|
Exhibit 10.32 Severance Agreement This
Severance Agreement (this "Agreement") is entered into
effective as of this day of December 3, 2008, by and between
Cortland Bancorp, an Ohio corporation, and Marlene J. Lenio (the
"Executive"), Vice President of The Cortland Savings and Banking
Company (the "Bank"), an Ohio-chartered bank and wholly owned
subsidiary of Cortland Bancorp, an Ohio corporation. Whereas
, recognizing the contributions to the profitability, growth, and
financial strength of Cortland Bancorp and the Bank that the
Executive has made and is expected to continue to make, intending
to assure itself of the current and future continuity of management
and establish minimum severance benefits for certain officers and
other key employees and ensure that officers and other key
employees are not practically disabled from discharging their
duties if a proposed or actual transaction involving a change in
control arises, and finally desiring to provide additional
inducement for the Executive to remain in the employ of Cortland
Bancorp and the Bank, Cortland Bancorp and the Bank entered into a
Severance Agreement Due to Change in Control of Cortland Bancorp
dated as of December 26, 2000 with the Executive,
Whereas , Cortland Bancorp and the Executive intend that
this Agreement supersede and replace in its entirety the
December 26, 2000 Severance Agreement Due to Change in Control
of Cortland Bancorp and that from and after the date hereof the
December 26, 2000 Severance Agreement Due to Change in Control
of Cortland Bancorp shall be of no further force or effect, and
Whereas , none of the conditions or events included in the
definition of the term "golden parachute payment" that is set forth
in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12
U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance
Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists
or, to the best knowledge of Cortland Bancorp, is contemplated
insofar as Cortland Bancorp or any of its subsidiaries is
concerned. Now Therefore , in consideration of these
premises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows. 1 . Cash Benefit after a Change
in Control . (a) Cash benefit . If a Change in Control
occurs, Cortland Bancorp shall make a lump-sum payment to the
Executive in an amount in cash equal to one times the
Executive’s compensation. For this purpose the
Executive’s compensation means ( x ) the sum of the
Executive’s base salary when the Change in Control occurs,
including salary deferred at the Executive’s election, plus (
y ) any bonus awarded for the most recent whole calendar
year before the year in which the Change in Control occurs,
regardless of whether the bonus is paid in the year earned and
regardless of whether the bonus is vested or subject to elective
deferral. The term bonus means cash or non-cash compensation of the
type that is required to be reported as bonus by Securities and
Exchange Commission rules governing tabular disclosure of executive
compensation, specifically Regulation S-K Item 402 (17
CFR 229.402, currently Item 402(c)(2)(iv)). The amount payable
to the Executive hereunder shall not be reduced to account for the
time value of money or discounted to present value. Subject to
section 16 of this Agreement, the payment required under this
section 1(a) shall be made within five business days after the
Change in Control occurs. The Executive shall be entitled to a
payment under this section 1(a) on no more than one occasion during
the term of this Agreement.
(b) Change in Control defined . For purposes of
this Agreement the term Change in Control means a change in control
as defined in Internal Revenue Code section 409A and rules,
regulations, and guidance of general application thereunder issued
by the Department of the Treasury, including — (1) Change
in ownership : a change in ownership of Cortland Bancorp occurs
on the date any one person or group accumulates ownership of
Cortland Bancorp stock constituting more than 50% of the total fair
market value or total voting power of Cortland Bancorp stock, (2)
Change in effective control : ( x ) any one person or
more than one person acting as a group acquires within a 12-month
period ownership of Cortland Bancorp stock possessing 30% or more
of the total voting power of Cortland Bancorp stock, or ( y
) a majority of Cortland Bancorp’s board of directors is
replaced during any 12-month period by directors whose appointment
or election is not endorsed in advance by a majority of Cortland
Bancorp’s board of directors, or (3) Change in ownership
of a substantial portion of assets : a change in ownership of a
substantial portion of Cortland Bancorp’s assets occurs if in
a 12-month period any one person or more than one person acting as
a group acquires from Cortland Bancorp assets having a total gross
fair market value equal to or exceeding 40% of the total gross fair
market value of all of Cortland Bancorp’s assets immediately
before the acquisition or acquisitions. For this purpose gross fair
market value means the value of Cortland Bancorp’s assets or
the value of the assets being disposed of, determined without
regard to any liabilities associated with the assets. 2
. Additional Benefits after Employment Termination .
