties to the Bank or Executive, Executive acknowledges and agrees that he/she shall be solely liable for the payment of any such taxes.

 

	
  

	
7.

	
This Agreement shall be construed according to the laws of the State of New York and any action arising herefrom shall be venued in the Monroe County Supreme Court or the United States District Court for the Western District of New York in Rochester, New York.

 

  

2

  

	
  

	
8.

	
In the event that the Bank must engage in any legal action or proceeding in order to enforce the terms of this Agreement, Executive agrees that he/she shall be liable for payment of the Bank’s reasonable attorneys’ fees and costs.

 

	
  

	
9.

	
The parties agree and acknowledge that they both participated in the negotiation and drafting of this Agreement and therefore, if any provision herein is contested, there shall be no presumption in favor or against either party as the draftsperson.

 

	
  

	
10.

	
Executive and the Bank acknowledge and agree that they have each reviewed this Agreement with an attorney of their choosing and are entering into this Agreement voluntarily and with a complete understanding of its terms and obligations.

 

	
  

	
11.

	
Any Notices provided for under this Agreement shall be sent, via certified mail return receipt requested, to the following addresses:

 

	
  

	
BANK:

	
Fairport Savings Bank

45 South Main Street

Fairport, NY 14450

	
  

	
EXECUTIVE:

	
Kevin Maroney

22 Littlewood Lane E

Rochester, NY 14625

	
  

	
12.

	
If any provision of this Agreement is determined to be invalid or unenforceable by any Court or tribunal, the parties agree that such provision shall not affect the validity or enforceability of any other provision herein.

 

	  	  	
Fairport Savings Bank

	  	  	  
	
Dated: March 28, 2012

	  	
/s/ Dana C. Gavenda

	  	
By:   

	
Dana C. Gavenda

	  	
Its:   

	
President and Chief Executive Officer

	  	  	  
	  	  	  
	  	  	
Executive

	  	  	  
	
Dated: March 28, 2012

	 By:   	
/s/ Kevin D. Maroney

  

3

  

 

FSB COMMUNITY BANKSHARES, INC.

ANNUAL INCENTIVE PLAN

This Annual Incentive Plan (the “Plan”) is adopted by FSB Community Bankshares, Inc. (the “Company”), effective as of January 1, 2012.

To encourage Eligible Employees to remain in the employ of the Company, the Company is willing to provide them with an annual cash bonus incentive whereby, every year that they are selected to participate in this Plan, they may receive a cash lump sum equal to a percentage of their base salary upon attainment of specified performance goals. The objective of this Plan is to align the interests of Eligible Employees with the interests of the Company to obtain superior financial results for the Company.

ARTICLE I

Definitions

Definitions. Whenever used in this Plan, the following words and phrases shall have the meanings specified:

1.1           “Award” means an annual bonus paid as a cash lump sum under the Plan.

1.2           “Base Salary” means the Participant’s base salary paid during each calendar year, excluding overtime, bonuses, any stock-based compensation (such as stock options or stock appreciation rights), reimbursements, etc.

1.3           “Committee” means the Compensation Committee of the Company’s Board of Directors.

1.4           “Eligible Employee” means employees of the Company or any affiliate who are selected by the Committee, in its sole discretion, to participate in this Plan.  Being selected to participate in this Plan for one Plan Year does not guarantee selection for participation in the Plan for any subsequent Plan Year.

1.5           “Plan Year” means the Company’s fiscal year, which is the calendar year.

1.6           “Participant” means an Eligible Employee who has been notified that he or she has been selected to participate in this Plan for the current Plan Year.

ARTICLE II

Annual Cash Bonuses

2.1           Bonus Award.

(a)           If the performance objectives defined by the Committee each year are accomplished, each Participant shall receive an Award under the Plan equal to a designated percentage of the Participant’s Base Salary, as determined each Plan Year by the Committee in its sole discretion.

  

  

  

 

(b)           Payment of the Award is contingent on the Participant’s performance level being “at expectation” in order to receive the payment. The Committee shall have the final authority to determine whether any Participant has satisfied the performance level requirement.

(c)           A Participant who is not employed as of the payout date for any Awards made for any Plan Year generally will not be paid the Award for that Plan Year, unless the Committee determines that such Participant should be paid all or a pro-rata portion of the Award for that Plan Year.  In the event a Participant dies while eligible for an Award under this Plan, the Committee shall determine whether all or any part of the Award earned for that Plan Year will be paid to the Participant’s estate.

