Document:

CB Bancshares, Inc. - Exhibit 10.2

 

Exhibit 10.2

CB BANCSHARES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

FOR DOUGLAS R. WELD

(Effective as of May 1, 2003)

35

 

CB BANCSHARES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

FOR DOUGLAS R. WELD

          THIS
AGREEMENT is adopted this 22nd day of July, 2003, by and
between CB Bancshares, Inc., a Hawaii corporation (the “Company”), and Douglas
R. Weld, Executive Vice President of City Bank, a wholly-owned subsidiary of
the Company (the “Executive”).

RECITALS

          The Executive is a member of a select group of management or highly
compensated employees who contribute materially to the continued growth,
development, and future business success of the Company. In order to promote
the loyalty, diligence, and performance of the Executive and to support the
economic security of the Executive during retirement, the Company desires to
provide to the Executive a supplemental executive retirement benefit.

          This Agreement is intended to be an unfunded nonqualified deferred
compensation arrangement for purposes of the Internal Revenue Code of 1986, as
amended (the “Code”), and the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”). This Agreement is intended to constitute a “top hat”
arrangement described in ERISA Section 201(2) and, therefore, exempt from the
coverage, funding, and fiduciary requirements of ERISA. All benefits payable
under this Agreement shall be paid out of the general assets of the Company.

          It is acknowledged that the Executive is employed by City Bank, a
wholly-owned subsidiary of the Company and, for purposes of this Agreement,
reference to employment with (or termination of employment from) the Company
shall include employment with (or termination of employment from) City Bank or
any other wholly-owned subsidiary of the Company that employs the Executive,
and all such entities shall be treated as single employer with respect to the
employment of the Executive. However, reference to the Company with respect
to obligations and responsibilities and funding for the payment of benefits,
and with respect to the governance of this Agreement (e.g., the Board of
Directors shall mean the Board of Directors of CB Bancshares, Inc.), and with
respect to a Change of Control shall mean reference only to CB Bancshares,
Inc.

 

 

AGREEMENT

          That in consideration of the following agreements hereinafter contained
the Company and the Executive agree as follows:

Definitions

          Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:

“Actuarial Equivalent” means a form of benefit different in time, period, or
manner of payment from a given form of benefit, but having the same value as
of a given date of determination based on a 7% interest assumption and the IAM
1983 Mortality Table.

“Beneficiary” means such term as described in Article 4.

“Change of Control” shall mean any of the following: (a) any person (as
defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended
from time to time (“Exchange Act”) and as used in Sections 13(d) and 14(d)
thereof), excluding the Company, any majority owned subsidiary of the Company
(a “Subsidiary”), and any employee benefit plan sponsored or maintained by the
Company or any Subsidiary (including any trustee of such plan acting as
trustee), but including a “group” as defined in Section 13(d)(3) of the
Exchange Act (a “Person”), becomes the beneficial owner of shares of the
Company having at least 20% of the total number of votes that may be cast for
the election of directors of the Company (the “Voting Shares”); (b) the
shareholders of the Company shall approve any merger, consolidation or other
business combination of the Company, sale of the Company’s assets or
combination of the foregoing transactions (a “Transaction”) other than a
Transaction involving only the Company and one or more of its Subsidiaries, or
a Transaction immediately following which the shareholders of the Company
immediately prior to the Transaction continue to have a majority of the voting
power in the resulting entity excluding for this purpose any shareholder
owning directly or indirectly more than 10% of the shares of the other company
involved in the merger; or (c) within any 24 month period beginning or after
December, 1995, the persons who were directors of the Company immediately
before the beginning of such period (the “Incumbent Directors”) shall cease
(for any reason other than death) to constitute at least a majority of the
Board of Directors of the Company or the board of directors of any successor
to the Company, provided that any director who was not a director as of
December, 1995, shall be deemed to be an Incumbent Director if such director
was elected to the Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually or by prior operation of this Section 1.3.
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred for the purposes of this Agreement by reason of any actions or events
in which the Executive participates in a capacity other than in the capacity
as Executive (or as a director of the Company or a Subsidiary, where
applicable.) In accordance with the

37

 

Recitals to this Agreement, the term “Company” under this Section 1.3 shall
mean CB Bancshares, Inc.

“Code” means the Internal Revenue Code of 1986, as amended.

“Disability” means the Executive’s suffering a sickness, accident or injury
which has been determined by the carrier of any individual or group disability
insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled. The Executive must submit proof to the Company of the
carrier’s or Social Security Administration’s determination upon the request
of the Company.

“Early Termination Date” means the date on which the Executive incurs a
Termination of Employment which is prior to the Executive’s Normal Retirement
Date and which is for reasons other than death, Disability, Termination for
Cause, or Termination for Good Reason following a Change of Control.

“Effective Date” means May 1, 2003.

“Final Monthly Compensation” means the amount determined as follows: [the
average of the annual base “Compensation” plus annual bonuses paid to the
Executive during the five year period immediately preceding the date of
Termination of Employment] divided by 12. For this purpose, the term
“Compensation” shall exclude any amounts paid on or after Termination of
Employment (e.g., severance pay, unused sick leave, unused vacation).
Further, the term “Compensation” shall include salary reduction amounts
contributed by the Company and not includible in the Executive’s income
pursuant to Code Sections 125 and 401(k). Unless otherwise provided herein,
at any time prior to the Normal Retirement Date, the Executive’s Final Monthly
Compensation determined as of the Normal Retirement Date shall be projected
based on a 4.5% annual salary increase adjustment.

“Involuntary Termination” means that the Executive ceases to be employed by
the Company at the direction of the Company and without the written consent of
the Executive.

“Normal Retirement Date” means the Executive’s 65th birthday.

“Pension Offset” means the value of the Executive’s then-existing aggregate
vested account balance or accrued benefit or any prior payment under any
defined contribution plan or defined benefit pension plan maintained by the
Company (or any predecessor employer such as International Savings and Loan
Association, Ltd.) (exclusive of any account balance or payment derived from
the Executive’s elective deferral contributions under Code Section 401(k)) as
of the Termination of Employment. For this purpose, any prior payment shall
be equal to the amount of such payment without interest adjustment from the
date of payment. The projected Pension Offset as of the Normal Retirement
Date shall be determined based on factors as may be reasonably assumed by the
Company based on existing facts and circumstances

38

 

and as shall be set forth, and periodically updated at the Company’s
discretion, in Exhibit 3 as attached. Further, for purposes of determining
the Pension Offset, the value described in this Section 1.11 shall be
converted to the Actuarial Equivalent form of a monthly annuity payment to the
Executive for life.

“Social Security Benefit” means 50% of the monthly social security
benefit to which the Executive is entitled under the Social Security Act. For
purposes of determining the Executive’s projected Social Security Benefit, the
Company shall estimate the Social Security Benefit from the base pay rate
assuming a 4.5% annual salary increase adjustment. For purposes of determining
a Disability Benefit under Section 2.3, the Social Security Benefit offset
used in the Normal Retirement Benefit formula shall be equal to the
Executive’s actual disability benefit payment under the Social Security Act
due to the Executive’s Disability and, if the Executive is not entitled to an
actual disability benefit payment under the Social Security Act, the Social
Security Benefit offset shall be determined as otherwise provided hereunder.

“Termination for Cause” means such term as described in Article 5.

