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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 2002
Exhibit 10.1
1ST CONSTITUTION BANCORP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
ESTABLISHMENT OF PLAN
Effective as of October 1, 2002, 1st Constitution Bancorp ("Bancorp") hereby
establishes a plan designed to provide a nonqualified pension benefit to certain
selected key executives of Bancorp and 1st Constitution Bank ("Bank").
ARTICLE II
DEFINITIONS
2.1 ACTUARIAL EQUIVALENT
"Actuarial Equivalent" means an amount or benefit of equal value based on
an interest rate established by the Committee from time to time, based
upon market conditions, as determined in the sole discretion of the
Committee.
2.2 BENEFICIARY
"Beneficiary" means one or more persons designated in writing by a Member
in the manner specified by the Committee to receive the Member's benefits
under the Plan in the event of his or her death, or in the event of no
such designation, the term will mean the estate of the Member.
2.3 BOARD OF DIRECTORS
"Board of Directors" means the Board of Directors of Bancorp.
2.4 CAUSE
"Cause" shall mean conviction or a plea of nolo contendre with respect to
a felony or a similar class crime committed while employed by the Company,
or if any regulatory agency requires the Company to sever its relationship
with the Member, or if the Member is required to not be associated with
any public company arising out of actions of the Member as an employee of
the Company. If the Member contests the determination of Cause, and if he
or she is successful in causing such determination to be reversed, then he
or she will be entitled to all benefits hereunder, plus interest and
reasonable legal fees in connection with such contest. If he or she
contests the determination of Cause and loses,
he or she will be responsible for the Company's legal fees if it is
determined by a court of competent jurisdiction that his or her contesting
the determination of Cause was done in bad faith. The Board of Directors
shall have the complete discretionary responsibility to determine whether
Cause exists, without participation of the Member involved.
2.5 CHANGE OF CONTROL
A "Change of Control" will be deemed to have occurred if -
(X) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a person engaging in a transaction
of the type described in clause (Z) below of this definition but which
does not constitute a change in control under such clause (Z), hereafter
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Bancorp
representing more than 50% of the combined voting power of Bancorp's then
outstanding securities; or
(Y) during any period of twenty-four (24) consecutive months during
the term of this Agreement, individuals who at the beginning of such
period constitute the Board of Directors, and any new director (other than
a director designated by a person who has entered into an agreement with
Bancorp to effect a transaction described in clauses (X) or (Z) of this
definition) whose election by such Board of Directors, or nomination for
election by Bancorp's shareholders, was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(Z) Bancorp completes a merger, consolidation or similar transaction
of Bancorp with or into any other corporation or entity, or a binding
share exchange involving Bancorp's securities, other than any such
transaction which would result in the voting securities of Bancorp
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of Bancorp or
2
such surviving entity outstanding immediately after such transaction, or
Bancorp completely liquidates, sells or otherwise disposes of all or
substantially all of its assets.
2.6 COMMITTEE
"Committee" means a committee of the Board of Directors to which is
delegated responsibility to administer this Plan.
2.7 COMPANY
"Company" means Bancorp and/or Bank.
2.8 DISABILITY
"Disability" means (i) the Member is determined to be disabled within the
meaning of the Company's long term disability plan, (ii) the Member is
unable to perform his or her job functions in full for a period of 180
days as a result of a physical or mental condition, or (iii) the Committee
determines that the Member is disabled after appropriate medical
consultants, all to be determined in the sole discretion of the Committee.
2.9 ELIGIBLE EMPLOYEE
"Eligible Employee" means any executive employed by the Company who is
designated by the Committee as a Member under the Plan.
2.10 FINAL BASE COMPENSATION
"Compensation" means a Member's highest annual rate of base compensation
in effect during the twelve (12) month period prior to termination of
employment, excluding bonuses, overtime pay, commissions, other
extraordinary payments, reimbursements or other expense allowances, equity
compensation, fringe benefits (cash and non-cash), moving expenses,
deferred compensation, and welfare benefits, paid by the Company to such
Employee for services rendered by him or her to the Company.
