COMMUNITY BANK OF TRI-COUNTY
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is
adopted this 6th day of September, 2003, by and between COMMUNITY
BANK OF TRI-COUNTY, a state-chartered commercial bank located in
Waldorf, Maryland (the “Company”), and WILLIAM
PASENELLI (the “Executive”).
To encourage the
Executive to remain an employee of the Company, the Company is
willing to provide salary continuation benefits to the Executive.
The Company will pay the benefits from its general
assets.
The Company and
the Executive agree as follows:
Whenever used in
this Agreement, the following words and phrases shall have the
meanings specified:
1.1 “
Change of Control ” The term “Change in
Control” shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote
more than 25% of the voting stock of the Company or the
Corporation; (ii) the acquisition of the ability to control
the election of a majority of the Company’s or the
Corporation’s directors; (iii) the acquisition of a
controlling influence over the management or policies of the
Company or the Corporation by an y person or by persons acting as a
“group” (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934); or (iv) during any period of
two consecutive years, individuals (the “Continuing
Directors”) who at the beginning of such period constitute
the Board of Directors of the Company or the Corporation (the
“Existing Board”) cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. Notwithstanding the foregoing, the
Corporation’s ownership of the Company shall not of itself
constitute a Change in Control for purposes of the Agreement. For
purposes of this paragraph only, the term “person”
refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein.
1.2 “
Code ” means the Internal Revenue Code of 1986, as
amended.
1.3
“Corporation” means the Tri-County Financial
Corporation.
1.4 “
Disability ” means a physical or mental infirmity
which impairs the Executive’s ability to substantially
perform his duties under the Employment Agreement with the Company
and which results in the Executive becoming eligible for long-term
disability benefits under the Company’s long-term disability
plan (or if the Company has no such plan in effect, which impairs
the Executive’s ability to substantially perform his duties
under the Employment Agreement for a period of 180 consecutive
days).
1.5 “
Effective Date ” means March 28, 2003.
1.6
“Employment Agreement” means the (name of
employment agreement) between the Company and the Executive dated
February 1, 2001, as the same may be amended from time to
time.
1.7
“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.
1.8 “
Normal Retirement Age ” means the Executive attaining
age 65.
1.9 “
Plan Year ” means a twelve-month period commencing on
January 1 and ending on December 31 of each year. The initial
Plan Year shall commence on the Effective Date of this
Agreement.
1.10 “
Termination for Cause ” shall be defined as set forth
in Article 5.
1.11 “
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.
1.12
“Years of Service” means the twelve consecutive
month period beginning on the Executive’s date of hire and
any twelve (12) month anniversary thereof, during the entirety
of which time the Executive is an employee of the
Company.
Article 2
Lifetime Benefits
2.1 Normal
Retirement Benefit . Upon Termination of Employment on or after
the Executive’s Normal Retirement Age, other than for reason
of death, the Company shall pay to the Executive the benefit
described in this Section 2.1 in lieu of any other benefit
under this Agreement.
2.1.1 Amount of
Benefit . The benefit under this Section 2.1 is an annual
benefit of $74,112 (Seventy-Four One Hundred Twelve Dollars) for a
period of fifteen (15) years resulting in a total benefit of
$1,111,680 (One Million One Hundred Eleven Thousand Six Hundred
Eighty Dollars). The Company’s Board of Directors, in its
sole discretion, through duly adopted resolution, may increase the
annual benefit under this Section.
2.1.2.
Payment of Benefit . The Company shall pay the benefit to
the Executive in 1802 equal monthly installments of $6,176 (Six
Thousand One Hundred Seventy Six Dollars) commencing with the month
following the later of (a) the Executive’s Termination
of Employment, or (b) the Executive attaining Normal Retirement
Age.
2.2 Early
Termination Benefit. Upon Termination of Employment prior to
Normal Retirement Age, other than for reasons of Disability, Change
of Control or death, the Company shall pay to the Executive the
benefit described in this Section 2.2 in lieu of any other
benefit under this Agreement.
2.2.1 Amount of
Benefit. The benefit under this Section 2.2 is determined
by multiplying the Normal Retirement Benefit amount described in
Section 2.1.1 by a fraction (rounded to the nearest
hundredth), the numerator of which is the number of Years of
Service at the time of the Executive’s termination of
employment (rounded to one tenth of a year); and the denominator is
the number of Years of Service that the Executive would have had if
the Executive had remained employed with the Company until the
Normal Retirement Age (rounded to one tenth of a year).
2.2.2 Payment
of Benefit . The Company shall pay the benefit to the Executive
in 180 equal monthly installments commencing with the month
following the Executive attaining Normal Retirement Age.
2.3 Disability
Benefit. Upon Termination of Employment due to Disability prior
to Normal Retirement Age, the Company shall pay to the Executive
the benefit described in this Section 2.3 in lieu of any other
benefit under this Agreement.
2.3.1 Amount of
Benefit. The benefit under this Section 2.3 is the Normal
Retirement Benefit amount described in
Section 2.1.1.
