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Exhibit
10.3
F ORM O
F O NE -Y EAR C
HANGE OF C ONTROL A
GREEMENT
This C
HANGE OF C ONTROL A
GREEMENT (the “Agreement”) is made
and entered into as of November 14, 2007 (the “Effective
Date”) by and among L AKE S
HORE S AVINGS B
ANK , a federally-chartered savings bank having
an office at 128 East 4 th Street, Dunkirk, New York 14048 (the “Bank”), L
AKE S HORE B ANCORP ,
I NC . , a federally-chartered corporation
having an office at 128 East 4 th Street, Dunkirk, New York 14048 (the “Company”) and
(the
“Officer”).
I
NTRODUCTORY S TATEMENT
The Bank has reorganized from
a New York-chartered mutual savings and loan association to a
federally-chartered stock savings bank and has become a
wholly-owned subsidiary of the Company, a mid-tier stock holding
company, which is majority owned by Lake Shore, MHC, a mutual
holding company (the “Reorganization”). In connection
with the Reorganization, certain shares of the Company’s
common stock were sold in an initial public stock offering. The
Officer has served the Bank in an executive capacity prior to the
Reorganization and is familiar with the Bank’s
operations.
The Board of Directors of the
Bank has concluded that it is in the best interests of the Bank,
the Company and their prospective shareholders to establish a
working environment for the Officer which minimizes the personal
distractions that might result from possible business combinations
in which the Company or the Bank might be involved following the
Reorganization. To this end, the Bank has decided to provide the
Officer with assurance that his compensation will be continued for
a minimum period of one (1) year following termination of
employment, as defined in Treasury Regulation
Section 1.409A-1(h)(ii) (the “Assurance Period”)
if his employment terminates under specified circumstances related
to a business combination. The Board of Directors of the Bank has
decided to formalize this assurance by entering into this Change of
Control Agreement with the Officer. The Board of Directors of the
Company has authorized the Company to guarantee the Bank’s
obligations under this Agreement.
The terms and conditions
which the Bank, the Company and the Officer have agreed to are as
follows.
A
GREEMENT
Section 1.
Effective Date; Term; Change of Control and Pending Change of
Control Defined .
(a) This Agreement shall take
effect on the effective date of the Reorganization (the
“Effective Date”) and shall be in effect during the
period (the “Term”) beginning on the Effective Date of
the Reorganization and ending on the first anniversary of the date
on which the Bank notifies the Officer of its intent to discontinue
the Agreement (the “Initial Expiration Date”) or, if
later, the first anniversary of the latest Change of Control or
Pending Change of Control, as defined below, that occurs after the
Effective Date and before the Initial Expiration Date.
(b) For all purposes of this
Agreement, a “Change of Control” shall be deemed to
have occurred upon the happening of any of the following
events:
(i) the consummation of a
reorganization, merger or consolidation of the Company with one
(1) or more other persons, other than a transaction following
which:
(A) at least 51% of the
equity ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (“Exchange Act”)) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the outstanding
equity ownership interests in the Company; and
(B) at least 51% of the
securities entitled to vote generally in the election of directors
of the entity resulting from such transaction are beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by
persons who, immediately prior to such transaction, beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all
or substantially all of the assets of the Company or beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the outstanding securities of the
Company entitled to vote generally in the election of directors by
any person or by any persons acting in concert;
(iii) a complete liquidation
or dissolution of the Company;
(iv) the occurrence of any
event if, immediately following such event, at least 50% of the
members of the Board of Directors of the Company do not belong to
any of the following groups:
(A) individuals who were
members of the Board of Directors of the Company on the date of
this Agreement; or
(B) individuals who first
became members of the Board of Directors of the Company after the
date of this Agreement either:
(1) upon election to serve as
a member of the Board of Directors of the Company by affirmative
vote of three-quarters of the members of such board, or of a
nominating committee thereof, in office at the time of such first
election; or
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(2) upon election by the
shareholders of the Board of Directors of the Company to serve as a
member of such board, but only if nominated for election by
affirmative vote of three-quarters of the members of the Board of
Directors of the Company, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however ,
that such individual’s election or nomination did not result
from an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents other than by or on
behalf of the Board of Directors of the Company; provided,
however, that this section 1(b)(iv) shall only apply if the
Company is not majority owned by Lake Shore, MHC; or
(v) any event which would be
described in section 1(b)(i), (ii), (iii) or (iv) if the
term “Bank” were substituted for the term
“Company” therein.