Notwithstanding the foregoing, Compensation shall include any amount which
is contributed by the Company pursuant to a salary reduction agreement and
which is not includible in the gross income of the Member under Section
125, 402(e)(3), or 402(h)(1)(B) of the Internal Revenue Code of 1986, as
amended. Notwithstanding the above, in the event of the death of a Member
(while still employed by the Company) prior to his or her attaining age 65
and
3
also prior to a Change of Control, then Final Base Compensation used
to calculate the SERP Benefit shall be determined for such Member in
accordance with Appendix C.
2.11 MEMBER
"Member" means an Eligible Employee who becomes a Member pursuant to
Article III.
2.12 NORMAL RETIREMENT DATE
"Normal Retirement Date" means a Member's 65th birthday.
2.13 PLAN
"Plan" means this 1st Constitution Bancorp Supplemental Executive
Retirement Plan, as set forth herein, as amended from time to time.
2.14 SERP BENEFIT
"SERP Benefit" shall mean the annual retirement benefit payable to a
Member pursuant to the terms of this Plan.
2.15 YEARS OF SERVICE
"Years of Service" means each full year in which a Member serves as an
employee of the Company (including years prior to implementation of this
Plan).
2.16 For purposes of this Plan, unless the context requires otherwise, the
masculine includes the feminine, the singular the plural, and vice versa.
Any reference to a "Section" or "Article" shall mean the indicated section
or article of this Plan unless otherwise specified.
ARTICLE III
PARTICIPATION
An Eligible Employee listed in Appendix A shall become a Member of the Plan
effective as of October 1, 2002. Each other Eligible Employee shall become a
Member upon appointment by the Committee (provided that the Committee also
determines a percentage multiplier for such new Member).
4
ARTICLE IV
SERP BENEFIT
4.1 AMOUNT OF SERP BENEFIT
Each Member who retires on or after his or her Normal Retirement Date
shall be entitled to a SERP Benefit. The amount of a Member's SERP Benefit
at his or her Normal Retirement Date shall be equal to the percentage
multiplier established by the Committee for such Member (as set forth in
Appendix A) multiplied by the Member's Final Base Compensation.
4.2 BENEFITS UPON REEMPLOYMENT
If a Member is rehired by the Company after he or she becomes entitled to
a SERP Benefit, his or her SERP Benefit shall not be paid during such
period of reemployment, but shall commence or resume not sooner than the
first day of the month following his or her subsequent retirement or
separation. The SERP Benefit payable after his or her subsequent
retirement or separation shall be recalculated under this Plan at such
subsequent retirement under the terms of the Plan then in effect (but
shall in no case be less than the SERP Benefit to which he or she was
entitled at the time of the first retirement).
4.3 EARLY RETIREMENT BENEFIT
Upon a Member's separation from service from the Company prior to his or
her Normal Retirement Date (for reasons other than Disability, death or
Change of Control), the SERP Benefit (i.e., the benefit payable at Normal
Retirement Date) will be reduced by five percent (5%) for each full or
partial year by which such Member's date of separation from service
precedes his or her Normal Retirement Date.
4.4 DISABILITY RETIREMENT BENEFIT
Upon a Member's separation from service from the Company as a result of
Disability, he or she will be 100% vested and entitled to the SERP
Benefit, which SERP Benefit shall
5
commence at Normal Retirement Date, unreduced for early retirement, in the
form of a lifetime annuity with a 15-year guarantee.
