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Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into
as of July 13, 1999 by and among HUDSON
CITY SAVINGS BANK, a savings bank
organized and operating under the laws of
the State of New Jersey and having an
office at West 80 Century Road, Paramus,
New Jersey 07652-1473 (the "Bank"),
HUDSON CITY BANCORP, INC., a business
corporation organized and existing under
the laws of the State of Delaware and
having an office at West 80 Century Road,
Paramus, New Jersey 07552-1473 (the
"Company") and RONALD E. HERMANCE, JR., an
individual residing at 327 McKinley Place,
Ridgewood, New Jersey 07450 (the
"Executive").
INTRODUCTORY STATEMENT
The Bank is undertaking a reorganization through which it will
convert from a mutual savings to a stock
savings bank and become a wholly owned
subsidiary of the Company, and the Company
will become a majority-owned
subsidiary of Hudson City, MHC, a New
Jersey mutual holding company (the
"Reorganization"). At the same time, the
Company will sell less than fifty
percent (50%) of its outstanding common
stock to the public in an initial public
offering. The Executive has served the Bank
in an executive capacity for many
years and is familiar with the Bank's
operations.
The Board of Managers of the Bank and the Board of Directors of
the
Company have concluded that it is in the
best interests of the Bank, the Company
and their prospective shareholders to
secure a continuity in management
following the Reorganization. They also
consider it desirable to establish a
working environment for the Executive which
minimizes the personal distractions
that might result from possible business
combinations in which the Company or
the Bank might be involved. For these
reasons, the Board of Managers of the Bank
and the Board of Directors of the Company
have decided to offer to enter into a
contract with the Executive for his future
services. The Executive has accepted
this offer.
The terms and conditions which the Bank, the Company and the
Executive have agreed to are as
follows.
AGREEMENT
SECTION 1. EMPLOYMENT.
The Company and the Bank hereby continue to employ the
Executive,
and the Executive hereby accepts such
continued employment, during the period
and upon the terms and conditions set forth
in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
PERIOD.
(a) The Company and the Bank shall employ the Executive during
an
initial period of three (3) years beginning
on the effective date of the
Reorganization (the "Employment
Commencement Date") and ending on the day before
the third (3rd) anniversary of the
Employment Commencement Date, and during the
period of any additional extensions
described in section 2(b) (the "Employment
Period").
(b) The
Employment Period shall be subject to extension in
the following manner:
(i) For purposes of determining the rights and obligations of
the
Executive
and the Company with respect to each other, on the day after
the
Employment
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Commencement Date and on each day thereafter, the Employment Period
shall
be
extended by one day, such that on any date the Employment Period
will
expire on
the day before the third (3rd) anniversary of such date. These
extensions
shall continue in perpetuity until discontinued by: (i) notice
to the
Executive given by the Company that they have elected to
discontinue the extensions; (ii) notice by the Executive to the
Company
that he
has elected to discontinue the extensions; or (iii) termination
of
the
Executive's employment with the Company, whether by
resignation,
discharge
or otherwise. On the date on which such a notice is deemed
given, or
on the effective date of a termination of the Executive's
employment
with the Company, the Employment Period shall be converted to a
fixed
period of three (3) years ending on the day before the third
(3rd)
anniversary of such date.
(ii) For purposes of determining the rights and obligations of
the
Executive
and the Bank with respect to each other, the Board of Directors
of the
Bank shall conduct an annual review of the Executive's
performance
on or
about each anniversary of the Employment Commencement Date (each,
an
"Anniversary Date") and may, on
the basis of such review and by written
notice to
the Executive, offer to extend the Employment Period through
the
day before
the third (3rd) anniversary of the relevant Anniversary Date.
In such
event, the Employment Period shall be deemed extended in the
absence of
objection from the Executive by written notice to Bank given
within ten
(10) business days after his receipt of the Bank's offer of
extension.
(c) 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 (i) for purposes
of determining the rights and
obligations of the Company and the
Executive to each other, the period beginning
on such date and ending on the day before
the third (3rd) anniversary of the
earliest of the date in question, any
earlier date on which the Executive or the
Company is deemed to have given a notice to
discontinue extensions of the
Employment Period, and any earlier date on
which the Executive's employment with
the Bank and the Company was terminated;
and (ii) for purposes of determining
the rights and obligations of the Bank and
the Executive to each other, the
period beginning on such date and ending on
the day before the third (3rd)
anniversary of the Employment Commencement
Date or, if later, on the day before
the third (3rd) anniversary of the last
Anniversary Date as of which the
Employment Period was extended pursuant to
section 2(b)(ii).