(a) Continued insurance benefits . Subject to section 2(b),
if the Executive’s employment terminates involuntarily but
without Cause or voluntarily but with Good Reason within
24 months after a Change in Control, Cortland Bancorp shall
cause to be continued medical, dental, accident, disability, and
life insurance coverage substantially identical to the coverage
maintained for the Executive before employment termination, in
accordance with the same schedule prevailing before employment
termination, and on substantially the same terms and conditions
prevailing before employment termination (including cost of
coverage to Cortland Bancorp and the Bank). The insurance coverage
shall continue until the first to occur of ( x ) the
Executive’s return to employment with Cortland Bancorp, the
Bank, or another employer, ( y ) the Executive’s
death, or ( z ) the end of the term remaining under this
Agreement when the Executive’s employment terminates.
2
(b) Alternative lump-sum cash payment . If (
x ) under the terms of the applicable policy or policies for
the insurance benefits specified in section 2(a) it is not possible
to continue the Executive’s coverage on the terms specified
in section 2(a), or ( y ) if when employment termination
occurs the Executive is a specified employee within the meaning of
section 409A of the Internal Revenue Code of 1986, if any of the
continued insurance coverage benefits specified in section 2(a)
would be considered deferred compensation under section 409A, and
finally if an exemption from the six-month delay requirement of
section 409A(a)(2)(B)(i) is not available for that particular
insurance benefit, instead of continued insurance coverage under
section 2(a) Cortland Bancorp shall pay or cause to be paid to the
Executive in a single lump sum an amount in cash equal to the
present value of Cortland Bancorp’s projected cost to
maintain that particular insurance benefit had the
Executive’s employment not terminated, assuming continued
coverage for the lesser of 36 months or the number of months until
the Executive attains age 65. The lump-sum payment shall be made
within five business days after employment termination or, if the
Executive is a specified employee within the meaning of section
409A and an exemption from the six-month delay requirement of
section 409A(a)(2)(B)(i) is not available, on the first day of the
seventh month after the month in which the Executive’s
employment terminates. (c) Miscellaneous benefits .
Subject to section 2(d), if the Executive’s employment
terminates involuntarily but without Cause or voluntarily but with
Good Reason within 24 months after a Change in Control —
(1) Cortland Bancorp shall for three years after termination
pay or cause to be paid the Executive’s initiation and
membership assessments and dues in a civic or social club of the
Executive’s choice. The Executive shall be solely responsible
for personal expenses for use of the club, (2) Cortland
Bancorp shall for three years after termination and at no cost to
the Executive provide or cause to be provided to the Executive
financial planning services, including but not limited to tax
preparation and financial planning having to do with receipt of
benefits under this Agreement, (3) Cortland Bancorp shall for
one year after termination and at no cost to the Executive provide
or cause to be provided to the Executive reasonable outplacement
services, including but not limited to employment counseling,
resume services, and executive placement services. (d)
Alternative lump-sum cash payment . If when employment
termination occurs the Executive is a specified employee within the
meaning of section 409A of the Internal Revenue Code of 1986, if
any of the miscellaneous benefits specified in section 2(c) would
be considered deferred compensation under section 409A, and finally
if an exemption from the six-month delay requirement of section
409A(a)(2)(B)(i) is not available for that particular benefit,
instead of the miscellaneous benefits under section 2(c) Cortland
Bancorp shall pay or cause to be paid to the Executive in a single
lump sum an amount in cash equal to the present value of Cortland
Bancorp’s projected cost to maintain that particular benefit
had the Executive’s employment not terminated. The lump-sum
payment shall be made within five business days after employment
termination or, if the Executive is a specified employee within the
meaning of section 409A and an exemption from the six-month delay
requirement of section 409A(a)(2)(B)(i) is not available, on the
first day of the seventh month after the month in which the
Executive’s employment terminates.
3
(e) Involuntary termination with Cause defined .
