Compensation and Human Resources Committee Interlocks and Insider Participation
Our Compensation and Human Resources (“CHR”) Committee determined the salaries paid to the Chief Executive Officer and those executive officers who report directly to the Chief
Executive Officer. None of the members of the CHR Committee was an officer or employee of Oritani Financial Corp. or Oritani Bank during the fiscal year ended June 30, 2019 or is a former officer of Oritani Financial Corp. or Oritani Bank. Each
member is an independent director under applicable Nasdaq rules.
During the fiscal year ended June 30, 2019: (i) no executive of Oritani Financial Corp. served as a member of the CHR Committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the CHR Committee of Oritani Financial Corp.; (ii) no executive officer of Oritani Financial Corp. served
as a director of another entity, one of whose executive officers served on the CHR Committee of Oritani Financial Corp.; and (iii) no executive officer of Oritani Financial Corp. served as a member of the CHR Committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of Oritani Financial Corp.
The CHR Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis that is required by the rules established by the Securities and Exchange
Commission. Based on such review and discussions, the CHR Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Form 10-K/A.
John J. Skelly, Jr (Chair) Nicholas Antonaccio
This CD&A contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act.
These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases,
including references to assumptions.
Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that
could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following:
We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.
On June 25, 2019, Oritani entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Valley National Bancorp (“Valley”), a New Jersey corporation. The Merger Agreement provides that,
upon the terms and subject to the conditions set forth therein, Oritani will merge with and into Valley, with Valley as the surviving corporation in the merger (the “Merger”). Immediately following the Merger, Oritani’s wholly owned subsidiary,
Oritani Bank, will merge with and into Valley’s wholly owned subsidiary, Valley National Bank, with Valley National Bank the surviving entity in the merger (the “Bank Merger”). The Merger Agreement was unanimously approved and adopted by the Board of
Directors of each of Oritani and Valley. Completion of the Merger is subject to receipt of the approvals of the shareholders of each of Oritani and Valley, applicable regulatory approvals and other customary closing conditions.
Oritani and Valley agreed to covenants set forth in the Merger Agreement with respect to the completion of the Merger and their respective operations during the pendency of the Merger. With respect
to Oritani’s compensation and benefits practices, prior to the effective time of the Merger (or earlier termination of the Merger Agreement), subject to specified exceptions, Oritani may not, and Oritani may not permit any of its subsidiaries to,
without the prior written approval of Valley (such consent not to be unreasonably withheld), undertake the following:
The Merger Agreement also provides that Valley shall honor all of Oritani’s benefit plans, including employment agreements and change of control agreements, except as follows:
Oritani has been a strong and profitable company and has generally performed in the top quartile of its peer group for many key financial metrics every year since its conversion
to a public company. Strong earnings performance continued in fiscal 2019. However, loan and deposit growth were below expectations. Disappointing results regarding growth also occurred in fiscal 2018. As discussed in prior public releases,
intense competition for commercial real estate loans as well as for retail deposits was encountered in both of these fiscal periods. The Company also experienced substantial prepayments of existing commercial real estate loans as existing borrowers
refinanced loans with other lenders, often at rates, terms and conditions which were not in the long term best interest of the Company and its shareholders to match. Despite our strong net income and return on average assets, our financial
performance did not merit the maximum incentive compensation level. However, as a result of our pending merger with Valley, the maximum achievement for the fiscal year ended June 30, 2019 was considered attained in accordance with the terms of our
Annual Incentive Plan. The highlights of our Fiscal 2019 Performance include:
Despite the recent growth results, we had previously demonstrated a prolonged ability to increase the loan and deposit portfolios, as detailed in the chart below:
We consider our ultimate measure of performance to be our return on average assets. While we have delivered strong results in this area, as detailed in the chart below, we have
also significantly exceeded median peer results for this measurement (peer data per S&P Global Market Intelligence).
The goal of the Executive Compensation Program is to enable the Company to attract, develop, and retain strong executive officers capable of maximizing the Company’s performance
for the benefit of its stockholders. The Company’s compensation philosophy is to provide competitive compensation opportunities that are aligned with its financial performance and the generation of value for stockholders through stock-price
appreciation. The Company’s focus is on retaining and motivating key executives, maintaining profitability, asset quality and loan growth, while controlling expenses. In recent years, the Company has refined its compensation philosophy to emphasize
the current use of annual cash incentives (i.e., versus stock compensation) and thereby focus and balance management’s attention not only on long-term value creation, but also on the achievement of annual business plan objectives. The Company
believes that previous equity awards (i.e., stock compensation) under the 2011 Equity Incentive Plan, as well as the Oritani Bank Employee Stock Ownership Plan, have been effective in providing management with strong economic incentives to increase
shareholder value, and served the Company well by ensuring the retention of key executives. The Company’s compensation philosophy has been adjusted to emphasize cash incentive opportunities among its top officers. The Company believes that previous
stock awards combined with current cash incentives provide a balanced and effective overall executive compensation program.
This discussion is focused specifically on the compensation of our Named Executive Officers, each of whom is named in the Summary Compensation Table which appears later in this section.
Roles of the Compensation and Human Resources Committee and Executive Officers
The CHR Committee assists the Board of Directors in discharging its responsibilities regarding the Company’s compensation and benefit plans and practices. Authority granted to the CHR Committee is
established in its charter, which is available through links under the Investor Relations tab on the Company’s website at www.oritani.com. One of the responsibilities of the CHR Committee is to provide, on an annual basis, final approval of the
significant components of the total compensation of the Named Executive Officers. In making these determinations, the CHR Committee considered the Named Executive Officer’s level of job responsibility, the compensation paid by peers for similar
levels of responsibility, industry survey data regarding executive compensation, the financial condition and performance of the Company, and an assessment of the Named Executive Officer’s individual performance. The CHR Committee also strongly
considered the recommendations of the Chief Executive Officer regarding the other Named Executive Officers. Input from the Chief Executive Officer was critical in ensuring that the CHR Committee had the information needed to make informed
compensation decisions. The Chief Executive Officer participates in compensation-related activities purely in an informational and advisory capacity and he presents the other Named Executive Officers’ performance summaries and recommendations
relating to their compensation to the CHR Committee for its review and approval. The Chief Executive Officer does not provide any input or attend any portion of meetings related to the evaluation of his performance and the determination of his
compensation.
The peer median and average compensation were important factors that were considered by the CHR Committee when contemplating adjustments to the Named Executive Officers’ salary. The CHR Committee
decided that the acceptable range for base salary increases for the Named Executive Officers was from 0 to 10%. This range was also used in the prior fiscal year.
Due to the pending Merger with Valley, no base salary adjustments are contemplated for the Named Executive Officers for fiscal 2020. Accordingly, the CHR Committee has not engaged a compensation
consultant for fiscal year 2020.
The Company’s 2019 fiscal year compensation program for Named Executive Officers consisted of base salary, annual cash incentives, the partial vesting of previously awarded
equity incentive awards (such as stock options and restricted stock awards) based on the Named Executive Officers continued service in accordance with the terms of the awards, a comprehensive benefits package and perquisites. As of August 18, 2016,
all previously awarded equity incentive awards for Named Executive Officers Lynch, Fields, and Wyks had fully vested.
In designing our executive compensation program, the CHR Committee seeks to create what it believes is the best mix of base salary, annual cash incentives and equity compensation in delivering the
Named Executive Officers’ total compensation. The executive compensation program is also designed to encourage and reward executives for achieving and maintaining high levels of performance while ensuring the stability and retention of our senior
management personnel. The CHR Committee believes that the mix of pay elements can and should be varied as needed to support the current and long-term business strategies of the Company, as well as to conform to generally-accepted principles of good
governance as they pertain to executive compensation. In recent years, the CHR Committee has emphasized the use of annual cash incentive compensation versus additional grants of long-term stock compensation. However, as described in our Proxy
Statement dated October 10, 2018, the CHR Committee also established a long term performance goal with respect to the incentive award opportunities under the Executive Officer Incentive Plan. The CHR Committee believes that senior management
personnel have currently attained adequate levels of equity incentives to ensure their mutuality of economic interest with all shareholders, and therefore the CHR Committee has emphasized annual cash incentives that correspond to the Company’s
business results in terms of both “performance versus plan” and “performance versus peers.” The CHR Committee concluded that the Named Executive Officers’ compensation was consistent with market practices and competitive and aligned with the
performance of the Company and Oritani Bank.
The CHR Committee considered the base salaries of the Named Executive Officers at the beginning of the period to be within a reasonable range based on their perception of existing
market conditions and the Named Executive Officers’ responsibilities. In addition to strong earnings and achievements of other hallmarks of operations and results, the CHR Committee was particularly satisfied with Management’s prompt and thorough
response to regulatory issues, maintenance of expense controls and asset quality. The CHR Committee noted Managements discipline in maintaining strong underwriting standards in the face of a competitive environment that exhibited contrary behavior.
The CHR Committee remained pleased with the performances of Mr. Fields and Mr. Wyks over the course of the year. A cost of living adjustment, consistent with the level of base salary increase awarded
to the base employee population, was provided with respect to their base salaries. No increase was awarded to Mr. Lynch as they determined that his current level of compensation was appropriate when compared to the peer group.
The CHR Committee was pleased with the performances of Messrs. Manderino and Breitenstein over the course of the year. The salary adjustments for these two individuals was greater than the cost of
living adjustment awarded to the base employee population, primarily because their current compensation was below peer median and average levels.
The concept of the Incentive Plan is to establish certain performance metrics that, if achieved, would likely result in strong financial performance of the Company and progress
toward the strategic objectives of the Board. The plan incorporates three potential incentive achievement levels for each performance metric: threshold, target and maximum; as well as a net income “gate.” The net income gate is an important feature
of our Incentive Plan that provides strong shareholder protection by identifying certain levels of earnings performance below which annual incentive compensation payments would not be approved by the CHR Committee or would be authorized and approved
at less than the maximum incentive award. This important safeguard in our program ensures that management’s annual incentive bonuses are not only commensurate with key performance indicators, but also in line with overall Company profitability.
At the conclusion of the measurement period, actual results are measured by the CHR Committee versus the performance metrics and “points” are awarded based on whether threshold,
target and maximum results were achieved for each performance metric, and whether income gate levels have been achieved. The total points are accumulated, and this result determines whether the Named Executive Officers are eligible for awards at the
threshold, target or maximum level of their annual incentive award opportunity under the Incentive Plan. In addition, the CHR Committee, if warranted, may add or subtract subjective points. The number and level of performance metrics, the Named
Executive Officers incentive level (as a percentage of base salary) and total number of points required to achieve threshold, target or maximum levels under the Incentive Plan, are established by the CHR Committee each year.
Details regarding the annual cash incentives paid in fiscal 2019 to the Named Executive Officers under the Incentive Plan were discussed in the October 10, 2018 proxy statement.
