Document:

exv10w3

 

AMENDMENT #2

TO EMPLOYMENT AGREEMENT

     AGREEMENT made the 25th day of June, 2007, by and between SOVEREIGN BANCORP, INC., a
Pennsylvania corporation (“SBI”), and JAMES J. LYNCH, an individual (the “Executive”).

WITNESSETH:

     WHEREAS, the parties entered into an agreement dated September 16, 2002 relating, among other
things, to the Executive’s employment by SBI (the “Original Employment Agreement”); and

     WHEREAS, the Original Employment Agreement was amended on May 30, 2006 in several respects
(the Original Employment Agreement, as so amended thereby, being referred to as the “Amended
Employment Agreement”); and

     WHEREAS, SBI has advised the Executive that it intends to terminate the Amended Employment
Agreement without Cause as of September 30, 2007; and

     WHEREAS, the parties desire, among other things, to further amend the Amended
Employment Agreement by executing this document (“Amendment #2”) to reflect the consequences to the
Executive and the obligations of SBI resulting from the Executive’s proposed termination without
Cause.

     NOW, THEREFORE, the parties, intending to be legally bound hereby, further agree as follows:

     1. Notwithstanding the provisions of Section 4(a) of the Amended Employment Agreement, the
prohibition in such section against a reduction in the Executive’s salary shall no longer apply, so
that any such reduction will not constitute a breach of such section (or any other provision of the
Amended Employment Agreement, including Section 5(a) thereof [prior to its deletion hereby]), nor
shall any such reduction give the Executive any other right under the Amended Employment Agreement,
including the right to terminate his employment on the basis of a deemed constructive discharge or
otherwise.

     2. The Executive’s salary under Section 4(a) shall be reduced to $100,000 per annum, payable
periodically at such times as other executives are paid their salaries.

     3. Notwithstanding the provisions of Sections 4(b), (c) and (d) of the Amended Employment
Agreement (but subject to the following sentence), effective as of January 1, 2007, the Executive
shall no longer, as a matter of right, be entitled to participate in any incentive compensation (or
similar) plan, including any stock-based compensation plan or arrangement, maintained by SBI or any
of its affiliates for its or their employees. This Paragraph 3 is not intended to affect the
provisions of Section 4(c) of the Amended Employment Agreement insofar as it relates to the
provision of welfare, retirement and fringe benefits during the term of the Amended Employment
Agreement.

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     4. Section 5 of the Amended Employment Agreement and all provisions of the Amended Employment
Agreement to the extent they relate to such Section 5 are deleted. All deleted sections,
subsections and the like shall be deemed to be marked as “reserved”.

     5. Section 6 of the Amended Employment Agreement and all provisions of the Amended Employment
Agreement to the extent they relate to such Section 6 are deleted. All deleted sections,
subsections and the like shall be deemed to be marked as “reserved”.

     6. Section 7 of the Amended Employment Agreement is amended and restated to read as follows—

     7. Termination Without Cause at September 30, 2007. Effective September 30, 2007, to the
extent Executive’s employment has not theretofore terminated, SBI declares this Agreement, as
amended, and the Executive’s employment to be terminated by SBI without Cause. In consideration of
such termination, the Executive shall be entitled to the payments and benefits set forth below.

     (a) Within 15 days after his termination of employment, the Executive shall be paid a lump
sum severance amount of $2,041,631 in cash.

     (b) Within 15 days after his termination of employment, the Executive
shall be paid a additional lump sum amount of $30,016, in cash, in lieu of
the continuation of any and all welfare benefits to which he was entitled
prior to his termination of employment or otherwise entitled under this
Agreement.