For purposes of this Agreement, involuntary termination of the
Executive’s employment shall be considered involuntary
termination with Cause if the Executive shall have committed any of
the following acts — (1) an act of fraud, embezzlement,
or theft while employed by Cortland Bancorp or the Bank, or
conviction of the Executive of or plea of no contest to a felony or
conviction of or plea of no contest to a misdemeanor involving
moral turpitude, or the actual incarceration of the Executive for
45 consecutive days or more, or (2) gross negligence,
insubordination, disloyalty, or dishonesty in the performance of
the Executive’s duties as an officer of Cortland Bancorp or
the Bank; willful or reckless failure by the Executive to adhere to
Cortland Bancorp’s or the Bank’s written policies;
intentional wrongful damage by the Executive to the business or
property of Cortland Bancorp or the Bank, including without
limitation its reputation, which in Cortland Bancorp’s sole
judgment causes material harm to Cortland Bancorp or the Bank;
breach by the Executive of fiduciary duties to Cortland Bancorp and
its stockholders, whether in the Executive’s capacity as an
officer or as a director of Cortland Bancorp or the Bank,
(3) removal of the Executive from office or permanent
prohibition of the Executive from participating in the Bank’s
affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or
(4) intentional wrongful disclosure of secret processes or
confidential information of Cortland Bancorp or the Bank, which in
Cortland Bancorp’s sole judgment causes material harm to
Cortland Bancorp or the Bank, or (5) any actions that cause
the Executive to be terminated for cause under any employment
agreement existing on the date hereof or hereafter entered into
between the Executive and Cortland Bancorp or the Bank, or
(6) the occurrence of any event that results in the Executive
being excluded from coverage, or having coverage limited for the
Executive as compared to other executives of Cortland Bancorp or
the Bank, under a blanket bond or other fidelity or insurance
policy covering directors, officers, or employees. For purposes of
this Agreement no act or failure to act on the Executive’s
part shall be deemed to have been intentional if it was due
primarily to an error in judgment or negligence. An act or failure
to act on the Executive’s part shall be considered
intentional if it is not in good faith and if it is without a
reasonable belief that the action or failure to act is in Cortland
Bancorp’s best interests. Any act or failure to act based
upon authority granted by resolutions duly adopted by the board of
directors or based upon the advice of counsel for Cortland Bancorp
shall be conclusively presumed to be in good faith and in Cortland
Bancorp’s best interests.
4
(f) Voluntary termination with Good Reason defined
. For purposes of this Agreement a voluntary termination by the
Executive shall be considered a voluntary termination with Good
Reason if the conditions stated in both clauses ( x ) and (
y ) are satisfied — ( x ) a voluntary
termination by the Executive shall be considered a voluntary
termination with Good Reason if any of the following occur without
the Executive’s advance written consent, and the term Good
Reason shall mean the occurrence of any of the following without
the Executive’s advance written consent — 1) a material
diminution of the Executive’s base salary, 2) a material
diminution of the Executive’s authority, duties, or
responsibilities, 3) a material diminution in the authority,
duties, or responsibilities of the supervisor to whom the Executive
is required to report, 4) a material diminution in the budget over
which the Executive retains authority, 5) a material change in the
geographic location at which the Executive must perform services,
or 6) any other action or inaction that constitutes a material
breach by Cortland Bancorp of this Agreement. ( y ) the
Executive must give notice to Cortland Bancorp of the existence of
one or more of the conditions described in clause ( x )
within 90 days after the initial existence of the condition,
and Cortland Bancorp shall have 30 days thereafter to remedy
the condition. In addition, the Executive’s voluntary
termination because of the existence of one or more of the
conditions described in clause ( x ) must occur within
24 months after the initial existence of the condition.
3 . Termination for Which No Benefits Are
Payable . Despite anything in this Agreement to the contrary,
the Executive shall not be entitled to benefits under this
Agreement if the Executive’s employment terminates with
Cause, if the Executive dies while actively employed by Cortland
Bancorp or the Bank, or if the Executive becomes totally disabled
while actively employed by Cortland Bancorp or the Bank. For
purposes of this Agreement the term totally disabled means that
because of injury or sickness the Executive is unable to perform
the Executive’s duties. The benefits, if any, payable to the
Executive or the Executive’s beneficiary or estate relating
to the Executive’s death or disability shall be determined
solely by such benefit plans or arrangements as Cortland Bancorp or
the Bank may have with the Executive relating to death or
disability, not by this Agreement.
5
4 . Term of Agreement . The initial term of
this Agreement shall be for a period of three years, commencing on
the effective date of this Agreement first written above. On the
first anniversary of the effective date of this Agreement and on
each anniversary thereafter this Agreement shall be extended
automatically for one additional year, unless Cortland
Bancorp’s board of directors gives notice to the Executive in
writing at least 90 days before the anniversary that the term
of this Agreement will not be extended. If the board of directors
determines not to extend the term, it shall promptly notify the
Executive. References herein to the term of this Agreement mean the
initial term and extensions of the initial term. Unless terminated
earlier, this Agreement shall terminate when the Executive attains
age 65. If the board of directors decides not to extend the term of
this Agreement, this Agreement shall nevertheless remain in force
until its term expires. 5 . This Agreement Is Not
an Employment Contract . The parties hereto acknowledge and
agree that this Agreement is not a management or employment
agreement and nothing in this Agreement shall give the Executive
any rights or impose any obligations to continued employment by
Cortland Bancorp or the Bank or successor of Cortland Bancorp.