In summary, the CHR Committee concluded that management had achieved the target level of annual cash incentive. In addition, the CHR Committee concluded that each Named Executive Officer had satisfactorily achieved his individual performance goals
and fully earned the individual performance component of his annual cash incentive. Accordingly, cash payments for the target level of achievement were approved by the CHR Committee and such amounts were paid to the executives in December 2018. The
awards to the Company’s Named Executive Officers totaled $940,000. The specific amount awarded to each Named Executive Officer that was paid during the fiscal year ended June 30, 2019 is set forth in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table.
Specific plan structure regarding the annual cash incentives eligible to be earned in fiscal 2019 were also disclosed in the October 10, 2018 proxy statement. The measurements are repeated below.
Incentive Plan Summary Charts
|
(dollars in thousands)
|
|
|
SHORT TERM INCENTIVE PLAN (STIP)
|
Measurement Period July 1, 2018 - June 30, 2019
|
|
|
|
|
|
|
|
Pretax Income Gate
|
|
$ 60,000
|
$ 55,000
|
$ 50,000
|
|
|
|
|
|
|
|
|
|
Achievement level required to earn:
|
|
GOAL
|
|
|
|
|
Loan Growth
|
|
|
|
|
|
Balance growth of at least
|
$ 176,000
|
$ 125,000
|
$ 75,000
|
|
|
or
|
|
|
|
|
|
Loan originations of at least
|
$ 490,000
|
$ 425,000
|
$ 350,000
|
|
|
|
|
|
|
|
Deposit Growth (net of brokered deposits)
|
|
|
|
|
|
Balance growth of at least
|
$ 197,000
|
$ 146,000
|
$ 99,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency Ratio
|
</= 35.87%
|
35.88 - 43.83%
|
43.84 - 47.82%
|
|
|
|
|
|
|
|
Non Performing Asset ratio
|
</= 0.25%
|
0.26 - 0.50%
|
0.51-0.76%
|
|
|
|
|
LONG TERM INCENTIVE PLAN (LTIP)
|
Measurement Period July 1, 2018 - June 30, 2021
|
|
GOAL
|
|
|
|
|
Return on Average Assets
|
|
|
|
|
|
Ratio of at least
|
1.00%
|
1.00%
|
0.75%
|
|
|
|
and
|
or
|
or
|
|
|
Peer group ranking
|
top quartile
|
top quartile
|
top half
|
Possible Payouts Under Incentive Plans
|
Estimated Possible Payouts Under Short Term Incentive Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Lynch
|
July 1, 2018
|
July 1, 2018
|
June 30, 2019
|
1 year
|
$184,625
|
$369,250
|
$553,875
|
John M. Fields, Jr.
|
July 1, 2018
|
July 1, 2018
|
June 30, 2019
|
1 year
|
$69,826
|
$122,195
|
$174,565
|
Louis Manderino
|
July 1, 2018
|
July 1, 2018
|
June 30, 2019
|
1 year
|
$52,800
|
$92,400
|
$132,000
|
Kurt Breitenstein
|
July 1, 2018
|
July 1, 2018
|
June 30, 2019
|
1 year
|
$50,000
|
$87,500
|
$125,000
|
Philip M. Wyks
|
July 1, 2018
|
July 1, 2018
|
June 30, 2019
|
1 year
|
$15,948
|
$31,896
|
$47,844
|
|
|
|
|
|
|
|
|
(1)
|
Assumes full achievement of the individual component of the Incentive Plan goal.
|
|
Estimated Possible Payouts Under Long Term Incentive Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Lynch
|
July 1, 2018
|
July 1, 2018
|
June 30, 2021
|
3 years
|
$125,545
|
$258,475
|
$369,250
|
John M. Fields, Jr.
|
July 1, 2018
|
July 1, 2018
|
June 30, 2021
|
3 years
|
$52,369
|
$87,282
|
$122,195
|
Louis Manderino
|
July 1, 2018
|
July 1, 2018
|
June 30, 2021
|
3 years
|
$39,600
|
$66,000
|
$92,400
|
Kurt Breitenstein
|
July 1, 2018
|
July 1, 2018
|
June 30, 2021
|
3 years
|
$37,500
|
$62,500
|
$87,500
|
Philip M. Wyks
|
July 1, 2018
|
July 1, 2018
|
June 30, 2021
|
3 years
|
$10,632
|
$21,264
|
$31,896
|
A provision of our Fiscal 2019 Annual and Long Term Incentive Plans states that, in the event an executive retires or dies, or management successfully enters into a merger transaction whereby the Company is acquired,
during the course of a measurement period, the measurement period will be concluded and the award will be earned at the Maximum level. Due to the Merger Agreement with Valley, the above awards were deemed by the CHR Committee to have been earned at
the Maximum level. No payments at this level will be authorized by the CHR Committee until all transaction-related conditions, including shareholder approval, have been fulfilled.
Fiscal 2020 Executive Officer Incentive Plan
Due to the pending merger with Valley, the performance goals for the Incentive Plan for the 2020 fiscal year were approved by the CHR Committee in the same manner as the 2019
fiscal year under the Incentive Plan, except for immaterial adjustments to the possible awards due to changes in base salary as described above. See “Plan Based Awards” for possible payments under the plan. As agreed to by Valley, in connection
with the Merger, a pro-rata bonus at target level for the fiscal year ended on June 30, 2020, based on the number of days through the closing date of the Merger, will be earned by the Named Executive Officers under this plan if the Merger is
completed.
Equity Incentives. In connection with the initial public offering of Oritani Bank’s federally chartered mid-tier holding company and
predecessor to the Company that was consummated in 2007 (the “Initial Stock Offering”), Oritani Bank established the Oritani Bank Employee Stock Ownership Plan (“ESOP”) that purchased 3.92% of the total shares issued in the offering for the benefit
of employees of Oritani Bank. In 2010, the ESOP also purchased an additional 4.0% of the shares issued in connection with the Company’s stock offering related to the mutual-to-stock conversion of Oritani Financial Corp., MHC, the former mutual
holding company of Oritani Bank (the “Second-Step Conversion”). The ESOP is a tax-qualified retirement plan as defined under the Internal Revenue Code.
At a special meeting of stockholders in April 2008, the Company’s stockholders approved the Company’s 2007 Equity Incentive Plan (“the 2007 Equity Plan”) which authorized the
issuance of up to 4,172,817 shares of Company common stock (as adjusted as a result of the Second-Step Conversion) pursuant to grants of incentive and non-statutory stock options, stock appreciation rights, and restricted stock awards. The 2007
Equity Plan provided officers, employees and directors of the Company and Oritani Bank with additional incentives to promote the growth and performance of the Company. The CHR Committee believes that officer
stock ownership provides a significant incentive in building stockholder value by aligning the interests of the officers, employees and directors with those of the Company’s shareholders. In accordance with the terms of the outstanding grant
agreements under the 2007 Equity Plan, all of the stock awards and the vast majority of stock options that had been granted under the Equity Plan vested in conjunction with the Second-Step Conversion. As of June 30, 2019, under the 2007 Equity Plan,
a total of 4,245,758 (101.75%) of stock options and restricted stock awards had been granted, 92,948 (2.23%) have expired or been forfeited, and 20,007 (0.48%) are available to be granted in the future. However, in accordance with the terms of the
Merger Agreement, no additional stock options or restricted stock awards will be granted prior to the closing of the Merger.
At a special meeting of stockholders in July 2011, the Company’s stockholders approved the Company’s 2011 Equity Incentive Plan (“2011 Equity Plan”) which authorized the issuance
of up to 5,790,950 shares of the Company’s common stock pursuant to grants of stock options, restricted stock awards and restricted stock units, with no more than 1,654,629 of the shares be issued as restricted stock awards or restricted stock
units. Employees and outside directors of the Company or Oritani Bank are eligible to receive awards under the 2011 Equity Plan. The total granted to non-employee directors may not exceed, in the aggregate, 30% of the shares reserved under the 2011
Equity Plan. Both the 2007 Equity Plan and the 2011 Equity Plan are administered by the CHR Committee.
As of June 30, 2019, under the 2011 Equity Plan, a total of 5,671,350 (97.93%)% stock options and restricted stock awards had been granted, 113,800 (1.97%) have expired or been
forfeited, and 233,400 (4.03%) are available to be granted in the future. However, in accordance with the terms of the Merger Agreement, no additional stock options or restricted stock awards will be granted prior to the closing of the Merger.
The stock options and restricted stock awards granted under the 2011 Equity Plan generally vest in equal installments over a five-year period. The vesting of the options and
restricted stock awards accelerate upon death or disability, retirement or an involuntary termination without cause following a change in control of the Company or Oritani Bank. The grants have other terms and conditions consistent with the 2011
Equity Plan. As of June 30, 2019, most of the awards provided to the Named Executive Officers under the 2007 Equity Plan and 2011 Equity Plan had fully vested.
Employment Agreements. Oritani Bank has entered into employment agreements with each of the Named Executive Officers. The employment agreements are designed
to give us the ability to retain the services of the Named Executive Officers, and provide them with severance payments in the event of their involuntary or constructive termination of employment without cause, including termination in connection
with a change in control. The rationale for providing these severance payments is to provide security for our Named Executive Officers and stability among our senior management team. The CHR Committee believes that the employment agreements are
consistent with industry practices and desirable for retaining executive talent. In addition, the CHR Committee believes that the terms and conditions of the employment agreements provided to the Company’s Named Executive Officers are reasonable,
appropriate and consistent with similar provisions contained in the employment agreements provided to senior executives of the Company’s peer comparator companies.
Other Benefits. Additionally, Oritani Bank provides certain fringe benefits, including retirement plans, termination benefits, and
perquisites. The retirement plans consist of:
•
|
A tax-qualified defined benefit plan (frozen as of December 31, 2008); a 401(k) plan (with an employer matching contribution equal to 50% of the first 6% of employee deferrals); and the
ESOP (with annual employer contribution equal to the amount of the annual ESOP loan repayment).
|
•
|
A nonqualified Benefit Equalization Plan which provides benefits to certain employees who are disallowed certain benefits under the Company’s qualified benefit plans; a nonqualified
Executive Supplemental Retirement Income Agreement for our Chief Executive Officer; and a post-retirement medical plan for certain eligible senior officers.
|
The CHR Committee considered these items when contemplating the overall compensation package awarded to the Named Executive Officers. The CHR Committee felt that these items
were appropriate given the level of responsibility for each Named Executive Officer and that no changes to the programs were warranted. See “Benefit Plans and Arrangements” for a further description of these plans.