Notwithstanding the nature of the Executive’s termination of employment, the
noncompetition and nonsolicitation provisions of Section 8 shall apply to him for
the 12-month period described therein; provided, however, that nothing set forth in
the noncompetition provisions of Section 8 shall restrict Executive from engaging,
directly or indirectly, for his own account or as an agent, consultant, employee,
partner, officer, director, or investor with respect to any investment company or
private equity, hedge, or similar fund (a “Financial Services Fund”) which makes
portfolio or similar investments in, or provides services to, entities in the
financial services sector in the geographic area in which SBI or its affiliates,
including the Bank, are conducting business at the time of the Executive’s
termination of employment (a “Financial Services Entity”), if (x) the ownership
interest by the Financial Services Fund in the Financial Services Entity represents
less than 5% of the total outstanding voting power of the Financial Services Entity
or (y) the Executive provides written notice to the general counsel of SBI no more
than 5 business days following the Financial Services Fund acquiring 5% or more of
the total outstanding voting power of the Financial Services Entity; provided,
however, that such permissible duties shall not include performance as an employee,
director or advisory committee member of any bank if such duties are otherwise
prohibited by the terms of Section 8 nor shall such

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permissible duties include any direct or indirect involvement in the Financial
Services Fund’s investment in a Financial Services Entity in the geographic area in
which SBI or its affiliates, including the Bank, are conducting business at the time
of the Executive’s termination of employment. SBI may, in its sole and absolute
discretion, upon written request from Executive, permit, in writing, Executive to
serve as a director or advisory committee member of a bank prior to the end of the
12-month period described above, provided that such bank has no operations where
Sovereign is conducting business in the states of Pennsylvania, New Jersey or
Maryland. In all events, the provisions of Section 8 regarding nonsolicitation of
customers and employees shall apply to the Executive, the Financial Services Fund
and any Financial Services Entity to the full extent and for the full time period
set forth in Section 8.

     7. The payments provided for in Section 7 of the Amended Employment Agreement, as further
amended and restated by Paragraph 6 above, shall be in complete discharge of the obligations of SBI
and its affiliated companies to the Executive in connection with his termination as described in
such Section 7; provided, however, that the provisions of such Section 7 shall not affect any other
right or benefit to which he may be entitled under an employee or executive benefit plan outside
the scope of the provisions of such Section 7.

     8. Except as otherwise provided herein, the effective date of the several paragraphs of this
Amendment #2 shall be the date first above written.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment #2, or caused it to be
executed, as of the date first above written.

	 	 	 	 	 	 	 
	 	 	SOVEREIGN BANCORP, INC.
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Thomas J. McAuliffe
	 	 	 	 	 
	 

	 	 	 	Director of Human Resources
	 

	 	 	 	Date: August 21, 2007
	 
	 	 	 	 	 	 
	[CORPORATE SEAL]

	 	Attest	 	/s/ Richard Toomey	 	 
	 	 	 	 	 
	 	 	 	 	Secretary
	 

	 	 	 	Date: August 21, 2007
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(SEAL)
	 	 	 	 	/s/ James J. Lynch
	 	 
	 	 	 	 	 	 	 
	 	 	 	 	James J.
Lynch
Date: August 22, 2007	 	 

3ex10-1.htm

    Exhibit
      10.1

     

    AJS
      BANCORP, INC.

     

    AMENDED
      AND RESTATED

     

    SUPPLEMENTAL
      EXECUTIVE AGREEMENT

     

    WHEREAS,
      Thomas R. Butkus (“Executive”) and AJS Bancorp, Inc. (the “Company”) entered
      into this Supplemental Executive Agreement (“Supplemental Agreement”) to
      supplement the Employment Agreement entered into between the Executive and
      the
      A. J. Smith Federal Savings Bank (the “Bank”), the wholly-owned subsidiary of
      the Company, on June 21,  2005, and

     

    WHEREAS,
      tax law provisions relating to “golden parachute payments” could have the effect
      of reducing the benefits otherwise provided to Executive under the Employment
      Agreement and/or other benefit plans or arrangements to which Executive is
      a
      party (the “Benefit Plans”) as a result of a change in control of the Company or
      the Bank; and

