EMPLOYMENT AGREEMENT
This
Employment
Agreement (this "Agreement") is made effective as of
December 29, 2008 (the
"Effective Date"),
by and between ES
Bancshares, Inc.
(the "Company"),
the holding
company of Empire
State Bank,
N.A., a national
banking association
(the "Bank"), and Arthur W. Budich ("Executive"). The
Company and
Executive are sometimes collectively referred to herein as the
"parties."
WHEREAS, Executive
is serving as Executive Vice President and Chief
Financial Officer of the Bank pursuant to an employment agreement
by and between
Executive and the Bank dated October 20, 2005 (the "2005
Agreement"); and
WHEREAS, the parties
wish to supersede
and update the 2005
Agreement to
take into account
certain changes in the law under Section 409A of the Internal
Revenue Code of 1986, as amended ("Code"), and for certain other
purposes; and
WHEREAS, the Company
wishes to assure
itself of the services of Executive
as an officer of the Company for the period provided in this
Agreement,
and in
order to induce
Executive to remain in the employ of the Company and to provide
further incentive
for Executive to achieve the financial and performance
objectives of the Company, the parties desire to enter into this
Agreement.
NOW,
THEREFORE, in
consideration of the mutual covenants herein contained,
and upon the terms and conditions hereinafter provided, the parties
hereby agree
as follows:
1. POSITION AND
RESPONSIBILITIES.
During the term of this Agreement, Executive shall serve as Executive
Vice
President and Chief Financial Officer of the Company. Executive shall have such
duties,
responsibilities and
powers as are customary and appropriate for such
offices, including
without limitation, keeping the board of directors of
the
Company (the "Board") fully informed of his activities.
2. TERM AND
DUTIES.
(a)
One Year Contract;
Annual Renewal. The term of Executive's employment
under this Agreement
shall commence as of the Effective Date and shall continue
for a period of one (1) year (the "Employment Period").
Commencing on the
first
anniversary date of
the Effective Date, and continuing at each anniversary date
thereafter (the "Anniversary Date"), the Agreement shall renew for
an additional
year such that the remaining term shall be one (1) year;
provided, however, if
written notice of
nonrenewal is provided to Executive at least thirty (30) days
and not more than sixty (60) days prior to an Anniversary Date, the
term of this
Agreement shall not so renew, provided further that on an annual
basis prior to
the issuance of the notice of nonrenewal or the deadline for the notice
period
referenced above,
which ever comes first, the Board shall conduct a performance
review of Executive
for purposes of
determining whether to
provide notice of
nonrenewal. If (i)
timely notice is not delivered to the Executive, or (ii) if
such performance
review is not
conducted as required above and its related
findings provided in
its entirety to the
Executive,
the Agreement shall be
automatically extended for an additional year.
<PAGE>
(b)
Change in Control.
In the event of a
Change in Control (as defined in
Section 7 of
this Agreement), the Employment Period shall no longer be
applicable, and the
term of this Agreement
shall be deemed
amended such that
Executive's period of
employment shall be
automatically extended
to the first
anniversary of the
date on which such Change in Control occurs (the "Revised
Employment Period"),
and shall be further
extended automatically
for one (1)
additional day each
day following such Change in Control, unless either
Executive or the
Company elects not to extend the Revised
Employment
Period
further by giving written notice thereof to the other party,
in which case the
Revised Employment
Period shall become fixed and shall end on the first
anniversary of such written notice.
(c)
Termination of Agreement. Notwithstanding anything contained in this
Agreement to the
contrary, either Executive or the Company may terminate
Executive's employment
with the Company at any time during the term of this
Agreement, subject to the terms and conditions of this
Agreement.
(d)
Continued Employment
Following Expiration of Term. Nothing in this
Agreement shall
mandate or prohibit a continuation of Executive's employment
following the
expiration
of the term of this
Agreement,
upon such terms
and
conditions as the Company and Executive may mutually agree.
(e)
Duties. During the term of this Agreement, except for periods of
absence occasioned by
illness, reasonable
vacation periods, and reasonable
leaves of absence
approved by the Board,
Executive shall devote
substantially
all of his
business time, attention, skill, and efforts to the faithful
performance of his duties hereunder, including activities and services
related
to the organization, operation and management of the Company, and
shall take all
reasonably necessary and appropriate actions to promote,
develop and extend
the
business of the Company.
3. COMPENSATION,
BENEFITS AND REIMBURSEMENT.
(a)
Base Salary. In consideration of Executive's performance of the duties
set forth in Section 2, the Company shall provide Executive the compensation
specified in this
Agreement.