(d) Nothing in this Agreement shall be deemed to prohibit the
Company or the Bank from terminating the
Executive's employment before the end
of the Employment Period with or without
notice for any reason. This Agreement
shall determine the relative rights and
obligations of the Bank, the Company and
the Executive in the event of any such
termination. In addition, nothing in this
Agreement shall require the termination of
the Executive's employment at the
expiration of the Employment Period. Any
such continuation shall be on an
"at-will" basis unless the Bank, the
Company and the Executive agree otherwise.
SECTION 3. DUTIES.
The Executive shall serve as President and Chief Operating
Officer
of the Company and as President and Chief
Operating Officer of the Bank, having
such power, authority and responsibility
and performing such duties as are
prescribed by or under their respective
By-Laws and as are customarily
associated with such positions. 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 Bank and the Company and
shall use his best efforts to
advance their respective best
interests.
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SECTION 4. CASH
COMPENSATION.
In consideration for the services to be rendered by the
Executive
hereunder, the Bank and the Company shall
pay to him a salary at an initial
annual rate of Three hundred seventeen
thousand dollars ($317,000), payable in
approximately equal installments in
accordance with their respective customary
payroll practices for senior officers. The
Bank's and the Company's respective
Boards of Directors shall review the
Executive's annual rate of salary at such
times during the Employment Period as they
deem appropriate, but not less
frequently than once every twelve (12)
months, and may, in their discretion,
approve a salary increase. In addition to
salary, the Executive may receive
other cash compensation from the Company or
the Bank for services hereunder at
such times, in such amounts and on such
terms and conditions as the Boards of
Directors of the Bank and the Company may
determine. If the Executive is
discharged or suspended, or is subject to
any regulatory prohibition or
restriction with respect to participation
in the affairs of the Bank, he shall
continue to perform services for the
Company in accordance with this Agreement
but shall not directly or indirectly
provide services to or participate in the
affairs of the Bank in a manner
inconsistent with the terms of such discharge or
suspension or any applicable regulatory
order.
SECTION 5. EMPLOYEE
BENEFIT PLANS AND PROGRAMS.
During the Employment Period, the Executive shall be treated as
an
employee of the Company and the Bank and
shall be entitled to participate in and
receive benefits under any and all
qualified or non-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 Company and the Bank, in accordance
with the terms and conditions of such
employee benefit plans and programs and
compensation plans and programs and
consistent with the Company's and the
Bank's customary practices.
SECTION 6.
INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six years
thereafter, the Company and the Bank shall
cause the Executive to be covered by
and named as an insured under any policy or
contract of insurance obtained by
them to insure their directors and officers
against personal liability for acts
or omissions in connection with service as
an officer or director of the Company
or the Bank or service in other capacities
at their request. The coverage
provided to the Executive pursuant to this
section 6 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 Company and
the Bank.
(b) To the maximum extent permitted under applicable law, during
the
Employment Period and for a period of six
years thereafter, the Company and the
Bank 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 Company and the
Bank or any subsidiary or affiliate
thereof.
SECTION 7. OUTSIDE
ACTIVITIES.
The Executive may serve as a member of the boards of directors
of
such business, community and charitable
organizations as he may disclose to and
as may be approved by the Boards of
Directors of the Company and the Bank (which
approval shall not be unreasonably
withheld); provided,
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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 Company or the
Bank and generally applicable to all
similarly situated executives.
SECTION 8. WORKING
FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Bank's
executive offices at the address first
above written, or at such other location
as the Bank, the Company and the Executive
may mutually agree upon. The Bank and
the Company shall provide the Executive at
his principal place of employment
with a private office, secretarial services
and other support services and
facilities 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 provide
to the Executive for his exclusive use
an automobile owned or leased by the
Company and appropriate to his position, to
be used in the performance of his duties
hereunder, including commuting to and
from his personal residence. The Bank or
the Company shall reimburse the
Executive for his ordinary and necessary
business expenses, including, without
limitation, all expenses associated with
his business use of the aforementioned
automobile, fees for memberships in such
clubs and organizations as the
Executive and the Company shall mutually
agree are necessary and appropriate for
business purposes, and his travel and
entertainment expenses incurred in
connection with the performance of his
duties under this Agreement, in each case
upon presentation to the payer of an
itemized account of such expenses in such
form as the payer may reasonably
require.