2.3.2 Payment
of Benefit. The Company shall pay the annual benefit to the
Executive in 180 equal monthly installments commencing with the
month following the Executive attaining Normal Retirement Age,
paying the annual benefit to the Executive for a period of
15 years.
2.4 Change of
Control Benefit . Upon Termination of Employment within
12 months subsequent to a Change of Control and prior to
Normal Retirement Age, the Company shall pay to the Executive the
benefit described in this Section 2.4 in lieu of any other
benefit under this Agreement.
2.4.1 Amount of
Benefit. The benefit under this Section 2.4 is the Normal
Retirement Benefit amount described in
Section 2.1.1.
2.4.2 Payment
of Benefit . The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments commencing with the
month following the Executive attaining Normal Retirement Age,
paying the annual benefit to the Executive for a period
of
2.4.3 Excess
Parachute Payment . Notwithstanding any provision of this
Agreement to the contrary, the Company will reduce any benefit
under this Agreement by an amount necessary to avoid an excise tax
under the excess parachute rules of Section 280G of the
Code.
2.5 Early
Payout. If the Executive’s Termination of Employment
occurs prior to Normal retirement Age, he may in a written request
to the Company elect to have annual benefit payments commence
within 30 days following the Executive’s Termination of
Employment rather than at age 65, provided the election is made
13 months prior to Termination of Employment. If such election
occurs the annual benefit amount shall be further reduced per month
for each month between Termination of Employment and age 65. Said
reduction shall be determined by using the 5-year Treasury Constant
Maturity Rate (not to exceed 6% annually) as of the last day of the
month prior to Termination of Employment, divided by 12.
3.1 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 benefit described in this Section
3.1. This benefit shall be paid in lieu of the benefits under
Article 2.
3.1.1 Amount of
Benefit . The benefit under this Section 3.1 is the Normal
Retirement Benefit amount described in
Section 2.1.1.
3.1.2 Payment
of Benefit . The Company shall pay the benefit to the
Executive’s beneficiary in 180 equal monthly installments
commencing with the month following the Executive’s
death.
3.2 Death
During Payment of a Benefit . If the Executive dies after any
benefit payments have commenced under Article 2 of this
Agreement but before receiving all such payments, the Company shall
pay the remaining benefits 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.
3.3 Death After
Termination of Employment But Before Payment of a Benefit
Commences. If the Executive is entitled to a benefit under
Article 2 of this Agreement, but dies prior to the
commencement of said benefit payments, the Company shall pay the
same benefit payments to the Executive’s beneficiary that the
Executive was entitled to prior to death except that the benefit
payments shall commence on the first day of the month following the
date of the Executive’s death, without any reduction for
earlier commencement.
4.1 Beneficiary
Designations . The Executive shall designate a beneficiary by
filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new
designation. However, designations will 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 Executive’s estate.
4.2 Facility of
Payment . 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.
Article 5
General Limitations
5.1 Termination
for Cause . Notwithstanding any provision of this Agreement to
the contrary, the Company shall not pay any benefit under this
Agreement if the Company terminates the Executive’s
employment for Cause. Cause shall mean, in the good faith
determination of the Company’s Board of Directors, the
Executive’s personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of
any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. The Executive shall have
no right to receive compensation or other benefits for any period
after Termination for Cause. No act, or failure to act, on the
Executive’s part shall be considered “willful”
unless he has acted, or failed to act, with an absence of good
faith and without a reasonable belief that his action or failure to
act was in the best interest of the Company.
5.2 Suicide or
Misstatement . The Company shall not pay 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
any benefit under this Agreement if the Executive has made any
material misstatement of fact on an employment application or
resume provided to the Company, on any application for any benefits
provided by the Company to the Executive, or on any application for
insurance that the Company may purchase on the life of
Executive.
5.3 Termination
or Suspension Under Federal Law . (1) If the Executive is
removed and/or permanently prohibited from participating in the
conduct of the Company’s affairs by an order issued under
Sections 8(c )(4) or 8(g)(1) of the Federal Deposit Insurance
Act (“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)), all
obligations of the Company under this Agreement shall terminate, as
of the effective date of the order, but vested rights of the
parties shall not be affected.
(2) If the
Company is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under
this Agreement
shall terminate as of the date of default; however, this Paragraph
shall not affect the vested rights of the parties.
(3) If a
notice served under Section 8(e)(3) of the FDIA (12 U.S.C.
1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Executive from participating in the conduct of the Company’s
affairs, the Company’s obligations under this Agreement shall
be suspended as of the date of such service, unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Company may in its discretion (i) pay the
Executive all or part of the compensation withheld while is
contract obligations were suspended, and (ii) reinstate (in
whole or in apart) any of its obligations which were
suspended.
Article 6
Claims and Review Procedure
6.1 Claims
Procedure . Any individual (“claimant”) who has not
received benefits under the Agreement that he or she believes
should be paid shall make a claim for such benefits as
follows:
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