The Company shall pay Executive a salary of
$____________ per year
("Base Salary").
The Base Salary shall be payable in
accordance with the Company's regular payroll practices. During the
term of this
Agreement, the Board
may consider increasing, but not decreasing, Executive's
Base Salary on an annual basis, as the Board deems appropriate.
Any increase in
Base Salary shall become "Base Salary" for purposes of this
Agreement.
(b)
Bonus. Executive shall
be entitled to participate in any bonus plan of
the Company in which
Executive is eligible to participate. Nothing paid to
Executive under
any such plan or
arrangement
will be deemed to be
in lieu of
other compensation to which Executive is entitled under this
Agreement.
(c)
Employee Benefits.
The Company shall
provide Executive with
employee
benefit plans,
arrangements,
life insurance and perquisites substantially
equivalent to those in which Executive was participating or from which he was
deriving benefit
immediately
prior to the
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commencement of the term of this Agreement, and the Company shall not,
without
Executive's prior written consent, make any changes in such plans,
arrangements
or perquisites
that would
adversely affect Executive's rights or benefits
thereunder, except as
to any changes that are applicable to all participating
employees. Without
limiting the generality of the foregoing provisions of this
Section 3(c),
Executive will be entitled to participate in and receive
benefits
under any employee
benefit plans including, but not limited to, retirement
plans, supplemental
retirement
plans, pension plans, profit-sharing plans,
health-and-accident
insurance plans,
medical coverage or any other employee
benefit plan or
arrangement made
available by the Company in the future to its
senior executives,
including any stock benefit plans, subject to and on a basis
consistent with the terms, conditions and overall
administration of such
plans
and arrangements (collectively, the "Benefit Plans").
(d)
Paid Time Off.
Executive shall be
entitled to paid
vacation time of
four (4) weeks each year during the term of this Agreement
(measured on a fiscal
or calendar year basis, in accordance with the Company's
usual practices), as
well as sick leave,
holidays and other
paid absences in
accordance
with the
Company's policies and
procedures for senior
executives. Any unused
paid time
off during an annual
period shall be treated in accordance with the Company's
personnel policies as in effect from time to time.
(e)
Expense
Reimbursements. Upon
submission of
appropriate
invoices or
vouchers as the
Company shall
specify, the Company shall pay or reimburse
Executive for all reasonable expenses incurred by Executive in the
performance
of his duties hereunder in furtherance of the business,
and in keeping with
the
policies of the Company and its subsidiaries and affiliates,
provided that such
payment or
reimbursement shall be
made as soon as practicable but in no event
later than March 15 of
the year following
the year in which such
the right to
such payment or reimbursement occurred.
4. OUTSIDE
ACTIVITIES.
Executive may serve as
a member of the board of directors (or a committee
thereof) of business,
civic, corporate,
community and charitable organizations
subject to the Executive giving notice thereof to the Board, provided that in
each case such service shall not materially interfere with the performance of
his duties under this
Agreement or present any conflict of interest. Such
service to and
participation in
outside organizations
shall be presumed
for
these purposes to be
for the benefit of the
Company, and the Company shall
reimburse Executive his reasonable expenses associated
therewith.
5. WORKING
FACILITIES AND EXPENSES.
Executive's principal
place of employment shall be the Company's principal
executive offices. The
Company shall provide Executive, at his principal place
of employment, with a
private office,
stenographic services
and other support
services and facilities suitable to his position with the
Company and necessary
or appropriate
in connection with the performance of his duties under this
Agreement. The Company
shall reimburse Executive for his ordinary and necessary
business expenses
incurred in connection
with the performance of his duties
under this Agreement, including, without limitation, fees for
organizations that
Executive and the Board mutually agree are necessary and
appropriate to
further
the business of the Company, and travel
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<PAGE>
and reasonable
entertainment
expenses.
Reimbursement of such
expenses shall be made
upon submission
of appropriate
invoices or vouchers as the Company shall specify.
6. PAYMENTS TO
EXECUTIVE UPON AN EVENT OF TERMINATION.
