In the event that Mr. Space is involuntarily terminated for cause or he voluntarily terminates employment without good reason, Mr. Space will be subject to a twelve month non-solicitation covenant (applicable to both customers and employees). In the event that he is involuntarily terminated without cause or voluntarily terminates employment for good reason, he will be subject to a twelve month non-solicitation covenant with respect to employees and a six month non-solicitation covenant with respect to customers.
Change in Control Agreement. The change in control agreement has a fixed three-year term commencing on September 6, 2022, with automatic annual one-year renewals thereafter, absent notice of non-renewal from either party. The agreement has a “double-trigger” payment feature requiring both a change in control of the Company and the involuntary termination of Mr. Space’s employment without “cause” or voluntary termination of employment by Mr. Space for “good reason” (each as defined in the change in control agreement) in order for any benefit to become payable under the agreement.
More specifically, in the event Mr. Space’s employment is terminated on or within twelve months after a “change in control” (as defined in the agreement) during the term of the agreement either by the Company, other than for death or disability or for a reason other than “cause”, or by Mr. Space after the occurrence of certain specified events constituting “good reason”, the Company will pay Mr. Space a lump-sum cash payment. That payment is equal to two times Mr. Space’s highest annual base salary in effect during the twelve months preceding his termination of employment. In addition, Mr. Space and his beneficiaries will remain eligible to participate, on the same terms and conditions as apply from time to time to the Company’s executive management team, in the medical, vision and dental programs of the Bank for two years, or a cash payment equal to the estimated after-tax cost to obtain such benefits, or substantially similar benefits, within thirty days following his termination.
In the event that Mr. Space is involuntarily terminated for cause or voluntarily terminates employment without good reason, he will be subject to a twelve month non-solicitation covenant (applicable to both customers and employees). In the event that Mr. Space is involuntarily terminated without cause or voluntarily terminates employment for good reason, he will be subject to a twelve month non-solicitation covenant with respect to employees and a six month non-solicitation covenant with respect to customers.
Supplemental Executive Retirement Plan Agreement. The supplemental retirement plan agreement (“SERP”) provides for the monthly payment of a fixed cash benefit over a period of fifteen years, commencing on the first day of the month following Mr. Space’s separation from service: (i) whether voluntary or due to a termination without cause; (ii) due to disability; (iii) due to death; or (iv) within two years following a change in control of the Bank. The normal retirement benefit under the SERP is $80,000 annually, which vests over a period of ten years (commencing January 1, 2023 through December 31, 2032). The Board of Directors of the Bank reserves the right to increase the amount of the benefit from time to time, in its discretion.
The SERP also contains non-competition and non-solicitation covenants. A violation of such covenants, except in limited circumstances, would result in the forfeiture of any unpaid benefits to Mr. Space.
Each of the foregoing agreements provides that, in the event that the payments to be received by Mr. Space, when taken together with payments and benefits payable to or on behalf of Mr. Space under any other plans, contracts or arrangements, would constitute an excess parachute payment under Internal Revenue Code Section 280G, Mr. Space may elect to reduce the payment actually received in order to reduce or eliminate the impact of the excise tax under Section 4999 of the Code. Mr. Space is not entitled to a “gross-up” payment to reduce the effect of the tax under Section 4999 of the Code.
The foregoing descriptions of the employment agreement, change in control agreement and supplemental executive retirement plan agreement do not purport to be complete and are qualified in their entirety by reference to the employment agreement, change in control agreement and supplemental executive retirement plan agreement, copies of which will be filed with the Company’s Annual Report for the fiscal year ending December 31, 2023.