6 . Payment of Legal Fees . Cortland Bancorp is
aware that after a Change in Control management could cause or
attempt to cause Cortland Bancorp to refuse to comply with its
obligations under this Agreement, or could institute or cause or
attempt to cause Cortland Bancorp to institute litigation seeking
to have this Agreement declared unenforceable, or could take or
attempt to take other action to deny Executive the benefits
intended under this Agreement. In these circumstances the purpose
of this Agreement would be frustrated. Cortland Bancorp desires
that the Executive not be required to incur the expenses associated
with the enforcement of rights under this Agreement, whether by
litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits intended to
be granted to the Executive hereunder. Cortland Bancorp desires
that the Executive not be forced to negotiate settlement of rights
under this Agreement under threat of incurring expenses.
Accordingly, if after a Change in Control occurs it appears to the
Executive that ( x ) Cortland Bancorp has failed to comply
with any of its obligations under this Agreement or ( y )
Cortland Bancorp or any other person has taken any action to
declare this Agreement void or unenforceable, or instituted any
litigation or other legal action designed to deny, diminish, or to
recover from the Executive the benefits intended to be provided to
the Executive hereunder, Cortland Bancorp irrevocably authorizes
the Executive from time to time to retain counsel of the
Executive’s choice, at Cortland Bancorp’s expense as
provided in this section 6, to represent the Executive in the
initiation or defense of any litigation or other legal action,
whether by or against Cortland Bancorp or any director, officer,
stockholder, or other person affiliated with Cortland Bancorp, in
any jurisdiction. Despite any existing or previous attorney-client
relationship between Cortland Bancorp and any counsel chosen by the
Executive under this section 6, Cortland Bancorp irrevocably
consents to the Executive entering into an attorney-client
relationship with that counsel, and Cortland Bancorp and the
Executive agree that a confidential relationship shall exist
between the Executive and that counsel. The fees and expenses of
counsel selected from time to time by the Executive as provided in
this section shall be paid or reimbursed to the Executive by
Cortland Bancorp on a regular, periodic basis upon presentation by
the Executive of a statement or statements prepared by counsel in
accordance with counsel’s customary practices, up to a
maximum aggregate amount of $500,000, whether suit be brought or
not, and whether or not incurred in trial, bankruptcy, or appellate
proceedings. Cortland Bancorp’s obligation to pay the
Executive’s legal fees under this section 6 operates
separately from and in addition to any legal fee reimbursement
obligation Cortland Bancorp may have with the Executive under any
separate salary continuation or other agreement. Despite anything
in this Agreement to the contrary however, Cortland Bancorp shall
not be required to pay or reimburse the Executive’s legal
expenses if doing so would violate section 18(k) of the Federal
Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of
the Federal Deposit Insurance Corporation [12 CFR 359.3].
6
7 . Withholding of Taxes . Cortland Bancorp
may withhold from any benefits payable under this Agreement all
Federal, state, local or other taxes as may be required by law,
governmental regulation, or ruling. 8 . Successors
and Assigns . (a) This Agreement is binding on Cortland
Bancorp’s successors . This Agreement shall be binding
upon Cortland Bancorp and any successor to Cortland Bancorp,
including any persons acquiring directly or indirectly all or
substantially all of the business or assets of Cortland Bancorp by
purchase, merger, consolidation, reorganization, or otherwise. But
this Agreement and Cortland Bancorp’s obligations under this
Agreement are not otherwise assignable, transferable, or delegable
by Cortland Bancorp. By agreement in form and substance
satisfactory to the Executive, Cortland Bancorp shall require any
successor to all or substantially all of the business or assets of
Cortland Bancorp expressly to assume and agree to perform this
Agreement in the same manner and to the same extent Cortland
Bancorp would be required to perform had no succession occurred.
(b) This Agreement is enforceable by the Executive’s
heirs . This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs,
distributes, and legatees. (c) This Agreement is personal
and is not assignable . This Agreement is personal in nature.
Without written consent of the other party, neither party shall
assign, transfer, or delegate this Agreement or any rights or
obligations under this Agreement except as expressly provided in
this section 8. Without limiting the generality of the foregoing,
the Executive’s right to receive payments hereunder is not
assignable or transferable, whether by pledge, creation of a
security interest, or otherwise, except for a transfer by
Executive’s will or by the laws of descent and distribution.