“Termination for Good Reason” means the Executive ceases to be employed by the
Company due to the occurrence of any of the following events without the
Executive’s express written consent following a Change of Control: (a) without
the Executive’s express written consent, the assignment to the Executive of
any duties inconsistent with his positions, duties, responsibilities and
status with the Company, or a change in the Executive’s reporting
responsibilities, titles or offices, or any removal of the Executive from or
any failure to re-elect the Executive to any of such positions, except in
connection with the Executive’s Termination for Cause, Disability, retirement
on or after his Normal Retirement Date, or as a result of his death; (b) a
reduction by the Company in the Executive’s base salary as in effect on the
date hereof or as the same may be increased from time to time; (c) without the
Executive’s express written consent the failure by the Company to continue any
action which would adversely affect the Executive’s participation in or
materially reduce the Executive’s benefits under any of such plans, or the
failure by the Company to provide the Executive with the number of paid
vacation days to which the Executive is then entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation
policy in effect on the date hereof; (d) the Company requiring the Executive
to be based anywhere other than in the community where the Executive is
currently based at the time of a change in control, except for required travel
on Company business to an extent substantially consistent with the Executive’s
present business travel obligations, or in the event the Executive consents to
a proposed relocation, the failure by the Company to pay (or reimburse the
Executive) for all reasonable moving expenses incurred by the Executive
relating to a change of his or her principal residence in connection with such
relocation and to indemnify the Executive against any loss of the fair market
value of such residence as determined by a real estate appraiser designated by
the Executive and reasonably satisfactory to the Company realized on the sale
of the Executive’s principal residence in connection with any such change of
residence.

39

 

“Termination of Employment” means that the Executive ceases to be employed by
the Company for any reason, voluntary or involuntary, other than by reason of
a leave of absence approved by the Company and the Executive.

“Year of Service” means each consecutive 12-month period of service ending on
the anniversary date of the Executive’s date of hire and during which the
Executive is employed on a full-time basis by the Company for at least 1,000
hours of service, inclusive of approved leaves of absence. Unless otherwise
provided herein, Years of Service shall include all Years of Service beginning
from the Executive’s date of hire.

Lifetime Benefits

Normal Retirement Benefit. Upon the Executive’s Termination of Employment on
or after his Normal Retirement Date for reasons other than death, the Company
shall pay to the Executive the “Normal Retirement Benefit” described in this
Section 2.1 in lieu of any other benefit under this Agreement.

Amount of Benefit. The Normal Retirement Benefit under this Section 2.1 is
the following monthly amount payable for the life of the Executive: 65% of
Final Monthly Compensation minus Social Security Benefit minus Pension Offset.
However, for purposes of determining the Normal Retirement Benefit under such
formula, the otherwise applicable “65%” under the preceding sentence shall be
reduced by 2.5% for each Year of Service less than 25 Years of Service, and
shall be increased by 2.5% for each Year of Service exceeding 25 Years of
Service (subject to a maximum adjusted percentage of 70%). Further, the
Normal Retirement Benefit shall be subject to the vesting schedule described
in Article 5.

Payment of Benefit. The Company shall pay the Normal Retirement Benefit to the
Executive in the specified form of the distribution option elected by the
Executive in accordance with the attached Exhibit 1. As reflected in Exhibit
1, prior to the commencement of any payment, the Executive may be allowed to
elect an additional form of distribution option or modify a previously elected
form of distribution option, but such election shall be allowed, if at all,
only at the time and in the manner specifically approved by the Board of
Directors at its complete discretion.

Early Termination Benefit. Upon the Executive’s Termination of Employment on
an Early Termination Date, the Company shall pay to the Executive the “Early
Termination Benefit” described in this Section 2.2 in lieu of any other
benefit under this Agreement.

Amount of Benefit. The Early Termination Benefit under this Section 2.2 shall
be equal to the Executive’s projected Normal Retirement Benefit which is
accrued as of the date of the Executive’s Termination of Employment and
payable commencing as of the first day of the month following his Normal
Retirement Date. Further, the Early Termination Benefit shall be subject to
the vesting schedule described in Article 5.

Payment of Benefit. The Company shall pay the Early Retirement Benefit to the
Executive in the Actuarial Equivalent form of equal monthly installments over
a

40

 

216-month term commencing as of the first day of the month following the
Executive’s Normal Retirement Date.

Disability Benefit. Upon the Executive’s Termination of Employment due to
Disability prior to his Normal Retirement Date, the Company shall pay to the
Executive the “Disability Benefit” described in this Section 2.3 in lieu of
any other benefit under this Agreement.

Amount of Benefit. The Disability Benefit under this Section 2.3 shall be
equal to the Executive’s Normal Retirement Benefit projected to his Normal
Retirement Date and payable commencing as of the first day of the month
following his Normal Retirement Date. Accordingly, in determining the
Executive’s projected Normal Retirement Benefit for this purpose, the
Executive shall be credited with the Years of Service that the Executive would
otherwise have earned if he continued employment through his Normal Retirement
Date. However, for this purpose, the Executive’s Final Monthly Compensation
shall be determined as of the date of his Termination of Employment and shall
not be subject to any projected annual increase to his Normal Retirement Date.

Payment of Benefit. The Company shall pay the Disability Benefit to the
Executive in the Actuarial Equivalent form of equal monthly installments over
a 216-month term commencing as of the first day of the month following the
Executive’s Normal Retirement Date.

Change of Control Benefit. Upon the Executive’s Involuntary Termination of
Employment or Termination for Good Reason prior to his Normal Retirement Date
and within 36 months following the occurrence of a Change of Control, the
Company shall pay to the Executive the “Change of Control Benefit” described
in this Section 2.4 in lieu of any other benefit under this Agreement.

Amount of Benefit. The Change of Control Benefit under this Section 2.4 shall
be equal to the Executive’s Normal Retirement Benefit projected to his Normal
Retirement Date and payable commencing as of the first day of the month
following his Normal Retirement Date. Accordingly, for purposes of determining
the Executive’s projected Normal Retirement Benefit, the Executive shall be
credited with the Years of Service that the Executive would have otherwise
earned if he continued employment through his Normal Retirement Date.
However, for purposes of calculating the Change of Control Benefit, the
Executive’s projected Normal Retirement Benefit shall be determined by
applying the Pension Offset determined as of the Executive’s Termination of
Employment (without any assumed employer contributions and earnings projected
to Normal Retirement Date).

Payment of Benefit. The Company shall pay the Normal Retirement Benefit to the
Executive in the specified form of the distribution option elected by the
Executive in accordance with the attached Exhibit 1. As reflected in Exhibit
1, prior to the commencement of any payment, the Executive may be allowed to
elect an additional form of distribution option or modify a previously elected
form of distribution option, but

41

 

such election shall be allowed, if at all, only at the time and in the manner
specifically approved by the Board of Directors at its complete discretion.

Excess Parachute Payment. If any benefit payable under this Agreement would
create an excise tax under the excess parachute rules of Code Sections 280G
and 4999, the Company shall pay to the Executive an additional amount (the
“Gross-up”) equal to the excise penalty tax amount divided by the sum of one
minus the sum of the penalty tax rate plus the executive’s marginal income tax
rate. The Gross-up shall be paid in a lump sum within 60 days of Termination
of Employment following Change in Control.

		
	 	               In the event the Internal Revenue Service adjusts the excise tax
computation of the Company, as provided in this Section 2.4.3 herein,
such that the Executive is liable for the payment of a greater excise
tax under Code Sections 280G and 4999, or such that the Executive does
not receive the full benefit that he would have received, the Company
shall reimburse the Executive for the full amount necessary to make the
Executive whole, including the value of the excise tax and all
corresponding interest and penalties due to the Internal Revenue
Service.

Death Benefits

Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive’s Beneficiary
the “Preretirement Death Benefit” described in this Section 3.1 in lieu of any
other benefit under this Agreement. The Company shall not pay any
Preretirement Death Benefit under this Section 3.1 if the Executive has
received any lifetime benefit payment provided under Article 2.

Amount of Benefit. The Preretirement Death Benefit under this Section 3.1
shall be equal to the Executive’s Normal Retirement Benefit projected to his
Normal Retirement Date. Accordingly, for purposes of determining the
Executive’s Normal Retirement Benefit, the Executive shall be credited with
the Years of Service that the Executive would have otherwise earned if he
continued employment through his Normal Retirement Date, and the Executive’s
Final Monthly Compensation shall be subject to the applicable projected annual
salary increase.

		
	 	          3.1.2 Payment of Benefit. Upon the Executive’s Death, the Company
shall pay the Preretirement Death Benefit to the Executive’s Beneficiary
in the form of the Actuarial Equivalent form of equal monthly
installments over a 20-year term commencing as of the first day of the
month following date of the Executive’s Death.