(a)
Upon the occurrence
of an Event of
Termination
(as herein
defined)
during the term of this Agreement, the provisions of this Section 6
shall apply;
provided, however,
that in the event such
Event of Termination
occurs within
eighteen (18)
months following a Change in Control (as defined in Section 7
hereof), Section 7
shall apply instead. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the
following:
(i) the involuntary termination of Executive's employment hereunder
by
the
Company for any reason other than termination governed by Section 7
(in
connection with or
following a Change in Control), Section 9 (due to
Disability), or Section 10 (for Just Cause); or
(ii) Executive's resignation from the Company's employ upon any of
the
following, unless consented to by Executive:
(A) failure to appoint
Executive to the
position set forth in
Section 1, or a material change in Executive's function, duties, or
responsibilities,
which change would
cause Executive's
position to
become one of lesser
responsibility,
importance,
or scope from the
position and
responsibilities
described in Section 1, to which
Executive has not
agreed in writing
(and any such
material change
shall be deemed a continuing breach of this Agreement by the
Company);
(B) a relocation of Executive's principal place of employment
to
a location that is
more than twenty (20)
miles from the
location of
the Company's
principal executive offices as of the date of this
Agreement;
(C) a material reduction in the benefits and perquisites,
including Base Salary,
to Executive
from those being
provided as of
the Effective
Date (except for any reduction that is part of a
reduction in pay or benefits that is generally applicable to officers
or employees of the Company);
(D) a liquidation or dissolution of the Company or the Bank; or
(E) a material breach
of this Agreement
by the Company or the
Bank.
Upon the occurrence of any event described in clause (ii) above,
Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation for "Good
Reason" upon not less than thirty (30) days prior written
notice given within a reasonable period of time (not to exceed
ninety (90) days)
after the event giving rise to the right to elect, which termination by
Executive shall be an Event of Termination. The Company shall have thirty
(30)
days to cure the
condition giving
rise to the
resignation
for Good Reason,
provided, that the Company may elect to waive said thirty (30) day
period.
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(b)
Upon the occurrence of an Event of Termination, the Company shall pay
Executive, or, in the
event of his subsequent death, his designated beneficiary
or beneficiaries, or,
if there are no designated beneficiaries, his estate, as
the case may be, as severance pay or liquidated damages, or both, a lump sum
cash payment equal to three (3) times the sum of (i) the average
annual rate of
Base Salary paid in the last three (3) years ending in the year of termination
and (ii) the average annual rate of bonus awarded to Executive
during the prior
three (3) years.
Such payments shall be paid within sixty (60) days of the
Executive's Separation
from Service (within
the meaning of Section 409A of the
Code) and shall not be reduced in the event Executive obtains other employment
following the Event of Termination.
(c)
Upon the occurrence of an Event of Termination, the Company shall pay
Executive, or in the
event of his subsequent death, his designated beneficiary
or beneficiaries, or,
if there are no designated beneficiaries, his estate, as
the case may be, a lump sum cash payment reasonably estimated to be
equal to the
present value of the contributions that would have been made on the
Executive's
behalf under the
Company's Benefit Plans (as defined in Section 3(c)
of this
Agreement), as if
Executive had continued working for the Company for the
remaining unexpired
Employment Period
under the Agreement following such Event
of Termination,
earning the salary and
credited service that would have been
achieved during such
period, where such present values are to be determined
using a discount rate
of six percent (6%)
and, in the case of defined benefit
plans, the mortality tables prescribed under Section 72 of the
Code. The amount
payable hereunder shall be paid as soon as reasonably practicable following the
occurrence of the Event of Termination but in no event shall be paid
later than
two and one-half
months following
the end of the
calendar year in which the
Event of Termination occurs.
(d)
Upon the occurrence
of an Event of
Termination,
the Company shall
provide at the Company's expense for the remaining unexpired Employment Period
under this Agreement, life insurance and non-taxable medical and
dental coverage
substantially comparable, as reasonably available, to the coverage
maintained by
the Company
for Executive prior to the Event of Termination, except to the
extent such coverage may be changed in its application to all
Company employees.
(e)
Upon the occurrence of an Event of Termination, Executive shall have
the right within thirty (30) days following such Event of
Termination, upon
the
surrender of stock options, stock, warrants, stock appreciation rights,
phantom
stock rights or other equity or equity rights (collectively, "Stock Rights")
issued to Executive by the Company or its parent, subsidiaries and affiliates,
to a lump sum payment equal to the product of:
(i) The excess of (A) the Fair Market Value (as herein defined) of a
share of stock of the
same class
as the stock that constitutes or is
subject to the Stock Right, determined as of the date of termination of
employment, over (B)
the exercise price per share, if any, for such Stock
Right, as specified in or under the relevant plan or program;
multiplied by
(ii) The number of shares with respect to which Stock Rights are
being
surrendered.
