This Employment Agreement (the
“Agreement”) is made and entered into as of November 6,
2006 by and among State Bancorp, Inc. , a New York
business corporation (the “Company”), State
Bank of Long Island , a banking corporation organized and
operating under the laws of the State of New York (the
“Bank”), and Thomas M. O’Brien ,
an individual (the “Executive”).
The Company is a bank holding company whose
common stock is listed for trading on the Nasdaq Stock Market
Global Market. The Bank is a wholly owned subsidiary of the Company
and conducts a commercial and consumer banking business in the New
York metropolitan area. The Executive has substantial prior
experience as a senior executive at public and private banking
companies in the New York metropolitan area, including service as
chief executive officer. The Board of Directors of the Company (the
“Company Board”) and the Board of Directors of the Bank
(the “Bank Board”) have determined that it is in the
best interest of the Company and the Bank to anticipate and provide
for a management transition arising from the eventual retirement of
the incumbent Chairman and Chief Executive Officer by securing the
services of a seasoned banking executive with prior experience as a
chief executive in exchange for a compensation package that
conserves tangible capital and creates a substantial focus on
creation of shareholder value. The Company and the Bank wish to
employ the Executive, and the Executive is willing to accept
employment, for such purposes.
The terms and conditions which the Company, the
Bank and the Executive have agreed to are as follows.
AGREEMENT
The Company and the Bank hereby offer to employ
the Executive, and the Executive hereby accepts such employment,
during the period and on the terms and conditions set forth in this
Agreement.
2.
Employment Period;
Remaining Unexpired Employment Period.
(a) The Bank shall employ the Executive for a period
of five (5) years beginning on the date of this Agreement (the
“Employment Commencement Date”) and ending on the fifth
(5th) anniversary of the Employment Commencement Date (the
“Employment Period”).
(b) Except as otherwise expressly provided in this
Agreement, any reference in this Agreement to the term
“Remaining Unexpired Employment Period” as of any date
shall mean the period beginning on such date and ending on the last
day of the Employment Period.
(c) Nothing in this Agreement shall be deemed to
prohibit the Bank or the Company from terminating the
Executive’s employment before the end of the Employment
Period with or without notice and for any reason or without reason.
This Agreement shall determine the relative rights and obligations
of the Company, the Bank and the Executive in the event of any such
termination. In addition, nothing in this Agreement shall require a
termination, or prohibit a continuation, of the Executive’s
employment at the expiration of the Employment Period. Any such
continuation shall be on an “at-will” basis unless the
Company, the Bank and the Executive agree otherwise.
(a) The Executive shall initially serve in the
positions of President and Chief Operating Officer of the Bank and
of the Company, shall have such power, authority and responsibility
and perform such duties as are customarily associated with such
positions and shall report to the Chairman and Chief Executive
Officer and to the Bank Board and the Company Board. Upon the
retirement or other cessation of service of the incumbent as Chief
Executive Officer (the “Transition Date”), the
Executive shall be elected to the position of Chief Executive
Officer of the Bank and the Company, shall have such power,
authority and responsibility and perform such duties as are
prescribed by or under the Bank’s By-Laws and as are
customarily associated with such position and shall report only to
the Company Board and the Bank Board.
(b) The Executive shall also serve as a member of
the Bank Board and the Company Board and as an officer or director
of any subsidiary or affiliate of the Bank or the Company, if duly
elected or appointed to serve in such capacities.
(c) The Executive shall devote his full business
time and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of
absence) to the business and affairs of the Company and the Bank
and shall use all of his skill and efforts to advance their best
interests. On the Employment Commencement Date, the Executive shall
execute a copy of the Company’s Code of Business Conduct and
Ethics.
(d) Within a reasonable period after the Employment
Commencement Date, the Executive agrees to invest $1,000,000 in the
Company’s Common Stock on a basis reasonably acceptable to
the Company and the Executive consistent with the Company’s
stock ownership guidelines for executives.
The Executive may serve as a member of the
boards of directors or other governing bodies of such business,
community and charitable organizations as he may disclose to and as
may be approved by the Company Board, or the Compensation Committee
or Executive Committee thereof (which approval shall not be
unreasonably withheld); provided, however , that such
service shall not materially interfere with the performance of his
duties under this Agreement. The Executive may also engage in
personal business and investment activities which do not materially
interfere with the performance of his duties hereunder;
provided, however , that such activities are not
prohibited under any code of conduct or investment or securities
trading policy established by the Bank or the Company and generally
applicable to all similarly situated executives. As of the date of
this Agreement, the Executive has disclosed to, the Company Board
has approved, the Executive’s service as a director of the
entities enumerated on Exhibit A to this Agreement.