Other Matters
Corporate Income Tax Considerations. Under Section 162(m) of the Internal Revenue Code, publicly traded companies are
subject to limits on the deductibility of executive compensation. Deductible compensation is limited to $1 million per year for each “covered employee” unless such compensation meets an exception as “qualified performance-based” compensation and is
paid pursuant to a written binding contract which was in effect prior to November 2, 2017 and which has not subsequently been materially modified. For taxable years ending on or before December 31, 2017, each Named Executive Officer listed in the
Summary Compensation Table, except for the principal financial officer, was considered to be a “covered employee.” Effective for taxable years beginning on or after January 1, 2018, as a result of the Tax Cuts and Jobs Act of 2017, the “qualified
performance-based” compensation exemption no longer applies and the definition of “covered employee” has been revised to include the principal executive officer, the principal financial officer and the three other most highly compensated executive
officers of the company required to be included in the Summary Compensation Table. For future years, a “covered employee” will also include any individual who was considered a covered employee for 2018 or any taxable year thereafter. Stock option
grants made prior to November 2, 2017 are intended to qualify as performance-based compensation.
A number of requirements must be met for particular compensation to qualify for tax deductibility, so there can be no assurance that the incentive compensation awarded will be fully deductible in all
circumstances. While the Committee currently does not have a formal policy with respect to the payment of compensation in excess of the deduction limit, the Committee’s historical practice has been to structure compensation programs offered to the
Named Executive Officers with a view to maximizing the tax deductibility of amounts paid. However, in structuring compensation programs and making compensation decisions, the Committee considers a variety of factors, including the Company’s tax
position, the materiality of the payment and tax deductions involved and the need for flexibility to address unforeseen circumstances and the Company’s incentive and retention requirement for its management personnel. After considering these factors,
the Committee may decide to authorize payments, all or part of which would be nondeductible for federal tax purposes.
Section 4999 of the Internal Revenue Code imposes a 20% excise tax on certain “excess parachute payments” made to “disqualified individuals.” Under Section 280G of the Internal
Revenue Code, such excess parachute payments are also nondeductible to the Company. If payments that are contingent on a change of control to a disqualified individual (which includes the Named Executive Officers) exceed 2.99 times the individual’s
“base amount,” (which is the five year average of the disqualified individual’s compensation set forth in his or her Form W-2 and/or Form 1099), they constitute “excess parachute payments” to the extent they exceed one time the individual’s base
amount. Severance payments to the Named Executive Officers pursuant to their employment agreements and other compensation arrangements that are paid in connection with a change in control of the Company or Oritani Bank are subject to reduction in
order to avoid penalties under Sections 280G and 4999 of the Internal Revenue Code.
Accounting Considerations. The CHR Committee considers the financial statement implications of each element of the Named Executive
Officers’ compensation. However, the impact of each compensation element on the Company’s overall compensation philosophy and compensation program, including considerations such as balancing long-term and short-term incentives, as well as the
projected economic costs of each element are the primary determining factors of the Named Executive Officers’ compensation packages.
Clawback. As a condition to receiving incentive compensation from the Company, each executive officer has entered into an agreement with
the Company providing that any bonus and incentive compensation awarded or paid subsequent to the adoption of this policy (July 7, 2011) is subject to recovery or “clawback” by the Company if (1) the payments or awards were based on materially
inaccurate financial statements or any other materially inaccurate performance metric criteria, and (2) the amount of the bonus or incentive compensation, as calculated under the restated or corrected financial results, is less than the amount
actually paid or awarded under the original financial results.
Stock Ownership and Retention Policy. The Board believes it is important that the executive
officers and directors of the Company have long term financial interests that are aligned with those of stockholders. Under this policy, the following stock ownership minimums are required: Chief Executive Officer is required to hold shares whose
value is at least five times the executives’ base salary; other executive officers are required to hold shares whose value is at least three times the executives’ base salary and Directors are required to hold at least 25,000 shares. An individual
must achieve these levels within five years of being appointed an executive officer or director. This policy is administered by the CHR Committee. Each of the relevant executive officers currently exceeds these requirements or has been in their
position less than five years.
Anti-Hedging Policy. In 2014, the Board also adopted an anti-hedging policy, which prohibits
directors and executive officers from engaging in or effecting any transaction designed to hedge or offset the economic risk of owning shares of Company common stock. Accordingly, any hedging, derivative or other equivalent transaction that is
specifically designed to reduce or limit the extent to which declines in the trading price of Company common stock would affect the value of shares of Company common stock owned by an executive officer or director is prohibited. Cashless exercises
of stock options are not deemed short sales and are permitted.
Risk Management
The CHR Committee believes that any risks arising from the Company’s compensation policies and practices for all of its employees, including the Named Executive Officers, are not reasonably likely to
have a material adverse effect on the Company or Oritani Bank. In addition, the CHR Committee believes that the mix and design of the elements of the compensation program will encourage senior management to act in a manner that is focused on
long-term valuation of the Company and Oritani Bank.
The CHR Committee regularly reviews the Company’s compensation program to ensure that controls are in place so that employees are not presented with opportunities to take unnecessary and excessive
risks that could threaten the value of the Company and Oritani Bank. With respect to the Incentive Plan, the CHR Committee reviews and approves the company-wide performance objectives that determine the bonus payments to be made thereunder.
Furthermore, all bonus payments are subject to clawback in accordance with our clawback policy, which ensures that performance awards are linked to the actual performance of the Company and Oritani Bank and promotes the long-term value creation of
the Company and Oritani Bank. Moreover, we instituted our anti-hedging policy to ensure that our equity incentive plans are more sensitive to risk, which helps ensure the sustainability of our overall performance beyond a one-year performance
period. Finally, by implementing the ESOP, 2007 Equity Plan and 2011 Equity Plan and by having an executive stock ownership and retention policy, our senior management team and employees have a significant ownership interest in the Company, which
will align their interests with those of the stockholders, and in turn will contribute to long-term stockholder value and decrease the likelihood that they would take excessive risks that could threaten the value of their common stock.
Executive Officer Compensation
Summary Compensation Table. The following table sets forth for the fiscal years ended June 30, 2019, 2018 and 2017 certain information as to the total
remuneration paid to Mr. Lynch, who serves as President and Chief Executive Officer, Mr. Fields, who serves as Executive Vice President and Chief Financial Officer, and the next three most highly compensated executive officers of the Company or
Oritani Bank. Each of the individuals listed in the table below is referred to as a “Named Executive Officer.”
Name and
principal position
|
|
|
|
|
|
Non Equity Incentive Plan Compensation ($)
|
Change in pension value and non—qualified deferred compensation earnings
($) (2)
|
All other compensation
($) (3)
|
|
Kevin J. Lynch
President and
Chief Executive Officer
|
2019
|
752,702
|
—
|
—
|
—
|
519,166
|
2,081,975
|
169,663
|
3,523,505
|
2018
|
744,181
|
—
|
—
|
—
|
738,500
|
665,432
|
195,215
|
2,343,328
|
2017
|
781,106
|
—
|
—
|
—
|
738,500
|
3,305,304
|
235,540
|
5,060,451
|
|
|
|
|
|
|
|
|
|
|
John M. Fields, Jr.
Executive Vice President
and Chief Financial Officer
|
2019
|
371,191
|
—
|
—
|
—
|
178,056
|
235,388
|
126,983
|
911,618
|
2018
|
363,065
|
—
|
—
|
—
|
227,103
|
24,087
|
145,482
|
759,738
|
2017
|
339,620
|
—
|
—
|
—
|
213,241
|
808,746
|
172,477
|
1,534,084
|
|
|
|
|
|
|
|
|
|
|
Louis Manderino
Executive Vice President
and Chief Risk Officer
|
2019
|
277,731
|
—
|
—
|
—
|
134,640
|
21,805
|
109,511
|
543,686
|
2018
|
259,754
|
—
|
—
|
17,800
|
160,800
|
17,422
|
131,058
|
586,834
|
2017
|
227,875
|
—
|
—
|
—
|
56,238
|
14,278
|
140,838
|
439,230
|
|
|
|
|
|
|
|
|
|
|
Kurt Breitenstein
Executive Vice President
and Chief Lending Officer
|
2019
|
258,173
|
—
|
—
|
—
|
55,250
|
—
|
125,859
|
439,281
|
2018
|
218,654
|
—
|
—
|
26,700
|
8,550
|
—
|
45,922
|
299,826
|
2017
|
138,846
|
—
|
156,500
|
26,800
|
—
|
—
|
17,335
|
339,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip M. Wyks
Senior Vice President
and Corp. Secretary
|
2019
|
216,812
|
—
|
—
|
—
|
53,160
|
232,011
|
101,365
|
603,348
|
2018
|
210,497
|
—
|
—
|
—
|
61,934
|
43,051
|
120,454
|
435,937
|
2017
|
204,367
|
—
|
—
|
—
|
60,130
|
53,347
|
141,311
|
459,154
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes payments for unused vacation days made to Mr. Lynch of $14,202, $5,681; and $42,606 for 2019, 2018 and 2017, respectively, and to Mr. Fields of $15,214, $17,465 and $7,822 for 2019,
2018 and 2017, respectively.
|
(2)
|
The amounts in this column reflect the actuarial change in the present value over the course of the fiscal year, of the Named Executive Officer’s benefits under the Defined Benefit Plan and
the defined benefit portion of the Benefit Equalization Plan. The amounts in this column also include the increase in the value of the Named Executive Officer’s benefits under the portion of the Benefit Equalization Plan that supplements
the ESOP. The totals also include the increase in the value of, in the case of Mr. Lynch, an Executive Supplement Retirement Income Agreement and the Directors’ Retirement Plan maintained by Oritani Bank, and, in the case of Mr. Fields,
the Director’s Retirement Plan maintained by Oritani Bank. Where applicable, the present value was determined using interest rate and mortality rate assumptions consistent with those used in Oritani Financial Corp.’s audited financial
statements and include amounts for which the Named Executive Officer may not currently be entitled to receive because such amounts are not vested. For fiscal 2019, this column also includes $423,558, $124,712, $21,805, and $36,638 of
preferential or above-market earnings on non tax-qualified deferred compensation for the portion of the Benefit Equalization Plan that supplements the 401(k) for Messrs. Lynch, Fields, Manderino and Wyks, respectively.
|
(3)
|
The amounts in this column represent the total of all perquisites (non-cash benefits and perquisites such as the use of employer-owned automobiles, membership dues and other personal
benefits), employee benefits (employer cost of life insurance and health insurance), employer contributions to defined contribution plans (the 401(k) Plan, the ESOP and the Benefit Equalization Plan) and dividends on unvested stock awards.