ARTICLE V
VESTING
A Member shall be vested in his SERP Benefit in accordance with the following
schedule:
Year(s) of Service Vested Percentage
------------------ -----------------
Less than 1 Year of Service 0%
1 Year of Service, but less than
2 Years of Service 10%
2 Years of Service, but less than
3 Years of Service 20%
3 Years of Service, but less than
4 Years of Service 30%
4 Years of Service, but less than
5 Years of Service 40%
5 Years of Service, but less than
6 Years of Service 50%
6 Years of Service, but less than
7 Years of Service 60%
7 Years of Service, but less than
8 Years of Service 70%
8 Years of Service, but less than
9 Years of Service 80%
9 Years of Service, but less than
10 Years of Service 90%
10 or more Years of Service 100%
If a Member terminates employment with the Company and each affiliated employer
with fewer than ten (10) Years of Service, any portion of the Member's SERP
Benefit which is not vested shall be forfeited.
Notwithstanding the foregoing, a Member shall be one hundred percent (100%)
vested in his or her SERP Benefit if, while he or she is employed by the
Company, he or she dies, he or she
6
separates from service with the Company as a result of Disability, or a Change
of Control occurs. In addition, a Member will be fully vested if he or she
retires on or after the Member's Normal Retirement Date. All benefits under the
Plan with respect to a Member will be forfeited if he or she is terminated (or
treated as terminated following actual termination) for Cause.
ARTICLE VI
DEATH BENEFITS
6.1 DEATH PRIOR TO SERP BENEFIT COMMENCEMENT
If the Member dies prior to commencement of the SERP Benefit while
employed by the Company (or after separating from service with the Company
as a result of Disability, as set forth in Section 4.4), the Member's
Beneficiary shall be entitled to a lump sum payment equal to the Actuarial
Equivalent of the SERP Benefit payable at the Normal Retirement Date.
6.2 DEATH AFTER SERP BENEFIT COMMENCEMENT
If the Member dies after commencement of the SERP Benefit, the Member's
Beneficiary shall be entitled to a lump sum payment equal to the Actuarial
Equivalent of the remaining SERP Benefit otherwise payable to the Member.
ARTICLE VII
TIME AND FORM OF PAYMENT
7.1 TIME OF PAYMENT
Payment of a Member's SERP Benefit will commence as follows:
- for retirement on his or her Normal Retirement Date, on the first
day of the month following retirement;
7
- for retirement from the Company prior to Normal Retirement Date, on
the first day of the month following such retirement, or the first
day of the month next following his or her 65th birthday (at the
election of the Member);
- for payment to a Beneficiary as a result of death, on or about the
first day of the month following such death;
- for termination following a Change of Control, the SERP Benefit will
be 100% vested (with a deemed 10 Years of Service) and will be paid
at age 65 or at any time following a Change of Control (as elected
by the Member) (with a five percent (5%) reduction for each year (or
portion thereof) by which the commencement date precedes his or her
65th birthday).
- for termination as a result of Disability, on the first day of the
month following the Member's attainment of age 65.
7.2 FORM OF PAYMENT
Upon becoming a Member in the Plan, the Member shall elect the form of
distribution of his or her SERP Benefit on a form provided by the
Committee for such purpose. If a Member fails to timely elect a form of
distribution, the lump sum will be treated as the default election. An
election hereunder shall be irrevocable except as hereinafter provided. A
Member may elect a different form of distribution in accordance with
procedures established by the Committee. However, any such election shall
be null and void if made less than nine (9) months prior to the Member's
termination of employment, in which case the form of distribution shall be
determined by the terms of the last election (including a default
election) validly in effect. The following distribution options are
available:
- for payments commencing on or after Normal Retirement Date or
following a Change of Control, the Member will be entitled to a
lifetime annuity with a 15 year minimum guarantee, or a lump sum
that is the Actuarial Equivalent of the annuity benefit
8
- for payments commencing prior to Normal Retirement Date (except
following a Change of Control), the Member will be entitled to a 15
year guaranteed annuity (but not a lifetime annuity), commencing at
the time set forth above, or a lump sum that is the Actuarial
Equivalent of such annuity benefit.
For purposes of this Article VII, an Employee shall not be deemed to have
terminated employment until he has terminated employment with the Company
and all affiliated employers.
