EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This sets forth the terms of the
Employment Agreement made as of April 4, 2008 between (i)
COMMUNITY BANK SYSTEM, INC., a Delaware corporation and registered
bank holding company, and COMMUNITY BANK, N.A., a national banking
association, both having offices located in Dewitt, New York
(collectively, the “Employer”), and (ii) SCOTT A.
KINGSLEY, an individual currently residing at Manlius, New York
(“Employee”).
WITNESSETH
IN
CONSIDERATION of the promises and mutual agreements and covenants
contained herein, and other good and valuable consideration, the
parties agree as follows:
1.
Employment .
(a)
Term . Employer shall employ Employee, and Employee shall
serve, as Executive Vice President and Chief Financial Officer, for
CBSI and CBNA for a term commencing on January 1, 2008 and
ending on December 31, 2010 (“Period of
Employment”), subject to termination as provided in paragraph
3 hereof.
(b)
Salary . During the Period of Employment, Employer shall pay
Employee a base salary at the annual rate of not less than $310,000
(“Base Salary”). Employee’s Base Salary for
calendar years after 2008 shall be reviewed and adjusted annually
in accordance with Employer’s regular practice for executive
employees. Employee’s Base Salary is payable in accordance
with Employer’s regular payroll practices for executive
employees.
(c)
Incentive Compensation . During the Period of Employment,
Employee shall be entitled to annual incentive compensation as a
Tier 2 Executive of the Employer pursuant to the terms of the
Management Incentive Plan, which has been approved by the Board of
Directors of Employer to cover Employee and other key personnel of
Employer, as well as other incentive plans that may be established
by Employer and that are applicable to Employer’s executives
of similar salary tier to Employee. Upon termination of
Employee’s employment pursuant to subparagraph 3(a), 3(b),
3(c) or 6, Employee shall be entitled to a pro rata portion (based
on Employee’s complete months of employment in the applicable
year) of the annual incentive awards that are payable with respect
to the year during which the termination occurs or, if the annual
awards for such year are not determinable at the termination date,
then the immediately prior year’s awards shall be used to
determine such pro rata portion.
2.
Duties during the Period of Employment . As Employer’s
Executive Vice President and Chief Financial Officer, Employee
shall have full responsibility, subject to the control of
Employer’s President and Chief Executive Officer and/or the
authorized designee of Employer’s Board of Directors, for the
supervision of all assigned aspects of Employer’s business
and operations including all matters related to finance,
accounting, investor relations, and financial services
subsidiaries, and the discharge of such other duties and
responsibilities to Employer, not inconsistent with such position,
as may from time to time be reasonably assigned to Employee by
Employer’s President and Chief Executive Officer, or the
authorized designee of Employer’s Board of Directors.
Employee shall report to the Employer’s President and Chief
Executive Officer. Employee shall devote Employee’s best
efforts to the affairs of Employer, serve faithfully and to the
best of Employee’s ability and devote all of Employee’s
working time and attention, knowledge, experience and skill to the
business of Employer, except that
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Employee
may affiliate with professional associations, and business, civic
and charitable organizations, provided that such services and
affiliations do not unreasonably interfere with the performance of
Employee’s duties under this Agreement. Employee shall serve
on the Board of Directors of, or as an officer of Employer’s
affiliates, without additional compensation if requested to do so
by the Board of Directors of Employer. Employee shall receive only
the compensation and other benefits described in this Agreement for
Employee’s services to affiliates of Employer.
3.
Termination . Employee’s employment by Employer shall
be subject to termination as follows:
(a)
Expiration of the Term . This Agreement shall terminate
automatically at the expiration of the Period of Employment unless
the parties enter into a written agreement extending
Employee’s employment, except for the continuing obligations
of the parties as specified hereunder.
(b)
Termination Upon Death . This Agreement shall terminate upon
Employee’s death. In the event this Agreement is terminated
as a result of Employee’s death, Employer shall continue
payments of Employee’s Base Salary for a period of
90 days following Employee’s death to the beneficiary
designated by Employee on the “Beneficiary Designation
Form” attached to this Agreement as Appendix A. Any
restrictions on shares of CBSI stock previously granted to Employee
shall be waived as of the date of death and Employee’s
beneficiary shall be free to dispose of any restricted stock
previously granted to Employee by Employer. Additionally, Employer
shall treat as immediately exercisable all unexpired stock options
issued by Employer and held by Employee that are not exercisable or
that have not been exercised, so as to permit the Beneficiary to
purchase the balance of Community Bank System,
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Inc.
(“CBSI”) Stock not yet purchased pursuant to said
options until the end of the full exercise period provided in the
original grant of the option right, determined without regard to
Employee’s death or termination of employment.
(c)
Termination Upon Disability . Employer may terminate this
Agreement upon Employee’s disability. For the purpose of this
Agreement, Employee’s inability to perform substantially all
of Employee’s duties under this Agreement by reason of
physical or mental illness or injury for a period of 26 successive
weeks (the “Disability Period”) shall constitute
disability. The determination of disability shall be made by a
physician selected by Employer and a physician selected by
Employee; provided, however, that if the two physicians so selected
shall disagree, the determination of disability shall be submitted
to arbitration in accordance with the rules of the American
Arbitration Association and the decision of the arbitrator shall be
binding and conclusive on Employee and Employer. During the
Disability Period, Employee shall be entitled to 100% of
Employee’s Base Salary otherwise payable during that period,
reduced by all other Employer-provided income replacement benefits
to which Employee may be entitled for the Disability Period on
account of such disability (including, but not limited to, benefits
provided under any disability insurance policy or program,
worker’s compensation law, or any other benefit program or
arrangement). Upon termination pursuant to this disability
provision, any restrictions on shares of CBSI stock previously
granted to Employee shall be waived and Employee shall be free to
dispose of any restricted stock granted to Employee. Additionally,
Employer shall treat as immediately exercisable all unexpired stock
options issued by Employer and held by Employee that are not
exercisable or that have not been exercised, so as to permit the
Employee to purchase the balance of CBSI Stock not yet purchased
pursuant to said options until the end of the full exercise period
provided in the original grant of
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the
option right, determined without regard to Employee’s
disability or termination of employment.