The components of the 2019 total are reported separately under the “All Other Compensation” table below.
|
All Other Compensation
The components of All Other Compensation for the fiscal year ended June 30, 2019 are provided in the table below:
|
Company Contribution on Medical, Dental, Disability and Insurance Benefits
|
|
Company Contribution to ESOP and 401(k) Plan Match
|
Benefit Equalization Plan Match Contribution
|
Dividends on unvested stock awards
|
|
|
Kevin J. Lynch
|
$ 37,513
|
$ 22,297
|
$ 71,007
|
$38,156
|
$ —
|
$ 690
|
$169,663
|
John M. Fields, Jr.
|
$ 27,983
|
$ 11,516
|
$ 71,007
|
$16,477
|
$ —
|
$ —
|
$126,983
|
Louis Manderino
|
$ 24,997
|
$ 1,136
|
$ 71,007
|
$12,371
|
$ —
|
$ —
|
$109,511
|
Kurt Breitenstein
|
$ 31,268
|
$ 7,084
|
$ 80,107
|
$ —
|
|
$ —
|
$125,859
|
Philip M. Wyks
|
$ 22,025
|
$ 2,611
|
$ 76,729
|
$ —
|
$ —
|
$ —
|
$101,365
|
CEO Pay Ratio
In accordance with the applicable provisions of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following
information about the relationship of the median annual total compensation of all employees of the Company and the annual total compensation of our President and Chief Executive Officer.
For 2019, our median annual total compensation for all employees other than our CEO was $80,680. The annual total compensation for our CEO for the same period was $3,523,505. The ratio of our CEO’s
compensation to the median employee’s compensation was 44 to 1.
We identified our median employee using our entire workforce for our fiscal year ending June 30, 2019 of approximately 214 full-time and 60 part-time employees. We used wages from our payroll records
as reported in Box 5 of Form W-2. We determined the compensation for our median employee by calculating total compensation for such employee for fiscal year 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. With regard
to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table included in this Form 10-K/A.
As the SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies, to apply certain exclusions, and to make reasonable estimates and
assumptions, the pay ratio reported by Oritani Financial Corp. may not be comparable to the pay ratio reported by other companies, as other companies may have different geographic profiles, different employee populations and compensation practices
and may utilize different methodologies, conclusions, exclusions, estimates and assumptions in calculating their pay ratios.
Plan-Based Awards. There were no equity plan-based awards granted to the Named Executive Officers during fiscal 2019.
The table below sets forth certain information as to grants during the 2019 fiscal year of non-equity plan based awards to the Named Executive Officers. See additional
information regarding this plan under “Annual Cash Incentives” within the “Compensation Discussion and Analysis.”
Estimated Possible Payouts Under Non-Equity Short Term Incentive Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Lynch
|
July 1, 2019
|
July 1, 2019
|
June 30, 2020
|
1 year
|
$184,625
|
$369,250
|
$553,875
|
John M. Fields, Jr.
|
July 1, 2019
|
July 1, 2019
|
June 30, 2020
|
1 year
|
$71,921
|
$125,861
|
$179,802
|
Louis Manderino
|
July 1, 2019
|
July 1, 2019
|
June 30, 2020
|
1 year
|
$57,000
|
$99,750
|
$142,500
|
Kurt Breitenstein
|
July 1, 2019
|
July 1, 2019
|
June 30, 2020
|
1 year
|
$52,500
|
$91,875
|
$131,250
|
Philip M. Wyks
|
July 1, 2019
|
July 1, 2019
|
June 30, 2020
|
1 year
|
$16,427
|
$32,853
|
$49,280
|
Estimated Possible Payouts Under Non-Equity Long Term Incentive Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Lynch
|
July 1, 2019
|
July 1, 2019
|
June 30, 2022
|
3 year
|
$125,545
|
$258,475
|
$369,250
|
John M. Fields, Jr.
|
July 1, 2019
|
July 1, 2019
|
June 30, 2022
|
3 year
|
$53,940
|
$89,901
|
$125,861
|
Louis Manderino
|
July 1, 2019
|
July 1, 2019
|
June 30, 2022
|
3 year
|
$42,750
|
$71,250
|
$99,750
|
Kurt Breitenstein
|
July 1, 2019
|
July 1, 2019
|
June 30, 2022
|
3 year
|
$39,375
|
$65,625
|
$91,875
|
Philip M. Wyks
|
July 1, 2019
|
July 1, 2019
|
June 30, 2022
|
3 year
|
$10,951
|
$21,902
|
$32,853
|
|
|
|
|
|
|
|
|
(1)
|
Assumes full achievement of the individual component of the Incentive Plan goal.
|
Incentive Plan. All full-time executive or senior officers of Oritani Bank are eligible for selection to participate in the Incentive
Plan. Each year, the CHR Committee will approve: (i) the employees who will participate in the Incentive Plan for that year; (ii) award levels, which shall be expressed as a percentage of a participant’s base salary for that year, for each
participant under the Incentive Plan (these award levels will include threshold, target and maximum award opportunities); (iii) company-wide performance goals. No later than 90 days after the commencement of each performance period (or by such
other deadline as may apply, if applicable, under Code Section 162(m)(4)(C) or the Treasury Regulations thereunder), the CHR Committee will establish in writing the performance goals for that performance period as well as the method for computing
the amount of compensation which each such participant will be paid if such goals are attained in whole or in part. Such method will be stated in terms of an objective formula or standard that precludes discretion to increase the amount that will
be due upon attainment of the goals. The CHR Committee retains discretion under the Incentive Plan to reduce an award at any time before it is paid. The performance period is generally equal to the Company’s fiscal year (the twelve month period
from July 1 to June 30). Payment is generally made in the December following the conclusion of the performance period. Cash awards may be paid under the Incentive Plan for any performance period only if and to the extent the awards are earned on
account of the attainment of the performance goals applicable to such performance period and after the CHR Committee certifies that the performance goals for the year have been satisfied. If a participant is not employed by Oritani Bank at the
time of the payment, no payment under the Incentive Plan will be made to the Participant except in the discretion of the CHR Committee. If a Participant dies, a payment under the Plan may be awarded in the discretion of the CHR Committee. Please
see “Compensation Discussion and Analysis” for further details about the Incentive Plan.
Outstanding Equity Awards at Year End. The following table sets forth information with respect to outstanding equity awards as of June 30,
2019 for the Named Executive Officers.
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2019
|
|
|
|
|
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (1)
|
|
Option
Expir-
ation
Date (2)
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (1)
|
|
Option
Expir-
ation
Date (2)
|
Number of
Shares or
Units of
Stock That
Have Not
Vested (2)
|
Shares or
Units of
Stock That
Have Not
Vested (3)
|
Kevin J. Lynch
|
—
|
—
|
—
|
—
|
901,697
|
—
|
$ 11.95
|
08/18/21
|
—
|
—
|
John M. Fields, Jr.
|
—
|
—
|
—
|
—
|
263,160
|
—
|
11.95
|
08/18/21
|
—
|
—
|
Louis Manderino
|
—
|
—
|
—
|
—
|
32,000
|
—
|
11.95
|
08/18/21
|
—
|
—
|
Louis Manderino
|
—
|
—
|
—
|
—
|
4,000
|
16,000
|
15.40
|
04/12/28
|
—
|
—
|
Kurt Breitenstein
|
8,000
|
12,000
|
15.65
|
10/03/26
|
6,000
|
24,000
|
15.40
|
04/12/28
|
6,000
|
106,440
|
Philip M. Wyks
|
—
|
—
|
—
|
—
|
24,456
|
—
|
11.95
|
08/18/21
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The stock option and restricted stock awards vest at a rate of 20% per year, commencing on the grant date. All unexercisable option and stock awards will become exercisable in conjunction
with the Merger.
|
(2)
|
Stock options expire ten years after grant date.
|
(3)
|
Market value calculated using June 28, 2019 closing price of $17.74/share.
|
Option Exercises And Stock Vested. The following table sets forth information concerning the exercise of stock options, and each vesting of restricted stock
during the fiscal year ended June 30, 2019 for the Named Executive Officers.
|
Option Exercises and Stock Vested for the Year Ended June 30, 2019
|
|
|
|
Name
|
Number of shares acquired on exercise
|
Value realized on exercise (1)
|
Number of shares acquired on vesting
|
Value realized on vesting (2)
|
Kevin J. Lynch
|
49,213
|
265,284
|
—
|
—
|
Kurt Breitenstein
|
—
|
—
|
2,000
|
31,260
|
Philip M. Wyks
|
14,000
|
68,215
|
—
|
—
|
|
|
|
|
|
(1)
|
Amount is equal to the market value of the underlying share on date of exercise, less the option exercise cost, times the number of options exercised.
|
(2)
|
Amount is equal to the number of shares that vested times the market value on the date of vesting ($15.63 per share on October 3, 2018).
|
Pension Benefits. The following table sets forth information with respect to pension benefits at and for the fiscal year
ended June 30, 2019 for the Named Executive Officers. See “Defined Benefit Plan,” “Directors’ Retirement Plan,” “Benefit Equalization Plan” and “Executive Supplemental Retirement Income Agreement” for a discussion of the plans referenced in this
table.
Pension Benefits at and for the fiscal year ended June 30, 2019 (1)
|
|
|
Number of years credited service
|
Present value of accumulated benefit
|
Payments during last fiscal year
|
Kevin J. Lynch
|
Directors’ Retirement Plan
|
28.67
|
$768,000
|
$ —
|
Benefit Equalization Plan (2)
|
15.50
|
1,513,000
|
—
|
Supplemental Retirement Income Agreement
|
14.50
|
11,827,000
|
—
|
John M. Fields, Jr.
|
Directors’ Retirement Plan
|
21.17
|
548,000
|
—
|
Defined Benefit Plan
|
10.67
|
398,000
|
—
|
Benefit Equalization Plan (2)
|
10.67
|
48,000
|
—
|
Philip M. Wyks
|
Defined Benefit Plan
|
32.50
|
1,738,000
|
—
|
|
|
|
|
|
(1)
|
The figures shown are determined as of the plan’s measurement date of June 30, 2019 for purposes of the Company’s audited financial statements. For mortality, discount rate and other assumptions used for this
purpose, please refer to note 14 in the audited financial statements included in the Company’s Annual Report on Form 10-K, filed on August 28, 2019.
|
(2)
|
Amount reflects the pension benefit portion of the Benefit Equalization Plan.
|
Nonqualified Deferred Compensation. The following table sets forth information with respect to the portion of the Benefit Equalization Plan that supplements the
401(k) Plan and the ESOP at and for the fiscal year ended June 30, 2019 for the Named Executive Officers.