Death During Payment of a Lifetime Benefit. If the Executive dies after any
lifetime benefit payments have commenced under Article 2 but before receiving
all such payments, the Company shall pay the remaining benefit payments to the
Executive’s Beneficiary at the same time and in the same amounts they would
have been paid to the Executive had the Executive survived. However, only the
benefit payments

42

 

required under the Executive’s form of distribution option shall be paid
(e.g., no payment to the Executive’s Beneficiary if the Executive had elected
a life annuity form of distribution).

Death After Termination of Employment But Before Payment of a Lifetime Benefit
Commences. If the Executive is entitled to the commencement of any lifetime
benefit payments under Article 2, but dies prior to the commencement of such
benefit payments, the Company shall pay the same benefit payments to the
Executive’s Beneficiary that the Executive was entitled to prior to death.
However, only the benefit payments required under the Executive’s form of
distribution option shall be paid (e.g., no payment to the Executive’s
Beneficiary if the Executive had elected a life annuity form of distribution).

Beneficiaries

     The Executive shall designate a Beneficiary by filing a written
designation with the Company in a manner similar to the attached Exhibit 2.
The Executive may revoke or modify the designation at any time by filing a new
designation. However, a designation shall only be effective if signed by the
Executive and received by the Company during the Executive’s lifetime. The
Executive’s Beneficiary designation shall be deemed automatically revoked if
the Beneficiary predeceases the Executive, or if the Executive names a spouse
as Beneficiary and the marriage is subsequently dissolved. If the Executive
dies without a valid beneficiary designation, all payments shall be made to
the personal representative of the Executive’s estate.

Vesting

Vesting. The Executive shall only be entitled to the payment of his vested
interest in any benefit provided under this Agreement, and any unvested portion
of the benefit shall be forfeited and shall not be paid to the Executive.

43

 

     The Executive’s Normal Retirement Benefit and Early Termination Benefit
shall be vested in accordance with the below schedule. For purposes of
applying the vesting schedule, the Years of Service earned by the Executive
prior to the Effective Date shall be disregarded.

	 	 	 	 	 	 
	Years of Service	 	Vesting Percentage
	
	 	

	Less than 4 years
	 	 	0	%
	 	4 years
	 	 	10	%
	 	5 years
	 	 	20	%
	 	6 years
	 	 	30	%
	 	7 years
	 	 	45	%
	 	8 years
	 	 	60	%
	 	9 years
	 	 	80	%
	10 years or more
	 	 	100	%

          However, the Executive shall maintain a 100% vested and nonforfeitable
interest in his Disability Benefit, Preretirement Death Benefit, and Change of
Control Benefit. Therefore, the above vesting schedule shall not apply to the
determination of the Executive’s Normal Retirement Benefit for purposes of
calculating the Executive’s Disability Benefit, Preretirement Death Benefit,
and Change of Control Benefit.

Termination for Cause. However, notwithstanding the above Section 5.1 or any
other provision of this Agreement to the contrary, the Company shall not pay,
and the Executive shall not be entitled to, any benefit under this Agreement
if the Company terminates the Executive’s employment for cause as follows:
(a) an act or acts of dishonesty or gross misconduct on the Executive’s part
which result or are intended to result in material damage to the Company’s
business or reputation or (b) repeated material violations by the Executive to
use his best efforts to perform faithfully and efficiently the
responsibilities applicable to the Executive in accordance with the
Executive’s position or any written agreement between the Company and the
Executive, which violations are demonstrably willful and deliberate on the
Executive’s part and which result in material damage to the Company’s business
or reputation.

Suicide or Misstatement. The Company shall not pay, and the Executive shall
not be entitled to, any benefit under this Agreement if the Executive commits
suicide within three years after the date of this Agreement. In addition, the
Company shall not pay, and the Executive shall not be entitled to, any benefit
under this Agreement if the Executive has made any material misstatement of
fact on any application for any benefits provided by the Company to the
Executive.

Competition After Termination of Employment. The Company shall not pay, and
the Executive shall not be entitled to, any benefit under this Agreement if
the Executive within three years from Termination of Employment and without
the prior written consent of the Company, engages in, becomes interested in,
directly or indirectly, as a sole proprietor, as a partner in a partnership,
or as a substantial shareholder in a corporation, or becomes associated with,
in the capacity of employee, director, officer,

44

 

principal, agent, trustee or in any other capacity whatsoever, in any
enterprise in the State of Hawaii which enterprise is, or may be deemed to be,
competitive with any business carried on by the Company as of the date of
Termination of Employment. This section shall not apply following a Change in
Control.

ADMINISTRATION

Authority of Board. The Board of Directors of the Company shall maintain the
authority and discretion to control and manage the operation and
administration of the Agreement. In its discretion, the Board of Directors
shall make such rules, interpretations, and computations and take such other
actions to administer the Agreement, as it may deem appropriate. The rules,
interpretations, computations, and other actions of the Board of Directors
shall be binding and conclusive on all persons. In administering the
Agreement, the Board of Directors shall have the authority to: (a) require, as
a condition to receiving benefits under the Agreement, such information as it
may reasonably require for the proper administration of the Agreement; (b)
make and enforce such rules and regulations as it deems to be necessary for
the administration of the Agreement; (c) interpret the Agreement; (d)
determine the amount and timing of benefits payable to any person in
accordance with the provisions of the Agreement; and (e) direct all payments
to be made pursuant to the Agreement.

          The Board of Directors is granted the authority to name an individual or
individuals from time to time to carry out one or more of the duties described
above. The expenses of the Board of Directors, or the individual or
individuals described in the preceding sentence, shall be paid directly by the
Company.

Incapacity. If a benefit is payable to a minor, to a person declared
incompetent, or to a person incapable of handling the disposition of his or
her property, the Company may pay such benefit to the guardian, legal
representative, or person having the care or custody of such minor,
incompetent person, or incapable person. The Company may require proof of
incompetence, minority, or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.

FUNDING

Unfunded Plan. All amounts payable in accordance with the Agreement shall be
paid in cash from the general funds of the Company and no special or separate
fund, other than a “rabbi trust” established pursuant to Section 7.2 below,
shall be established, and no other segregation of assets shall be made to
assure the payment of any amounts payable in accordance with the Agreement.
The Executive shall have no right, title, or interest whatsoever in or to any
investment that the Company may make to aid it in meeting its obligations
hereunder, including, but not limited to, deemed investments. Nothing
contained in the Agreement, and no action taken pursuant to its provisions
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Executive or any other person. To
the extent that any

45

 

person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor.

Rabbi Trust Allowed. The Company may, for administrative reasons, establish a
“rabbi trust” for the benefit of Executive under the Agreement. If such a
trust is established, its assets shall be used exclusively for the purposes
set forth in the Agreement and the applicable trust agreement, subject to the
following conditions:

          (a) The creation of said trust shall not cause the Agreement to be other
than “unfunded” for purposes of Title I of ERISA;

	 	 	 	The Company shall be treated as the “grantor” of said trust for
purposes of Code Section 677; and
	 
	 	 	 	The trust agreement shall provide that its assets may be used to
satisfy claims of the Company’s general creditors in the event of
insolvency, and the rights of such general creditors in such
circumstances are enforceable by them under federal and state law.

          It is intended that such a trust be consistent with tax law requirements
preventing inclusion in income for income tax purposes prior to actual payment
of benefits under the Agreement. If such a trust is established, then prior to
the payment of benefits to the Executive, there shall be no actual transfer of
assets to the Executive under the Agreement and trust, and the Agreement and
trust shall confer no current benefit that would be immediately taxable to the
Executive under the constructive receipt rule or economic benefit doctrine
under the tax laws.

AMENDMENT AND TERMINATION

Amendment or Termination. This Agreement may be amended or terminated only by
written mutual agreement between the Company and the Executive.

Reorganization of the Company. The Company shall not merge or consolidate into
or with another company, or reorganize, or sell substantially all of its
assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume and discharge the
obligations of the Company under this Agreement. Upon the occurrence of such
event, the term “Company” as used in this Agreement shall be deemed to refer
to the successor or survivor company.