In no event, however, shall a Change of
Control be deemed to have occurred as a result of (i) any
acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any
subsidiary of either of them, or by any employee benefit plan
maintained by any of them or (ii) the conversion of Lake
Shore, MHC to a stock form company and the issuance of additional
shares of the Company in connection therewith. For purposes of this
section 1(b), the term “person” shall have the meaning
assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
(c) For purposes of this
Agreement, a “Pending Change of Control” shall mean:
(i) the signing of a definitive agreement for a transaction
which, if consummated, would result in a Change of Control;
(ii) the commencement of a tender offer which, if successful,
would result in a Change of Control; or (iii) the circulation
of a proxy statement seeking proxies in opposition to management in
an election contest which, if successful, would result in a Change
of Control; provided, however, that the Change of Control
contemplated does, in fact, occur.
Section 2.
Discharge Prior to a Pending Change of Control
.
The Bank may discharge the
Officer at any time prior to the occurrence of a Pending Change of
Control for any reason or for no reason. In such event:
(a) The Bank shall pay to the
Officer (or, in the event of his death, his estate) his earned but
unpaid compensation (including, without limitation, salary and all
other items which constitute wages under applicable law) as of the
date of his termination of employment. This payment shall be made
at the time and in the manner prescribed by law applicable to the
payment of wages but in no event later than thirty (30) days
after the date of the Officer’s termination of
employment.
(b) The Bank shall provide
the benefits, if any, due to the Officer (or, in the event of his
death, his estate, surviving dependents or his designated
beneficiaries) under the employee benefit plans and programs and
compensation plans and programs maintained for the benefit of the
officers and employees of the Bank. The time and manner of payment
or other delivery of these benefits and the recipients of such
benefits shall be determined according to the terms and conditions
of the applicable plans and programs.
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The payments and benefits described in
sections 2(a) and (b) shall be referred to in this Agreement
as the “Standard Termination Entitlements.”
The Officer, the Company and
the Bank agree that the termination benefits described in this
section 2 are intended to be exempt from Section 409A
(“Section 409A”) of the Internal Revenue Code of 1986,
as amended (the “Code”) pursuant to Treasury Regulation
Section 1.409A-1(b)(4) as short-term deferrals or pursuant to
Treasury Regulation Section 1.409A-1(b)(1) as non-taxable
benefits.
Section 3.
Termination of Employment Due to Death .
The Officer’s
employment with the Bank shall terminate, automatically and without
any further action on the part of any party to this Agreement, on
the date of the Officer’s death. In such event, the Bank
shall pay and deliver to his estate and surviving dependents and
beneficiaries, as applicable, the Standard Termination Entitlements
within the timeframes contained in section 2.
The Officer, the Company and
the Bank agree that the termination benefits described in this
section 3 are intended to be exempt from Section 409A pursuant
to Treasury Regulation Section 1.409A-1(b)(4) as short-term
deferrals or pursuant to Treasury Regulation
Section 1.409A-1(b)(1) as non-taxable benefits.
Section 4.
Termination Due to Disability after Change of Control or Pending
Change of Control .
The Bank may terminate the
Officer’s employment during the Term and after the occurrence
of a Change of Control or a Pending Change of Control upon a
determination, by a majority vote of the members of the Board of
Directors of the Bank, acting in reliance on the written advice of
a medical professional acceptable to it, that the Officer is
suffering from a physical or mental impairment which, at the date
of the determination, has prevented the Officer from performing his
assigned duties on a substantially full-time basis for a period of
at least one hundred and eighty (180) days during the period
of one (1) year ending with the date of the determination or
is likely to result in death or prevent the Officer from performing
his assigned duties on a substantially full-time basis for a period
of at least one hundred and eighty (180) days during the
period of one (1) year beginning with the date of the
determination. In such event:
(a) The Bank shall pay and
deliver to the Officer (or in the event of his death before
payment, to his estate and surviving dependents and beneficiaries,
as applicable) the Standard Termination Entitlements within the
timeframes contained in section 2.