If the Executive attempts an assignment or transfer that is
contrary to this section 8, Cortland Bancorp shall have no
liability to pay any amount to the assignee or transferee. 9
. Notices . Any notice under this Agreement shall be
deemed to have been effectively made or given if in writing and
personally delivered, delivered by mail properly addressed in a
sealed envelope, postage prepaid by certified or registered mail,
delivered by a reputable overnight delivery service, or sent by
facsimile. Unless otherwise changed by notice, notice shall be
properly addressed to the Executive if addressed to the address of
the Executive on the books and records of Cortland Bancorp at the
time of the delivery of the notice, and properly addressed to
Cortland Bancorp if addressed to the Board of Directors, Cortland
Bancorp, 194 West Main Street, Cortland, Ohio 44410, Attention:
Corporate Secretary.
7
10 . Captions and Counterparts . The
headings and subheadings used in this Agreement are included solely
for convenience and shall not affect the interpretation of this
Agreement. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same agreement.
11 . Amendments and Waivers . No provision of
this Agreement may be modified, waived, or discharged unless the
waiver, modification, or discharge is agreed to in a writing signed
by the Executive and by Cortland Bancorp. No waiver by either party
hereto at any time of any breach by the other party hereto or
waiver of compliance with any condition or provision of this
Agreement to be performed by the other party shall be deemed a
waiver of other provisions or conditions at the same or at any
other time. 12 . Severability . The provisions
of this Agreement are severable. The invalidity or unenforceability
of any provision shall not affect the validity or enforceability of
the other provisions of this Agreement. Any provision held to be
invalid or unenforceable shall be reformed to the extent (and only
to the extent) necessary to make it valid and enforceable.
13 . Governing Law . The validity,
interpretation, construction, and performance of this Agreement
shall be governed by and construed in accordance with the
substantive laws of the State of Ohio, without giving effect to the
principles of conflict of laws of the State of Ohio. 14
. Entire Agreement . This Agreement constitutes the
entire agreement between Cortland Bancorp and the Executive
concerning the subject matter. No rights are granted to the
Executive under this Agreement other than those specifically set
forth. No agreements or representations, oral or otherwise,
expressed or implied concerning the subject matter have been made
by either party that are not set forth expressly in this Agreement.
This Agreement supersedes and replaces in its entirety the
December 26, 2000 Severance Agreement Due to Change in Control
of Cortland Bancorp, and from and after the date of this Agreement
the December 26, 2000 Severance Agreement Due to Change in
Control of Cortland Bancorp shall be of no further force or effect.
15 . No Mitigation Required . Cortland Bancorp
hereby acknowledges that it will be difficult and could be
impossible ( x ) for the Executive to find reasonably
comparable employment after termination and ( y ) to measure
the amount of damages the Executive suffers because of termination.
Additionally, Cortland Bancorp acknowledges that its general
severance pay plans do not provide for mitigation, offset, or
reduction of any severance payment received thereunder. Cortland
Bancorp further acknowledges that the payment of benefits by
Cortland Bancorp under this Agreement is reasonable and shall be
liquidated damages. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor shall any profits, income,
earnings, or other benefits from any source whatsoever create any
mitigation, offset, reduction, or any other obligation on the part
of the Executive hereunder or otherwise.
8
16 . Internal Revenue Code Section 409A
. Cortland Bancorp and the Executive intend that their exercise of
authority or discretion under this Agreement shall comply with
section 409A of the Internal Revenue Code of 1986. If when the
Executive’s employment terminates the Executive is a
specified employee, as defined in section 409A of the Internal
Revenue Code of 1986, and if any payments or benefits under this
Agreement will result in additional tax or interest to the
Executive because of section 409A, then despite any provision of
this Agreement to the contrary the Executive shall not be entitled
to the payments or benefits until the earliest of ( x ) the
date that is at least six months after termination of the
Executive’s employment for reasons other than the
Executive’s death, ( y ) the date of the
Executive’s death, or ( z ) any earlier date that does
not result in additional tax or interest to the Executive under
section 409A. As promptly as possible after the end of the period
during which payments or benefits are delayed under this provision,
the entire amount of the delayed payments shall be paid to the
Executive in a single lump sum. If any provision of this Agreement
does not satisfy the requirements of section 409A, the provision
shall nevertheless be applied in a manner consistent with those
requirements. If any provision of this Agreement would subject the
Executive to additional tax or interest under section 409A,
Cortland Bancorp shall reform the provision. However, Cortland
Bancorp shall maintain to the maximum extent practicable the
original intent of the applicable provision without subjecting the
Executive to additional tax or interest, and Cortland Bancorp shall
not be required to incur any additional compensation expense as a
result of the reformed provision. References in this Agreement to
section 409A of the Internal Revenue Code of 1986 include rules,
regulations, and guidance of general application issued by the
Department of the Treasury under Internal Revenue Code section
409A. In Witness Whereof , the parties have executed this
Severance Agreement as of the date first written above.