Nonqualified Deferred Compensation (401k) Plan at and for the Fiscal Year Ended June 30, 2019
|
|
Executive contributions in last fiscal year
|
Registrant contributions in last fiscal year (1)
|
Aggregate earnings in last fiscal year (2)
|
Aggregate withdrawals/distributions
|
Aggregate balance at June 30, 2019
|
Kevin Lynch
|
$349,574
|
$ 38,156
|
$640,030
|
$ —
|
$7,662,823
|
John M. Fields, Jr.
|
139,544
|
16,477
|
196,500
|
—
|
2,371,756
|
Louis Manderino
|
71,500
|
12,371
|
34,356
|
—
|
445,518
|
Philip M. Wyks
|
—
|
—
|
55,363
|
—
|
645,541
|
Nonqualified Deferred Compensation (ESOP) at and for the Fiscal Year Ended June 30, 2019
|
|
Executive contributions in last fiscal year
|
Registrant contributions in last fiscal year (3)
|
Aggregate earnings in last fiscal year
|
Aggregate withdrawals/distributions
|
Aggregate balance at June 30, 2019
|
Kevin Lynch
|
$ —
|
$(235,591)
|
$ —
|
$ —
|
$4,664,649
|
John M. Fields, Jr.
|
—
|
(68,324)
|
—
|
—
|
1,301,229
|
Philip M. Wyks
|
—
|
(8,627)
|
—
|
—
|
77,116
|
|
|
|
|
|
|
(1)
|
The amounts reported in this column were also reported as compensation in the Summary Compensation Table as components of the 2019 total for “All Other Compensation.”
|
(2)
|
For Messrs. Lynch, Fields, Manderino and Wyks, $423,558, $124,712, $21,805, and $36,638, respectively, were reported as components of the 2019 total for “Change in pension value and non-qualified deferred
compensation earnings” in the Summary Compensation Table as preferential or above-market earnings on non tax-qualified deferred compensation.
|
(3)
|
The amounts reported in this column were also included in the calculation of compensation in the Summary Compensation Table as components of the 2019 total for “Change in pension value and nonqualified deferred
compensation earnings.” This total includes the impact of the decreased value of the phantom stock allocated to the Named Executive Officer’s account that occurred between the 2019 and 2018 measurement dates.
|
Benefit Plans and Arrangements
Employment Agreements. Oritani Bank entered into an amended and restated employment agreement with Kevin J. Lynch effective as of December
31, 2008. The agreement had an initial term of three years. Unless notice of non-renewal is provided, the agreement renews annually. Under the agreement, Mr. Lynch’s current base salary is $738,500. The base salary is reviewed at least annually and
may be increased, but not decreased. In addition to base salary, the agreement provides for, among other things, participation in bonus programs and other employee pension benefit and fringe benefit plans applicable to executive employees, use of an
automobile and reimbursement of expenses associated with the use of such automobile. The executive is also entitled to reimbursement of business expenses, including fees for membership in a country club, a health club, and such other clubs and
organizations as appropriate for business purposes. The executive is entitled to indemnification to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with any action in
which he may be involved by reason of having been an officer or director of Oritani Bank. Upon retirement, the executive and his spouse would be entitled to continuing health care insurance coverage until the death of the executive and his spouse.
The executive is entitled to severance payments and benefits in the event of his termination of employment under specified circumstances. In the event: (A) the executive’s employment is terminated
for reasons other than (1) just cause; (2) disability; (3) death, (4) retirement; or (5) a change in control, or (B) the executive resigns during the term of the agreement following (1) the failure to elect or reelect or to appoint or reappoint
executive to his executive position, (2) a material change in the executive’s functions, duties, or responsibilities, which change would cause executive’s position to become one of lesser responsibility, importance or scope, (3) a relocation of the
executive’s principal place of employment by more than 30 miles from its location at the effective date of the employment agreement or a material reduction in the benefits and perquisites from those being provided to the executive as of the effective
date of the employment agreement, (4) the liquidation or dissolution of Oritani Bank, or (5) a breach of the employment agreement by Oritani Bank, then the executive (or, in the event of the executive’s death, his beneficiary) would be entitled to a
severance payment equal to three times the sum of the executive’s highest base salary and highest rate of bonus, and the executive would be entitled to the continuation of life, medical, and dental coverage for 36 months or as provided in the Oritani
Bank nonqualified senior officers medical benefit plan. In the event of a termination following a change in control of the Company, the executive (or, in the event of the executive’s death, his beneficiary) would be entitled to a severance payment
equal to three times the sum of the executive’s highest base salary and highest rate of bonus paid to him during the term of the employment agreement, plus continuation of insurance coverage for 36 months.
Upon termination of the executive’s employment other than in connection with a change in control, the executive agrees not to compete with Oritani Bank for one year following termination of
employment in any city, town or county in which Oritani Bank has an office or has filed an application for regulatory approval to establish an office. Should the executive become disabled, Oritani Bank would continue to pay the executive his base
salary, bonuses and other cash compensation for the longer of the remaining term of the employment agreement or one year, provided that any amount paid to the executive pursuant to any disability insurance would reduce the compensation he would
receive. In the event the executive dies while employed by Oritani Bank, the executive’s beneficiary or estate will be paid the executive’s base salary for the remaining term of the employment agreement and the executive’s family will be entitled to
continuation of medical and dental benefits.
Oritani Bank has entered into employment agreements with Messrs. Fields, Manderino, Breitenstein and Wyks that are substantially similar to the employment agreement of Mr. Lynch, except that each of
these agreements has a term of two years and entitles the executive to a severance payment equal to two times the sum of the executive’s highest base salary and highest rate of bonus and to the continuation of life, medical, and dental coverage for
24 months or as provided in the Oritani Bank nonqualified senior officers medical benefit plan. In the event of a termination following a change in control of the Company, the executive (or, in the event of the executive’s death, his beneficiary)
would be entitled to a severance payment equal to two times the sum of the executive’s highest base salary and highest rate of bonus paid to him or her during the term of the employment agreement, plus continuation of insurance coverage for
24 months.
Benefit Equalization Plan. Oritani Bank adopted the 2008 Benefit Equalization Plan to provide certain executives with benefits to which
they would otherwise be entitled under Oritani Bank’s Defined Benefit Pension Plan, 401(k) Plan and ESOP, but for the limitations imposed by the Internal Revenue Code. The 2008 Benefit Equalization Plan was originally adopted in 2005 and was amended
and restated in January 2008 in order to incorporate the final Department of the Treasury regulations issued under Code Section 409A. Oritani Bank’s prior Benefit Equalization Plan was frozen effective as of December 31, 2004. The 2008 Benefit
Equalization Plan is materially similar to the frozen Benefit Equalization Plan, except that a participant’s elections regarding distributions under the tax-qualified 401(k) Plan, the ESOP and Defined Benefit Pension Plan control the form and timing
of distributions of a participant’s account in the frozen Benefit Equalization Plan. This provision is no longer permitted with respect to deferrals or accruals subject to Code Section 409A and is not included in the 2008 Benefit Equalization Plan.
Employees who are president, executive vice president, senior vice president and vice president of Oritani Bank are, to the extent selected, eligible to participate in the plan. During the 2018 fiscal year, nine current employees and six retired or
former employees participated in the 401(k) Plan portion of the 2008 Benefit Equalization Plan and four current employees and one retired employee participated in the ESOP portion of the 2008 Benefit Equalization Plan. The CHR Committee administers
the plan and determines the employees eligible for participation. The term “Benefit Equalization Plan” as referenced in the compensation tables set forth above and below refers to both the 2008 Benefit Equalization Plan and the frozen Benefit
Equalization Plan.
Under the 401(k) Plan portion of the 2008 Benefit Equalization Plan, participants may make annual deferrals of compensation in an amount up to the difference between the maximum amount the
participant would be permitted to contribute to 401(k) Plan for the given year but for the limitations of the Internal Revenue Code and the deferrals actually made to the 401(k) Plan by the participant for the plan year. Oritani Bank establishes a
supplemental 401(k) plan account for each participant and credits the account with such contributions. In addition, the participant’s account is credited monthly with earnings at a rate equivalent to the greater of (i) the Citibank Prime Rate, or
(ii) nine percent (9%), plus matching contributions. For the 2018 fiscal year, a total of $1.1 million in interest was credited to the accounts of employees under this plan. Upon termination of service due to any reason other than death, the
supplemental 401(k) plan benefit (equal to the participant’s supplemental 401(k) plan account) will be payable either in a lump sum or in up to 5 annual installments, as elected by the participant pursuant to their initial deferral election. Upon
termination of service due to death, the supplemental 401(k) plan benefit under the 2008 Benefit Equalization Plan will be payable to the participant’s beneficiary either in a lump sum or in annual installments, pursuant to the participant’s initial
deferral election.
Upon termination of service due to any reason other than death, a participant will also be entitled to a benefit equal to the difference between the actuarial present value of the participant’s
normal retirement benefit under Oritani Bank’s Defined Benefit Pension Plan and the actuarial present value of his normal retirement benefit calculated pursuant to the terms of the Defined Benefit Pension Plan, without the application of the
limitations imposed by the Internal Revenue Code, which such amount reduced and offset by the corresponding benefit amount payable to the participant under the frozen Benefit Equalization Plan. The supplemental defined benefit plan benefit under the
2008 Benefit Equalization Plan will be payable to the participant in monthly installments for the longer of 120 months or the remainder of the participant’s life. In the event of the participant’s death before 120 installments have been paid, the
participant’s beneficiary will receive the present value of the remaining monthly installments in a lump sum. Alternatively, the participant may also make, prior to commencement of the supplemental defined benefit plan benefit, a one-time irrevocable
election to receive his benefit under the plan in the form of a 100% joint and survivor annuity or a 50% joint and survivor annuity. Upon termination of service due to death, the supplemental defined benefit plan benefit under the 2008 Benefit
Equalization Plan will be payable to the participant’s beneficiary either in a lump sum or in annual installments, pursuant to the participant’s initial deferral election. A participant’s supplemental defined benefit plan amount payable under the
2008 Benefit Equalization Plan will be reduced and offset by the corresponding supplemental defined benefit plan amount payable under the frozen Benefit Equalization Plan.
The supplemental employee stock ownership plan benefit under the 2008 Benefit Equalization Plan is denominated in shares of phantom stock equal to the difference between the number of shares of the
Company common stock that would have been allocated to the participant under the employee stock ownership plan, but for the limitations imposed by the Internal Revenue Code, and the actual number of shares of the Company common stock allocated to the
participant under the Oritani Bank employee stock ownership plan for the relevant plan year. In addition, the participant is entitled to receive earnings on the phantom shares deemed allocated to his or her account, based on the fair market value of
the Company common stock on such date. Upon termination of service due to any reason including death, the supplemental employee stock ownership plan benefit will be payable either in a lump sum or in up to five annual installments, as elected by the
participant pursuant to his initial deferral election. On May 10, 2010, participation in the employee stock ownership portion of the 2008 Benefit Equalization Plan was frozen such that no new participants may join the plan after that date. In July
2011, a rabbi trust was established to fund the cash equivalent of the participant’s accrued balance of phantom shares at June 30, 2011. The trustee purchased actual shares of Company common stock with this cash in order to minimize the future cost
of this benefit due to dividends and increases in the value of the Company’s common stock. The trustee has purchased additional shares annually as additional phantom shares are due the employees under the plan.