(b) In addition to the
Standard Termination Entitlements, the Bank shall continue to pay
the Officer his base salary, at the annual rate in effect for him
immediately prior to the termination of his employment, during a
period ending on the earliest of: (i) the expiration of one
hundred and eighty (180) days after the date of termination of
his employment; (ii) the date on which long-term disability
insurance benefits are first payable to him under any long- term
disability insurance plan covering employees of the Bank
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(the “LTD Eligibility
Date”); (iii) the date of his death; and (iv) the
expiration of the Assurance Period (the “Initial Continuation
Period”). If the end of the Initial Continuation Period is
neither the LTD Eligibility Date nor the date of his death, the
Bank shall continue to pay the Officer his base salary, at an
annual rate equal to sixty percent (60%) of the annual rate in
effect for him immediately prior to the termination of his
employment, during an additional period ending on the earliest of
the LTD Eligibility Date, the date of his death and the expiration
of the Assurance Period.
A termination of employment due to
disability under this section 4 shall be effected by a notice of
termination given to the Officer by the Bank and shall take effect
on the later of the effective date of termination specified in such
notice or the date on which the notice of termination is deemed
given to the Officer.
The Officer, the Company and
the Bank agree that the termination benefits described in this
section 4 are intended to be exempt from Section 409A pursuant
to Treasury Regulation Section 1.409A-1(b)(4) as short-term
deferrals or pursuant to Treasury Regulation
Section 1.409A-1(b)(1) as non-taxable benefits.
Section 5.
Discharge with Cause after Change of Control or Pending Change
of Control .
(a) The Bank may terminate
the Officer’s employment with “Cause” during the
Term and after the occurrence of a Change of Control or Pending
Change of Control, but a termination shall be deemed to have
occurred with “Cause” only if:
(i) the Board of Directors of
the Bank and the Board of Directors of the Company, by separate
majority votes of their entire membership, determine that the
Officer should be discharged because of 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 any material breach of this Agreement;
and
(ii) at least forty-five
(45) days prior to the vote contemplated by section 1(b)(i),
the Bank has provided the Officer with notice of its intent to
discharge the Officer for Cause, detailing with particularity the
facts and circumstances which are alleged to constitute Cause (the
“Notice of Intent to Discharge”); and
(iii) after the giving of the
Notice of Intent to Discharge and before the taking of the vote
contemplated by section 5(a)(i), the Officer (together with his
legal counsel, if he so desires) is afforded a reasonable
opportunity to make both written and oral presentations before the
Board of Directors of the Bank for the purpose of refuting the
alleged grounds for Cause for his discharge; and
(iv) after the vote
contemplated by section 5(a)(i), the Bank has furnished to the
Officer a notice of termination which shall specify the effective
date of his termination of employment (which shall in no event be
earlier than the date on which such notice is deemed given) and
include a copy of a resolution or resolutions adopted by the Board
of Directors of the Bank,
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certified by its corporate
secretary and signed by each member of the Board of Directors
voting in favor of adoption of the resolution(s), authorizing the
termination of the Officer’s employment with Cause and
stating with particularity the facts and circumstances found to
constitute Cause for his discharge (the “Final Discharge
Notice”).
(b) If the Officer is
discharged with Cause during the Term and after a Change of Control
or Pending Change of Control, the Bank shall pay and provide to him
(or, in the event of his death, to his estate, his surviving
beneficiaries and his dependents) the Standard Termination
Entitlements only, within the timeframes contained in section 2.
Following the giving of a Notice of Intent to Discharge, the Bank
shall temporarily suspend the Officer’s duties and authority
and, in such event, shall also suspend the payment of salary and
other cash compensation, but not the Officer’s participation
in retirement, insurance and other employee benefit plans. If the
Officer is not discharged, or is discharged without Cause, within
forty-five (45) days after the giving of a Notice of Intent to
Discharge, payments of salary and cash compensation shall resume,
and all payments withheld during
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