(d)
Termination for Cause . Employer may terminate
Employee’s employment immediately for “cause” by
written notice to Employee. For purposes of this Agreement, a
termination shall be for “cause” if the termination
results from any of the following events:
(i) The
willful breach of any material provision of this Agreement, which
breach Employee shall have failed to cure within thirty
(30) days following Employer’s written notice to
Employee specifying the nature of the breach;
(ii) Any
documented misconduct by Employee as an executive or director of
Employer, or any subsidiary or affiliate of Employer for which
Employee is performing services hereunder, which is material and
adverse to the interests, monetary or otherwise, of Employer or any
subsidiary or affiliate of Employer;
(iii) Unreasonable
neglect or refusal to perform the duties assigned to Employee under
or pursuant to this Agreement, unless cured within thirty
(30) days following Employer’s written notice to
Employee specifying the nature of the neglect or refusal;
(iv) Conviction
of a crime involving any act of dishonesty, acts of moral
turpitude, or the commission of a felony;
(v) Adjudication
as a bankrupt, which adjudication has not been contested in good
faith, unless bankruptcy is caused directly by Employer’s
unexcused failure to perform its obligations under this
Agreement;
(vi)
Documented failure to follow the reasonable, written instructions
of the Board of Directors of Employer or the Employer’s
President and Chief
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Executive Officer, provided that the instructions do not require
Employee to engage in unlawful conduct; or
(vii) A
willful violation of a material rule or regulation of the Office of
the Comptroller of the Currency or of any other regulatory agency
governing Employer or any subsidiary or affiliate of
Employer.
Notwithstanding
any other term or provision of this Agreement to the contrary, if
Employee’s employment is terminated for cause, Employee shall
forfeit all rights to payments and benefits otherwise provided
pursuant to this Agreement; provided, however, that Base Salary
shall be paid through the date of termination.
(e)
Termination For Reasons Other Than Cause . In the event
Employer terminates Employee’s employment prior to
December 31, 2010 for reasons other than “cause”
(as defined in paragraph 3(d)), then Employee shall be entitled to
a severance benefit equal to the greater of (i) the sum of
Employee’s annual Base Salary in effect at the time of
termination and the aggregate sum of all payments made to Employee
during the 12 months preceding Employee’s termination
pursuant to the Management Incentive Plan (or equivalent successor
plan), or (ii) amounts of Base Salary and expected Management
Incentive Plan ( or equivalent successor plan) payments that
otherwise would have been payable through the balance of the
unexpired term of this Agreement. Unless Employee is a
“specified employee” (as determined in accordance with
Internal Revenue Code Section 409A), the benefit payable
pursuant to this paragraph 3(e) shall be payable in equal biweekly
installments over the 12 month period that begins on the first
day of the month following Employee’s termination. If
Employee is a “specified employee” (as determined in
accordance with Internal Revenue Code Section 409A), then
installment payments during the first six months of the
12 month installment period
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shall be
limited to the extent required by Internal Revenue Code
Section 409A, annual unpaid installment amounts shall be paid
immediately after such six-month period and installment payments
due during the remaining six months shall be paid as
scheduled.
In
addition to the cash benefit described in the foregoing of this
paragraph 3(e), Employer shall: (iii) waive all restrictions
on all restricted stock previously granted to Employee and permit
Employee to dispose of any restricted stock; and (iv) treat as
immediately exercisable all unexpired stock options held by
Employee that are not exercisable or that have not been exercised,
so as to permit Employee to purchase the balance of CBSI Stock not
yet purchased pursuant to said options until the end of the full
exercise period provided in the original grant of the option right
determined without regard to Employee’s termination of
employment.
Notwithstanding
the foregoing, if Employer terminates Employee for reasons other
than cause and under circumstances that entitle Employee to
payments and benefits under paragraph 6 of this Agreement
(regarding “Change of Control”) then amounts payable
under clauses (i) or (ii) of this paragraph 3(e) shall be
reduced by any payments made to Employee under paragraphs 6(a)(i)
and (ii).
(f)
Expiration of Term Without Renewal. In the event that
Employee’s employment ends on December 31, 2010 solely
because Employer chooses not to renew or extend this Agreement
beyond December 31, 2010 for reasons other than cause, then
Employee shall be entitled to a severance benefit equal to the sum
of (i) 175 percent of Employee’s annual Base Salary
in effect at the time of termination, and (ii) the aggregate
sum of all payments made to Employee during 2010 pursuant to the
Management Incentive Plan (or equivalent successor plan). The
benefit payable under this paragraph 3(f) shall be reduced by
any
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amounts
payable to Employee under paragraphs 6(a)(i) and (ii). Any
remaining benefit described in this paragraph 3(f) shall be paid on
or before March 15, 2011.
(g) Employer
shall have the right of first refusal to purchase from Employee or
Employee’s estate, shares of CBSI stock acquired pursuant to
the exercise of stock options after the date of Employee’s
termination of employment for any reason, in the event Employee or
Employee’s estate elects to dispose or transfer such acquired
shares. Such right of first refusal shall expire ten years from the
date of termination. Employee (or Employee’s estate, as the
case may be) shall provide Employer with not less than
30 days’ advance written notice of any disposition or
transfer. If Employer chooses to exercise
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