In the event of a change in control of Oritani Bank or the Company, the participant’s supplemental 401(k) plan benefit, supplemental employee stock ownership plan benefit, and supplemental defined
benefit plan benefit will be paid to the participants in a lump sum at the time of the change in control, unless a participant has selected an alternative form of distribution upon a change in control. Such an election, if made, was required to be
made by a participant not later than December 31, 2008, or with respect to new plan participants within thirty days after the participant first becomes eligible to participate in the 2008 Benefit Equalization Plan.
Executive Supplemental Retirement Income Agreement. Oritani Bank entered into an Executive Supplemental Retirement Income Agreement (the
“Agreement”) for Kevin J. Lynch (the “Executive”) effective as of January 1, 2005. The Agreement provides for the payment of a supplemental retirement income benefit equal to 70% of the Executive’s highest average annual base salary and bonus (over
a 36-consecutive month period within the last 120 consecutive months of employment), reduced by the sum of the Executive’s (i) annuitized value of the benefits payable from Oritani Bank’s Defined Benefit Pension Plan, (ii) annuitized value of the
benefits payable under the defined benefit portion of Oritani Bank’s frozen Benefit Equalization Plan and 2008 Benefit Equalization Plan and (iii) annuitized value of one-half of the Executive’s Social Security benefits attributable to Social
Security taxes paid by Oritani Bank on behalf of the Executive, reduced by the Social Security offset under the Oritani Bank’s Defined Benefit Pension Plan. In the event the Executive dies prior to termination of employment or after termination of
employment but prior to the payment of any portion of the supplemental retirement income benefit, the Executive’s beneficiary will be entitled to a survivor’s benefit, payable in 240 monthly installments, and equal to the supplemental retirement
income benefit determined as if the Executive retired on the day before his death and commenced receiving benefits at such time. In the event the Executive dies while receiving benefits under the Agreement, the unpaid balance of benefits will be paid
to the Executive’s beneficiary for the remainder of the 240 installments. Upon the Executive’s retirement, the Executive will be entitled to a supplemental retirement income benefit payable in monthly installments over the longer of 240 months or the
Executive’s lifetime. In the event the Executive is a “specified employee,” payments will commence the first day of the 7th month following the Executive’s retirement, but only to the extent necessary to comply
with Code Section 409A. In the event the Executive becomes disabled, he will be entitled to a supplemental disability benefit equal to the supplemental retirement income benefit calculated as if the Executive retired on the date of his termination of
employment due to disability. In the event of the Executive’s termination of employment within 3 years following a change in control, other than due to termination for cause, the Executive will be entitled to a full supplemental retirement income
benefit calculated as if the Executive had retired following his normal retirement date. Payments to the Executive in the event of a change in control will be made in 240 monthly installments. The total cost to Oritani Bank for this plan during
fiscal 2019 was $841,000.
Directors’ Retirement Plan. Messrs. Lynch and Fields are participants in the Director’s Retirement Plan. Please see “Director
Compensation –Director’s Retirement Plan” for further details.
Senior Officers Post-Retirement Medical Coverage. Senior officers designated by the Board of Directors who have attained age 52 and have at
least five years of service, are eligible to participate in the senior officers post-retirement medical coverage program. If a participant dies after becoming eligible for coverage but prior to retirement, the individual will be deemed to have
retired on the day before the individual died. Coverage will begin at the time of retirement and continue at the same level as before retirement. Retirees who are eligible for Medicare benefits will have benefits under the program coordinated with
Medicare benefits. The spouse of a senior officer covered under the program will be entitled to medical coverage for life. Oritani Bank’s contribution to the program will be limited to two times the medical insurance premium at the time of the
individual’s retirement. During fiscal 2019, five current employees and four retired employees were eligible for participation in the Senior Officers Post-Retirement Medical Coverage, including Messrs. Lynch, Fields and Wyks, and the total cost to
Oritani Bank during fiscal 2019 was $279,000.
Group Life Insurance Retirement Plan. In conjunction with its investment in Bank Owned Life Insurance, Oritani Bank implemented this plan
which provides selected employees, including each Named Executive Officer, with post-retirement life insurance. Coverage under this plan is only applicable to selected employees who retire from Oritani Bank while participating in this plan (or if
their termination is due to disability or change in control). The coverage provided under this plan to a participant’s beneficiary in the event of his or her death is equal to: two times annual base salary for vice presidents and above; and one time
annual base salary for assistant vice presidents and below. The Company incurs no additional cost to provide the coverage, however, there is an expense accrual associated with the benefit. This accrual totaled $17,000 during fiscal 2019.
401(k) Plan. The Oritani Bank Employees’ Savings & Profit Sharing Plan and
Trust (the “401(k) Plan”) is a defined contribution employee savings plan covering all eligible employees of Oritani Bank. Employees who have completed 250 hours of service during a 3 consecutive month period are eligible to participate in the
401(k) plan. Employees who have completed 1,000 hours of service during a 12-consecutive-month period will receive the employer match component of the plan. Participants may contribute up to 50% of their plan salary to the plan. Oritani Bank will
provide matching contributions at the rate of 50% of the participant’s contributions, up to 6% of each participant’s monthly plan salary. Employee and employer contributions are 100% vested at all times. In general, under federal tax law limits, the
annual elective deferrals made to the plan may not exceed the lesser of 100% of the participant’s total compensation or $18,500 for the 2018 calendar year and $19,000 for the 2019 calendar year. Participants who have attained age 50 before the end
of a calendar year will be eligible to make catch-up elective deferral contributions in accordance with Section 414(v) of the Internal Revenue Code. The maximum catch-up elective deferral contribution level for both the 2018 and 2019 calendar years
is $6,000. This amount is periodically adjusted for inflation. Contributions are invested at the participant’s direction in one or more of the investment funds provided under the plan including an employer stock fund providing participants the
opportunity to purchase shares of employer stock for their accounts. A loan program is available to plan participants. In general, participants may make only one withdrawal from their accounts per calendar year while they are employed, subject to
certain limitations; upon termination of employment, they may make withdrawals from their accounts at any time. Participants who become disabled may withdraw from their vested account balance as if they had terminated employment. In the event of a
participant’s death, the participant’s beneficiary will be entitled to the value of the participant’s account. Employer contributions for the 2019 fiscal year were $236,000.
Defined Benefit Plan. Oritani Bank participates in the Financial Institutions Retirement Fund, a multiple-employer defined benefit plan,
for the benefit of its employees (the “Defined Benefit Plan” or “Defined Benefit Pension Plan”). Employees of Oritani Bank who are ages 21 or older and who have completed 12 months of employment are eligible to participate in the plan. Participants
become vested in their retirement benefit upon completion of 5 years of employment. Participants who have reached age 65 automatically become 100% vested, regardless of the number of completed years of employment. Payments of benefits under the plan
are made in the form of a life annuity with 120 payments guaranteed unless one of the optional forms of distribution has been selected. Upon termination of employment at or after age 65, a participant will be entitled to an annual normal retirement
benefit equal to 1.25% multiplied by the number of years of benefit service, multiplied by the participant’s average annual salary, up to the covered compensation limits, for the 5 highest paid consecutive years of benefit service. In addition, the
participant will be entitled to an annual retirement benefit equal to 1.75% multiplied by the number of years of benefit service, multiplied by the participant’s average annual salary in excess of the covered compensation limits, for the 5 highest
paid consecutive years. The covered compensation limit is the average of the maximum wage subject to FICA taxes (i.e., the social security wage base) for the 35-year period preceding social security retirement age. In the event a participant has more
than 35 years of service, the benefit attributable to benefit service completed in excess of 35 years will be calculated by using a 1.75% accrual rate for the portion of a participant’s high-5 year average salary below the covered compensation limit.
Participants who terminate employment prior to age 65 will be entitled to a reduced retirement benefit calculated by applying an early retirement factor based on the participant’s age when payments begin. The earliest age at which a participant may
receive retirement benefits is age 55.
Normal and early retirement benefits are payable over the longer of the lifetime of the retiree or 120 monthly installments. In the event a retiree dies before 120 monthly installments have been
paid, the retiree’s beneficiary will be entitled to the value of such unpaid installments paid in a lump sum. The participant or beneficiary may elect to have benefits paid in the form of installments. In the event a participant dies while in active
service, his beneficiary will be entitled to a lump sum death benefit equal to 100% of the participant’s last 12 months’ salary, plus an additional 10.0% of such salary for each year of benefit service until a maximum of 300% of such salary is
reached for 20 or more years, plus refund of the participant’s contributions, if any, with interest.
This plan was frozen as of January 1, 2009. Existing participants remain eligible to receive their accrued benefit as of that date; however, no new benefits will accrue under the plan. Employer
contributions for fiscal 2019 were $1.3 million.
Stock Benefit Plans
Employee Stock Ownership Plan. The Oritani Bank Employee Stock Ownership Plan (“ESOP” or “employee stock ownership plan”) was adopted in
connection with our Initial Stock Offering in 2007. Employees who are at least 21 years old with at least one year of employment with Oritani Bank are eligible to participate. The employee stock ownership plan trust originally borrowed funds from
the Company and used those funds to purchase a shares of our common stock equal to 3.92% of the outstanding shares of common stock, including shares of common stock issued to Oritani Financial Corp., MHC and to the Oritani Bank Charitable Foundation,
that were issued in connection with our Initial Stock Offering. In connection with our Second-Step Conversion and related stock offering, the ESOP loan was refinanced and the ESOP purchased 4% of the stock offering. Collateral for the loan is the
Oritani common stock purchased by the employee stock ownership plan. The loan will be repaid principally from Oritani Bank discretionary contributions to the employee stock ownership plan over a period of not more than 25 years. The loan documents
provide that the loan may be repaid over a shorter period, without penalty for prepayments. The interest rate for the loan currently adjusts to the prime rate in January of each year. The rate was 4.50% for calendar 2018 and is 5.50% for calendar
2019. Shares purchased by the employee stock ownership plan are held in a suspense account for allocation among participants as the loan is repaid.
Contributions to the employee stock ownership plan and shares released from the suspense account in an amount proportional to the repayment of the employee stock ownership plan loan are allocated
among employee stock ownership plan participants on the basis of compensation in the year of allocation. Benefits under the plan become vested at the rate of 20% per year except for the first year of credited service, for which no vesting is earned.
Benefits are fully vested upon completion of six years of credited service. A participant’s interest in their account under the plan will also fully vest in the event of termination of service due to a participant’s early or normal retirement, death,
disability, or upon a change in control (as defined in the plan). Vested benefits will be payable generally in the form of common stock, or to the extent participants’ accounts contain cash, benefits will be paid in cash. Oritani Bank’s contributions
to the employee stock ownership plan are discretionary, subject to the loan terms and tax law limits. Therefore, benefits payable under the employee stock ownership plan cannot be estimated. We are required to record compensation expense each year in
an amount equal to the fair market value of the shares released from the suspense account. The related expense incurred during fiscal 2019 was $3.0 million. In the event of a change in control, each participant’s ESOP account balance will become
fully vested.