SECTION 9. TERMINATION
OF EMPLOYMENT DUE TO DEATH.
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:
(a) The Bank and the Company shall pay to the Executive's 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 30 days after the date of the
Executive's
termination of employment.
(b) The Company and the Bank shall provide the benefits, if any,
due
to the
Executive's 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 Company and 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.
The payments and benefits described in
sections 9(a) and (b) shall be referred
to in this Agreement as the "Standard
Termination Entitlements."
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SECTION 10. TERMINATION DUE TO DISABILITY.
The Bank and the Company may terminate the Executive's
employment
upon a determination, by separate votes of
a majority of the members of the
Boards of Directors of the Company and the
Bank, 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 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 Executive 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 and the Company shall pay and deliver to the
Executive
(or in the
event of his death before payment, to his estate and surviving
dependents
and beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements, the
Bank
and the
Company shall continue to pay the Executive 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 or the Company (the "LTD
Eligibility Date"); (iii) the date of his death; and (iv) the
expiration
of the
Remaining Unexpired Employment 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 Company and the
Bank shall
continue
to pay the Executive 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 Remaining Unexpired Employment Period.
A termination of employment due to
disability under this section 10 shall be
effected by joint notice of termination
given to the Executive by the Company
and 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
Executive.
SECTION 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:
(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 Executive (A) has willfully and intentionally failed
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); (B) has willfully and
intentionally engaged in dishonest or illegal conduct in connection
with
his
performance of services for the Company or the Bank or has been
convicted
of a felony; (C) has willfully violated, in any material
respect,
any law, rule, regulation, written agreement or final
cease-and-desist order with respect to his performance of services
for
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the
Company or the Bank; or (D) has willfully and intentionally
breached
the
material terms of this Agreement in any material respect; and
(ii) at least forty-five (45) days prior to the votes
contemplated
by section
11(a)(i), the Bank and the Company have provided the Executive
with notice of their
intent to discharge the Executive 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 votes contemplated by section 11(a)(i), the
Executive
(together with his legal counsel, if he so desires) is afforded
a
reasonable opportunity to make both written and oral
presentations
before the
Boards of Directors of the Company and the Bank for the purpose
of
refuting the alleged grounds for Cause for his discharge; and
(iv) after the votes contemplated by section 11(a)(i), the
Company
and the
Bank have furnished to the Executive 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 and the Board of Directors of the
Company,
certified
by their corporate secretaries and signed by each member of
their
respective Board of Directors voting in favor of adoption of
the
resolution(s), authorizing the termination of the Executive's
employment
with Cause
and stating with particularity the facts and circumstances
found to
constitute Cause for his discharge (the "Final Discharge
Notice").
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 Company and the
Bank. Any act, or failure to act, based
upon authority given pursuant to a
resolution duly adopted by the Board and
the Bank Board or based upon the
written advice of counsel for the Company
or the Bank 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 Company and
the Bank.
(b) If the Executive is discharged during the Employment Period
with
Cause, the Company and 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.
Following the giving of a Notice of
Intent to Discharge, the Bank and the
Company may temporarily suspend the
Executive's duties and authority and, in
such event, may also suspend the
payment of salary and other cash
compensation, but not the Executive's
participation in retirement, insurance and
other employee benefit plans. If the
Executive 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 the
period of suspension shall be promptly
restored. If the Executive is discharged
with Cause not later than forty-five (45)
days after the giving of the Notice of
Intent to Discharge, all payments withheld
during the period of suspension shall
be deemed forfeited and shall not be
included in the Standard Termination
Entitlements. If a Final Discharge Notice
is given later than forty-five (45)
days, but sooner than ninety (90) days,
after the giving of the Notice of Intent
to Discharge, all payments made to the
Executive during the period beginning
with the giving of the Notice of Intent to
Discharge and ending with the
Executive's discharge with Cause shall be
retained by the Executive and shall
not be applied to offset the Standard
Termination Entitlements. If the Bank and
the Company do not give a Final Discharge
Notice to the Executive within ninety
(90) days after giving a
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Notice of Intent to Discharge, the Notice
of Intent to Discharge shall be deemed
withdrawn and any future action to
discharge the Executive with Cause shall
require the giving of a new Notice of
Intent to Discharge.
SECTION 12. DISCHARGE WITHOUT CAUSE.