46

 

Claims and Review Procedures

Claims Procedure. An Executive or Beneficiary (the “Claimant”) who has not
received benefits under the Agreement that he or she believes should be paid
may make a claim for such benefits as follows:

Initiation – Written Claim. The Claimant may initiate a claim by submitting
to the Company a written claim for benefits.

Timing of Company Response. The Company shall respond to such Claimant within
90 days after receiving the claim. If the Company determines that special
circumstances require additional time for processing the claim, the Company
may extend the response period by an additional 90 days by notifying the
Claimant in writing, prior to the end of the initial 90-day period, that an
additional period is required. The notice of extension shall set forth the
special circumstances and the date by which the Company expects to render its
decision.

Notice of Decision. If the Company denies part or all of the claim, the
Company shall notify the Claimant in writing of such denial. The Company
shall write the notification in a manner calculated to be understood by the
Claimant. The notification shall set forth: (a) the specific reasons for the
denial; (b) a reference to the specific provisions of the Agreement on which
the denial is based; (c) description of any additional information or material
necessary for the Claimant to perfect the claim and an explanation of why it
is needed; (d) an explanation of the Agreement’s review procedures and the
time limits applicable to such procedures; (e) and a statement of the
claimant’s right to bring a civil action under ERISA Section 502(a) following
an adverse benefit determination on review.

Review Procedure. If the Company denies part or all of the claim, the
Claimant shall have the opportunity for a full and fair review by the Company
of the denial, as follows:

Initiation – Written Request. In order to initiate the review, the Claimant,
within 60 days after receiving the Company’s notice of denial, may file with
the Company a written request for review.

Additional Submissions – Information Access. The Claimant shall then have the
opportunity to submit written comments, documents, records, and other
information relating to the claim. The Company shall also provide the
Claimant, upon request and free of charge, reasonable access to, and copies
of, all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the Claimant’s claim for benefits.

47

 

Considerations on Review. In considering the review, the Company shall take
into account all materials and information the Claimant submits relating to
the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.

Timing of Company Response. The Company shall respond in writing to such
claimant within 60 days after receiving the request for review. If the
Company determines that special circumstances require additional time for
processing the claim, the Company can extend the response period by an
additional 60 days by notifying the claimant in writing, prior to the end of
the initial 60-day period, that an additional period is required. The notice
of extension must set forth the special circumstances and the date by which
the Company expects to render its decision.

Notice of Decision. The Company shall notify the Claimant in writing of its
decision on review. The Company shall write the notification in a manner
calculated to be understood by the Claimant. The notification shall set
forth: (a) the specific reasons for the denial; (b) a reference to the
specific provisions of the Agreement on which the denial is based; (c) a
statement that the Claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to
bring a civil action under ERISA Section 502(a).

LEGAL STATUS

          This Agreement is intended to constitute a nonqualified deferred
compensation agreement which is not subject to the qualification requirements
of Code Section 401(a). Further, this Agreement is intended to constitute an
“top hat” arrangement within the meaning of ERISA 201(2) and is not subject to
the coverage, funding, and fiduciary requirements of ERISA. Finally, until
the occurrence of a distribution event and the actual payment to the Executive
of a benefit hereunder, it is intended that there has been no transfer of any
benefit to the Executive under Code Section 83 and no benefit is subject to
inclusion for income tax purposes.

Miscellaneous

Binding Effect. This Agreement shall bind the Executive and the Company, and
their beneficiaries, survivors, executors, successors, administrators and
transferees.

48

 

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

Nontransferability. Benefits under this Agreement cannot be sold, transferred,
assigned, pledged, attached, or encumbered in any manner.

Notice. Any notice, consent, or demand required or permitted to be given
under the provisions of this Agreement by one party to another shall be in
writing, shall be signed by the party giving or making the same, and may be
given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to their last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent, or demand.

Tax Withholding. The Company shall withhold any taxes that are required to be
withheld from the benefits provided under this Agreement.

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

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

Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under this Agreement. It may delegate to others certain aspects
of the management and operational responsibilities including the employment of
advisors and the delegation of ministerial duties to qualified individuals.

Construction. The headings of the Articles in this Agreement is provided for
convenience only and will not affect its construction or interpretation. All
references to “Article” or “Articles” refer to the corresponding Article or
Articles of this Agreement. Wherever any words are used under the Agreement in
the masculine, feminine, or neuter gender, they shall be construed as though
they were also used in another gender in all cases where they would so apply.

49

 

          IN WITNESS WHEREOF, the Company and the Executive have signed this
Agreement on the date first written above.

	 	 	 
	COMPANY:	 	 
	 	 	 
	CB BANCSHARES, INC.	 	
EXECUTIVE:
	 	 	 
	By /s/ Ronald K. Migita	 	
        /s/ Douglas R. Weld
	Title: President and Chief Executive Officer	 	
DOUGLAS R. WELD

50

 

EXHIBIT 1

CB BANCSHARES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

FOR DOUGLAS R. WELD

FORM OF BENEFIT ELECTION

     As the Executive under the above-named agreement (“Agreement”), and in
accordance with Sections 2.1 and 2.4 of the Agreement, I understand that I am
required to elect the Actuarial Equivalent form of distribution of my Normal
Retirement Benefit and Change of Control Benefit, respectively, as of the date
of the Agreement. I understand that this election is irrevocable and that I am
not entitled to change the form of distribution hereby elected. However, I
understand that, prior to the commencement of the distribution of my benefit,
the Company shall allow me to file a petition with the Company which may
request a change in the form of distribution, and the Board of Directors, in
its sole and complete discretion, may accept or reject such a request. I
hereby elect the form of distribution as indicated below (check appropriate
boxes):

     Section 2.1
of the Agreement – Normal Retirement Benefit

	 	o	 	Equal monthly installments over a period of 10 years commencing
as of the first day of the month following termination of employment.
	 
	 	o	 	Equal monthly installments over a period of 15 years commencing
as of the first day of the month following termination of employment.
	 
	 	o	 	Single lump sum payment within 30 days following termination
of employment.
	 
	 	o 	 	Single life annuity commencing as of the first day of the
month following termination of employment.
	 
	 	o 	 	Joint and 50% survivor annuity commencing as of the first day of
the month following termination of employment.
	 
	 	o 	 	Joint and 100% survivor annuity commencing as of the first day of
the month following termination of employment.

     Section 2.4
of the Agreement – Change of Control Benefit

	 	o 	 	Equal monthly installments over a period of 20 years commencing
as of the first day of the month following Normal Retirement Date.
	 
	 	o 	 	 Equal monthly installments over a period of 20 years commencing
as of the first day of the month following termination of employment.
	 
	 	o 	 	Single lump sum payment within 30 days following termination
of employment.
	 
	 	o 	 	Single lump sum payment made on the first day of the
                 month immediately following termination of employment.

	 	 	 	 	 	 	 
	Dated	 	 	 	Signature	 	 
	 	 	

	 	 	 	

	 	 	 
	 	 	
RECEIPT ACKNOWLEDGED:
	 	 	
CB BANCSHARES, INC.

	 	 	 	 	 	 	 
	Dated	 	 	 	By	 	 
	 	 	

	 	 	 	

	 	 	 	 	 	 	Its

51

 

EXHIBIT 2

CB BANCSHARES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

FOR DOUGLAS R. WELD

BENEFICIARY DESIGNATION FORM

	 	 	 	 	 	 	 	 	 
	Executive’s  Name	 	 	 	 	 	 
	 	 	

	Address	 	 	 	 	 	 	 	 
	 	

	Social Security	 	 	 	Birth Date	 
	 	 	

	 	 	 	

     As the Executive under the above-named agreement (“Agreement”), I hereby
acknowledge that, in accordance with the right granted to me under the
Agreement to designate and redesignate the beneficiary or beneficiaries to
receive my Agreement benefit in the event of my death following my termination
of employment and prior to the complete distribution of my retirement benefit,
I hereby designate the following beneficiaries to receive such benefit in the
order of priority as indicated:

	 	 	 	 	 
	Primary Beneficiary:	 
	 	 	 	 	 
	Full name:	 	 	 
	 	 	

	Street address:	 	 
	 	 	

	City/State/Zip code:	 	 
	 	 	 	

	Social Security Number:
	 	 	 	 	

	Relationship to me:	 
	 	 	 	

     Contingent Beneficiary (i.e., my designated beneficiary in the event my
primary beneficiary predeceases me):

	 	 	 	 	 
	Full name:	 	 	 
	 	 	

	Street address:	 	 
	 	 	

	City/State/Zip code:	 	 
	 	 	 	

	Social Security Number:
	 	 	 	 	

	Relationship to me:	 
	 	 	 	

I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the
designations will be automatically revoked if the beneficiary predeceases me,
or, if I have named my spouse as beneficiary and our marriage is subsequently
dissolved. I understand that any beneficiary designation is not valid unless
received by the Company prior to my death.