5.
Working Facilities and
Expenses.
The Executive’s principal place of
employment shall be at the Company’s executive offices as of
the date of this Agreement, or at such other location as the
Company and the Executive may mutually agree upon. The Company or
the Bank shall provide the Executive at his principal place of
employment with a private office, secretarial services and other
support services and facilities (including but not limited to a
Company owned or leased automobile) suitable to his positions with
the Company and the Bank and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement.
The Company shall reimburse the Executive for such ordinary and
necessary travel, entertainment and business expenses consistent
with past practice or as the Executive and the Company shall
mutually agree are necessary and appropriate for business purposes,
upon presentation of an itemized account of such expenses in such
form as the Company may reasonably require.
For his services under this Agreement during the
Employment Period, the Bank and the Company shall provide the
Executive with a compensation package consisting of the following:
(i) a base salary; (ii) a stock-based signing bonus in the form of
a restricted stock grant; (iii) an annual incentive; and (iv) a
long-term incentive in the form of stock options, as
follows:
(i)
Base Salary
. The Company and the Bank shall pay the Executive
a base salary at the annual rate of Fifty Thousand Dollars
($50,000), payable in approximately equal installments in
accordance with the Bank’s customary payroll practices for
senior officers. The Company Board, or the Compensation Committee
or Executive Committee thereof, shall review the Executive’s
annual rate of salary at such times during the Employment Period as
it deems appropriate, but not less frequently than once every
twelve (12) months, and may, in its discretion, approve a salary
increase.
(ii)
Annual
Incentive . The
Executive shall be eligible for an annual incentive award, which
may be payable in cash or stock-based compensation, on a basis no
less favorable than members of the office of the Chairman of the
Company (the “Annual Bonus”). The Executive shall have
a target Annual Bonus (the “Target Bonus”) of
$225,000.
(iii)
Long-term
Incentive . In
consideration of the Executive’s acceptance of employment and
execution of this Agreement, the Company shall
grant to the Executive non-qualified stock options (the
“Initial Stock Options”) to purchase a number of shares
of Common Stock of the Company (“Common Stock”) equal
to the quotient of (i) One Million Dollars ($1,000,000) divided by
(ii) thirty-four percent (34%) of the closing sales price for a
share of Common Stock as reported in the New York City Edition of
the Wall Street Journal for the fourth (4th) trading day after the
Company's issuance of a press release announcing the Executive's
employment as President and Chief Operating Officer of the Company
(the date of such announcement, the “Announcement
Date”). Twenty (20%) of the Initial Stock Options shall vest
and become exercisable on each anniversary of the Announcement Date
until all of the Initial Stock Options have become exercisable. The
Initial Stock Options shall have a term that expires on the tenth
(10th) anniversary of the Announcement Date or, if earlier, at the
date and time of the Executive’s discharge with Cause (as
defined herein) and an exercise price per share equal to fair
market value of the Common Stock subject to the Initial Stock
Options on the date of grant. The Initial Stock Options shall be
evidenced by a written stock option agreement in a form prescribed
by the Company that is consistent with the terms of this Agreement
and otherwise is substantially the same as the form of stock option
agreement used by the Company for other executive officer stock
option grants as of the date of this Agreement.
(iv)
Signing Bonus
. In consideration of the Executive’s
acceptance of employment and execution of this Agreement, the
Company shall pay to the Executive a signing bonus (the
“Signing Bonus”) by delivery to the Executive of a
number of shares of Common Stock equal to the quotient of (A) One
Million Five Hundred Thousand Dollars ($1,500,000.00) divided by
(B) the average of the closing sales price for a share of Common
Stock as reported in the New York City Edition of the Wall Street
Journal for each trading day during the period of seven (7)
consecutive trading days commencing on the fourth (4th) trading day
after the Announcement Date (such period, the “Averaging
Period” and such number of shares of Common Stock, the
“Bonus Stock”). The Signing Bonus shall be delivered by
issuance to the Executive of a certificate evidencing the Bonus
Stock with a record date of the last day of the Averaging Period.