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
Cortland Bancorp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Marlene J. Lenio
|
|
|
|
|
|
Lawrence A. Fantauzzi
|
|
|
|
|
|
|
|
Its:
|
|
President and Chief Executive Officer
|
|
|
9
Severance Agreement This Severance Agreement (this
"Agreement") is entered into effective as of this day of
December 3, 2008, by and between Cortland Bancorp, an Ohio
corporation, and Craig M. Phython (the "Executive"), Senior Vice
President, Chief Investment Officer and Treasurer of The Cortland
Savings and Banking Company (the "Bank"), an Ohio-chartered bank
and wholly owned subsidiary of Cortland Bancorp, an Ohio
corporation. Whereas , recognizing the contributions to the
profitability, growth, and financial strength of Cortland Bancorp
and the Bank that the Executive has made and is expected to
continue to make, intending to assure itself of the current and
future continuity of management and establish minimum severance
benefits for certain officers and other key employees and ensure
that officers and other key employees are not practically disabled
from discharging their duties if a proposed or actual transaction
involving a change in control arises, and finally desiring to
provide additional inducement for the Executive to remain in the
employ of Cortland Bancorp and the Bank, and Whereas , none
of the conditions or events included in the definition of the term
"golden parachute payment" that is set forth in section
18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C.
1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation
Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the
best knowledge of Cortland Bancorp, is contemplated insofar as
Cortland Bancorp or any of its subsidiaries is concerned. Now
Therefore , in consideration of these premises and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows.
1 . Cash Benefit after a Change in Control .
(a) Cash benefit . If a Change in Control occurs, Cortland
Bancorp shall make a lump-sum payment to the Executive in an amount
in cash equal to one times the Executive’s compensation. For
this purpose the Executive’s compensation means ( x )
the sum of the Executive’s base salary when the Change in
Control occurs, including salary deferred at the Executive’s
election, plus ( y ) any bonus awarded for the most recent
whole calendar year before the year in which the Change in Control
occurs, regardless of whether the bonus is paid in the year earned
and regardless of whether the bonus is vested or subject to
elective deferral. The term bonus means cash or non-cash
compensation of the type that is required to be reported as bonus
by Securities and Exchange Commission rules governing tabular
disclosure of executive compensation, specifically
Regulation S-K Item 402 (17 CFR 229.402, currently
Item 402(c)(2)(iv)). The amount payable to the Executive
hereunder shall not be reduced to account for the time value of
money or discounted to present value. Subject to section 16 of this
Agreement, the payment required under this section 1(a) shall be
made within five business days after the Change in Control occurs.
The Executive shall be entitled to a payment under this section
1(a) on no more than one occasion during the term of this
Agreement.
(b) Change in Control defined . For purposes of
this Agreement the term Change in Control means a change in control
as defined in Internal Revenue Code section 409A and rules,
regulations, and guidance of general application thereunder issued
by the Department of the Treasury, including — (1) Change
in ownership : a change in ownership of Cortland Bancorp occurs
on the date any one person or group accumulates ownership of
Cortland Bancorp stock constituting more than 50% of the total fair
market value or total voting power of Cortland Bancorp stock, (2)
Change in effective control : ( x ) any one person or
more than one person acting as a group acquires within a 12-month
period ownership of Cortland Bancorp stock possessing 30% or more
of the total voting power of Cortland Bancorp stock, or ( y
) a majority of Cortland Bancorp’s board of directors is
replaced during any 12-month period by directors whose appointment
or election is not endorsed in advance by a majority of Cortland
Bancorp’s board of directors, or (3) Change in ownership
of a substantial portion of assets : a change in ownership of a
substantial portion of Cortland Bancorp’s assets occurs if in
a 12-month period any one person or more than one person acting as
a group acquires from Cortland Bancorp assets having a total gross
fair market value equal to or exceeding 40% of the total gross fair
market value of all of Cortland Bancorp’s assets immediately
before the acquisition or acquisitions. For this purpose gross fair
market value means the value of Cortland Bancorp’s assets or
the value of the assets being disposed of, determined without
regard to any liabilities associated with the assets. 2
. Additional Benefits after Employment Termination .
(a) Continued insurance benefits . Subject to section 2(b),
if the Executive’s employment terminates involuntarily but
without Cause or voluntarily but with Good Reason within
24 months after a Change in Control, Cortland Bancorp shall
cause to be continued medical, dental, accident, disability, and
life insurance coverage substantially identical to the coverage
maintained for the Executive before employment termination, in
accordance with the same schedule prevailing before employment
termination, and on substantially the same terms and conditions
prevailing before employment termination (including cost of
coverage to Cortland Bancorp and the Bank). The insurance coverage
shall continue until the first to occur of ( x ) the
Executive’s return to employment with Cortland Bancorp, the
Bank, or another employer, ( y ) the Executive’s
death, or ( z ) the end of the term remaining under this
Agreement when the Executive’s employment terminates.