	 	 	 	 	 	 	 	 	 
	Dated	 	 	 	Signature	 	 	 
	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 
	 	 	 	 	RECEIPT ACKNOWLEDGED:
	 	 	 	 	CB
BANCSHARES, INC.
	 	 	 	 	 	 	 
	Dated	 	 	 	By	 	 	 	 
	 	 	

	 	 	

	 	 	 	 	 	Its	 	 

52

 

EXHIBIT 3

CB BANCSHARES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

FOR DOUGLAS R. WELD

ASSUMPTIONS

(Effective as of May 1, 2003)

Section 1.11 Pension Offset

     For purposes of determining the projected Pension Offset as of the Normal
Retirement Date, the following assumptions shall apply: (a) an annual employer
contribution rate of 3% of eligible compensation to the existing qualified
401(k) plan maintained by the Company; (b) an annual employer contribution rate
of 1% of eligible compensation to the existing qualified employee stock
ownership plan maintained by the Company; (c) 7% annual earnings under such
plans; and (d) 4.5% annual salary increase.

53The Rylan Group, Inc. - Exhibit 10.13

 

Exhibit 10.13

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

Effective July 1, 2002

 

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

TABLE OF CONTENTS

	 	 	 	 	 	 
	 	 	 	Page
	 	 	 	

	ARTICLE 1 Definitions
	 	 	1	 
	ARTICLE 2 Vesting
	 	 	3	 
	 	2.1 Vesting in Benefits
	 	 	3	 
	ARTICLE 3 Benefits
	 	 	3	 
	 	3.1 Eligibility for Benefits
	 	 	3	 
	 	3.2 Death Benefit
	 	 	3	 
	 	3.3 Forms of Payment; Elections
	 	 	4	 
	 	3.4 Withdrawal Election
	 	 	4	 
	 	3.5 Committee Discretion
	 	 	4	 
	 	3.6 Withholding and Payroll Taxes
	 	 	4	 
	ARTICLE 4 Termination, Amendment or Modification of the Agreement
	 	 	5	 
	 	4.1 Termination or Amendment
	 	 	5	 
	 	4.2 Termination of Agreement
	 	 	5	 
	ARTICLE 5 Other Benefits and Agreements
	 	 	5	 
	 	5.1 Coordination with Other Benefits
	 	 	5	 
	ARTICLE 6 Administration of this Agreement
	 	 	5	 
	 	6.1 Committee Duties
	 	 	5	 
	 	6.2 Administration Upon Change In Control
	 	 	5	 
	 	6.3 Agents
	 	 	6	 
	 	6.4 Binding Effect of Decisions
	 	 	6	 
	 	6.5 Indemnity of Committee
	 	 	6	 
	 	6.6 Company Information
	 	 	6	 
	ARTICLE 7 Claims Procedures
	 	 	6	 
	 	7.1 Presentation of Claim
	 	 	6	 
	 	7.2 Notification of Decision
	 	 	7	 
	 	7.3 Review of a Denied Claim
	 	 	7	 
	 	7.4 Decision on Review
	 	 	7	 
	 	7.5 Legal Action
	 	 	8	 
	 	7.6 Named Fiduciary
	 	 	8	 
	ARTICLE 8 Beneficiary Designation
	 	 	8	 

-i-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	8.1 Beneficiary
	 	 	8	 
	 	8.2 Beneficiary Designation; Change; Spousal Consent
	 	 	8	 
	 	8.3 Acknowledgement
	 	 	8	 
	 	8.4 No Beneficiary Designation
	 	 	8	 
	 	8.5 Doubt as to Beneficiary
	 	 	9	 
	 	8.6 Discharge of Obligations
	 	 	9	 
	ARTICLE 9 Trust
	 	 	9	 
	 	9.1 Establishment of the Trust
	 	 	9	 
	 	9.2 Interrelationship of the Agreement and the Trust
	 	 	9	 
	 	9.3 Deposits to the Trust
	 	 	9	 
	ARTICLE 10 Miscellaneous
	 	 	9	 
	 	10.1 Status of Agreement
	 	 	9	 
	 	10.2 Unsecured General Creditor
	 	 	10	 
	 	10.3 Company’s Liability
	 	 	10	 
	 	10.4 Nonassignability
	 	 	10	 
	 	10.5 Furnishing Information
	 	 	10	 
	 	10.6 Terms
	 	 	10	 
	 	10.7 Captions
	 	 	10	 
	 	10.8 Governing Law
	 	 	10	 
	 	10.9 Validity
	 	 	10	 
	 	10.10 Notice
	 	 	10	 
	 	10.11 Successors
	 	 	11	 
	 	10.12 Spouse’s Interest
	 	 	11	 
	 	10.13 Incompetent
	 	 	11	 
	 	10.14 Court Order
	 	 	11	 
	 	10.15 Distribution in the Event of Taxation
	 	 	11	 
	 	10.16 Legal Fees To Enforce Rights After Change in Control
	 	 	12	 

-ii-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

THE RYLAND GROUP, INC.

DREIER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     THIS DREIER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (this “Agreement”) is
entered into as of July 1, 2002 between the Ryland Group, Inc. (the “Company”)
and R. Chad Dreier (the “Participant”).

RECITALS

	A.	 	The Participant is the Chief Executive Officer of the Company, and the
Company desires to have the continued services and counsel of the
Participant.

	B.	 	The purpose of this Agreement is to provide specified benefits to the
Participant as more fully described below.

AGREEMENT

NOW THEREFORE, it is mutually agreed as follows:

ARTICLE 1

Definitions

     For purposes hereof, unless otherwise clearly apparent from the context,
the following phrases or terms shall have the following indicated meanings:

	 	 	 
	1.1	 	
“Beneficiary” shall mean one or more persons, trusts, estates or other
entities, designated, in accordance with Article 8, that are entitled to
receive the Participant’s benefits under this Agreement upon the
Participant’s death.
	 	 	 
	1.2	 	
“Beneficiary Designation Form” shall mean the form established from time
to time by the Committee that the Participant completes, signs and returns
to the Committee to designate a Beneficiary.
	 	 	 
	1.3	 	
“Change in Control” shall mean the first to occur of any of the following
events:

	 	(a)	 	The acquisition by any person, other than the Company or any
employee benefit plan of the Company, of beneficial ownership of 20%
or more of the combined voting power of the Company’s then
outstanding voting securities;

	 	(b)	 	The first purchase under a tender offer or exchange offer,
other than an offer by the Company or any employee benefit plans of
the Company, pursuant to which shares of common stock have been
purchased;

	 	(c)	 	During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by
stockholders of the Company of each new director was approved by a
vote of at least two-

-1-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 		 	thirds of the directors then still in office who were directors at
the beginning of such period; or

	 	(d)	 	Approval by stockholders of the Company of a merger,
consolidation, liquidation or dissolution of the Company, or the sale
of all or substantially all of the assets of the Company.

	 	 	 
	1.4	 	
“Claimant” shall have the meaning set forth in Section 7.1.
	 	 	 
	1.5	 	
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
	 	 	 
	1.6	 	
“Committee” shall mean the committee described in Article 7.
	 	 	 
	1.7	 	
“Company” shall mean The Ryland Group, Inc., a Maryland corporation.
	 	 	 
	1.8	 	
“Compensation Committee” shall mean the Compensation Committee of the
Board of Directors of the Company.
	 	 	 