Stock-Based Incentive Plans. We adopted the 2007 Equity Plan and 2011 Equity Plan (“Equity Plans”) to provide our officers, employees and
directors with additional incentives to promote our growth and performance and to align their interests with our stockholders. Stockholders approved the 2007 Equity Plan on April 22, 2008 and the 2011 Equity Plan on July 26, 2011. Please see
“Equity Incentives” under “Elements of the Compensation Package” of the Compensation Discussion and Analysis for additional information on the Equity Plans.
The Equity Plans are administered by the CHR Committee. Employees and outside directors of the Company or its subsidiaries are eligible to receive awards under the Equity Plans. The CHR Committee
may determine the type and terms and conditions of awards under the Equity Plans, which shall be set forth in an award agreement delivered to each participant. Each award shall be subject to conditions established by the CHR Committee that are set
forth in the recipient’s award agreement, and shall be subject to vesting conditions and restrictions as determined by the CHR Committee. Awards may be granted in a combination of incentive and non-qualified stock options, stock appreciation rights,
restricted stock or restricted stock units, provided however that non-employee directors may not receive incentive stock options.
Unless the CHR Committee specifies otherwise, awards will vest at the rate of 20% per year commencing one year after the date of grant (such that the awards will be fully vested five years from the
grant date); subject to acceleration of vesting, to the extent specified by the CHR Committee, in the event of death, disability, or due to a change in control. The CHR Committee may in its discretion elect to use a different vesting schedule or
different performance measures set forth in the Equity Plans.
Potential Payments Upon Termination of Employment or Change in Control.
The tables below reflect the amount of compensation to each of the Named Executive Officers pursuant to such individual’s employment agreement and our non-qualified benefit plans
and the Equity Plans in the event of termination of such Named Executive Officer’s employment. The amount of compensation payable to each Named Executive Officer upon involuntary not-for-cause termination, and in the event of disability or death is
shown below. The amounts shown assume that such termination was effective as of June 30, 2019, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The
actual amounts to be paid out could only be determined at the time of such Named Executive Officer’s separation from the Company. Information concerning the projected payments to the Named Executive Officers in connection with the pending Merger
with Valley is reflected in separate disclosure following this table.
|
|
|
|
|
|
Kevin J. Lynch
|
|
|
|
|
|
|
|
|
Employment Agreement
|
$ 4,984,875(1)
|
$ —(2)
|
$ 1,943,222(3)
|
$ 1,900,597(4)
|
Exec. Supplemental Retirement
|
|
|
|
|
|
|
|
|
Income Agreement
|
11,827,000(5)
|
11,827,000(5)
|
11,827,000(5)
|
11,827,000(5)
|
Benefit Equalization Plan
|
13,840,473(6)
|
13,840,473(6)
|
13,840,473(6)
|
13,840,473(6)
|
Director's Retirement Plan
|
768,000(7)
|
768,000(7)
|
768,000(7)
|
768,000(7)
|
John M. Fields, Jr.
|
|
|
|
|
|
|
|
|
Employment Agreement
|
$ 1,330,531(1)
|
$ —(2)
|
$582,972(3)
|
$578,194(4)
|
Benefits Equalization Plan
|
3,720,985(6)
|
3,720,985(6)
|
3,720,985(6)
|
3,720,985(6)
|
Director's Retirement Plan
|
548,000(7)
|
548,000(7)
|
548,000(7)
|
548,000(7)
|
Louis Manderino
|
|
|
|
|
|
|
|
|
Employment Agreement
|
$ 1,012,500(1)
|
$ —(2)
|
$466,269(3)
|
$460,108(4)
|
Benefits Equalization Plan
|
445,518(6)
|
445,518(6)
|
445,518(6)
|
445,518(6)
|
Kurt Breitenstein
|
|
|
|
|
|
|
|
|
Employment Agreement
|
$971,250(1)
|
$ —(2)
|
$441,859(3)
|
$433,240(4)
|
Philip M. Wyks
|
|
|
|
|
|
|
|
|
Employment Agreement
|
$602,305(1)
|
$ —(2)
|
$362,558(3)
|
$357,826(4)
|
Benefits Equalization Plan
|
2,460,657(6)
|
2,460,657(6)
|
2,460,657(6)
|
2,460,657(6)
|
|
|
|
|
|
(1)
|
For Mr. Lynch, this amount represents (i) three times the sum of his: (A) highest base salary paid during the term of the agreement, plus (B) highest bonus earned during the last three completed fiscal years;
and (ii) the value of 36 months of continued life, disability, medical and dental insurance coverage. For all other Named Executive Officers, this amount represents (i) two times the sum of the Named Executive Officer’s: (A) highest base
salary paid during the term of the agreement, plus (B) highest bonus earned during the last three completed fiscal years; and (ii) the value of 24 months of continued life, disability, medical and dental insurance coverage. In the event
the Named Executive Officer’s termination is in connection with a change in control, the change in control termination payment payable under his employment agreement could be reduced to avoid penalties under Section 280G of the Internal
Revenue Code.
|
(2)
|
Each Named Executive Officer is entitled to no payments or benefits under his employment agreement as a result of his retirement.
|
(3)
|
Amount represents the Named Executive Officer’s base salary and continued life, medical, dental and disability insurance for the remaining term of the employment agreement, without any reduction for payments
under bank-sponsored disability programs.
|
(4)
|
Represents the base salary and medical, dental, family and other benefits payable to the Named Executive Officer’s beneficiary for the remaining term of the employment agreement.
|
(5)
|
Amount represents 100% of the present value of Mr. Lynch’s accumulated benefit under his Executive Supplemental Retirement Income Agreement.
|
(6)
|
Amount represents the Named Executive Officer’s aggregate accumulated benefit of the defined benefit, 401(k) and ESOP portion of the Benefit Equalization Plan.
|
(7)
|
Amount represents the present value of Messrs. Lynch’s and Fields’ accumulated benefit under the Directors’ Retirement Plan.
|
Projected Payments in Connection with Pending Merger with Valley
The following table sets forth the amounts projected to be paid to each Named Executive Officer in connection with the pending Merger of Oritani with Valley. The amounts are based on the following
assumptions (except as otherwise provided in the footnotes to the table below): (1) the effective time of the Merger is December 1, 2019; and (2) each Named Executive Officer experiences a qualifying termination of employment on December 1, 2019. The
table does not include the value of benefits that the Named Executive Officers are vested in without regard to the occurrence of a change in control. Amounts below are based on certain assumptions that may or may not actually occur. As a result, the
actual amounts to be received by a Named Executive Officer may materially differ from the amounts set forth below.
|
|
|
|
|
|
|
Kevin J. Lynch
|
$6,699,126
|
$ —
|
$ —
|
$ —
|
$669,185
|
$7,368,311
|
John M. Fields, Jr.
|
1,600,775
|
—
|
1,200,819
|
—
|
669,185
|
3,470,779
|
Louis Manderino
|
1,226,679
|
24,640
|
—
|
45,353
|
423,136
|
1,719,808
|
Kurt Breitenstein
|
1,168,520
|
115,040
|
—
|
57,030
|
40,393
|
1,380,983
|
Philip Wyks
|
674,537
|
—
|
—
|
—
|
531,148
|
1,205,685
|
(1)
|
As described above, the cash payments payable to each of the Oritani Named Executive Officers consist of (a) for all Named Executive Officers, a lump sum payment equal to two (2) times
(and in the case of Mr. Lynch, three (3) times) the sum of (i) the highest rate of base salary and (ii) the highest annual bonus paid in the preceding three years, payable pursuant to their employment agreements, the payment of which does
not assume any reduction to avoid penalties under Section 280G of the Code; (b) for all Named Executive Officers, a lump sum payment equal to the portion of their bonus awards under the Executive Officer Incentive Plan for the fiscal year
ended June 30, 2019 that was earned as a result of the Merger; (c) for all Named Executive Officers, a lump sum payment equal to their pro-rata bonus payable under the Executive Officer Incentive Plan for the fiscal year ending June 30,
2020; and (d) for Mr. Lynch, the estimated portion of the $3.0 million that will be used to settle his future retiree health obligations under the Officer Retiree Health Plan. For Messrs. Fields and Wyks, the settlement of their future
retiree obligations under the Officer Retiree Health Plan is still to be negotiated with Valley. The payments described in clause (a) are “modified single trigger” payments because the payments may be triggered due to the Named Executive
Officer’s voluntary resignation for any reason within one year following the Merger. The payments described in clause (b), (c) and (d) are “single trigger” payments because they are payable solely as a result of, or in connection with, the
Merger.
|
Set forth below are the separate values of each of payments described in clauses (a), (b), (c) and (d) above.
|
|
|
|
|
Kevin J. Lynch
|
$4,984,875
|
$553,875
|
$263,128
|
$897,248
|
John M. Fields, Jr.
|
1,330,531
|
179,802
|
90,442
|
—
|
Louis Manderino
|
1,012,500
|
142,500
|
71,679
|
—
|
Kurt Breitenstein
|
971,250
|
131,250
|
66,020
|
—
|
Philip Wyks
|
602,305
|
49,280
|
22,952
|
—
|
(2)
|
All unvested restricted stock and stock options awarded to the Named Executive Officers will become vested upon the Named Executive Officer’s qualifying termination event following the change in control, as
determined under the Oritani Equity Plans (i.e., a “double-trigger vesting” because the vesting is contingent upon a qualifying termination event at or following the Merger). Set forth below are the values of the unvested equity awards,
based on a per share price of each type of equity-based award that would become vested and be settled upon the effective time of the Merger, based on a price per share of $16.94 (i.e., the average closing price per share of Valley’s
common stock over the first five business days following the announcement of the Merger Agreement, multiplied by the exchange ratio set forth in the Merger Agreement).
|
|
|
|
Kevin J. Lynch
|
$ —
|
$ —
|
John M. Fields, Jr.
|
—
|
—
|
Louis Manderino
|
—
|
24,640
|
Kurt Breitenstein
|
67,760
|
47,280
|
Philip Wyks
|
—
|
—
|
(3)
|
With respect to Mr. Fields, whose benefit payable under the Director Retirement Plan will become fully vested because he will be deemed to be age 65 and have completed 10 years of service as a result of the
Merger (i.e., a single trigger vesting), the amount reflects the enhanced portion of Mr. Fields’ normal retirement benefit, which will be payable in a cash lump sum in connection with the expected termination of the Director Retirement
Plan as described above. The enhanced portion of Mr. Field’s normal retirement benefit is a single trigger payment because the payment is conditioned solely upon a change in control, such as the Merger.
|
(4)
|
The amounts in this column represent the present value of the cash equivalent of the cost of providing continued coverage for Messrs. Manderino and Breitenstein under the health insurance plans and other
welfare arrangements currently sponsored by Oritani Bank for two years pursuant to their employment agreements. The present value was calculated using a discount rate equal to 120% of the applicable federal rate (compounded semi-annually)
for August 2019, as published by the Internal Revenue Service. Messrs. Lynch, Fields and Wyks are entitled to continued health benefits pursuant to their participation in the Officer Retiree Health Plan, which they are entitled to receive
without regard to the Merger.
