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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 using
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