	1.9	 	
“Death Benefit” shall mean the Participant’s unpaid Vested SERP Benefit
(i) payable in equal annual installments over the remaining number of
years and in the same amounts as such benefit would have been paid to the
Participant had the Participant survived, or (ii) the present value
equivalent of such benefit stream payable in a lump sum, calculated using
an 8% discount rate.
	 	 	 
	1.10	 	
“Election Form” shall mean the form upon which the Participant elects the
manner of distribution of his SERP Benefit and Death Benefit, and shall be
made in such form as the Committee may require, including thereon a power
of attorney from the Participant’s community property spouse, if any,
authorizing the Participant to act on behalf of such spouse in making the
election and agreeing to be irrevocably bound by any such act with respect
to any community property interest under this Agreement.
	 	 	 
	1.11	 	
“ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
	 	 	 
	1.12	 	
“Retirement” shall mean the voluntary or involuntary termination of the
Participant’s employment with the Company for any reason other than death.
	 	 	 
	1.13	 	
“SERP Benefit” shall mean a benefit in the amount of (i) $2,400,000 per
annum, payable in annual installments for a period of 15 years, or (ii)
the present value equivalent of such benefit stream payable in a lump sum,
calculated using an 8% discount rate.
	 	 	 
	1.14	 	
“Termination of Employment Without Cause” shall mean an involuntary
termination of the Participant’s employment with the Company other than by
reason of the Participant’s (i) willful and continued failure to perform
the material duties of his position after receiving notice of such failure
and being given reasonable opportunity to cure such failure; (ii) willful
misconduct which is demonstrably and materially injurious to the Company;
or (iii) conviction of a felony. No act or failure to act on the part of
the Participant shall be considered “willful” unless it is done or omitted
to be done in bad faith or without reasonable belief that the action or
omission was in the best interest of the Company.

-2-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	1.15	 	
“Trust” shall mean the trust established pursuant to that certain Master
Trust Agreement, dated as of November 1, 2002, between the Company and the
trustee named therein, as amended from time to time.

	 	 	 
	1.16	 	
“Vested SERP Benefit” shall mean the Participant’s SERP Benefit
multiplied by the applicable vesting percentage set forth in Article 2 of
this Agreement.

ARTICLE 2

Vesting

	 	 	 
	2.1	 	
Vesting in Benefits

	 	(a)	 	General. The Participant shall vest in his SERP Benefit
according to the following vesting schedule, provided that he is
continuously employed with the Company from July 1, 2002, through the
specified date of vesting:

	 	 	 	 	 
	Date of Vesting	 	Vesting Percentage
	
	 	

	December 30, 2002
	 	 	0	%
	December 30, 2003
	 	 	20	%
	December 30, 2004
	 	 	40	%
	December 30, 2005
	 	 	60	%
	December 30, 2006
	 	 	80	%
	December 30, 2007
	 	 	100	%

	 	(b)	 	Special. Notwithstanding anything to the contrary in this
Section 2.1, the Participant shall immediately become 100% vested (if
he is not already vested in accordance with the above vesting
schedule) in the SERP Benefit upon the occurrence of a Change in
Control or if he experiences a Termination of Employment Without
Cause.

ARTICLE 3

Benefits

	 	 	 
	3.1	 	
Eligibility for Benefits

	 	(a)	 	SERP Benefit. Upon Retirement, the Participant shall be
eligible to receive his Vested SERP Benefit.

	 	(b)	 	Commencement of SERP Benefit. The payment of the Participant’s
Vested SERP Benefit shall commence within sixty (60) days of the
later of (i) January 1, 2008, or (ii) the date of the Participant’s
Retirement.

	 	 	 
	3.2	 	
Death Benefit

-3-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	(a)	 	Death Benefit. In the event of the Participant’s death before
Retirement, or after Retirement but before the Participant’s Vested
SERP Benefit has been paid in full, the Participant’s Beneficiary
shall receive a Death Benefit.

	 	(b)	 	Commencement of Death Benefit. The Death Benefit shall be paid
to the Participant’s Beneficiary no later than sixty (60) days after
the date on which the Committee is provided with proof that is
satisfactory to the Committee of the Participant’s death.

	 	 	 
	3.3	 	
Forms of Payment; Elections. The Participant shall elect on an Election
Form to have his (i) SERP Benefit paid in a lump sum or in equal annual
installments for fifteen (15) years, and (ii) Death Benefit paid in a lump
sum or in equal annual installments over the remaining number of years and
in the same amounts as such benefit would have been paid to the
Participant had the Participant survived. The Participant may change his
initial elections or any subsequent elections by submitting new Election
Forms to the Committee, provided that any such Election Forms are
submitted to and accepted by the Committee in its sole discretion at least
one (1) year prior to the date on which the payment of the applicable
benefit commences. The Election Forms most recently accepted by the
Committee shall govern the payout of the Participant’s SERP Benefit and
Death Benefit. If the Participant does not make an election with respect
to the form of payment of his SERP Benefit or if his initial election is
not submitted in a taxable year prior to the taxable year in which the
date of his Retirement falls, then such benefits shall be payable in
fifteen (15) equal annual installments. Similarly, if the Participant
does not make an election with respect to the form of payment of his Death
Benefit, then such benefits shall be paid in a lump sum.

	 	 	 
	3.4	 	
Withdrawal Election. On or after the date that payments commence under
this Agreement, the Participant, or his Beneficiary, as the case may be,
may elect to receive all or a percentage of the Participant’s remaining
unpaid Vested SERP Benefit payments or Death Benefit payments, in a lump
sum, less a penalty as described below. The lump sum payment shall be
equal to (i) the present value of the applicable percentage of the
Participant’s remaining unpaid Vested SERP Benefit payments or Death
Benefit payments, calculated using an 8% discount rate, less (ii) a
penalty equal to 10% of the amount computed under clause (i) (the net
amount shall be referred to as the “Benefit Amount”). The Participant, or
his Beneficiary, shall make this election by giving the Committee advance
written notice of the election in a form determined from time to time by
the Committee. The Participant, or his Beneficiary, shall be paid the
Benefit Amount within sixty (60) days of the election date. In the event
that a Participant elects to receive less than 100% of his remaining
unpaid Vested SERP Benefit payments or Death Benefit payments as a
distribution under this Section, any remaining annual installments payable
pursuant to Article 3 shall be adjusted accordingly.

	 	 	 
	3.5	 	
Committee Discretion. Upon the request of the Participant, the
Committee, in its sole discretion and consistent with its established
procedures and rules, may consider other forms of benefit payments, or the
timing of benefit payments, as it deems necessary and prudent under the
circumstances.

	 	 	 
	3.6	 	
Withholding and Payroll Taxes. The Company shall withhold from any and
all benefits made under this Article 3, all federal, state and local
income, employment and other taxes required to

-4-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	 	 	
be withheld by the Company
in connection with the benefits hereunder, in amounts to be determined in
the sole discretion of the Company.

ARTICLE 4

Termination, Amendment or Modification of the Agreement

	 	 	 
	4.1	 	
Termination or Amendment. This Agreement may be terminated or amended
only by a written agreement executed by the Company and the Participant.

	 	 	 
	4.2	 	
Termination of Agreement. Unless otherwise modified pursuant to Section
4.1 above, this Agreement shall terminate upon the full payment of the
Participant’s Vested SERP Benefit or Death Benefit in accordance with
Article 3.

ARTICLE 5

Other Benefits and Agreements

	 	 	 
	5.1	 	
Coordination with Other Benefits. The benefits provided for the
Participant under this Agreement are in addition to any other benefits
available to such Participant under any other plan or program for
employees of the Company. This Agreement shall supplement and shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

ARTICLE 6

Administration of the Agreement

	 	 	 
	6.1	 	
Committee Duties. This Agreement shall be administered by a Committee,
which shall consist of the Compensation Committee, or such committee as
the Compensation Committee shall appoint. The Committee shall have the
discretion and authority to (i) make, amend, interpret and enforce all
appropriate rules and regulations for the administration of this
Agreement, (ii) make benefit entitlement determinations, and (iii) decide
or resolve any and all questions including interpretations of this
Agreement, as may arise in connection with the Agreement.