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For purposes of this Section 6(e), for purposes of determining
Executive's right
following an Event of Termination to exercise any Stock Rights not
surrendered
pursuant hereto, Executive shall be deemed to be fully vested in
and entitled to
exercise all Stock
Rights under any stock option or rights plan or program
maintained by, or covering employees of, the Company or its
subsidiaries, even
if Executive
is not so vested or
entitled to then
exercise such rights
under
such plan or program.
(f)
For purposes of this
Agreement,
"Fair Market Value" means the fair
market value per share of the Company's common stock ("Common Stock"). For
purposes hereof,
the Fair Market Value
of a share of Common Stock shall be the
closing sale
price of a share
of Common Stock on the date the Executive
exercises his right under Section 6(e) of this Agreement (or, if
such day is not
a trading day in the U.S. markets, on the nearest preceding trading day), as
reported with respect to the principal market (or the composite of the
markets,
if more than one) or
national quotation
system in which such
shares are then
traded, or if no such closing prices are reported, the mean between
the high bid
and low asked prices
that day on the
principal market or
national quotation
system then in use.
(g)
For purposes of this Agreement, a "Separation from Service" shall
have
occurred if the
Company and
Executive reasonably anticipate that either no
further services will
be performed by the Executive after the date of the Event
of Termination
(whether as an employee or as an independent contractor) or the
level of further services performed will not exceed
forty-nine percent (49%) of
the average level of
bona fide services in
the twelve (12) months
immediately
preceding the Event of Termination. For all purposes hereunder,
the definition
of Separation
from Service shall be interpreted consistent with Treasury
Regulation Section
1.409A-1(h)(ii). If
Executive is a Specified Employee, as
defined in Code Section 409A and any payment to be made under
paragraph (b) or
(c) of this Section 6 shall be determined to be subject to Code Section
409A,
then if and to the extent necessary to comply with Code Section 409A
and avoid
additional tax
thereunder,
such payment or a portion of such
payment (to the
minimum extent
possible) shall be delayed and shall be paid on the first day
of
the seventh month following Executive's Separation from
Service.
7. CHANGE IN
CONTROL.
(a)
Any payments made to
Executive pursuant to
this Section 7 are in lieu
of any payments
that may otherwise be owed to Executive pursuant to this
Agreement under
Section 6, such that Executive shall either receive payments
pursuant to
Section 6 or
pursuant to Section 7, but not pursuant to both
Sections.
(b)
For purposes of this Agreement, the term "Change in Control" shall
mean
any of the following events:
(i) any "person" (as
the term is used in Sections 13(d) and 14(d) of
the
Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes
the
"beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or
indirectly,
of securities of the Bank or the Company
representing
twenty-five percent (25%) or more of the combined voting power
of
such outstanding securities, except for any securities
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purchased by any employee stock ownership plan or trust
established by the
Bank
or the Company; or
(ii) individuals
who constitute the
Board on the Effective Date (the
"Incumbent Board")
cease for any reason
to constitute at least a majority
thereof, provided
that any person
becoming a director
subsequent to the
Effective Date
whose election was approved by a vote of at least
three-quarters of the
directors comprising
the Incumbent Board,
or whose
nomination for
election by stockholders of the Bank or the Company was
approved by the same Nominating Committee serving under an
Incumbent Board,
shall be, for purposes of this Subsection (B), considered as though they
were
members of the Incumbent Board; or
(iii) a sale of all or substantially all the assets of the Bank or
the
Company, or a plan of
reorganization,
merger, consolidation,
or similar
transaction occurs in which the security holders of the Bank or the
Company
immediately prior to
the consummation
of the transaction do not own at
least fifty and one tenth of one percent (50.1%) of the securities of the
surviving entity to be outstanding upon consummation of the
transaction; or
(iv) a proxy statement is issued soliciting proxies from stockholders
of
the Bank or the Company by someone other than the current
management of
the
Bank or the Company, seeking stockholder approval of a plan of
reorganization, merger
or consolidation
of the Bank or the
Company, or
similar transaction
with one or more corporations as a result of which the
outstanding shares of
the class of securities then subject to the plan are
to
be exchanged for or converted into cash or property or
securities
not
issued by the Bank or the Company; or
(v) a tender offer is made for twenty-five percent (25%) or more of
the
voting securities of the Bank or the Company, and stockholders owning
beneficially or of
record twenty-five percent (25%) or more of the
outstanding securities
of the Bank or the Company have tendered or offered
to
sell their shares pursuant to such tender offer and such tendered
shares
have
been accepted by the tender offeror.
(c)
Upon the occurrence of
a Change in Control
followed within
eighteen
(18) months by an Event of Termination (as defined in Section 6 hereof),
the
Comp