7.3 CALCULATION OF LUMP SUM AMOUNT
A lump sum amount payable under the Plan shall be calculated by
determining the amount of the monthly immediate annuity payable in
accordance with the otherwise applicable provisions of the Plan in the
distribution form described in Section 6.2(a) and multiplying such amount
by a factor derived from the Actuarial Equivalent assumptions described in
Section 2.1.
ARTICLE VIII
ADMINISTRATION
8.1 COMMITTEE
The Committee shall supervise the daily management and administration of
the Plan.
8.2 RESPONSIBILITIES AND POWERS OF THE COMMITTEE
The Committee shall have the responsibility:
(a) To administer the Plan in accordance with the terms hereof, and to
exercise all powers specifically conferred upon the Committee hereby
or necessary to carry out the provisions thereof.
9
(b) To construe and interpret the Plan, which construction shall be
conclusive, correct any defects, supply omissions, and reconcile
inconsistencies to the extent necessary to effectuate the Plan.
(c) To keep all records relating to Members of the Plan and such other
records as are necessary for proper operation of the Plan.
8.3 OPERATION OF THE COMMITTEE
In carrying out the Committee's functions hereunder:
(a) The Committee may adopt rules and regulations necessary for the
administration of the Plan and which are consistent with the
provisions hereof.
(b) All acts and decisions of the Committee shall be approved by a
majority of the members of the Committee and shall apply uniformly
to all Members in like circumstances. Written records shall be kept
of all acts and decisions.
(c) The Committee may authorize one or more of its members to act on its
behalf. The Committee may also delegate, in writing, any of its
responsibilities and powers to an individual(s) who is not a
Committee member.
(d) The Committee shall have the right to hire, at the expense of the
Company, such professional assistants and consultants as it, in its
sole discretion, deems necessary or advisable, including, but not
limited to, accountants, actuaries, consultants, counsel and such
clerical assistance as is necessary for proper discharge of its
duties.
8.4 INDEMNIFICATION
In addition to any other indemnification that a fiduciary, including but
not limited to a member of the Committee, is entitled to, the Company
shall indemnify such fiduciary from all claims for liability, loss or
damage (including payment of expenses in connection with defense against
such claim) arising from any act or failure to act which constitutes a
10
breach of such individual's fiduciary responsibilities with respect to
this Plan under any aspects of the law.
ARTICLE IX
MISCELLANEOUS
9.1 BENEFITS PAYABLE BY THE COMPANY
All benefits payable under this Plan constitute an unfunded obligation of
the Company. Payments shall be made, as due, from the general funds of the
Company. The Company, at its option, may maintain one or more bookkeeping
reserve accounts to reflect its obligations under the Plan and may make
such investments as it may deem desirable to assist it in meeting with
obligations. Any such investments shall be assets of the Company subject
to claims of its general creditors. No person eligible for a benefit under
this Plan shall have any right, title to interest in any such investments.
9.2 AMENDMENT OR TERMINATION
(a) The Board of Directors reserves the right to amend, modify, or
restate or terminate the Plan; provided, however, that no such
action by the Board of Directors shall reduce a Member's vested SERP
Benefit calculated as of the time thereof, except as set forth in
Section 9.2(d). The provisions of this Section prohibiting an action
by the Board of Directors which would reduce a Member's vested SERP
Benefit cannot be amended without the consent of all Members
(including those who have retired). Any amendment to the Plan shall
be made in writing by the Board of Directors, with or without a
meeting, or shall be made in writing by the Committee, to the extent
that Board of Directors has specifically delegated the authority to
make such amendment to the Plan to the Committee.
(b) This Plan constitutes the entire agreement of the Company with
respect to the provision of SERP Benefits and cannot be modified
orally or in any writing other than a resolution pursuant to the
provisions of Section 9.2(a).