	 	 	 
	6.2	 	
Administration Upon Change In Control. For purposes of this Agreement,
the Committee shall be the “Administrator” at all times prior to the
occurrence of a Change in Control. Upon and after the occurrence of a
Change in Control, the “Administrator” shall be an independent third party
selected by the Compensation Committee of the Board of Directors of the
Company, as such committee was constituted prior to the Change in Control.
The Administrator shall have the discretionary power to determine all
questions arising in
connection with the administration of the Agreement and the interpretation
of the Agreement and Trust including, but not limited to benefit
entitlement determinations; provided, however, upon and after the
occurrence of a Change in Control, the Administrator shall have no power
to direct the investment of Trust assets or select any investment manager
or custodial firm for the Trust. Upon and after the occurrence of a
Change in Control, the Company must: (1) pay all reasonable administrative
expenses and fees of the Administrator; (2) indemnify the Administrator
against any costs, expenses and liabilities including, without limitation,
attorney’s fees and expenses arising in connection with

-5-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	 	 	
the performance of
the Administrator hereunder, except with respect to matters resulting from
the gross negligence or willful misconduct of the Administrator or its
employees or agents; and (3) supply full and timely information to the
Administrator on all matters relating to the Agreement, the Trust, the
Participant and his Beneficiaries, the Participant’s benefits under this
Agreement, the date and circumstances of the Participant’s termination of
employment or death, and such other pertinent information as the
Administrator may reasonably require. Upon and after a Change in Control,
the Administrator may be terminated (and a replacement appointed) only
with the approval of the Compensation Committee of the Board of Directors
of the Company, as such committee was constituted prior to a Change in
Control. Upon and after a Change in Control, the Administrator may not be
terminated by the Company. If the Administrator resigns or is removed and
no successor is appointed and approved by the Compensation Committee of
the Board of Directors of the Company, as such committee was constituted
prior to a Change in Control, the Participant may apply to a court of
competent jurisdiction for appointment of a successor third-party
administrator.

	 	 	 
	6.3	 	
Agents. In the administration of this Agreement, the Committee may
employ agents and delegate to them such administrative duties as it sees
fit, (including acting through a duly appointed representative), and may
from time to time consult with counsel who may be counsel to the Company.

	 	 	 
	6.4	 	
Binding Effect of Decisions. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive
and binding upon all persons having any interest in the Agreement.

	 	 	 
	6.5	 	
Indemnity of Committee. The Company shall indemnify and hold harmless
the members of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Agreement, except in the case of willful misconduct by the
Committee or any of its members.

	 	 	 
	6.6	 	
Company Information. To enable the Committee to perform its functions,
the Company shall supply full and timely information to the Committee on
all matters relating to the compensation of the Participant, the date and
circumstances of the Participant’s termination of employment or death, and
such other pertinent information as the Committee may reasonably require.

ARTICLE 7

Claims Procedures

	 	 	 
	7.1	 	
Presentation of Claim. The Participant or his Beneficiary (such
Participant or Beneficiary being referred to below as a “Claimant”) may
deliver to the Committee a written claim for a determination with respect
to the amounts distributable to such Claimant pursuant to this Agreement.
If such a claim relates to the contents of a notice received by the
Claimant, the claim must be made within sixty (60) days after such notice
was received by the Claimant. All other claims must be made within 180
days of the date on which the event that caused the claim to arise
occurred. The claim must state with particularity the determination
desired by the Claimant.

-6-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	7.2	 	
Notification of Decision. The Committee shall consider a Claimant’s
claim within a reasonable time, but no later than ninety (90) days after
receiving the claim. If the Committee determines that special
circumstances require an extension of time for processing the claim,
written notice of the extension shall be furnished to the Claimant prior
to the termination of the initial ninety (90) day period. In no event
shall such extension exceed a period of ninety (90) days from the end of
the initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which the
Committee expects to render the benefit determination. The Committee
shall notify the Claimant in writing:

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

	 	(b)	 	that the Committee 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:

	 	(i)	 	the specific reason(s) for the denial of the claim,
or any part of it;

	 	(ii)	 	specific reference(s) to pertinent provisions of
the Agreement upon which such denial was based;

	 	(iii)	 	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;

	 	(iv)	 	an explanation of the claim review procedure set
forth in Section 7.3 below; and

	 	(v)	 	a statement of the Claimant’s right to bring a
civil action under ERISA Section 502(a) following an adverse
benefit determination on review.

	 	 	 
	7.3	 	
Review of a Denied Claim. On or before sixty (60) days after receiving a
notice from the Committee that a claim has been denied, in whole or in
part, a Claimant (or the Claimant’s duly authorized representative) may
file with the Committee a written request for a review of the denial of
the claim. The Claimant (or the Claimant’s duly authorized
representative):

	 	(a)	 	may, upon request and free of charge, have reasonable access
to, and copies of, all documents, records and other information
relevant to the claim for benefits;

	 	(b)	 	may submit written comments or other documents; and/or

	 	(c)	 	may request a hearing, which the Committee, in its sole
discretion, may grant.

	 	 	 
	7.4	 	
Decision on Review. The Committee shall render its decision on review
promptly, and no later than sixty (60) days after the Committee receives
the Claimant’s written request for a review of the denial of the claim.
If the Committee determines that special circumstances require an
extension of time for processing the claim, written notice of the
extension shall be furnished to the Claimant prior to the termination of
the initial sixty (60) day period. In no event shall such extension
exceed a period of sixty (60) days from the end of the initial period.
The extension notice shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render
the benefit determination. In rendering its decision, the

-7-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	 	 	
Committee shall
take into account all comments, documents, records and other information
submitted by the Claimant relating to the claim, without regard to whether
such information was submitted or considered in the initial benefit
determination. The decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:

	 	(a)	 	specific reasons for the decision;

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

	 	(c)	 	a statement that the Claimant is entitled to receive, upon
request and free of charge, reasonable access to and copies of, all
documents, records and other information relevant (as defined in
applicable ERISA regulations) to the Claimant’s claim for benefits;
and

	 	(d)	 	a statement of the Claimant’s right to bring a civil action
under ERISA Section 502(a).

	 	 	 
	7.5	 	
Legal Action. A Claimant’s compliance with the foregoing provisions of
this Article 7 is a mandatory prerequisite to a Claimant’s right to
commence any legal action with respect to any claim for benefits under
this Agreement.

	 	 	 
	7.6	 	
Named Fiduciary. The Committee shall be the named fiduciary, within the
meaning of ERISA, with respect to this Agreement solely for purposes of
this Article 7.

ARTICLE 8

Beneficiary Designation

	 	 	 
	8.1	 	
Beneficiary. The Participant shall have the right, at any time, to
designate his Beneficiary(ies) (both primary as well as contingent) to
receive any benefits payable under the Agreement to a beneficiary upon the
Participant’s death. The Beneficiary designated under this Agreement may
be the same as or different from the Beneficiary designation under any
other plan of the Company in which the Participant participates.

	 	 	 
	8.2	 	
Beneficiary Designation; Change; Spousal Consent. The Participant shall
designate his Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its designated
agent. The Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Committee’s rules and procedures, as
in effect from time to time. If the Participant names someone other than
his or her spouse as a Beneficiary and if the Committee requires that
spousal consent be obtained with respect to the Participant, a spousal
consent, in the form designated by the Committee, must be signed by the
Participant’s spouse and returned to the Committee. Upon the acceptance
by the Committee of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Committee shall be
entitled to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Committee prior to his death.

	 	 	 
	8.3	 	
Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by
the Committee or its designated agent.

	 	 	 
	8.4	 	
No Beneficiary Designation. If the Participant fails to designate a
Beneficiary as provided in Sections 8.2 and 8.3 above or, if all
designated Beneficiaries predecease the Participant or die prior

-8-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
		 	
to
complete distribution of the Participant’s benefits, then the
Participant’s spouse shall be the designated Beneficiary. If the
Participant has no surviving spouse, the benefits remaining under the
Agreement shall be payable to the executor or personal representative of
the Participant’s estate.