The Bank and the Company may discharge the Executive at any
time
during the Employment Period and, unless
such discharge constitutes a discharge
with Cause:
(a) The Bank and the Company shall pay and deliver to the
Executive
(or in the event of his death before
payment, to his estate and surviving
dependents and beneficiaries, as
applicable) the Standard Termination
Entitlements.
(b) In addition to the Standard Termination Entitlements:
(i) During the Remaining Unexpired Employment Period, the Bank
and
the
Company shall provide for the Executive and his dependents
continued
group
life, health (including hospitalization, medical and major
medical),
dental,
accident and long-term disability insurance benefits on
substantially the same terms and conditions (including any
required
premium-sharing arrangements, co-payments and deductibles) in
effect for
them
immediately prior to the Executive's termination. The coverage
provided
under this section 12(b)(i) may, at the election of the Bank
and
the
Company, be secondary to the coverage provided as part of the
Standard
Termination Entitlements and to any employer-paid coverage provided
by a
subsequent
employer or through Medicare, with the result that benefits
under the
other coverages will offset the coverage required by this
section
12(b)(i).
(ii) The Bank and the Company shall make a lump sum payment to
the
Executive
(or, in the event of his death before payment, to his estate),
in an
amount equal to the estimated present value of the salary that
the
Executive
would have earned if he had continued working for the Company
and the
Bank during the Remaining Unexpired Employment Period at the
highest
annual rate of salary achieved during the period of three (3)
years
ending immediately prior to the date of termination (the
"Salary
Severance
Payment"). The Salary Severance Payment shall be computed using
the
following formula:
SSP=(Epsilon) n [
(BS/PR)
]
--------------------
1 [ [ 1 +
(I / PR)]n]
where
"SSP" is the amount of the Salary Severance Payment (before the
deduction
of applicable federal, state and local withholding taxes); "BS"
is the
highest annual rate of salary achieved by the Executive during
the
period of
three (3) years ending immediately prior to the date of
termination; "PR" is the number of payroll periods that occur
during a
year under
the Company's and the Bank's normal payroll practices; "I"
equals the
applicable federal short term rate established under section
1274 of
the Internal Revenue Code of 1986 (the "Code") for the month in
which the
Executive's termination of employment occurs (the "Short Term
AFR") and
"n" equals the product of the Remaining Unexpired Employment
Period at
the Executive's termination of employment (expressed in years
and
fractions of years) multiplied by the number of payroll periods
that
occur
during a year under the Company's and the Bank's normal payroll
practices.
The Salary Severance Payment shall be made within five (5)
business
days after the
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Executive's termination of employment and shall be in lieu of any
claim to
a
continuation of base salary which the Executive might otherwise
have and
in lieu of
cash severance benefits under any severance benefits program
which may
be in effect for officers or employees of the Bank or the
Company.
(iii) The Bank and the Company shall make a lump sum payment to
the
Executive
(or, in the event of his death before payment, to his estate),
in an
amount equal to the estimated present value of the annual
bonuses
that the
Executive would have earned if he had continued working for the
Company
and the Bank during the Remaining Unexpired Employment Period
at
the
highest annual rate of salary achieved during the period of three
(3)
years
ending immediately prior to the date of termination (the "Bonus
Severance
Payment"). The Bonus Severance Payment shall be computed using
the
following formula:
BSP = SSP x (ABP / ASP)
where
"BSP" is the amount of the Bonus Severance Payment (before the
deduction
of applicable federal, state and local withholding taxes);
"SSP"
is the
amount of the Salary Severance Payment (before the deduction of
applicable
federal, state and local withholding taxes); "ABP" is the
aggregate
of the annual bonuses paid or declared (whether or not paid)
for
the most
recent period of three (3) calendar years to end on or before
the
Executive's termination of employment; and "ASP" is the aggregate
base
salary
actually paid to the Executive during such period of three (3)
calendar
years (excluding any year for which no bonus was declared or
paid). The
Bonus Severance Payment shall be made within five (5) business
days after
the Executive's termination of employment and shall be in lieu
of any
claim to a continuation of participation in annual bonus plans
of
the Bank
or the Company which the Executive might otherwise have.
(iv) The Bank and the Company shall make a lump sum payment to
the
Executive
(or, in the event of his death before payment, to his estate),
in an
amount equal to the estimated present value of the long-term
incentive
bonuses that the Executive would have earned if he had
continued
working
for the Company and the Bank during the Remaining Unexpired
Employment
Period (the "Incentive Severance Payment"). The Incentive
Severance
Payment shall be computed us