The Executive may, in his discretion, timely file an election under
section 83(b) of the Internal Revenue Code of 1986, as amended (the
“Code”) with respect to the Bonus Stock. The Bonus
Stock shall vest in twenty (20) equal quarterly installments
commencing with the end of the first quarter in which the
Employment Commencement Date occurs, subject to acceleration upon
death, Disability and termination without Cause or termination by
the Executive with Good Reason The Signing Bonus shall be in lieu
of participation during the Employment Period in any non-qualified
deferred compensation or supplemental executive retirement program
provided for other senior executives of the Bank or the Company,
however denominated (except for any program providing for the
voluntary or mandatory deferral of compensation otherwise earned
and payable).
7.
Employee Benefit Plans
and Programs.
(a) Except as expressly provided herein to the
contrary, during the Employment Period, the Executive shall be
treated as an employee of the Bank and the Company and shall be
entitled to participate in and receive benefits under any and all
qualified retirement, pension, savings, profit-sharing or stock
bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and
long-term disability insurance plans, and any other employee
benefit and compensation plans (including, but not limited to, any
incentive compensation plans or programs, stock option and
appreciation rights plans and restricted stock plans) as may from
time to time be maintained by, or cover employees of, the Bank and
the Company, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and
programs and consistent with the Bank’s and the
Company’s customary practices.
(b) The Company and the Bank shall provide the
Executive and his eligible dependents with coverage under the
Bank’s and the Company’s group health (including
hospitalization, medical and major medical), dental and vision care
plans through the last day of the first calendar month in which the
both the Executive and his spouse are eligible for coverage under
Medicare. In lieu thereof, the Bank and the Company may provide
substitute coverage by direct payment to the carrier of the
Executive’s share of premiums for continuation coverage under
the corresponding plan of a prior employer or for coverage under an
individual policy providing substantially equivalent benefits and
approved by the Executive (which approval shall not be unreasonably
withheld or delayed). The Company may require the Executive, while
employed, to pay a portion of the premium cost of such coverage;
provided, however , that the
Executive’s dollar cost for any period shall not exceed the
dollar cost borne by senior executives of the Company for
corresponding coverage. Following the Executive’s termination
of employment, the Company shall use all reasonable efforts to have
such coverage continued and the Company may require the Executive
to pay the full premium cost for such coverage (but in no event in
excess of the aggregate premium cost paid by the Company and an
actively employed executive for the same or substantially similar
coverage), provided that if the Company cannot provide continuing
coverage under its then existing plans, it shall have no obligation
to acquire alternative coverage. The obligation to provide this
coverage shall survive the termination of the Agreement unless the
Executive is terminated with Cause or resigns without Good Reason
(as defined in this Agreement).
(c) In addition to coverage under any group-term
life insurance program maintained generally for employees of the
Bank and the Company, the Bank and the Company shall pay directly
to the carrier all required premiums under [Name of insurer and
policy number deleted for privacy reasons] that are become due
during the period beginning on the Employment Commencement Date and
ending on the last day of the calendar year in which the Executive
attains age 65. The obligation to make these payments shall survive
the termination or expiration of this Agreement for any reason
other than the Executive’s discharge with Cause or
resignation without Good Reason (as defined in this
Agreement).
8.
Indemnification and
Insurance.
(a) During the Employment Period and thereafter, the
Bank and the Company shall cause the Executive to be covered by any
policy or contract of insurance obtained by them to insure their
respective directors and officers against personal liability for
acts or omissions in connection with service as an officer or
director or service in other capacities at their request. The
coverage provided to the Executive pursuant to this section 8 shall
be of the same scope and on the same terms and conditions as the
coverage (if any) provided to other officers or directors of the
Bank and the Company.
(b) To the maximum extent permitted under applicable
law, during the Employment Period and thereafter, the Bank and the
Company shall indemnify the Executive against and hold him harmless
from any costs, liabilities, losses and exposures to the fullest
extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Bank
or any subsidiary or affiliate thereof.
9.
Termination of Employment
Due to Death.
(a) The Executive’s employment with the Bank
and the Company shall terminate, automatically and without any
further action on the part of any party to this Agreement, on the
date of the Executive’s death. In such event:
(i) The Bank and the Company shall pay to the
Executive’s estate his earned but unpaid compensation
(including, without limitation, salary, any Annual Incentive
payable in respect of a completed fiscal year, 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 30 (thirty) days after the date of
the Executive’s termination of employment.