	 	 	 
	8.5	 	
Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Agreement, the Committee
shall have the right, exercisable in its discretion, to cause the Company
to withhold such payments until this matter is resolved to the Committee’s
satisfaction.

	 	 	 
	8.6	 	
Discharge of Obligations. The payment of benefits under this Agreement
to a Beneficiary shall fully and completely discharge the Company and the
Committee from all further obligations under this Agreement with respect
to the Participant, and this Agreement shall terminate upon such full
payment of benefits.

ARTICLE 9

Trust

	 	 	 
	9.1	 	
Establishment of the Trust. In order to provide assets from which to
fulfill the obligations to the Participant and his beneficiaries under the
Agreement, the Company shall establish a Trust by a trust agreement with a
third party, the trustee, to which the Company may, in its discretion,
contribute cash or other property, including securities issued by the
Company, to provide for the benefit payments under the Agreement.

	 	 	 
	9.2	 	
Interrelationship of the Agreement and the Trust. The provisions of this
Agreement shall govern the rights of the Participant to receive
distributions. The provisions of
the Trust shall govern the rights of the Company, the Participant and the
creditors of the Company to the assets transferred to the Trust. The
Company shall at all times remain liable to carry out its obligations
under the Agreement. The Company’s obligations under the Agreement may be
satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Company’s obligations
under this Agreement.

	 	 	 
	9.3	 	
Deposits to the Trust. The Company shall deposit into the Trust an amount
of cash or, in its discretion, other assets, including if desirable
securities issued by the Company, equal to $3.4 million per annum for the
five (5) year period commencing January 1, 2003. Immediately before the
closing of any transaction constituting a Change of Control, the Company
shall deposit into the Trust such amount of cash and other assets, if any,
sufficient in amount to cause the total value of the assets held in such
Trust at that time to equal the present value of the SERP Benefit
calculated using an 8% discount rate.

ARTICLE 10

Miscellaneous

	 	 	 
	10.1	 	
Status of Agreement. This Agreement is intended to be a plan that is
not qualified within the meaning of Code Section 401(a) and that is
“unfunded and is maintained by an employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees” within the meaning of ERISA Sections 201(2),
301(a)(3) and

-9-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	 	 
	 	 	
401(a)(1). This Agreement shall be administered and
interpreted to the extent possible in a manner consistent with that
intent.

	 	 	 
	10.2	 	
Unsecured General Creditor. The Participant and his Beneficiaries,
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of the Company. Any and all of the
Company’s assets shall be, and remain, the general, unpledged unrestricted
assets of the Company.

	 	 	 
	10.3	 	
Company’s Liability. The Company’s liability for the payment of benefits
shall be defined only by this Agreement, as entered into between the
Company and the Participant.

	 	 	 
	10.4	 	
Nonassignability. Neither the Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance
of actual receipt, the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be,
unassignable and non-transferable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by
the Participant or any other person, nor be transferable by operation of
law in the event of the Participant’s or any other person’s bankruptcy or
insolvency.

	 	 	 
	10.5	 	
Furnishing Information. The Participant or his Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested
in order to facilitate the administration of this Agreement and the
payments of benefits hereunder, including but not limited to taking such
physical examinations as the Committee may deem necessary.

	 	 	 
	10.6	 	
Terms. Whenever any words are used herein in the masculine, they shall
be construed as though they were in the feminine in all cases where they
would so apply; and wherever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they would
so apply.

	 	 	 
	10.7	 	
Captions. The captions of the articles, sections and paragraphs of this
Agreement are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.

	 	 	 
	10.8	 	
Governing Law. Subject to ERISA, the provisions of this Agreement shall
be construed and interpreted according to the internal laws of the State
of Maryland without regard to its conflict of laws principles.

	 	 	 
	10.9	 	
Validity. In case any provision of this Agreement shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Agreement shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.

	 	 	 
	10.10	 	
Notice. Any notice or filing required or permitted to be given to the
Committee under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below:

	 
	SERP Committee
	The Ryland Group, Inc.

-10-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 
	24025 Park Sorrento
	Suite 400
	Calabasas, California 91302

	 	 	 
	 	 	
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.

	 	 	 
	 	 	
Any notice or filing required or permitted to be given to the Participant
under this Agreement shall be sufficient if in writing and hand-delivered,
or sent by mail, to the last known address of the Participant.

	 	 	 
	10.11	 	
Successors. The provisions of this Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and the
Participant and his Beneficiary.

	 	 	 
	10.12	 	
Spouse’s Interest. The interest in the benefits hereunder of a spouse
of the Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in
any manner,
including but not limited to such spouse’s will, nor shall such interest
pass under the laws of intestate succession.

	 	 	 
	10.13	 	
Incompetent. If the Committee determines in its discretion that a
benefit under this Agreement is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person’s property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetency, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant’s Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Agreement for such payment amount.

	 	 	 
	10.14	 	
Court Order. The Committee is authorized to make any payments directed
by court order in any action in which the Committee has been named as a
party.

	 	 	 
	10.15	 	
Distribution in the Event of Taxation

	 	(a)	 	In General. If, for any reason, all or any portion of the
Participant’s benefit under this Agreement becomes taxable to the
Participant prior to receipt, the Participant may petition the
Committee for a distribution of that portion of his or her benefit
that has become taxable. Upon the grant of such a petition, which
grant shall not be unreasonably withheld, the Company shall
distribute to the Participant immediately available funds in an
amount equal to the taxable portion of his or her benefit (which
amount shall not exceed the Participant’s unpaid Vested SERP Benefit
under the Agreement). If the petition is granted, the tax liability
distribution shall be made within ninety (90) days of the date when
the Participant’s petition is granted. Such a distribution shall
affect and reduce the benefits to be paid under this Agreement.

-11-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

	 	(b)	 	Trust. If the Trust terminates in accordance with its terms
and benefits are distributed from the Trust to the Participant or his
Beneficiary in accordance therewith, the Participant’s benefits under
this Agreement shall be reduced to the extent of such distributions.

	 	 	 
	10.16	 	
Legal Fees To Enforce Rights After Change in Control. The Company is
aware that upon the occurrence of a Change in Control, the Board or the
board of directors of the Company (which might then be composed of new
members) or a shareholder of the Company or of any successor corporation
or affiliate of a successor corporation might then cause or attempt to
cause the Company or such successor to refuse to comply with its
obligations under the Agreement and might cause or attempt to cause the
Company to institute, or may institute, litigation seeking to deny the
Participant the benefits intended under the Agreement. In these
circumstances, the purpose of the Agreement could be frustrated.
Accordingly, if, following a Change in Control, it should appear
to the Participant that the Company or any successor corporation has
failed to comply with any of its obligations under the Agreement or any
agreement thereunder or, if the Company or any other person takes any
action to declare the Agreement void or unenforceable or institutes any
litigation or other legal action designed to deny, diminish or to recover
from the Participant the benefits intended to be provided, then the
Company irrevocably authorizes such Participant to retain counsel of his
choice at the expense of the Company to represent such Participant in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer,
shareholder, other person or entity affiliated with the Company or any
successor corporation or affiliate of a successor corporation thereto in
any jurisdiction.

-12-

 

The Ryland Group, Inc.

Dreier Supplemental Executive Retirement Plan

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date and year indicated below.

	 	 	 	 	 
	 	 	“Company”

The Ryland Group, Inc., a Maryland corporation
	 	 	 	 	 
	 	 	
By:  /s/ Robert J. Cunnion, III	 	 
	 	 	

	 	 	Robert J. Cunnion, III
	 	 	Senior Vice President
	 	 	 
	 	 	
Attest:  /s/ Timothy J. Geckle	 
	 	 	

	 	 	Timothy J. Geckle
	 	 	Secretary
	 	 	 
	 	 	
Date: July 1, 2002
	 	 	

	 	 	“Participant”

R. Chad Dreier
	 	 	/s/ R. Chad Dreier
	 	 	

	 	 	
Date: July 1, 2002
	 	 	

-13-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}]]