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(5)
|
This column represents the estimated dollar value of additional allocations to the Named Executive Officers in connection with the termination of the ESOP and repayment of the outstanding ESOP loan balance
at closing. Following the repayment of the ESOP loan with unallocated shares, the remaining shares in the ESOP suspense account will be exchanged for the merger consideration and will be allocated to all eligible employees, including the
Named Executive Officers, as earnings of the ESOP based on the eligible employee’s account balance. The estimated dollar value attributable to each Named Executive Officer as set forth above is based on a number of assumptions that may or
not be accurate at the closing of the Merger, including that eligible participants who are currently employed by Oritani Bank remain employed by Oritani Bank through the Merger closing date and the merger consideration value is $16.94
(the average value of Valley’s common stock as of the first five (5) business days commencing after the public announcement of the Merger, multiplied by the exchange ratio set forth in the Merger Agreement).
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Director Compensation
Each of the individuals who serves as a director of the Company also serves as a director of Oritani Bank and earns director fees in each capacity. Each non-employee director is
currently paid a fee of $1,750 for each Company meeting attended and a fee of $1,750 for each Oritani Bank meeting attended. There are no separate fees paid for committee meetings attended. Additionally, each director receives a monthly retainer of
$1,750 from each of the Company and Oritani Bank. Additional annual retainers are paid to the Lead Director/Chairman of the Audit Committee ($21,000) and the Chairmen of the other Board of Directors’ committees ($11,000). The Lead Director/Chairman
of the Audit Committee is Director Antonaccio.
The following table sets forth the total fees and certain other remuneration paid to the non-management directors during fiscal 2019. Information with respect
to director compensation paid to directors who are also Named Executive Officers is included above in “Executive Officer Compensation—Summary Compensation Table.”
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Fees Earned or
Paid in Cash
|
Change in Pension Value
and Nonqualified Deferred
Compensation Earnings (1)
|
|
Nicholas Antonaccio
|
$105,000
|
$121,754
|
$226,754
|
James J. Doyle
|
95,000
|
200,638
|
295,638
|
Robert S. Hekemian
|
102,917
|
275,768
|
378,685
|
Harvey Hirschfeld
|
95,000
|
112,947
|
207,947
|
John J. Skelly, Jr.
|
95,000
|
135,582
|
230,582
|
Judith Schumacher Tilton
|
77,000
|
—
|
77,000
|
|
|
|
|
(1)
|
The amounts in this column reflect the actuarial change in the present value at June 30, 2019 compared to June 30, 2018, of the directors’ benefits under the Directors’ Retirement Plan,
determined using interest rate and mortality rate assumptions consistent with those used in Oritani Financial Corp.’s audited financial statements and includes amounts for which the director may not currently be entitled to receive because
such amounts are not vested. This column also includes $97,754; $171,638; $159,768; $31,947 and $135,582 of preferential or above-market earnings on non tax-qualified deferred compensation for Directors Antonaccio, Doyle, Hekemian,
Hirschfeld and Skelly, respectively, under the Directors’ Deferred Fee Plan.
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Directors Deferred Fee Plans. Oritani Bank adopted the 2005 Directors Deferred Fee Plan, effective as of January 1, 2005, in order to
include the provisions required by Section 409A of the Internal Revenue Code. Contributions to Oritani Bank’s prior Directors Deferred Fee Plan were frozen, effective as of December 31, 2004. Each month, Oritani Bank credits a director’s account
under the 2005 Directors Deferred Fee Plan with the amount such director elects to defer. The director’s deferral election must generally be submitted to Oritani Bank prior to January 1 of the plan year in which the fees to be deferred are otherwise
payable to the director and is irrevocable with respect to the fees covered by such election. Each director’s account under the plans is credited every month with interest at a rate equal to the greater of the Citibank Prime Rate or a 9% annualized
rate.
A committee appointed by the Oritani Bank Board of Directors administers the plan. The CHR Committee may in its discretion permit a director to request that his deferred fee account(s) be invested in
an alternative investment such as equity securities, fixed income securities, money market accounts and cash. The account of a director who has selected an alternative investment is credited with earnings or losses based on the investment selected. A
director is 100% vested at all times in his deferred fee account(s).
Unless the director has designated a specified payment date, the director’s account balance under the 2005 Directors Deferred Fee Plan will be payable upon the earlier of: (i) separation from
service; (ii) death; (iii) disability; or (iv) a change in control of the Company. The benefit will be paid in the form of a lump sum or up to 10 annual installments, as elected by the director in his deferral election form.
With regard to the frozen Directors Deferred Fee Plan, the director’s account balance thereunder is payable upon either the director’s designated retirement age or actual retirement, as elected by
the director. Alternatively, the director may elect to receive an in-service distribution, provided that such distribution will be payable no earlier than January 1st of the calendar year that is at least two years following the year for
which the deferral election made. In the event of death or disability, the director’s benefit will be payable to the director (or his beneficiary) at the time specified in his deferral election. All benefits are payable in the form of either a lump
sum, or 5 or 10 annual installments, as elected by the director in his deferral election form.
During fiscal 2019, Oritani Bank credited $982,000 in interest to directors’ accounts under the Directors Deferred Fee Plans.
Director’s Retirement Plan. Oritani Bank maintains the 2005 Director’s Retirement Plan that was adopted as a restatement of the Director’s
Retirement Plan and is intended to comply with section 409A of the Internal Revenue Code. Oritani Bank’s prior Director’s Retirement Plan was frozen, effective as of December 31, 2004. Benefits payable under the 2005 Director’s Retirement Plan are
reduced by the amount of the retirement benefits payable to the director under the frozen Director’s Retirement Plan.
The 2005 Director’s Retirement Plan provides retirement, medical and death benefits to directors, including directors who are also employees, who have at least five years of service and retire after
attaining age 65, or who, after attaining age 60 retire, die or become disabled. Upon retirement on or after attaining age 65 with at least ten years of cumulative service, an eligible director’s annual retirement benefit is equal to 50% of the
director’s aggregate annual compensation with respect to his final year of service, including fees paid to the director for attendance at regular monthly meetings and annual meetings of Oritani Bank and the Company, monthly retainers, and any
additional annual retainers paid to the director for service as a committee chair, lead director or otherwise. The annual retirement benefit is generally payable to the director (and his beneficiary) in the form of either a single life annuity or
joint and survivor annuity, provided, however, that a director may elect (in accordance with the terms of the plan) to receive the actuarial equivalent of his lifetime annual retirement benefit in the form of a lump sum in the event of his disability
or separation from service within two years of a change in control of Oritani Bank.
If, after attaining age 60, a director retires, dies or becomes disabled, and such director has more than five years of service the director or his beneficiary will be entitled to the following
percentage of benefit: 50% if the director has 5 to 6 years of service, 60% if the director has 6 to 7 years of service, 70% if the director has 7 to 8 years of service, 80% if the director has 8 to 9 years of service, 90% if the director has 9 to
10 years of service and 100% if the director has more than 10 years of service. In the event of a change in control, each director will be deemed to have 10 years of service and attained age 65 for the purpose of calculating his benefit under the
plan. A director who retires prior to age 60 for any reason shall receive no benefit under the plan.
Each director was entitled to elect prior to December 31, 2006 to receive a lump sum payment upon a change in control in an amount equal to the present value of his plan benefits. Benefits under the
plan are generally payable in monthly installments for the director’s lifetime or as a joint and survivor form of benefit depending on the director’s marital status at the time of the payment triggering event. Notwithstanding the foregoing, a
director was permitted to elect prior to December 31, 2008, to receive his plan benefits in the form of a lump sum payment in the event of his disability prior to termination of service.
In the event a director who has served on the Board of Directors for at least five years dies while in service, the director’s spouse will be entitled to a benefit calculated as if the director had
continued service until age 65. The amount of the survivor’s benefit will be based on the number of years the director would have served on the Board of Directors assuming the director served on the Board of Directors until age 65. The benefit will
be payable to the director’s spouse for the remainder of the spouse’s life, along with medical benefits. As also described above under “Senior Officers and Directors Post-Retirement Medical Coverage,” medical benefits provided to directors and their
spouses prior to the date of their retirement will continue to be provided to retired directors and their spouses, as long as the director lives, or, in the event the director dies while in office, the medical benefits will continue to be provided to
the director’s spouse for his or her lifetime. In the event the cost of medical benefits provided under the plan exceeds 200% of the cost of such benefits to Oritani Bank immediately prior to the director’s retirement, the cost in excess of 200% will
be paid by the retired director or his or her spouse. The total cost of the plan to Oritani Bank during the 2019 fiscal year was $341,000.
Directors also receive $50,000 of post-retirement life insurance coverage, which was obtained in conjunction with the Company’s purchase of Bank-Owned Life Insurance See “Group Life Insurance
Retirement Plan” above for further details. The Company incurs no additional cost to provide this coverage; however, there is an immaterial accrual expense associated with the benefit.
Stock-Based Incentive Plans. The non-management directors are eligible to participate in the 2007
Equity Plan and the 2011 Equity Plan. Please see “Stock Benefit Plans” under “Benefit Plans and Arrangements” for additional information regarding these plans. On August 28, 2018, 10,000 stock awards and 20,000 option awards were granted to Judith
Schumacher Tilton upon her election to the Board of Directors. The following table sets forth information with respect to outstanding equity awards as of June 30, 2019 for the non-management directors:
OUTSTANDING EQUITY AWARDS AT JUNE 30, 2019
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|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
|
Option Expiration Date (1)
|
Outstanding Unvested Restricted Stock as of June 30, 2019
|
Market Value of Restricted Stock that has Not Vested (2)
|
2011 Equity Plan
|
|
|
|
Nicholas Antonaccio
|
250,000
|
—
|
11.95
|
08/18/21
|
—
|
—
|
James J. Doyle
|
90,000
|
—
|
11.95
|
08/18/21
|
—
|
—
|
Robert S. Hekemian
|
227,500
|
—
|
11.95
|
08/18/21
|
—
|
—
|
John J. Skelly, Jr.
|
227,500
|
—
|
11.95
|
08/18/21
|
—
|
—
|
Judith Schumacher Tilton
|
—
|
20,000
|
16.15
|
08/28/28
|
10,000
|
177,400
|
|
|
|
|
|
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(1)
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Stock options expire ten years after grant date.
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(2)
|
Market value calculated using June 28, 2019 closing price of $17.74/share.
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