2
(b) Alternative lump-sum cash payment . If (
x ) under the terms of the applicable policy or policies for
the insurance benefits specified in section 2(a) it is not possible
to continue the Executive’s coverage on the terms specified
in section 2(a), or ( y ) if when employment termination
occurs the Executive is a specified employee within the meaning of
section 409A of the Internal Revenue Code of 1986, if any of the
continued insurance coverage benefits specified in section 2(a)
would be considered deferred compensation under section 409A, and
finally if an exemption from the six-month delay requirement of
section 409A(a)(2)(B)(i) is not available for that particular
insurance benefit, instead of continued insurance coverage under
section 2(a) Cortland Bancorp shall pay or cause to be paid to the
Executive in a single lump sum an amount in cash equal to the
present value of Cortland Bancorp’s projected cost to
maintain that particular insurance benefit had the
Executive’s employment not terminated, assuming continued
coverage for the lesser of 36 months or the number of months until
the Executive attains age 65. The lump-sum payment shall be made
within five business days after employment termination or, if the
Executive is a specified employee within the meaning of section
409A and an exemption from the six-month delay requirement of
section 409A(a)(2)(B)(i) is not available, on the first day of the
seventh month after the month in which the Executive’s
employment terminates. (c) Miscellaneous benefits .
Subject to section 2(d), if the Executive’s employment
terminates involuntarily but without Cause or voluntarily but with
Good Reason within 24 months after a Change in Control —
(1) Cortland Bancorp shall for three years after termination
pay or cause to be paid the Executive’s initiation and
membership assessments and dues in a civic or social club of the
Executive’s choice. The Executive shall be solely responsible
for personal expenses for use of the club, (2) Cortland
Bancorp shall for three years after termination and at no cost to
the Executive provide or cause to be provided to the Executive
financial planning services, including but not limited to tax
preparation and financial planning having to do with receipt of
benefits under this Agreement, (3) Cortland Bancorp shall for
one year after termination and at no cost to the Executive provide
or cause to be provided to the Executive reasonable outplacement
services, including but not limited to employment counseling,
resume services, and executive placement services. (d)
Alternative lump-sum cash payment . If when employment
termination occurs the Executive is a specified employee within the
meaning of section 409A of the Internal Revenue Code of 1986, if
any of the miscellaneous benefits specified in section 2(c) would
be considered deferred compensation under section 409A, and finally
if an exemption from the six-month delay requirement of section
409A(a)(2)(B)(i) is not available for that particular benefit,
instead of the miscellaneous benefits under section 2(c) Cortland
Bancorp shall pay or cause to be paid to the Executive in a single
lump sum an amount in cash equal to the present value of Cortland
Bancorp’s projected cost to maintain that particular benefit
had the Executive’s employment not terminated. The lump-sum
payment shall be made within five business days after employment
termination or, if the Executive is a specified employee within the
meaning of section 409A and an exemption from the six-month delay
requirement of section 409A(a)(2)(B)(i) is not available, on the
first day of the seventh month after the month in which the
Executive’s employment terminates.
3
(e) Involuntary termination with Cause defined .
For purposes of this Agreement, involuntary termination of the
Executive’s employment shall be considered involuntary
termination with Cause if the Executive shall have committed any of
the following acts — (1) an act of fraud, embezzlement,
or theft while employed by Cortland Bancorp or the Bank, or
conviction of the Executive of or plea of no contest to a felony or
conviction of or plea of no contest to a misdemeanor involving
moral turpitude, or the actual incarceration of the Executive for
45 consecutive days or more, or (2) gross negligence,
insubordination, disloyalty, or dishonesty in the performance of
the Executive’s duties as an officer of Cortland Bancorp or
the Bank; willful or reckless failure by the Executive to adhere to
Cortland Bancorp’s or the Bank’s written policies;
intentional wrongful damage by the Executive to the business or
property of Cortland Bancorp or the Bank, including without
limitation its reputation, which in Cortland Bancorp’s sole
judgment causes material harm to Cortland Bancorp or the Bank;
breach by the Executive of fiduciary duties to Cortland Bancorp and
its stockholders, whether in the Executive’s capacity as an
officer or as a director of Cortland Bancorp or the Bank,
(3) removal of the Executive from office or permanent
prohibition of the Executive from participating in the Bank’s
affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or
(4) intentional wrongful disclosure of secret processes or
confidential information of Cortland Bancorp or the Bank, which in
Cortland Bancorp’s sole judgment causes material harm to
Cortland Bancorp or the Bank, or (5) any actions that cause
the Executive to be terminated for cause under any employment
agreement existing on the date hereof or hereafter entered into
between the Executive and Cortland Bancorp or the Bank, or
(6) the occurrence of any event that results in the Executive
being excluded from coverage, or having coverage limited for the
Executive as compared to other executives of Cortland Bancorp or
the Bank, under a blanket bond or other fidelity or insurance
policy covering directors, officers, or employees. For purposes of
this Agreement no act or failure to act on the Executive’s
part shall be deemed to have been intentional if it was due
primarily to an error in judgment or negligence. An act or failure
to act on the Executive’s part shall be considered
intentional if it is not in good faith and if it is without a
reasonable belief that the action or failure to act is in Cortland
Bancorp’s best interests. Any act or failure to act based
upon authority granted by resolutions duly adopted by the board of
directors or based upon the advice of counsel for Cortland Bancorp
shall be conclusively presumed to be in good faith and in Cortland
Bancorp’s best interests.