11
(c) Except as provided in Section 9.2(d), if the Plan is terminated, a
determination shall be made of each Member's SERP Benefit as of the
Plan termination date, and if a Member has not then attained age 65,
he or she shall be treated as if the Member had terminated
employment with the Company and each affiliated employer at such
date. A Member's SERP Benefit, as determined in accordance with the
preceding sentence, shall be calculated as if such Member has ten
Years of Service (regardless of the actual number of Years of
Service), if such Member is an employee of the Company on the Plan
termination date. The amount of such vested SERP Benefit shall be
payable to the Member in accordance with the otherwise applicable
terms of the Plan unless the Plan is amended to provide otherwise
and the Member consents in writing to such amendment.
(d) Bancorp may terminate the Plan or suspend payments or suspend
operation of the Plan if the Company is subjected to regulatory
discipline limiting its ability to pay compensation to Members, or
if the Company is advised by a regulatory agency that payments to a
particular Member or continuation of the Plan will result in
regulatory sanctions against the Company, its officers or directors.
9.3 STATUS OF EMPLOYMENT
Nothing herein contained shall be construed as conferring any rights upon
any Member of any person for a continuation of employment, nor shall it be
construed as limiting in any way the right of the Company to discharge any
Member or to treat him or her without regard to the effect which such
treatment might have upon him or her as a Member of the Plan.
9.4 PAYMENTS TO MINORS AND INCOMPETENTS
If a Member or beneficiary entitled to receive any benefit hereunder is a
minor or is deemed by the Committee or is adjudged to be legally incapable
of giving valid receipt and discharge for such benefits, they will be paid
to the duly appointed guardian of such minor or incompetent or to such
other legally appointed person as the Committee might
12
designate. Such payment shall, to the extent made, be deemed a complete
discharge of any liability for such payment under this Plan.
9.5 INALIENABILITY OF BENEFITS
The right of any person to any benefit or payment under the Plan shall not
be subject to voluntary or involuntary transfer, alienation or assignment,
and, to the fullest extent permitted by law, shall not be subject to
attachment, execution, garnishment, sequestration or other legal or
equitable process. In the event a person who is receiving or is entitled
to receive benefits under the Plan attempts to assign, transfer or dispose
of such right, or if an attempt is made to subject said right to such
process, such assignment, transfer or disposition shall be null and void.
9.6 TAXES
It is the intent of the Company that amounts deferred under the Plan shall
not be subject to federal income tax until distributed from the Plan.
However, the Company does not guarantee or warrant that Plan benefits will
be excludable from a Member's gross income for federal or state income tax
purposes until distributed, and the Member (or Beneficiary) shall in all
cases be liable for any taxes due on benefits attributable to such Member
or Beneficiary.
The Committee shall make appropriate arrangements to (a) withhold
FICA/FUTA taxes due on amounts accrued and vested under the Plan and (b)
withhold federal and state income taxes due on amounts distributed from
the Plan. Further, the Committee may make any arrangements it deems
appropriate to withhold for any other taxes required to be withheld by any
government or governmental agency.
9.7 GOVERNING LAW
Except to the extent pre-empted by federal law, the provisions of the Plan
will be construed according to the laws of the State of New Jersey.
13
APPENDIX A
The following Eligible Employees are Members of the Plan as of January 1, 2002:
PERCENTAGE OF
EXECUTIVE FINAL BASE COMPENSATION
--------- -----------------------
Robert Mangano 50%
Richard Copeland 25%
Joseph Reardon 25%
Irving Wischik 25%
14
APPENDIX B
EXAMPLE
The Member elects to retire at age 59. He has 8 years of service (and is
therefore 80% vested). He is retiring 6 years before age 65 (30% reduction (6
years, multiplied by 5% per year) from the 50% of his final pay benefit = 35%).
Therefore, his benefit will be 80% of 35% = 28% of his final base pay to be paid
at age 60 or 65 for 15 years, or a lump-sum equivalent.
15
APPENDIX C
For purposes of this Appendix C only, Final Base Compensation shall mean
Compensation determined at the date of death, but deemed adjusted by four
percent (4%) increases, compounded annually, until age 65.
16
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