(ii) The Bank and the Company shall provide the
benefits, if any, due to the Executive’s estate, surviving
dependents or 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 and the
Company. 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.
The payments
and benefits described in sections 9(a)(i) and (ii) shall be
referred to in this Agreement as the “Standard Termination
Entitlements.”
(b) In addition to the Standard Termination
Entitlements, in the event of the Executive’s death during
the Employment Period, the entire unvested portion of the Signing
Bonus and the Initial Stock Options shall vest as of the
Executive’s date of death.
10.
Termination Due to
Disability.
The Bank and the Company may terminate the
Executive’s employment upon a determination, by vote of a
majority of the members of the Company Board, or the members of the
Compensation Committee or Executive Committee thereof, acting in
reliance on the written advice of a medical professional acceptable
to them, that the Executive is suffering from a physical or mental
impairment which, at the date of the determination, has prevented
the Executive from performing his assigned duties on a
substantially full-time basis for a period of at least sixty (60)
days during the period of six (6) months ending with the date of
the determination or is likely to result in death or prevent the
Executive from performing his assigned duties on a substantially
full-time basis for a period of at least sixty (60) days during the
period of six (6) months beginning with the date of the
determination. In such event:
(a) The Bank shall pay and deliver to the Executive
(or in the event of his death before payment, to his estate,
surviving dependents or beneficiaries, as applicable) the Standard
Termination Entitlements.
(b) In addition to the Standard Termination
Entitlements (i) the Signing Bonus and the Initial Stock Options
shall continue to vest as if the Executive remained in the active
service of the Bank and the Company and (ii) upon the
Executive’s death prior to full vesting, any unvested portion
of the Signing Bonus and the Initial Stock Options shall vest as of
the Executive’s date of death.
A termination
of employment due to disability under this section 10 shall be
effected by notice of termination given to the Executive by the
Bank and the Company and shall take effect on the later of the
effective date of termination specified in such notice or sixty
(60) days after the date on which the notice of termination is
deemed given to the Executive.
11.
Discharge with
Cause.
(a) The Bank and the Company may terminate the
Executive’s employment during the Employment Period, and such
termination shall be deemed to have occurred with
“Cause” only if the Company Board and the Bank Board,
by majority vote of their entire membership, each determines that
the Executive (i) has willfully failed or refused to perform his
assigned duties under this Agreement in any material respect
(including, for these purposes, the Executive’s inability to
perform such duties as a result of drug or alcohol dependency);
(ii) has committed gross negligence in the performance of, or is
guilty of continual neglect of, his assigned duties; (iii) has been
convicted or entered a plea of guilty or nolo contendere
to, the commission of a felony or any other crime involving
dishonesty, personal profit or other circumstance likely, in the
reasonable judgment of the Company Board and Bank Board, to have a
material adverse effect on the Bank and the Company or their
business, operations or reputation taken as a whole; (iv) has
violated, in any material respect, any law, rule, regulation,
written agreement or final cease-and-desist order applicable to the
Bank in his performance of services for the Bank or the Company or
the Company’s or the Bank’s Code of Conduct; or (v) has
willfully and intentionally breached the material terms of this
Agreement in any material respect. For purposes of this section 11,
no act or failure to act on the part of the Executive shall be
considered “willful” unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best
interests of the Bank and the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by
the Company Board or the Bank Board or the Executive Committee
thereof or based upon the written advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and in the best interests of the
Bank and the Company. Termination with Cause shall be effected by
written notice to the Executive setting forth with particularity
the grounds for termination.
(b) If the Executive is discharged during the
Employment Period with Cause, the Bank and the Company shall pay
and provide to him (or, in the event of his death, to his estate,
his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements only; any unvested Bonus Stock,
any unexercised options to purchase Common Stock, whether or not
vested shall be forfeited. While a proceeding to discharge the
Executive with Cause is pending, the Company Board and the Bank
Board may, by written notice to the Executive, temporarily suspend
the Executive’s duties and authority and, in such event, may
also suspend the payment of salary and other cash compensation and
the vesting of Bonus Stock and the exercise of stock options, but
not the Executive’s participation in retirement, insurance
and other employee benefit pla