4
(f) Voluntary termination with Good Reason defined
. For purposes of this Agreement a voluntary termination by the
Executive shall be considered a voluntary termination with Good
Reason if the conditions stated in both clauses ( x ) and (
y ) are satisfied — ( x ) a voluntary
termination by the Executive shall be considered a voluntary
termination with Good Reason if any of the following occur without
the Executive’s advance written consent, and the term Good
Reason shall mean the occurrence of any of the following without
the Executive’s advance written consent — 1) a material
diminution of the Executive’s base salary, 2) a material
diminution of the Executive’s authority, duties, or
responsibilities, 3) a material diminution in the authority,
duties, or responsibilities of the supervisor to whom the Executive
is required to report, 4) a material diminution in the budget over
which the Executive retains authority, 5) a material change in the
geographic location at which the Executive must perform services,
or 6) any other action or inaction that constitutes a material
breach by Cortland Bancorp of this Agreement. ( y ) the
Executive must give notice to Cortland Bancorp of the existence of
one or more of the conditions described in clause ( x )
within 90 days after the initial existence of the condition,
and Cortland Bancorp shall have 30 days thereafter to remedy
the condition. In addition, the Executive’s voluntary
termination because of the existence of one or more of the
conditions described in clause ( x ) must occur within
24 months after the initial existence of the condition.
3 . Termination for Which No Benefits Are
Payable . Despite anything in this Agreement to the contrary,
the Executive shall not be entitled to benefits under this
Agreement if the Executive’s employment terminates with
Cause, if the Executive dies while actively employed by Cortland
Bancorp or the Bank, or if the Executive becomes totally disabled
while actively employed by Cortland Bancorp or the Bank. For
purposes of this Agreement the term totally disabled means that
because of injury or sickness the Executive is unable to perform
the Executive’s duties. The benefits, if any, payable to the
Executive or the Executive’s beneficiary or estate relating
to the Executive’s death or disability shall be determined
solely by such benefit plans or arrangements as Cortland Bancorp or
the Bank may have with the Executive relating to death or
disability, not by this Agreement.
5
4 . Term of Agreement . The initial term of
this Agreement shall be for a period of three years, commencing on
the effective date of this Agreement first written above. On the
first anniversary of the effective date of this Agreement and on
each anniversary thereafter this Agreement shall be extended
automatically for one additional year, unless Cortland
Bancorp’s board of directors gives notice to the Executive in
writing at least 90 days before the anniversary that the term
of this Agreement will not be extended. If the board of directors
determines not to extend the term, it shall promptly notify the
Executive. References herein to the term of this Agreement mean the
initial term and extensions of the initial term. Unless terminated
earlier, this Agreement shall terminate when the Executive attains
age 65. If the board of directors decides not to extend the term of
this Agreement, this Agreement shall nevertheless remain in force
until its term expires. 5 . This Agreement Is Not
an Employment Contract . The parties hereto acknowledge and
agree that this Agreement is not a management or employment
agreement and nothing in this Agreement shall give the Executive
any rights or impose any obligations to continued employment by
Cortland Bancorp or the Bank or successor of Cortland Bancorp.
6 . Payment of Legal Fees . Cortland Bancorp is
aware that after a Change in Control management could cause or
attempt to cause Cortland Bancorp to refuse to comply with its
obligations under this Agreement, or could institute or cause or
attempt to cause Cortland Bancorp to institute litigation seeking
to have this Agreement declared unenforceable, or could take or
attempt to take other action to deny Executive the
|