(d)           If an Eligible Employee becomes a Participant at any time after the beginning of a Plan Year, the Award payable to that Participant shall be pro-rated, such that, the percentage of Base Salary that constitutes the Award for that Plan Year shall be multiplied by a fraction, where the numerator is the number of full calendar months that the individual was a Participant in the Plan and the denominator is 12.

2.2           Performance Objectives. Payment of Awards in any Plan Year is contingent upon the performance objectives specified by the Committee for any Participant being met by that Participant. The specific goals are determined annually by the Committee and are subject to change by the Committee, but generally include performance targets such as net income, mortgage originations, NIM, transaction account deposits/percentage of total deposits; asset quality, net NIE, investments percentage of total assets, controllable branch expenses, checking account growth, and other discretionary or qualitative measures.  Unless the Committee determines otherwise, if the performance objectives for a Plan Year are not satisfied, no Award shall be paid under the Plan for that Plan Year.

2.3           Annual Award and Accrual of Costs. The Committee will establish a targeted Award level for each Eligible Employee at the beginning of each Plan Year based on the stated performance objectives for that year. The Company will accrue the cost of this Award during the course of the year and adjust the accrual rate based on periodic review of the Company’s likelihood of achieving the performance objectives.

2.4           Time of Payout. No later than two and one half (2 1⁄2) months after the close of the Plan Year, the Award will be paid to the Participant in a cash lump sum.  Awards under the Plan are intended to be exempt from Section 409A of the Internal Revenue Code under the “short term deferral rule” set forth in Treasury Regulations Section 1.409A-1(b)(4).

ARTICLE III

Amendments and Termination

3.1           Right to Amend or Terminate.  The Committee may amend or terminate this Plan at any time without the consent of any Participants.

  

2

  

 

ARTICLE IV

Miscellaneous

4.1           Binding Effect. This Plan shall be binding on the Participants, the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.

4.2           No Guarantee of Employment. This Plan is not an employment policy or contract. It does not give any Participant the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Participant. It also does not interfere with the Participant’s right to terminate employment at any time.

4.3           Non-Transferability. Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

4.4           Applicable Law. The Plan and all rights hereunder shall be governed by the laws of the State of New York, except to the extent preempted by the laws of the United States of America.

4.5           Entire Agreement. This Plan constitutes the entire agreement between the Company and the Employee as to the subject matter hereof. No rights are granted to the Employee by virtue of this Plan other than those specifically set forth herein.

4.6           Administration. The Committee shall have powers which are necessary to administer this Plan, including but not limited to:

(a)           Interpreting the provisions of the Plan;

(b)           Establishing and revising the method of accounting for the Plan;

(c)           Maintaining a record of benefit payments; and

(d)           Establishing rules and prescribing any forms necessary or desirable to administer the Plan.

IN WITNESS WHEREOF, the Company has executed this Plan on the date set forth below.

	  	  	
FSB COMMUNITY BANKSHARES, INC.

	  	  	  
	  	  	  
	
March 28, 2012

	
By:   

	
/s/ Robert W. Sturn

	
Date

	  	
Chair, Compensation Committee

 

  

3

  

 

EVP CFO - 2012

	  	
Award as a Percent of Beginning Year Base salary at Various Performance Levels

	
Measure

	
Goal Weight

	
Below Threshold

	
Threshold

	
Target

	
Maximum

	
Target

	
Net Income

	
20%

	
0%

	
2.40%

	
3.00%

	
3.60%

	
10 bp ROA

	
Net NIE

	
15%

	
0%

	
1.80%

	
2.25%

	
2.70%

	
Budget

	
NIM

	
20%

	
0%

	
2.40%

	
3.00%

	
3.60%

	
Budget

	
Asset Quality

	
10%

	
0%

	
1.20%

	
1.50%

	
1.80%

	
(1)

	
Investments % of Total Assets

	
15%

	
0%

	
1.20%

	
1.50%

	
1.80%

	
28.1%

	
Discretionary/Qualitative

	
20%

	
0%

	
2.40%

	
3.00%

	
3.60%

	  
	
Totals

	
100%

	
0%

	
12.00%

	
15.0%

	
18.00%

	  

If the Bank's budgeted net income is not attained then awards are capped at the "Threshold" percentage reflected above.

(1)  FSB performance versus NYS peer group

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}]]