     

    WHEREAS,
      the Board believes that this Supplemental Agreement is in the best interests
      of
      the Company and its shareholders and will provide the benefits intended to
      be
      provided to Executive in the event of a change in control of the Company or
      the
      Bank, without any reduction because of tax code “penalties” or excise taxes
      relating to a change in control; and

     

    WHEREAS,
      Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and
      the final regulations promulgated thereunder provide that certain tax gross-up
      payments may be considered nonqualified deferred compensation that must comply
      with Code Section 409A; and

     

    WHEREAS,
      the Company and the Executive now desire to amend and restate this Supplemental
      Agreement effective as of July 1, 2007, for the purpose of providing further
      incentive to the Executive to achieve successful results in the management
      and
      operations of the Company and to conform the Supplemental Agreement to the
      provisions of Code Section 409A.

     

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

     

    1.           In
      the event of a Change in Control (as defined in the Employment Agreement) of
      the
      Bank or the Company, the Executive shall be entitled to receive, pursuant to
      this Supplemental Agreement, an amount, payable by the Company, in addition
      to
      any compensation or benefits payable by the Company pursuant to the Employment
      Agreement and/or the Benefit Plans, which amount shall equal the difference,
      if
      any, between (i) the amount that would be paid under the Employment Agreement
      and/or the Benefit Plans, and (ii) the amount that is actually paid under the
      terms of the Employment Agreement and/or the Benefit Plans (assuming that such
      Benefit Plans requires a cut-back to avoid an excess parachute payment (as
      defined in Section 4999 of the Internal Revenue Code of 1986, as
      amended).  Any payments payable under this Section 1 shall be paid
      at  the time and in the same manner as such payments would be paid
      under the Employment Agreement or applicable Benefit Plan, as if paid under
      such
      agreement or plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.           In
      addition, in each calendar year that Executive is entitled to receive payments
      or benefits under the provisions of the Employment Agreement and/or the Benefit
      Plan and this Supplemental Agreement, the independent accountants of the Company
      shall determine if an excess parachute payment (as defined in Section 4999
      of
      the Internal Revenue Code of 1986, as amended (the “Code”))
      exists.  Such determination shall be made after taking any reductions
      permitted pursuant to Section 280G of the Code and the regulations
      thereunder.  Any amount determined to be an excess parachute payment
      after taking into account such reductions shall be hereafter referred to as
      the
“Initial Excess Parachute Payment.”  As soon as practicable after a
      Change in Control, the Initial Excess Parachute Payment shall be
      determined.  Such Initial Excess Parachute Payment shall be paid to
      Executive or on his behalf to the applicable taxing authority, subject to
      applicable withholding requirements under applicable state or federal law,
      in an
      amount equal to:

     

    
      	
               

            	
              (i)

            	
              twenty
                (20) percent of the Initial Excess Parachute Payment (or such other
                amount
                equal to the tax imposed under Section 4999 of the Code),
                and

            

    

     

    
      	
               

            	
              (ii)

            	
              such
                additional amount (tax allowance) as may be necessary to compensate
                Executive for the payment by Executive of state and federal income,
                employment and excise taxes on the payment provided under Clause
                (i) and
                on any payments under this Clause (ii).  In computing such tax
                allowance, the payment to be made under Clause (i) shall be multiplied
                by
                the “gross up percentage” (“GUP”).  The GUP shall be determined
                as follows:

            

    

     

    
      	 	
              GUP
                =

            	
                Tax
                Rate

              1-
                Tax Rate

            

    

    

    The
      Tax
      Rate for purposes of computing the GUP shall be the highest marginal federal
      and
      state income and employment-related tax rate, including any applicable excise
      tax rate, applicable to the Executive in the year in which the payment under
      Clause (i) is made.

    

    
      	
               

            	
              (iii)

            	
              Such
                Initial Excess Parachute Payment and such tax allowance shall be
                paid to
                the applicable taxing authority for the benefit of the Executive
                when due,
                or if such Initial Excess Parachute Payment and/or tax allowance
                are paid
                by Executive, then to the Executive no later than the end of the
                Executive’s taxable year next following the Executive’s taxable year in
                which the related taxes are remitted to the required taxing
                authority.

            

    

    

    3.           Notwithstanding
      the foregoing, if it shall subsequently be determined in a final judicial
      determination or a final administrative settlement to which Executive is a
      party
      that the excess parachute payment as defined in Section 4999 of the Code,
      reduced as described above, is different from the Initial Excess Parachute
      Payment (such different amount being hereafter referred to as the “Determinative
      Excess Parachute Payment”) then the Company’s independent accountants shall
      determine the amount (the “Adjustment Amount”) the Executive must pay to the
      Company or the Company must pay to the Executive in order to put the Executive
      (or the Company, as the case may be) in the same position as the Executive
      (or
      the Company, as the case may be) would have been if the Initial Excess Parachute
      Payment had been equal to the Determinative Excess Parachute

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Payment.  In
      determining the Adjustment Amount, the independent accountants shall take into
      account any and all taxes (including any penalties and interest) paid by or
      for
      Executive or refunded to Executive or for Executive's benefit.  As
      soon as practicable after the Adjustment Amount has been so determined, but
      no
      later than two and one-half months after the end of the year in which the
      Adjustment Amount has been so determined, the Company shall pay the Adjustment
      Amount to Executive or the Executive shall repay the Adjustment Amount to the
      Company, as the case may be.  The purpose of this paragraph is to
      assure that (i) the Executive is not paid more as reimbursement for the golden
      parachute excise tax than it may ultimately be determined is necessary to make
      him whole, and (ii) if it is subsequently determined that additional golden
      parachute excise tax is owed by him, additional reimbursement payments will
      be
      made to him to make him whole for the additional excise tax.

     

    4.           In
      each calendar year that Executive receives payments or benefits under the
      Employment Agreement, Executive shall report on his state and federal income
      tax
      returns such information as is consistent with the determination made by the
      independent accountants of the Company as described above.  The
      Company shall indemnify and hold Executive harmless from any and all losses,
      costs and expenses (including without limitation, reasonable attorney's fees,
      interest, fines and penalties) that Executive incurs as a result of so reporting
      such information.  Executive shall promptly notify the Company in
      writing whenever the Executive receives notice of the institution of a judicial
      or administrative proceeding, formal or informal, in which the federal tax
      treatment under Section 4999 of the Code of any amount paid or payable under
      this Supplemental Agreement is being reviewed or is in dispute.  The
      Company shall assume control at its expense over all legal and accounting
      matters pertaining to such federal tax treatment (except to the extent necessary
      or appropriate for Executive to resolve any such proceeding with respect to
      any
      matter unrelated to amounts paid or payable pursuant to this
      contract).  The Executive shall cooperate fully with the Company in
      any such proceeding.  The Executive shall not enter into any
      compromise or settlement or otherwise prejudice any rights the Company may
      have
      in connection therewith without prior consent to the Company.

     

    IN
      WITNESS WHEREOF, AJS Bancorp, Inc. has caused this Amended and Restated
      Supplemental Agreement to be executed by the duly authorized members of the
      board of directors, and Executive has signed this Amended and Restated
      Supplemental Agreement as of the 21st day of
      August
      2007.

    

    
      	
              ATTEST:

            	
              AJS
                BANCORP, INC.

            
	 	 
	 	 
	
              /s/
                Jo Anne Cano

            	
              /s/
                Lyn G. Rupich

            
	 	 
	
              WITNESS:

            	
              EXECUTIVE

            
	 	 
	 	 
	
              /s/Donna
                J. Manuel

            	
              /s/
                Thomas R. Butkus

            

    

    

    

    3

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